| VA Borrower Eligibility | | | Veteran | | | Veteran with Spouse | | | Veteran with another veteran | | | Veteran with Non-veteran (who is not the spouse) is sent directly to the VA Eligibility center for prior approval |
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| Veteran Entitlement Service Period | | | | ERA | Dates | Minimum Service | | WWII | 9-16-40 thru 7-25-47 | 90 continous days | | Peacetime | 7-26-47 thru 6/26/50 | 181 days | | Korean | 6-27-50 thru 1-31-55 | 90 days | | Post-Korean | 2-1-55 thru 8/4-64 | 181 days | | Vietnam | 8-5-64 thru 5-7-75 | 90 days | | Post-Vietnam (Enlisted) | 5-8-75 thru 9-7-80 | 181 days | | Post-Vietnam (Officer) | 5-8-75 thru 10-16-81 | 2 years | | Post Vietnam (Officer) | 9-8-80 thru 8-1-90 | 2 years | | Persian Gulf | 8-2-90 thru undetermined | 2 years or period called to active duty, not less than 90 days |
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| Other Eligible Persons | | | | Active Duty Members | 90 continous days (181 during peacetime) | | Active Reserve or National Guards | 6 years in selected reserves | | Un-remarried surviving spouse | No time requirement, Veteran must have died on active duty or from a service-connected disability. | | POW/MIA spouse | Veteran must have been a POW or MIA for 90 days |
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| Eligible Loan Purpose | | | Purchase 1- 4 family units, including | | Condominiums (VA approved) | | Townhouses | | Manufactured Home (and Lot) | | | To Build a Home | | | To Purchase and improve a home | | | To improve a home by installing energy-related features | | | To Refinance an existing home loan for the purpose of:| | Cash Out – up to 90% LTV | | Reducing the interest rate (IRRRL) | | | Interest Rate Reduction Refinance Loan | | | Only existing VA loans qualify |
| | | Converting an adjustable rate mortgage (ARM) to a fixed rate mortgage |
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| Available Programs | | | Fixed Rate | | | | | | Adjustable Rate Mortgage (ARM) | | | | | 1 year – must Qualify at 1% above note rate | | | 3/1 | | | 5/1 | | | | | Margins: 1 YR = 2.25%, 3/1 and 5/1 = 1.75% | | | Caps: 1/5 |
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| Maximum Loan Limits | | | Purchase = $417,000 | | Refinance (Rate & Term) = 90% Loan to Value of home (not to exceed $417,000) | | Refinance (Cash Out) = 90% Loan to Value of home (not to exceed $417,000) | | Refinance (IRRRL) = 100% Loan to Value of home |
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| Maximum LTV’s | | | Zero Down | | 100% LTV | | LTV may be up to 103.3% (when Funding Fee is financed) |
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| Loan Approval Requirements | | | Applicant must be an eligible veteran who has available entitlement; | | 100% LTV | | The loan must be for eligible purposes; | | Veteran must occupy home within a reasonable period after closing; | | Veteran must be a satisfactory credit risk, and | | Income must be stable and sufficient to | | | Meet mortgage payment | | | Take care of obligations and expenses and have enough left over for family support. |
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| Loan Types Requiring Prior Approval | | | Joint Loans with someone other than spouse. | | Loans to veterans in receipt of VA non service-connected pension | | Loans to vets rated incompetent by VA | VA Eligibility Center
P. O. Box 20729 251
N. Main Street
Winston-Salem, NC 27120
888-244-6711 (8:00-4:00 EST |
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| Occupancy: | | | Any person who uses entitlement on a joint loan must certify intent to personally occupy the property. | | Any borrower on a joint loan who does not use entitlement for the loan (such as a non-veteran) does not have to occupy the property. | | | Lenders Handbook, VA Pamphlet 26-7, Revised, Change 3, Chapter 5 |
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| Energy Efficient Mortgage (EEM) | | | Loans for the acquisition of an existing dwelling and the cost of making energy efficient improvements, refinancing an existing VA loan. | | Mortgage may be increased by: | | | Up to $3000 documented costs | | | Up to $6000 provided increase in PITI does not exceed reduction in monthly utility | | | More than $6000 subject to determination by VA |
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| Cash Out Refinance | | | Loan Limit 90% of the Loan to Value (appraisal) (Max $417,000) | | | + Funding Fee | | | + cost of Energy Efficient Improvements |
