1. Product Description:
VA Fixed Rate and ARM loans.

2. Program Codes:
VF30 - VA 30 Year Fixed

VF15 – VA 15 Year Fixed

VF30B – VA 30 Year Buydown

VF30J – VA Jumbo 30 Year Fixed

VF15J – VA Jumbo 15 Year Fixed

V31T – VA 3/1 Year Treasury ARM – 30 Year Term Only

VJ31T – VA Jumbo 3/1 Year Treasury ARM – 30 Year Term Only

3. Property Types:
SFR, 2-4 Units, PUDs or VA approved Condo’s. See section 41 for restrictions on Manufactured Homes. Manufactured Homes are not allowed on ARM loans V31T and VJ31T.

4. Occupancy:
Veterans purchasing a primary residence, refinancing or improving their home must certify that they intend to live in the home.
If the buyer is on active duty, a spouse may certify occupancy. In the case of single or married service members deployed from their permanent duty station, they are considered to be in a temporary duty status and are able to certify intent to occupy. There is no need to have a spouse certify occupancy.
If refinancing a VA-guaranteed loan solely to reduce the interest rate, Veterans need only to certify to prior occupancy.

5. Geographic Restrictions:
Texas cashout refinances are prohibited.

6. Documentation Types:
Full Doc, Streamline.

7. Minimum Loan Amount:
None.

8. Maximum LTV and Loan Amounts:

Type of Transaction

Maximum LTV*
Max Loan Amount

Purchase
100% of VA Reasonable Value**
Plus VA Funding Fee
$333,700

IRRRL (Streamline)
Existing VA loan balance
Plus the cost of any energy efficiency improvements up to $6,000
Plus Allowable fees and charges
Plus up to 2 Discount Points
Plus VA Funding Fee
$333,700

Cashout Refinance
90% of VA Reasonable Value
Plus the cost of any energy efficiency improvements up to $6,000
Plus VA Funding Fee
$333,700

Loan to Refinance

-A Construction loan or;

-An installment land sales contract,

-A loan assumed by the Veteran at an interest rate higher than that for the proposed refinancing loan
The lesser of:

VA Reasonable Value
OR sum of the outstanding balance of the loan plus allowable closing costs and discounts, (For construction loans, "balance of the loan" includes the balances of the construction financing and lot liens, if any)
Plus the cost of any energy efficiency improvements up to $6,000
Plus VA Funding Fee
$333,700

* In addition to the factors listed in the table, the maximum loan amount will also be based upon the Veteran’s available Entitlement as stated on the Certificate of Eligibility.

** Loan amount with no money down and full entitlement is $240,000 plus funding fee.

9. MI Coverage:
Private mortgage insurance is not required on VA loans, however a Funding Fee is required in most cases.

The VA Funding Fee may be added to the maximum loan as long as the loan does not exceed $333,700.

Federal law requires all Veterans to pay a Funding Fee, with the following exceptions:

Loans made to veterans receiving compensation for service-connected disabilities, or

Veterans who, but for receipt of retirement pay, would be entitled to receive compensation for service-connected disabilities, or

Loans to surviving spouses of veterans who died in service or from for service-connected disabilities.

VA form 26-8937 Verification of VA Benefit-Related Indebtedness must be completed by the VA for Veterans exempt from the Funding Fee

The funding Fee may be paid in cash or financed, or a combination of the two.

Calculation

The funding fee is calculated based upon the loan amount and whether the Veteran is a first-time or subsequent user (See IRRRL below for exceptions). Depending on the amount of Eligibility the Veteran has, the loan amount may be for 100% of the sales price of the property (or appraised value, if lesser) or the sales price/appraised value less any down payment.

Funding Fee for Veterans – First-time Use

The funding fees for veterans who have not previously obtained a VA loan and whose loan eligibility is not derived from six (6) years of service in the Selected Reserve are:

2.20% of the loan amount for loans with a downpayment of less than 5% (Eff. 1/1/04)

1.50% of the loan amount for loans with at least a 5% downpayment

1.25% of the loan amount for loans with at least a 10% downpayment

Funding Fee for Reservists and National Guards – First-time Use

The funding fees for veterans who have not previously obtained a VA loan and whose loan eligibility is not derived from six (6) years of service in the Selected Reserve are:

2.40% of the loan amount for loans with a downpayment of less than 5% (Eff. 1/1/04)

1.75% of the loan amount for loans with at least a 5% downpayment (Eff. 1/1/04)

1.50% of the loan amount for loans with at least a 10% downpayment (Eff. 1/1/04)

Funding Fee for IRRRLs – First Time and Subsequent Use

0.50% of the amount computed on line 14 of VA Form 26-8923, IRRRL Worksheet for both Veterans and Reservists.

