This is a pet peeve of mine.
If you counteroffer the applicant you are telling them we can't make the loan on the terms requested but we will make you a loan on these terms. If you have not underwritten the applicant to see if they qualify for those terms before you offer them then IMO that's on you.
If you still need to underwrite the applicant to qualify them for different terms then I would suggest denying the loan for the reason you cannot make it as applied for and advising them you would reconsider the request if certain conditions are met.
My 2 cents worth.
The opinions expressed are mine and they are not to be taken as legal advice.