Kentucky VA Home Loans Approval Criteria

What Criteria Does the VA Use to Approve a Kentucky  VA Mortgage Loans?

What does the VA use to approve Kentucky VA mortgage loans?

If you’re a first-time buyer, VA loans may strike you as confusing and may even be a little daunting. This is because there are a lot of misconceptions about VA mortgage loans, not least of which is the concern on who issues the loan.

It is important to keep in mind that VA guarantees the loan but it does not insure it. Once you are aware of it, you will be able to understand the role that VA plays in the lending process.

Who approves my loan?

According to the VA, many, if not all, VA home loans are approved by the lender using the lending guidelines and criteria which are drafted by the VA. While still in the process of servicing a VA loan, there are several people who usually discuss what the VA will likely approve or decline – in fact, numerous articles with topics revolving VA loans even state it in terms of a particular agency approving an individual loan.

In many situations, the discussions really refers to the rules that are under government regulations. When the VA is required to take care of an individual case, more often than not it means that the situation isn’t properly addressed by existing rules or that the lender still needs additional details.

What is required for my loan to be approved?

Simply put, there are two basic methods set in the VA mortgage guidelines that will determine if an applicant is qualified for a loan. The first thing that will be considered is your income. This is what is referred to as the residual income method.

You will have to ask yourself: can you actually afford to pay the daily costs of the VA home loan? Are your debts too big that you won’t be able to handle an additional monthly mortgage anymore?

You will also need to take into consideration things like your car payment and credit card payments. The second qualification to consider is a more definite examination of the said issues, based on a formula commonly referred to as debt-to-income ratio.

VA Income Requirement Guidelines are similar to other programs.  This is not an inclusive list of items needed.  Documentation may be more of less perLender requirements or through the use of automated underwriting engines such as DO/DU(FNMA) or LP(FHLMC)

Employment verification general requirement

  • Verify a minimum of 2 years employment.
  • If not employed by the present employer less than 2 years:
    Verify prior employment plus present employment covering a total of 2 years;
  • Gaps of employment great than 30 days may need explanation
  • Current paystubs for 1 months time period.  Paystub must contain YTD information.
  • W-2 forms for the past 2 years


  • Provide an explanation of why 2 years employment could not be verified.

Borrowers that are self employed will need to provide the following:

VA’s debt-to-income ratio is a ratio of total monthly debt payments (housing expense, installment debts, etc.) to gross monthly income is generally 41%:

Though Debt Ratios may exceed the 41%, if not approved through and automated underwriting engine such as DO/DU(FNMA) or LP(FHLMC) then and underwriter will be looking to make sure that there are some compensating factors. 

In addition, underwriter need to review and verify that there is sufficient residualincome for family support available for the Veteran after making the loan.



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.They cannot be used to compensate for unsatisfactory credit.

Valid compensating factors should logically be able to compensate (to some extent) for the identified weakness in the loan. For example, significant liquid assets may compensate for a residual income shortfall whereas long-term employment would not.

Compensating factors include, but are not limited to the following:

Excellent credit history
Conservative use of consumer credit
Minimal consumer debt
Long-term employment
Significant liquid assets
Sizable downpayment
The existence of equity in refinancing loans
Little or no increase in shelter expense
Military benefits
Satisfactory homeownership experience
High residual income
Low debt-to-income ratio
Tax credits for child care, and
Tax benefits of homeownership.

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