Funding Fee for Cash-Out Refinances – First Time Use

2.20% for first-time use (2.40% for Reserves/National Guard) (Eff. 1/1/04)

Funding Fee for All Subsequent Use Loans (Except IRRRLs)

Veterans using any loan program for the second and subsequent times will pay the following funding fees:

3.30% of the loan amount for all cashout refinances, and purchase money loans with a downpayment of less than 5% (Eff. 1/1/04)

1.50% of the loan amount (2.25% for Reserves/National Guard) for loans with at least a 5% downpayment (N/A to cashout refinances)

1.25% of the loan amount (2.00% for Reserves/National Guard) for loans with at least a 10% downpayment (N/A to cashout refinances)

9. MI Coverage cont.:
Funding Fee for Other Types of loans (Either Type of Veteran, First or Subsequent Use)

1.00% for Assumptions

Funding Fee Exemption

A Veteran must establish any claim for exemption from the fee. The following are the only exceptions allowed:
Veterans receiving VA compensation for service-connected disabilities.
Veterans who would be entitled to receive compensation for service-connected disabilities if they did not receive retirement pay.
Surviving spouses of veterans who died in service or from service-connected disabilities (whether or not such surviving spouses are veterans with their own entitlement and whether or not they are using their own entitlement on the loan).

10. Index:
Weekly average yield on US Treasury securities adjusted to a constant maturity of 1 year as published by the Federal Reserve.

11. Margin:
2.25%

12. Initial/Annual Adjustment Cap:
1% initial rate cap and 1% cap at each interest rate adjustment period thereafter.

13. Life Cap:
Life-of-loan cap of 5%.

14. Payment Cap:
N/A

15. Payment Adjustment:
ARM change date is determined by Lender at the time the loan is locked.

16. Conversion Option:
None.

17. Conversion Fee:
N/A

18. Assumptions:
Loan assumable under the following conditions:

Loan must be current.
The prospective purchaser will assume full liability for repayment of the loan.
The prospective purchaser qualifies from a credit standpoint.
The borrower does not have to be a veteran.
If the assumptor is a veteran, he may wish to substitute his/her entitlement. This procedure must be requested from VA.

19. Prepayment Penalty:
Refer to Note and Deed.

20. Subordinate Financing:
Secondary financing is acceptable as long as:

The Veteran is not placed in a substantially worse position than if the entire amount borrowed had been guaranteed by VA and
The requirements detailed below are met:
Documentation is required disclosing source, amount and repayment terms of the second mortgage and agreement to such terms by all obligors.
Second mortgage must be subordinate to the VA-guaranteed loan. The second mortgage must be in a junior lien position relative to the VA loan.
Proceeds of the second mortgage may be used for a variety of purposes, including but not limited to the following:
Closing costs
MAY NOT be used to cover any portion of a down payment required by VA to cover the excess of the purchase price over VA’s reasonable value.
There can be no cashout back to the Veteran from the VA first mortgage or a second mortgage obtained simultaneously.
The veteran must qualify for the second mortgage, which is underwritten as an additional recurring monthly obligation.
The rate on the second mortgage may exceed the rate on the VA-guaranteed first. However, it may not exceed industry standards for second mortgages. ("Rule of thumb" is that second mortgages are one or two percent above the market interest rates for first mortgages.)
The second mortgage should not restrict the Veteran’s ability to sell the property any more than the VA first mortgage; that is, it should be assumable to creditworthy purchasers.
There should be a reasonable grace period before
A late charge becomes due, or
Commencement of foreclosure proceedings in the event of default.
To calculate CLTV: Divide the sum of the first lien mortgage and the total HELOC credit line limit and any other secondary financing by the lower of the sales price or appraised value.
On IRRRLs, and Cashout refinances, second lien may remain in place without regard to total indebtedness as long as it is subordinated to the new first lien

21. Temporary Buydowns:
(VF30B)

VA 2-1 Buydown may qualify at the Start Rate if borrower shows increasing income.

