Who Approves A VA Loan?
Applying for a VA home loan can be a bit more complex than a conventional loan, but the perks (including the no money down option) can definitely be worth the additional effort.
One of the complexities of a VA loan application has to do with how the loans are approved. With a conventional loan, the borrower applies, submits the loan application paperwork and waits for the lender to do the work. For many VA home loans this process is the same, but some VA loans require an additional step.
VA regulations say that a lender with “automatic approval authority” can make the call on whether or not to approve a VA insured mortgage in a variety of situations, but some VA loan applications require the loan to be submitted to the VA for “prior approval”. For example, joint loans must be submitted to the VA. Joint loan transactions are not simple issuance of credit to qualified borrowers, and require closer scrutiny.
That’s not to say that it is more difficult to qualify for a joint loan–every situation has its own nuances–but the VA does insist on a closer look at the application first. The prior approval requirement means the loan application may take a bit longer to process, but once the loan comes back as approved from the VA, the process can begin moving forward again.
The VA Lender’s Handbook says, “All lenders, whether or not they have automatic authority, must submit the following types of loans to VA for prior approval” including “loans to veterans in receipt of VA nonservice-connected pension” and “loans to veterans rated incompetent by VA”. Interest Rate Reduction Refinancing loans made for delinquent mortgages also require prior VA approval.
In some cases, VA loans for manufactured homes also require prior VA approval. This is true when the manufactured home is not “permanently affixed to the lot and considered real estate under state law”. The VA does provide an exception to this rule–a lender who has been “separately approved” for automatic approval authority for these types of mortgages is not required to submit for prior approval from the VA.
The list of VA mortgage loan applications which must go to the VA for prior approval also includes co-op and supplemental loans, and “unsecured loans or loans secured by less than a first lien.”