VA Loan – Manual Underwrite – 500 Minimum Score

Army Family Series: Real American Soldier With Wife & Son


Low Credit Score
500 Minimum Score
Manual Underwrite

VA Key Underwriting Criteria

  • There is no maximum debt ratio. However, the lender must provide compensating factors if the total debt ratio is more than 41 percent.
  • There is no maximum loan amount. However, VA does limit its guaranty. Veterans can borrow up to $484,350 without a down payment in most of the country and up to $726,525 in high cost areas.
  • VA’s residual income guidelines ensure Veteran borrowers can afford the loan. These guidelines establish how much money a Veteran must have left over after all debts and living expenses are considered.
  • There is no minimum credit score requirement. Instead, VA requires a lender to review the entire loan profile.

When applying for a VA loan if you are told a required minimum credit score of 620, 600 or 580 is needed or you must have a debt to income ratio of no more than 41 percent.  These are called Lender Overlays to the VA underwriting guidelines.

Access Capital Group, Inc. is a NO Overlay Lender.

A lot of times when a Veteran has higher Debt to Income ratios, lower credit scores and or past credit charge off or collection accounts a Manual Underwrite is necessary.   A manual underwrite is when you do not receive an automated approval from Fannie Mae and Freddie Mac underwriting systems.

Keys to a manual underwritten VA Loan

12 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
  • Rent free living with family

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 you VA loan options and has experience working with manually underwritten VA Loan.