How to Appeal a VA Loan Denial

Getting denied for a VA loan can be disappointing, but it’s not the end of the road.

VA loans provide an excellent opportunity for veterans and their families to buy a home, offering perks like no down payment and more lenient credit requirements.

Even though VA loans are meant to be accessible, denials do happen. The good news? You can appeal the decision and take steps to strengthen your next application.

Here’s a practical guide on what to do if your VA loan application is denied and how you can turn things around.

Common Reasons for VA Loan Denial

Understanding why your loan was denied is the first step in successfully appealing the decision. Here are some of the most common reasons VA loan applications get turned down:

Low Credit Score: While VA loans are more flexible than conventional loans, most lenders require a credit score of at least 620.
High Debt-to-Income (DTI) Ratio: If too much of your monthly income goes toward debt payments, lenders may consider you too risky.
Insufficient Income: Lenders need to see that your income can comfortably cover mortgage payments.
Property Issues: The home must meet VA standards for safety, sanitation, and structural soundness. If it doesn’t, the loan could be denied.
Previous Foreclosure or Bankruptcy: These don’t necessarily disqualify you, but they may require a waiting period before you can apply again.

Step 1: Review Your Denial Letter

When your loan is denied, the lender will provide a denial letter. This document explains why your application was turned down, giving you clear insight into what needs to be addressed. Pay attention to key areas:

Credit Score: Is your score below the minimum requirement?
Debt-to-Income Ratio: Are your debt payments too high relative to your income?
Income Verification: Did your income documentation fail to meet the lender’s standards?
Property Issues: Did the property fail to meet VA appraisal requirements?

The information in this letter will guide your next steps.

Step 2: Talk to Your Lender

Once you’ve reviewed your denial letter, it’s a good idea to speak with your lender. This conversation can clarify any confusion about why you were denied and give you insights into what you can do to improve your chances next time.

“Many VA loan denials come down to simple issues like missing paperwork or small credit score discrepancies,” says James Porter, Loan Officer at Veteran’s Financial Group. “A quick conversation with your lender can often reveal exactly what went wrong and what to focus on to fix it.”

Your lender might even have advice on specific steps you can take to reapply more successfully.

Step 3: Fix Errors on Your Credit Report

Sometimes, the issue is a mistake on your credit report. Errors can drag down your credit score and lead to unnecessary denials. Take these steps to clean up your credit report:

Dispute Errors: If you find mistakes—like incorrect account balances or payments marked as late—dispute them with the credit bureau.
Pay Off Debt: Reducing your credit card balances and paying off loans can significantly boost your credit score.
Avoid New Credit: Try not to open new credit accounts while working on your appeal. It can lower your score in the short term.

“Even small changes, like paying down a high-interest credit card, can have a positive impact on your score,” says Sandra Green, a mortgage specialist at Heroes Lending Services. “A few tweaks can make the difference between approval and denial.”

Step 4: Improve Your Financial Profile

If your denial was due to a high debt-to-income ratio or insufficient income, improving your financial situation is essential. Here’s how you can do it:

Lower Your Debt-to-Income Ratio: Focus on paying down debt to reduce your DTI. The lower your monthly obligations, the more likely a lender is to approve your loan.
Increase Your Income: Consider ways to boost your income, whether through a side gig, a raise, or a new job. The more stable and reliable your income, the better your chances of approval.

Improving these areas not only strengthens your current financial situation but also makes you a more attractive candidate to lenders when you reapply.

Step 5: Ask for a Re-Evaluation of Your Certificate of Eligibility (COE)

The Certificate of Eligibility (COE) proves you’re eligible for a VA loan. If the issue lies with your COE, you can request a re-evaluation. Here’s what you can do:

Check Your COE Status: Log into the VA’s eBenefits portal to view your COE.
Submit Additional Documents: The VA might need more information, such as proof of military service or updated income details.
Follow Up: Don’t be afraid to check in if you don’t hear back in a timely manner.

Step 6: File a Notice of Disagreement (NOD)

If you believe there was a mistake in the denial of your loan, you can file a Notice of Disagreement (NOD). This formal appeal process allows you to contest the decision.

Timeline: You have one year from the date of denial to file a NOD.
What to Include: Clearly explain why you disagree with the decision and include supporting documents.
Submit: Send the NOD to the VA office that handled your loan application.

Filing a NOD can be a time-consuming process, but if there was an error, it’s worth pursuing.

Step 7: Reapply for Your VA Loan

Once you’ve addressed the issues that caused the denial—whether it’s fixing errors, improving your financial profile, or getting your COE re-evaluated—you’re ready to reapply. Here’s what to keep in mind:

Submit Updated Documents: Make sure to provide up-to-date income verification and any improvements in your credit score or debt status.
Consider Switching Lenders: If you feel that your current lender isn’t the right fit, you can always apply through a different VA-approved lender who may be more willing to work with your situation.

“Sometimes, finding a new lender who better understands the VA loan process can make all the difference,” explains Paul Turner, Chief Lending Officer at Valor Mortgage Solutions. “Every lender evaluates loans a little differently.”

Common Reasons for a Loan Denial and How to Fix Them

Reason for Denial	How to Address It
Low Credit Score	Pay down debt, correct credit report errors
High Debt-to-Income Ratio	Lower debt, increase income
Insufficient Income	Provide additional income documentation
Property Issues	Work with the seller to fix problems
Foreclosure or Bankruptcy	Wait for the mandatory waiting period

Tips for Improving Your VA Loan Approval Odds

To improve your chances of getting approved when you reapply, follow these tips:

Monitor Your Credit: Regularly check your credit report for any changes or errors that could negatively affect your score.
Lower Debt: Focus on paying off high-interest loans or credit card balances to lower your debt-to-income ratio.
Be Prepared: Have all your income verification documents ready to show the lender that you’re financially stable and capable of making mortgage payments.
Work with a VA-Savvy Lender: Not all lenders are equally familiar with the VA loan process. Make sure you’re working with one who understands the ins and outs of VA loans.

The Bottom Line

Getting denied for a VA loan doesn’t mean your dream of homeownership is over. By understanding why you were denied, correcting any issues, and improving your financial profile, you can increase your chances of approval when you reapply.

Be patient, persistent, and make sure you’re working with a lender who understands the VA loan process.