Purchase only.

Not allowed on VA ARM loans.

Not allowed on Manufactured Homes.

22. Delegated U/W authority:
Delegated. Loans may be manually underwritten or may be run through an automated underwriting system. Loans underwritten with an automated system must receive a DU Approve/Eligible or LP Accept approval.

23. Underwriting:
All loans will be underwritten to VA guidelines.
Regardless of the LP/DU score, the borrower(s) must have the required amount of residual to be a saleable loan.
The use of FHMA/FHLMC waivers is not permitted on the VA ARM (V31T or VJ31T) programs.
Provide a clear CAIVRS # on each applicant and any co obligor. An applicant cannot be considered a satisfactory credit risk if he/she has a judgment lien against his/her property for a debt owed to the Government until the judgment is paid or otherwise satisfied.
Down payment on VA jumbo is required; the veteran’s entitlement plus cash down payment must be equal to at least 25% of the mortgage amount.

Minimum Credit Standards on VA Jumbo

DU Approve or LP Accept, OR

Minimum FICO 640 with:

Minimum 3 trades >= 2 years
0x30 past 12 months on Mortgage/Housing
2x30 past 24 months for Installment
3x30 & 1x60 past 24 months for Revolving
BK – none in past 3 years, no derogatory after BK, re-established credit covering the most recent 2 years
Foreclosure – none in past 3 years
Major Derogatory (collections, judgments, etc.) – none in past 12 months (ignore medical collections <$500)
Bankruptcy

Chapter 7 - Must be a minimum of 2 Years old, unless providing extenuating circumstances, however no less than 1 year from discharge.

Chapter 13 – Minimum 1 year into BK with satisfactory performance and approval from court to obtain the new mortgage.

CAIVR System

Access system for all borrowers on the transaction (Borrower, co-borrowers and co-signors if applicable)
Non-Purchasing Spouse (Community Property States)

If property is located in a community property state, or the borrower resides in a community property state, the following requirements apply:

A credit report for the non-purchasing spouse is required to determine any joint or individual debts.
Clear CAIVR
Even if the non-purchasing spouse does not have a social security number, a credit report is still required.
The monthly payment amount of 5% of the outstanding balance (whichever is greater) of all debts of the non-purchasing spouse must be included in the qualifying ratios.
If debts of the non-purchasing spouse are in dispute, they need not be counted provided the file contains documentation to support that they are in dispute.
Credit history of the non-purchasing spouse should not be the sole basis for declining the loan.
In some community property states, such as California, the laws state that the debts incurred by either spouse prior to the marriage are the liability of the community estate.
List of known Community Property States

Arizona Louisiana New Mexico Wisconsin
California Missouri North Carolina Wyoming
Idaho Nebraska Texas
Kansas Nevada Washington

23. Underwriting cont.:
Income from Non-Military Employment can include the following:

Salaried Employed Borrower

A written VOE, or
Paystubs covering at least the most recent 30-day period, and
W-2 forms for the previous 2 years, and
A telephone verification of the applicant’s current employment documenting the date of verification and the name, title, and telephone number of the person with whom employment was verified.
Building Trades/Seasonal or Climate-Dependent Work

Provide documentation evidencing total earnings YTD
2 years federal income tax returns required
Union employees must provide evidence of a history with the union
Employed for less than 12 months – not considered stable and reliable, however, it may be considered stable and reliable if the individual facts warrant such a conclusion

Carefully consider the following:
Employer’s evaluation of the probability of continued employment
Applicant’s training and/or education. (This applies mostly to skilled positions. Examples include nurse, medical technician, lawyer, paralegal and computer systems analyst.)
If the probability of continued employment is high, based on these factors, then the underwriter may give favorable consideration to including the income in total effective income
If the probability of continued employment is good, but not as well supported or employment will be terminated at some point in the future which can be reasonably estimated, the lender may still consider the income of an applicant who has been employed at least 6 months to partially offset debts of 10 to 24 months duration
Income from Overtime, Part-time, Second Jobs, and Bonuses

