VA Manual Underwriting Guide
When a computer says "maybe," a human underwriter says "let me take a closer look." Learn how manual underwriting can help veterans qualify for a VA loan with no down payment.
What is VA Manual Underwriting?
In simple terms: VA manual underwriting is when a human, not a computer, decides if you can afford a home. While most VA loans are approved by an automated software system (AUS), manual underwriting happens when your financial situation needs a person to look at the nuances.
- Thin credit file or no credit score
- DTI exceeds 41%
- Recent bankruptcy or foreclosure
- Non-traditional income sources
- Certificate of Eligibility (COE)
- DD-214 or Statement of Service
- 2 years tax returns & W-2s
- Residual income calculation
DTI Limits (Debt-to-Income)
VA loans use a 41% DTI guideline for manual underwriting, but this can be exceeded with strong compensating factors. Unlike FHA, VA focuses heavily on residual income.
| Scenario | Max DTI | Requirements |
|---|---|---|
| Standard | 41% | Meets residual income requirements |
| With Compensating Factors | Up to 50% | Strong residual income + factors |
| Tax-Free Income | Higher | Disability, BAH can be grossed up 25% |
VA Compensating Factors
Excellent Credit History
12+ months of clean credit
Significant Liquid Assets
Savings, investments, retirement
Long-Term Employment
2+ years same field/employer
Minimal Housing Increase
New payment similar to current
Military Benefits
Tax-free income like disability/BAH
Conservative Credit Use
Low utilization, minimal debt
Residual Income Requirements
Residual income is the key to VA loan approval. It's the money left over each month after paying your mortgage, taxes, insurance, debts, and estimated utilities/maintenance. Requirements vary by region and family size.
| Family Size | Northeast | Midwest | South | West |
|---|---|---|---|---|
| 1 | $450 | $441 | $441 | $491 |
| 2 | $755 | $738 | $738 | $823 |
| 3 | $909 | $889 | $889 | $990 |
| 4 | $1,025 | $1,003 | $1,003 | $1,117 |
| 5+ | $1,062 | $1,039 | $1,039 | $1,158 |
* Add $80 for each additional family member beyond 5
Northeast
CT, MA, ME, NH, NJ, NY, PA, RI, VT
Midwest
IA, IL, IN, KS, MI, MN, MO, ND, NE, OH, SD, WI
South
AL, AR, DC, DE, FL, GA, KY, LA, MD, MS, NC, OK, PR, SC, TN, TX, VA, WV
West
AK, AZ, CA, CO, HI, ID, MT, NM, NV, OR, UT, WA, WY
LTV Requirements (Down Payment)
Great news! VA loans offer 100% financing even with manual underwriting. No down payment is required as long as you meet residual income requirements.
Standard VA benefit, even with manual underwriting
VA loans never require PMI
Can be financed. Exempt for disabled veterans.
Summary for Veterans
As a veteran, you can qualify for a VA loan with no down payment and no mortgage insurance even with manual underwriting. The key is meeting the residual income requirements for your region and family size. If your DTI exceeds 41%, you'll need strong compensating factors and residual income that exceeds the minimum by at least 20%.
Ready to See If You Qualify?
Speak with a VA loan specialist who understands manual underwriting and can help you navigate the process.
Frequently Asked Questions
Common questions about VA manual underwriting
Disclaimer: This information is provided for educational purposes only and is based on VA guidelines as of 2026. Actual loan approval is subject to lender requirements, property appraisal, Certificate of Eligibility, and other factors. Guidelines may change. Consult with a licensed mortgage professional for personalized advice. NorthStar Funding NMLS #139369.