VA Loan – Automated Approval and Manual Underwriting

VA Loan Blog

There are two ways to underwrite your VA loan.  Automated Approval and Manual Underwriting.

The easiest and most common is an Automated Approval.  Your VA loan will be underwritten through Fannie Mae (DU) and Freddie Mac (LP) AUS (automated underwriting system).   Depending on the findings from DU or LP will determine if you have an Automated Approval or if your VA loan will be Referred to the VA  Manual Underwriting Guidelines.

AUS approved findings are;

*DU automated approval is an “Approve/Eligible”

*LP automated approval is an “Accept”

When your VA loan is Approve/Eligible or Accept it means it is automated approved, and you have met Fannie and Freddie VA loan parameters.  Just because you received the automated approval doesn’t mean the loan is good to go.  The VA underwriter will review the findings and your supplied supporting documents (ex: pay stubs, bank statements, drives license, etc..) before issuing your final loan approval.

When you do not receive the DU “Approve/Eligible” or the LP “Accept” your loan is then Referred to the VA Manual Underwriting Guidelines.

AUS Refer findings are;

DU     “Refer/Eligible”

LP      “Refer”

Meaning your loan is Eligible for VA but the AUS is Referring your loan to the VA underwriter to determine you meet the VA Manual Underwriting Guidelines.  When you receive the Refer findings it is generally due to layers of risk.  The most common layer of risk is your credit score.   If your credit score is 620+ and your debt to income (DTI) ratios are low, you will generally receive the AUS automated approval and why so many lenders have minimum credit scores.

Whether we go the easy automated approval route or the more labor intensive  manual underwrite, we close VA loans with low credit and credit scores down to 500.

Keys to VA Manual Underwriting

24 months rent history is a must

  • Cancelled checks
  • Third Party Management Company
  • Rent free living with family

Credit History

  • No late payments in the past 12 months, if so isolated is ok
  • Any Charged off or Collections accounts in the past 24 months will require a Letter of Explanation(LOE)
  • LOE detailing the reason for the delinquent credit and how to prevent in the future

Compensating factors

  • Compensating factors may affect the loan decision. These factors are especially important when reviewing loans which are marginal with respect to residual income or debt-to-income ratio
  • Conservative use of consumer credit
  • LOE detailing the reason for the delinquent credit and how to prevent in the future
  • Minimal consumer debt
  • Long-term employment
  • Significant liquid assets
  • Sizable down-payment
  • The existence of equity in refinancing loans
  • Little or no increase in shelter expense
  • Military benefits
  • High residual income
  • Low debt-to-income ratio

Most importantly make sure you are working with a Loan Officer and Lender who will take the time to review all your VA loan options and has experience working with manually underwritten VA Loans. Because even if you meet all the VA manual underwriting criteria the loan must still be underwritten by a VA Underwriter who must weigh all the risks and compensating factors to make their final loan decision.

VA Loan Low Credit Score  ZERO DOWN LOAN 500 Minimum Credit
VA IRRRL No Credit Score Required
No Overlay Lender
VA Loan Manual Underwrite

Contact Us

Access Capital Group Inc.
202 E. Earll Drive
Suite 460
Phoenix, AZ 85012

Phone: 6026485860


NMLS Consumer Access
NMLS # 33043

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