🏠Introduction
Welcome to our guide on manual underwrite VA loans! If you’re here, then you’re likely interested in learning more about these loans, how they work, and whether you may qualify for one.
VA loans, in general, are backed by the U.S. Department of Veterans Affairs and are designed to help eligible veterans, active-duty service members, and their families buy homes. Manual underwrite VA loans, specifically, are a type of VA loan that can be used when an application doesn’t receive an automated approval through a computer underwriting system.
In this guide, we will explain everything you need to know about manual underwrite VA loans, including eligibility requirements, advantages and disadvantages, and frequently asked questions.
So, let’s dive in!
🏠What is a Manual Underwrite VA Loan?
A manual underwrite VA loan is a type of loan that allows VA lenders to underwrite VA loans through manual processes instead of relying on computer-automated underwriting systems.
Typically, when you apply for a VA loan, your application is run through an automated underwriting system that evaluates your credit score, income, and debt-to-income ratio to determine if you qualify for a loan. If your application gets an automated approval, you can move forward with the loan process.
However, if your application receives a “refer” recommendation from the automated system, it means that your application must be manually underwritten. This is where manual underwrite VA loans come in.
Eligibility Requirements for Manual Underwrite VA Loans
Manual underwrite VA loans have the same eligibility requirements as standard VA loans. To be eligible for a VA loan, you must meet at least one of the following requirements:
- You’re an active-duty service member
- You’re a veteran
- You’re a reservist or National Guard member
- You’re the spouse of a service member who died in the line of duty or as a result of a service-related disability
In addition to meeting one of these requirements, you must also have a Certificate of Eligibility (COE), meet credit and income requirements, and use the loan to buy or build a primary residence.
Advantages of Manual Underwrite VA Loans
There are several advantages to using a manual underwrite VA loan:
- Flexible credit requirements: Because manual underwrite VA loans are manually underwritten, lenders may be more willing to consider your overall credit history and other factors that may offset a lower credit score.
- No loan limits: Unlike some other types of VA loans, manual underwrite VA loans don’t have loan limits. This means you could potentially qualify for a higher loan amount.
- Lower closing costs: Because loans don’t go through automated underwriting, there may be fewer fees and costs associated with the loan.
🏠Manual Underwrite VA Loan: The Process
If your application requires a manual underwrite VA loan, the lender will need to consider several factors before approving your loan.
Income and Employment Verification
The lender will need to verify that you have a stable income and employment history. This will require you to provide recent pay stubs, W-2 statements, and tax returns. If you’re self-employed, you may need to provide additional documentation, such as profit and loss statements or business tax returns.
Debt-to-Income Ratio
The lender will also need to evaluate your debt-to-income (DTI) ratio. This is the percentage of your monthly income that goes toward paying debts like credit card payments, car payments, and student loans. Typically, VA lenders prefer a DTI ratio of 41% or less.
Credit and Payment History
The lender will also review your credit score and payment history to determine your overall creditworthiness. While there is no minimum credit score requirement for manual underwrite VA loans, most lenders will require a credit score of at least 620.
Residual Income
The lender will also evaluate your residual income. This is the money you have left over each month after paying your bills and other expenses. Generally, VA lenders prefer borrowers to have a certain amount of residual income every month to ensure they can afford to make their mortgage payments.
🏠Frequently Asked Questions About Manual Underwrite VA Loans
Question |
Answer |
|---|---|
Can I get a manual underwrite VA loan with bad credit? |
While there is no minimum credit score requirement for manual underwrite VA loans, most lenders will require a credit score of at least 620. |
Are manual underwrite VA loans more expensive than other types of VA loans? |
No, manual underwrite VA loans typically have lower closing costs than other types of VA loans. |
What are the maximum loan amounts for manual underwrite VA loans? |
Manual underwrite VA loans do not have a maximum loan limit. However, your loan amount will depend on your income, credit, and other factors. |
Can I use a manual underwrite VA loan to refinance my current mortgage? |
Yes, you can use a manual underwrite VA loan to refinance your current mortgage. |
Does getting a manual underwrite VA loan take longer than getting an automated approval? |
Yes, getting a manual underwrite VA loan can take longer than getting an automated approval. The manual underwriting process requires more documentation and manual review by the lender. |
Can I use a manual underwrite VA loan to buy a second home or investment property? |
No, manual underwrite VA loans can only be used to buy or build a primary residence. |
What happens if my loan application doesn’t receive a manual approval? |
If your application doesn’t receive a manual approval, you may need to explore other types of loans or work to improve your credit and financial situation before reapplying. |
Do I need to be a first-time homebuyer to qualify for a manual underwrite VA loan? |
No, there are no first-time homebuyer requirements for manual underwrite VA loans. However, you must use the loan to buy or build a primary residence. |
Can I use a manual underwrite VA loan to buy a fixer-upper? |
Yes, you can use a manual underwrite VA loan to buy a fixer-upper. However, the property must meet certain VA requirements and must be used as your primary residence. |
How do I apply for a manual underwrite VA loan? |
To apply for a manual underwrite VA loan, you can contact a VA-approved lender or use the VA’s eBenefits portal. |
Do I need to pay mortgage insurance with a manual underwrite VA loan? |
No, manual underwrite VA loans do not require mortgage insurance. |
How long does it take to get approved for a manual underwrite VA loan? |
The time it takes to get approved for a manual underwrite VA loan can vary depending on the lender and your financial situation. However, it typically takes longer than an automated approval. |
Can I use a manual underwrite VA loan to buy a manufactured home? |
Yes, you can use a manual underwrite VA loan to buy a manufactured home if it meets certain VA requirements. |
🏠Conclusion
Manual underwrite VA loans can be a great option for eligible borrowers who may not receive an automated approval for a VA loan. These loans are manually underwritten and can offer more flexibility in credit requirements and loan amounts, as well as lower closing costs.
If you’re interested in a manual underwrite VA loan, be sure to research your options, speak with a VA-approved lender, and make sure you meet the eligibility requirements. And as always, carefully consider all aspects of the loan before making a decision.
Take Action Today
If you’re ready to take the next steps towards homeownership, contact a VA-approved lender today to learn more about manual underwrite VA loans and whether they may be right for you.
Disclaimer
This article serves only as a guide and is not intended as legal or financial advice. Before making any financial decisions, be sure to consult with a qualified professional.