| | Must payoff an existing lien(s) of record. | | Itemization of debts paid off required. | | Veteran can receive cash proceeds. |
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| Other Refinancing Loans | | | To payoff Construction Loans | | Installment land sales contracts | | Loans assumed by veterans at interest rates higher than that for the proposed refinance | | These loans are like cash-out, except: | | Loan amount is not limited to 90% | | Loan may not exceed the lesser of the VA reasonable value or the sum of the outstanding balance of the loan to be refinanced | | | + allowable closing costs and discount points |
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| Interest Rate Reduction Refinance Loan (VA to VA) | | | Loan Limit 90% of the Notice of Value (appraisal) | | | + Funding Fee | | | + cost of Energy Efficient Improvements |
| | Must payoff an existing lien(s) of record. | | Itemization of debts paid off required. | | Veteran can receive cash proceeds. |
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| IRRRL Borrower Eligibility | | | | Parties obligated on old VA Loan | Parties to be obligated on new IRRRL | Is IRRRL Possible? | | Unmarried veteran | Veteran and new spouse | Yes | | Spouse alone (veteran died) | No | | Veteran alone | Different veteran who has substituted entitlement | Yes | | Veteran and spouse | Divorced veteran alone | Yes | | Veteran and different spouse | Yes | | Spouse alone (veteran died) | Yes | | Divorced spouse alone | No | | Different spouse alone (veteran died) | No | | Veteran and non-veteran joint loan obligors | Veteran alone | Yes | | Non-veteran alone | No |
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| Standard Documentation | | | Income claimed by applicant that cannot be verified should not be given consideration. | | A minimum of two years employment verified. | | VOE’s dated within 120 days of the note, 180 days for new construction. | | Certified copy of applicant’s pays stub. | | VOE should be compared to pay stub for consistency. | | If in school/military during this time, borrower must provide evidence: transcripts or discharge papers. | | Explain any gaps in employment of a month of more. No explanation required on gaps < 60 days if LP approved. |
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| Reservists, National Guard & Active Duty Applicants | | | The Leave and Earnings Statement (LES)must identify service members who are within 12 months of release from active duty or end of contract term. | | Continuation of Military Allowances must be determined to count as income. | | | Flight pay, hazardous duty pay, etc If cannot be determined use to offset debts of 24 months or less. |
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| Leave & Earnings Statement | | | If the date is within 12 months of the anticipated date that the loan will close, the loan package must also include one of the following items or combination of: | | Re-enlistment documentation | | Valid offer of local civilian employment following release of active duty | | Intent to re-enlist letter certified by commanding officer | | Or Documentation of unusually strong underwriting factors such as – Down payment of 10%; significant cash reserves, and evidence of strong community ties, coupled with non-military spousal income. |
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| Notified of Mobilization | | | Lenders must recognize that activated reservists whose incomes are reduced may be unable to qualify for the loan they are seeking. | | Ask if applicant has been notified of a mobilization of his or her unit. | | If so, the loan must be underwritten on the basis of the projected active duty income. |
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| Employment Income | | | Self-employment Income- 2 years, or | | | Related Experience and/or specialized training |
| | Commission Income – 2 years | | Rental Income – 25% vacancy factor | | | Multi-family Housing – 6 mos. reserves | | | Rental of Existing Property – offset PITI | | | Other Rental Property – 2 mos. reserves |
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| Stability & Use of Income | | | 12 months or longer to count as income | | 2nd job income, only after 2 years | | | Ability of working two jobs must be demonstrated |
| | Overtime or Part-time – reliable after 2 years | | Seasonal Income – document continuance | | Unemployment compensation – not stable | | Worker’s Compensation, Foster Care, Alimony, and Child Support – paid consistently and likely to continue | | Public Assistance and Social Security – 3 yrs continuance |