Must be verified for two (2) years
Must be regular and predictable
Must be reasonable likelihood that it will continue in the foreseeable future
If received <24 months but >12 months, may be used to offset debts of 10 to 24 months duration. Include an explanation
Commission

When all or a major portion of the applicant’s income is derived from commissions, obtain the following documentation:
Written VOE or other written verification which provides the following:
Actual amount of commissions paid year to date
Basis for payment (salary plus commission, straight commission, or draws against commission)
When commissions are paid (monthly, quarterly)
Individual income tax returns, signed and dated, plus all applicable schedules for the previous two years
Less then two years cannot usually be considered stable unless the applicant has had previous related employment and/or extensive specialized training
Less than one year is not acceptable as stable

23. Underwriting cont.:
Self-Employed Borrowers - A borrower who has an ownership interest of 25% or more in a business is considered to be self-employed.

Must have been established for a minimum of 2 years. A shorter timeframe will be considered on a case-by-case basis
Must have a signed 4506
Copies of the past two years’ signed and dated individual federal income tax returns are required
A year-to-date Profit and Loss Statement and current Balance Sheet are required
If the business is a corporation or partnership
Copies of the signed federal business income tax returns for the previous two years plus all applicable schedules, and
List of all stockholders or partners showing the interest each holds in the business
Less then two years cannot usually be considered stable unless the applicant has had previous related employment and/or extensive specialized training
Less than one year is not acceptable as stable
Income from Military Employment can include the following:

A military LES (Leave and Earnings Statement) is required instead of a VOE (VA Form 26-8479)

Service members who are within 12 months of release from active duty or end of contract term

Find the date of expiration of the applicant’s current contract for active service on the LES or on Officer’s Orders
For National Guard or Reserve member, find the expiration date of the applicant’s current contract
If the date is within 12 months of the anticipated date that the loan will close, include one of the following four items, or combination of items to be acceptable:
Documentation that the service member has already re-enlisted or extended his/her period of active duty to a date beyond the 12 month period following the projected closing of the loan, OR
Verification of a valid offer of local civilian employment following the release from active duty. All data pertinent to sound underwriting procedures (date employment will begin, earnings, and so on) must be included, OR
A statement from the service member that he/she intends to re-enlist or extend his/her period of active duty to a date beyond the 12 months period, PLUS a statement from the service member’s commanding officer confirming that:
The service member is eligible to re-enlist or extend his/her active duty as indicated AND
The commanding officer has no reason to believe that such re-enlistment or extension of active duty will not be granted, OR
Documentation of other unusually strong positive factors, such as
A down payment of at least 10%
Significant cash reserves, and
Clear evidence of strong ties to the community coupled with a non-military spouse’s income so high that only minimal income from the active duty service member is needed to qualify

23. Underwriting cont.:
Military Quarters Allowance may be used when:

The applicant’s duty assignment clearly qualifies the applicant for quarters allowance
When VA has established that the waiting list for on-base housing in a particular geographic area is so long that it is improbable that individuals desiring to purchase off-base housing would be precluded from doing so in the foreseeable future.
VA issues a release to all lenders in the jurisdiction to inform them of its determination
Subsistence and Clothing Allowances

Any subsistence (rations) and clothing allowances are indicated on the LES
Other Military Allowances

Verification of the type and amount of the military allowance, and how long the applicant has received it.
Military allowances may be included in effective income only if such income can be expected to continue because of the nature of the recipient’s assigned duties
If duration of the military allowance cannot be determined, this source of income may still be used to offset obligations of 10 to 24 months duration
Income from Service in the Reserves or National Guard

Income derived from service in either Reserves or National Guard may be included in effective income if the length of the applicant’s total active and Reserve/Guard service indicates a strong probability that the Reserve/Guard income will continue
Otherwise, this income may be used to offset obligations of 10 to 24 months duration

24. Age of Documents:
120 Days

180 Days on new construction

25. Qualifying Ratios:
41% and VA residual income for area must be met.

Ratio’s can be exceeded with compensating factors.

ARMS qualify at the initial rate.

Residual income is the amount of income available for family support after taxes and Social Security expense has been subtracted from the gross income and after the house payment and other long-term debt has been paid.

