Just Denied for a VA Loan? Here's What to Do Next

Answer a few questions about your denial and get a personalized diagnosis: the VA baseline rule, whether switching lenders could help, documents to gather, and your next three actions.

The single most important question after a denial is whether the reason was a VA requirement or the lender’s own policy. This table separates the two for the most common denial triggers.

The stage of denial determines your best next action. A prequalification rejection is different from a final underwriting denial.

An AUS Refer is not a denial. It means the automated system could not approve the file and the loan must be manually underwritten. Many files that receive a Refer are ultimately approved through VA manual underwriting. A suspension means the underwriter needs additional documentation — the file is not dead. A conditional approval means you are approved pending specific conditions being met.

Credit Score

VA does not set a universal minimum credit score. Lender overlays typically range from 580 to 640. A denial for credit score is almost always a lender overlay, not a VA requirement. [F-CREDIT-01]

VA Loan with 580 Credit Score Guide — Denied Due to Credit

DTI and Residual Income

41% DTI is not a hard VA maximum. VA treats it as a benchmark that requires closer scrutiny, not an automatic disqualification. When residual income exceeds the VA regional guideline by at least 20%, the loan may be approved above 41% with justification. [F-DTI-01, F-DTI-02]

Can My DTI Be Over 41%? — VA Residual Income Chart — Denied Due to DTI

Income and Employment

Self-employment income is generally considered stable after 2 years, but less than 2 years can qualify with prior related employment or specialized training. Less than 1 year can rarely qualify but is not absolutely barred. Overtime and bonus income generally requires a 2-year verified history. [F-INC-01, F-INC-02, F-INC-03]

Self-Employment Eligibility — Changing Jobs During the Process

Student Loans

Student loans deferred at least 12 months beyond closing may be excluded from the loan analysis. Loans in repayment or scheduled to begin within 12 months use the greater of the credit-report payment or 5% of the outstanding balance divided by 12. [F-STUD-01, F-STUD-02]

How Underwriters Count Student Loans — Buying a Home with Student Loan Debt

Collections, Charge-Offs, and Judgments

Medical collections (including medical charge-offs) may be disregarded if not reduced to judgment. Non-medical collections do not need to be paid off if overall credit is acceptable; they are counted at 5% of balance divided by 12 for DTI. Judgments are treated more strictly — they generally must be paid or placed on an acceptable repayment plan. [F-COLL-01, F-COLL-02, F-COLL-03, F-COLL-04]

Collections & Charge-Off Guidelines — Medical Debt and VA Loans

CAIVRS and Federal Debt

A CAIVRS flag from delinquent or defaulted federal debt (student loans, VA debt, tax debt, SBA, FHA) suspends loan processing until the debt is brought current or placed on an acceptable arrangement. This applies across all lenders — switching lenders will not clear a CAIVRS flag. [F-CAIVRS-01]

CAIVRS & Federal Debt Guide — VA Loans and IRS Tax Liens

Bankruptcy and Foreclosure

Chapter 7 discharged more than 2 years ago may be disregarded. Between 1 and 2 years, approval requires re-established credit and circumstances beyond control. Within 12 months, approval is generally not possible. Chapter 13 with 12+ months of satisfactory plan payments and Trustee or Judge approval may receive favorable consideration. Foreclosure follows the same 2-year framework as Chapter 7. Short sales and deeds-in-lieu may not require a waiting period if the borrower’s payment history was unaffected. [F-BK-01 through F-SS-01]

VA Loan After Bankruptcy — During Chapter 13 — After Chapter 7 — Foreclosure Recovery

Property: MPR and Low Appraisal

VA Minimum Property Requirements are VA rules that cannot be waived by any lender. Appraisal value issues are separate from condition issues. When the appraisal comes in low, the Veteran can use Tidewater, submit a Reconsideration of Value, renegotiate the price, pay the difference, or use the VA escape clause.

VA MPR Guide — VA Appraisal & Tidewater — How to Appeal a VA Appraisal — Denied Due to Appraisal

COE, Eligibility, and Entitlement

Service requirements depend on era and status. Current active duty needs 90 continuous days. Guard and Reserve need 6 creditable years or qualifying active-duty service. An other-than-honorable discharge does not automatically bar eligibility — VA conducts a Character of Discharge review, expanded effective June 25, 2024 (FR 2024-09012). [F-ELIG-01, F-DISCH-01]

VA COE Decoder — Denied COE — What’s Next — Service Requirements Guide

Condo Project Approval

The condominium project must be approved by the VA before any unit in the project is eligible for VA financing. The VA does not offer single-unit condo approval; that is an FHA program. See why the VA does not offer it and what to do instead. [F-CONDO-01: VA Pamphlet 26-7 Ch. 16, Section 16-A.02]

VA loan condo buying guide

What Your Adverse Action Notice Means

It is uncommon, but material changes before funding can still derail a loan. Changes that can cause problems after clear-to-close include: new debt or credit accounts, job loss or employment change, late payments, undisclosed liabilities, large unexplained bank deposits, property damage discovered before closing, title issues, or insurance problems.

VA baseline waiting periods are distinct from the practical time borrowers typically need to resolve the underlying issue.

Typical recovery times are [Network experience] observations, not VA rules. VA baseline periods are sourced from VA Pamphlet 26-7 Chapter 4 (KnowVA, captured 2026-09-21).

VA loans have a lower denial rate than FHA or conventional loans. For current denial-rate data and methodology, see our detailed breakdown: How Often Do VA Loans Fall Through?

Whether you get your earnest money back depends on your purchase contract, financing contingency, VA escape clause (where applicable), deadlines, the reason financing failed, and state law. Do not assume it is automatically refundable. Ask your real estate agent, title company, or attorney about your specific contract terms.

VA Loan Earnest Money: Smart Deposits & Buyer Protections