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| Credit Requirements | | | General Rule: | | No derogatory references within last 12 months, generally = acceptable credit. Exceptions are: | | | Outstanding judgments – loan cannot be approved with unpaid judgment, unless acceptable payment plan with acceptable payment history. | | | Unresolved Federal debts –Must be paid in full, in non-collectible status, or on repayment plan. |
| | Tri-merge Credit Report – 120 days, 180 new construction |
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| Credit History | | | Credit scores not required. | | Non-traditional credit allowed. | | Examples of non-traditional credit: | | | Rental history | | | Utilities | | | Insurance (not payroll deducted), auto, life, renters | | | Auto payments paid to alternative resources | | | Child Care, department stores |
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| Bankruptcy | | | Chapter 13 | | Need 12 months satisfactory payment history and approval of court. | | | | Chapter 7 | | 2 years, date of discharge, with no derogatory credit | | Due to circumstances beyond borrower’s control, 12 month with no derogatory credit and documentation of circumstances. |
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| Foreclosures & CCCS | | | Foreclosure: | | At least two years since foreclosure completed. | | Guidelines for bankruptcies filed under Chapter 7 | | Prior VA loans: sufficient entitlement, no unresolved debt to government | | | | Consumer Credit Counseling Service | | If entered before delinquency, a positive or neutral factor. | | One year acceptable payment history, and counselor approval |
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| Assets | | | Applicant or spouse must have sufficient cash to cover: | | Closing costs or points which are their responsibility | | Down Payment, if less than 100% LTV | | Difference between sales price and the loan amount, if sales price exceeds appraised value | | VA does not require reserves | | Liquid assets must be verified to the extent that are needed to close the loan. |
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| Gift Funds | | | Gift Funds are acceptable from the following sources: | | Borrower’s relative | | Borrower’s employer or labor union | | Charitable Organization | | Governmental Agency or public entity that has a program to provide homeownership assistance |
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| Compensating Factors | | | | Excellent long term credit | | Minimal consumer debt | | Significant liquid assets | | Little or no increase in shelter expense | | Low debt to income ratio | | Tax benefit of home ownership | | Conservative use of consumer credit |
| | Long-term employment | | Down Payment | | Military benefits | | High residual income | | Tax credits for child care | | Equity in refinancing loans | | |
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| VA Residual Income | | | Monthly balance of funds available for family support after meeting the borrowers shelter, expenses, debts, and taxes. | | It is calculated per the VA Loan Analysis. | | The table of residual income figures is based off of loan amount, region and family size. |
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| Residual Income | | | | Table of Residual Incomes by Region For Loan Amounts of $ 80,000 ans above (VA Lender’s Handbook 26-7, Chapter 4, Page 4-63) | | Family Size | Northeast | Midwest | South | West | | 1 | $450 | $441 | $441 | $491 | | 2 | $755 | $768 | $768 | $823 | | 3 | $909 | $889 | $889 | $990 | | 4 | $1,025 | $1,003 | $1,003 | $1,117 | | 5 | $1,062 | $1,039 | $1,039 | $1,158 | | Over 5 | Add $80 for each additional member upto a family of 7. |
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| Maintenance & Utilities | | | To be used to determine residual income and entered on line 19 of the VA Loan Analysis: | | Calculated at 14 cents per square foot | | Calculation is utilized in the required VA Loan Analysis | | 1500 sq. ft. X .14 = $210 |
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| Child Care Expenses | | | Required on VA Purchases and any Credit Qualifying Refinance if the borrower has disclosed dependents. | | If the Veteran has any children, then a Child Care Letter/Statement will be required. | | | The child care statement must disclose who will be taking care of the children. | | | Any expenses as a result of child care are included in the total debt to income ratio. |