Formula for residual income is the total gross monthly income minus the following:

Federal, State, and Local taxes
Social Security expense
Total housing expense (calculate maintenance and utility costs using 14 cents per square foot)
Long term Debt
Tax-free income may not be grossed up for calculating residual income.

Count ALL members of the household without regard to nature of the relationship when determining "family size".

Regardless of the LP/DU score, the loan must meet the minimum amount of residual income as determined by VA.

25. Qualifying Ratios cont.:
Table of Residual Incomes by Region

For loan amounts of $80,000 and above

Family Size
West
South

1
$491.00
$441.00

2
$823.00
$738.00

3
$990.00
$889.00

4
$1,117.00
$1,003.00

5
$1,158.00
$1,039.00

Over 5
Add $80 for each additional member up to 7

Table of Residual Incomes by Region

For loan amounts of $79,999 and below

Family Size
West
South

1
$425.00
$382.00

2
$713.00
$641.00

3
$859.00
$772.00

4
$967.00
$868.00

5
$1,004.00
$902.00

Over 5
Add $80 for each additional member up to 7

States in West Region
States in South Region

Arizona

California

Colorado

Idaho

Montana
Nevada

New Mexico

Oregon

Utah
Florida

Maryland
Oklahoma

Texas

26. Credit Scores:
VA streamline loans require a minimum credit score of 600.

Use lowest FICO of all borrowers.

Minimum Credit Standards on VA Jumbo

DU Approve or LP Accept, OR

Minimum FICO 640 with:

Minimum 3 trades >= 2 years
0x30 past 12 months on Mortgage/Housing
2x30 past 24 months for Installment
3x30 & 1x60 past 24 months for Revolving
BK – none in past 3 years, no derogatory after BK, re-established credit covering the most recent 2 years
Foreclosure – none in past 3 years
Major Derogatory (collections, judgments, etc.) – none in past 12 months (ignore medical collections <$500)

27. Borrower Eligibility:
A veteran is eligible for VA home loan benefits if he or she served on active duty in the Army, Navy, Air Force, Marine Corps, or Coast Guard after September 15, 1940, and was discharged under conditions other than dishonorable after either:

- 90 days or more, any part of which occurred during wartime, or

- 181 continuous days or more (peacetime).

Eligible Veteran/Borrower Combinations:

Veteran (single or married)
Veteran and non-Veteran Spouse
2 Veterans who are married to each other
Unmarried surviving spouse of an otherwise eligible veteran
Ineligible Veteran/Borrower Combinations:

2 Veterans who are not married to each other
Veteran and a non-Veteran (who is not the spouse of the veteran)
Remarried surviving spouse of an otherwise eligible veteran
All other Veterans not meeting the eligibility requirements of the VA Form 26-1880
Veteran’s Entitlement:

The COE will show the amount of "entitlement" or "eligibility" available to the Veteran
The maximum loan entitlement available to any Veteran is $36,000
An additional $24,000 of entitlement is available for loans of more than $144,000 for purchases and IRRRLs, only
In order to meet Secondary Marketing requirements, the Veteran must have entitlement available in an amount equal to 25% of the loan amount. The loan amount calculation for ensuring 25% coverage on purchases and cashout refinances is as follows:
75% x (the lesser of purchase price or appraised value) + available entitlement = maximum base loan amount

For IRRRLs the entitlement is transferred from the old loan to the new loan, therefore the calculation is not necessary
For purchase transactions the maximum entitlement is $60,000
For cashout refinances the maximum entitlement is $36,000 even for loans greater than $144,000
The VA Funding Fee may be added to the maximum loan as long as the loan does not exceed $333,700 for purchase, IRRRLs and cashout refinance transactions
Any required downpayment based on the calculation above must be paid in cash from the Veteran’s verified liquid assets. Subordinate financing may NOT be used to cover downpayment
If a Veteran refinances a VA loan with a conventional loan, this can be done only once. The law permits restoration without disposal of the property one time only. Any future restorations would require disposal of all properties obtained with a VA guaranteed loan.

28. Co-Borrowers:
Co-borrowers other than spouse are not permitted.
Non-occupant co-borrowers are not permitted.

29. Assets:
Veteran may borrower up to 100% of the reasonable value of the property as determined by VA. If the purchase price or cost is more than VA’s reasonable value, the Veteran must certify that he or she has paid or will pay the difference in cash from his or her own resources.

