The Department of Veterans Affairs issues loan guarantees with easier qualifying requirements than most conventional lenders. However, this does not mean you will be automatically approved just because of your military service. Some veterans are denied based on military status, credit history, lack of income or the loan terms they are seeking. Overall, about 15 percent of applications are denied, but some may be able to reapply.
Denial Based on Military Status
Your military service requirements will depend on the time you served and whether you were active duty, in the reserves or otherwise employed in the military. Generally, you must serve between 90 days and 24 months minimum, and you must be either actively serving, honorably discharged or retired to be eligible. Some veterans will be denied because they do not meet these requirements, and they will not be eligible in the future.
Denial Based on Credit
Your credit will be considered when you apply for a VA loan. The VA will accept some credit errors, and typically it will insure you even if you do not qualify on your own for a loan without this assistance. Your score does not matter; rather, you must have a good record of payment within the past 12 months. Any bankruptcies must be at least two years old, and VA bankruptcies may be subject to further regulation. Even though the VA does not consider your exact credit score, it will review your current debts, and any troublesome debts may be grounds for denial of a VA loan. Some veterans will not qualify based on these factors, but often they will be given assistance or options to reapply in the future.
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Denial Based on Income
You must have stable income to qualify for a VA home loan. VA benefits do count as income, nor do any other medical or disability benefits you may receive. Even if you have a low income, you should qualify as long as your income is stable. Some veterans who apply with no income or a highly unstable income will be denied a VA loan. After their income is stable for at least two years, they may qualify.
Denial Based on Application
It is possible some veterans will be denied a VA home loan guarantee because of the terms of the loan itself, not because of their individual profile. For example, a veteran who qualifies for a $250,00 guarantee may be denied an application for a guarantee of $300,000. Similarly, the VA may feel that the lender's contract does not meet VA standards. Some VA home loans will be denied on these grounds, but the veteran can reapply with a different contract that better suits the VA's regulations and still receive a loan.
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