VA Prior Approval Loans
VA Prior Approval Loans are specific types of VA-guaranteed loans that must be submitted to the Department of Veterans Affairs (VA) for underwriting and approval before the loan can be closed. This requirement applies to all lenders, regardless of whether they possess VA Automatic Lenders (Supervised and Nonsupervised).
Mandatory Prior Approval Cases
The following types of loans always require VA prior approval:
- Joint loans: Loans made to a Veteran and another Veteran, or a Veteran and a non-Veteran.
- Loans to Veterans in receipt of VA nonservice-connected pension.
- Loans to Veterans with a VA appointed fiduciary.
- Delinquent IRRRLs: Fannie Mae to Fannie Mae Refinances made to refinance VA loans that are delinquent.
- Manufactured home loans: Unless the manufactured home is permanently affixed to the lot and considered real estate under state law, or the lender has been separately approved for this purpose.
- Unsecured loans or loans secured by less than a first lien.
Additionally, lenders without VA Automatic Lenders (Supervised and Nonsupervised) must submit all loans for prior approval, with the sole exception of non-delinquent IRRRLs.
Optional Prior Approval Processing
Lenders with VA Automatic Lenders (Supervised and Nonsupervised) may also elect to submit a loan for prior approval. This optional procedure is intended for cases that may not be clearly approvable under the VA's published VA-Approved Credit Underwriter and Underwriting Standards but which, in the lender's view, contain significant Compensating Factors.
Lenders should only consider submitting cases for prior approval if they firmly believe approval can be justified, and the specific facts of the case appear to preclude automatic approval. This process serves as an important tool for approving marginal or complex loans that might otherwise be denied, thereby increasing credit access for minority and lower-income borrowers. It should not be used to shift the burden of a loan rejection to the VA.
When submitting a loan for optional prior approval, the underwriter must include:
- A detailed explanation of why the loan should be approved by the VA.
- A thorough justification for not approving the loan on an automatic basis.
It is not sufficient to submit a loan to the VA solely to comply with a veteran's or real estate agent's request.
Study the full exam sections
This page is reference detail. The five SAFE exam study guides put it in context.