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Explaining Manual Underwriting on VA Loans

Sometimes lenders will need to do a closer inspection of your finances to verify you can handle the responsibility of a mortgage. This is called Manual Underwriting, and it does differ from the standard underwriting process.


One of the most significant benefits of the VA loan program is that veterans who've hit a rough financial patch can still qualify for a mortgage. But lenders will need to take a closer look to ensure you can handle a monthly mortgage payment responsibility.

In these cases, you may hear a loan specialist say that your loan will need a "manual underwrite" or to be "manually underwritten."

The first question in the minds of many prospective borrowers is: "What exactly does that mean, and how does it differ from the standard VA underwriting process?"

VA Manual Underwriting Guidelines

When veterans come to a lender, their information is entered into what's called an Automated Underwriting System, or AUS. This is essentially a computer program that helps streamline the application process and let lenders know at the outset whether a borrower will meet credit and income requirements.

Loan applications that receive an AUS approval can allow lenders to proceed with less paperwork and fewer documentation needs.

But certain circumstances can knock an application from AUS consideration, including:

  • A lack of credit depth or history
  • A bankruptcy in the last 24 months
  • Default or delinquency on federal debt
  • Late mortgage payments
  • Foreclosure, short sale or deed-in-lieu of foreclosure

A file that gets bounced from the automated system may be eligible for a manual underwrite. This means a real, live underwriter will have to crunch the numbers and evaluate the risk from Day One, rather than later in the process like normal. Your loan file is being underwritten manually, by hand, from the start.

Veterans facing a manual underwrite will likely need to meet tighter requirements for things like debt-to-income (DTI) ratio, derogatory credit, financial documentation, and more.

What is the max DTI on a VA manual underwrite?

Some lenders on an AUS file may be able to work with a DTI ratio up to 60 or 65 percent in some instances. But on a manual underwrite, that threshold isn't likely to exceed 45 or 50 percent.

Lenders might also have restrictions regarding a borrower's ability to obtain an Energy Efficient Mortgage (EEM) on a manual underwrite.

They might also limit how much they'll lend to borrowers whose loans require manual underwriting.

Guidelines and policies on manual underwriting can vary by lender.

Verification of Rent (VOR)

You may also have to go the extra mile on a manual underwrite regarding your current living situation.

Veterans who aren't currently homeowners might need what's known as a Verification of Rent, or VOR, if they're planning to purchase a home.

Lenders want to see that you've made on-time rent payments or that you have solid assets while living rent-free, which can lessen any "payment shock" that can come with suddenly having a monthly mortgage payment.

There are all kinds of rent and living scenarios. You may need bank records, canceled checks, a letter of explanation, and more to satisfy VA lenders.

Manual underwriting can make the loan process a bit more involved for military borrowers. But it also represents a safety net of sorts.

Veterans who've been hit by tough financial or credit events can still secure a VA home loan.

Yes, there may be a few more steps or additional layers of scrutiny — but there's also a sense of hope that might not otherwise be there.