When it comes to VA manual underwriting in 2025, lenders and borrowers need to be fully aware of the guidelines that dictate when a loan must be manually reviewed. Manual underwriting is required when certain credit factors or risk indicators are present, and a traditional AUS (Automated Underwriting System) approval is not available.

At North Star Mortgage Network, we make sure that veterans and active-duty service members don’t miss out on homeownership simply because their profile doesn’t fit a cookie-cutter mold. This guide outlines the VA manual underwriting 2025 requirements that lenders and underwriters must follow.

What Triggers VA Manual Underwriting?

Loans may require manual underwriting when one or more of the following are present:

  • Limited or no credit history
  • Recent bankruptcy (within the past 24 months)
  • Foreclosure, short sale, or deed-in-lieu
  • Late mortgage payments
  • Federal debt delinquency or default

VA Manual Underwriting 2025 Debt-to-Income (DTI) Guidelines

In a manual underwriting scenario, the VA requires stricter scrutiny of the debt-to-income (DTI) ratio:

  • DTI should not exceed 41%
  • DTI over 41% may be permitted only if residual income is at least 120% of the guideline
  • All household members and job-related expenses must be considered
  • Income gross-up must align with the borrower’s tax bracket
  • High-balance VA loans are not eligible for manual underwriting – they must receive an AUS approval

Documentation Requirements for VA Manual Underwriting

VA manual underwriting in 2025 demands full documentation. Below are some highlights:

Credit Reports and Payment History

  • A 24-month rental history is required if rent is not listed on the credit report
  • Any mortgage history with more than one 30-day late payment requires downgrade to manual
  • All significant debts (over 2% of gross monthly income) must be verified if not on the credit report

Employment and Income

  • Gaps in employment under 30 days do not require explanation
  • Pay stubs, YTD info, and verbal employer verification are required
  • For self-employed borrowers:
    • Two years of signed tax returns or IRS transcripts
    • Balance sheets and P&L may be required depending on tax year timing
    • Business tax returns may be waived if borrower has owned the business for 5+ years and other criteria are met

Asset Verification

  • Provide two months of bank statements to verify funds for closing
  • Must show funds are in the borrower’s name

Valid Compensating Factors for VA Manual Underwrites

Underwriters may approve a marginal loan if strong compensating factors are present. However, these factors must be genuine strengths, not just program compliance:

  • Excellent credit history
  • Conservative credit use and low consumer debt
  • Long-term, stable employment
  • Large cash reserves
  • Sizable down payment (if applicable)
  • High residual income
  • Minimal increase in shelter costs
  • History of responsible homeownership
  • VA benefits that strengthen loan performance

Why Work With North Star Mortgage Network?

Navigating VA manual underwriting 2025 can be complex, but we specialize in making it simple. Our team understands the unique situations veterans face, and we’re proud to stand by you to secure a home loan that fits your life.

If you’re facing manual underwriting due to credit issues, limited history, or prior financial hardship — don’t let that stop you. We know the guidelines inside and out and have a strong track record of helping borrowers get approved when others say no.

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