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| Non-allowable Closing Costs | | | VA does not recognize certain closing costs as charges/fees that the Veteran is allowed to pay. VA does not set a percentage of allowable closing costs, they refer to what is typical for the area. | | Non-allowable costs include: | | | Administration | | | Underwriting | | | Processing | | | Tax service | | | Courier/mail fees, etc. |
| | These fees are payable by the seller or lender. |
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| Seller Concessions | | | Anything of value added to the transaction by the builder or seller for which the buyer pays nothing. May not exceed 4% of reasonable value. | | Payment of buyer’s funding fee | | Gifts, such as big screen television or car | | Payoff of credit balances or judgments | | Payment of extra points for rate buy down | | | | Seller Concessions Do Not Include: | | Payment of buyer’s closing costs | | Payment of points as appropriate to the market. |
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| Power of Attorney | | | VA will allow a veteran to use an attorney-in-fact to execute any documents necessary to obtain a VA guaranteed loan. | | Requires a general or specific Power of Attorney and written consent to transaction. | | | Entitlement – clear intent to use his COE | | | Purpose – obtain a loan for purchase, refinance. | | | Property Identification | | | Price and terms – sales price and loan terms | | | Occupancy – intent to occupy by veteran |
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| Veteran’s Status as Alive and not MIA | | | At time of closing, the lender must verify that the veteran is alive, and, if on active military duty, not missing in action. | | Lender to Certify | | If lender has difficulty obtaining, lender may request VA to obtain the necessary information. | | VA may deny guaranty on a loan if a lender fails to properly verify, and veteran was deceased or MIA at the time the loan was closed. |
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| Funding Fee Requirements | | | Verify status of any veteran who may be exempt from paying the funding fee | | Determine amount of funding fee owed by a non-exempt borrower | | Collect the appropriate fee | | A veteran may be exempt, complete Verification of VA Benefit-related Indebtedness if any apply: | | | Vet receives VA compensation for service connected disability | | | Has received a VA disability in the past | | | ASK your Veteran if he is exempt! |
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| VA Funding Fee | | | | VA Funding Fees – Purchases | | Transaction Type | Down Payment | Military | Reservist / National Guard | | Initial use of entitlement | Less than 5% | 2.15% | 2.40% | | Second or Subsequent use | Less than 5% | 3.30% | 3.30% | | Initial use of entitlement or Second or subsequent use | 5% but less than 10% | 1.50% | 1.75% | | Initial use of entitlement or Second or subsequent use | More than 10% | 1.25% | 1.50% | | VA Funding Fees – Refinances | | Transaction Type | Down Payment | Military | Reservist / National Guard | | Initial use of entitlement | Less than 5% | 2.15% | 2.40% | | Second or Subsequent use | Less than 5% | 3.30% | 3.30% | | Initial use of entitlement or Second or subsequent use | 5% but less than 10% | 1.50% | 1.75% | | Initial use of entitlement or Second or subsequent use | More than 10% | 1.25% | 1.50% | | VA Funding Fees – Interest Rate Reduction Refinance Loan and Assumptions | | Transaction Type | Military | Reservist / National Guard | | All IRRRL’s and Assumptions | 0.50% | 0.50% |
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| Veteran Entitlement Service Period | | | | ERA | Dates | Minimum Service | | WWII | 9-16-40 thru 7-25-47 | 90 continous days | | Peacetime | 7-26-47 thru 6/26/50 | 181 days | | Korean | 6-27-50 thru 1-31-55 | 90 days | | Post-Korean | 2-1-55 thru 8/4-64 | 181 days | | Vietnam | 8-5-64 thru 5-7-75 | 90 days | | Post-Vietnam (Enlisted) | 5-8-75 thru 9-7-80 | 181 days | | Post-Vietnam (Officer) | 5-8-75 thru 10-16-81 | 2 years | | Post Vietnam (Officer) | 9-8-80 thru 8-1-90 | 2 years | | Persian Gulf | 8-2-90 thru undetermined | 2 years or period called to active duty, not less than 90 days |
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| Pricing Scenario | | | Compare VA Pricing to other products! | | The best pricing for 100% LTV |
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