Assets will be needed for the following:

Closing costs or points which are the applicant’s responsibility and are not financed in the loan
The difference between the sales price and the loan amount if the sales price exceeds the reasonable value established by VA

30. Gifts:
Gift Fund Requirements:

Gift funds are allowed with no exception, including Non-Profit Organizations
List donor’s name, address and phone number, relationship to Borrower and dollar amount of gift on application or gift letter. If provided in a gift letter, the donor must sign it.
If sufficient funds required have not been verified in Borrower’s accounts, document transfer.

31. Reserves:
There is not a standard reserve requirement except for 2 situations:

6 months PITI if the property securing the VA loan is a multi unit property
3 months PITI if the rental income is from a property other than the property securing the VA loan

32. Refinances:
Cashout Refinances not allowed on Manufactured Homes.

Cashout Refinance:

Any refinance transaction that does not meet the requirements for an IRRRL is considered a cash-out refinance and must meet the following conditions:

Complete credit package is required
The new loan is limited to 90% of the LAPP/CRV plus the cost of any energy-efficient improvements (see VA Handbook section 7.03) plus the VA funding fee
Loans to refinance construction loans, installment land sale contracts and loans assumed by veterans at interest rates higher than that for the proposed refinance will base their loan amounts on the lesser of the following:
The VA reasonable value plus the VA funding fee, OR
The sum of the outstanding balance of the loan to be refinanced plus allowable closing costs (including the funding fee) and discounts.
The CLTV is not limited as long as the LTV does not exceed 90% and the second lien holder agrees to subordinate
Borrower must qualify on ratio, residual and credit basis.
There must be an existing lien on the subject property, the veteran may not refinance a home owned free and clear.
The property must be owner-occupied by the Veteran as his principal residence.
Re-warranting of Condo and PUD projects (based on current information) is required.
Surviving spouses of veterans are not eligible for cash-out refinances.
Interest Rate Reduction Refinances (IRRRL) Requirements:

A Veteran is permitted to refinance a current VA loan at a lesser rate of interest based on the following provisions:

The new loan is limited to a maximum of the balance of the old loan, allowable fees, closing costs, prepaids, up to 2.00 discount point, and funding fee.
If necessary, the refinancing loan amount must be rounded down to avoid the payment of cash to the Veteran.
The only situations which come about at closing which may result in the borrower receiving cash are as follows:
Computational errors
Changes in final payoff figures
Up-front fees paid for the appraisal and/or credit report that are later added into the loan, AND
Refund of the escrow balance on the old loan.

32. Refinances cont.:
Interest Rate Reduction Refinances (IRRRL) Requirements cont.:

Second liens may be subordinated without regard to combined loan-to-values
No proceeds may be allowed to payoff secondary liens or other debts.
The term of the new loan for an IRRRL may be up to 10 years longer than that of the original loan subject to the maximum of 30 years.
If the Veteran is deceased, the surviving spouse is considered a Veteran for the purpose of refinancing, providing spouse was a co-obligor. Such surviving spouse must own and occupy the property to be refinanced.
If the existing loan was assumed by a Veteran who substituted his/her entitlement, the Veteran transferee may refinance the loan as an IRRRL.
The dollar amount of guaranty applicable to the old VA loan is essentially transferred to the new loan. There will be no additional charge to the Veteran’s remaining loan entitlement in connection with the refinancing loan.
VA will automatically provide 25% guaranty
The existing VA loan must be current; Lender will run a credit report – borrowers Credit Score must be >=600
A loan which is delinquent (more than 30 days) must be submitted to VA on a prior approval basis with the following additional information:
Explanation for loan delinquency, including documentation to support the explanation, and evidence that the cause of delinquency has been resolved
Credit Report (in-file is acceptable)
Current paystub and telephone verification of current employment (if not employed, evidence of source of income such as disability, etc.)
Completed VA Form 26-6393, Loan Analysis
12 month pay history of current mortgage if not on credit report
The loan being refinanced must be the same home that is secured by the entitlement used on the Certificate of Eligibility. Proof must be obtained such as a note, HUD-1, or any other document which shows the LH# of the used entitlement is the same as the LH# on the Certificate of Eligibility (COE)
The Veteran must own the property securing the loan to be refinanced
If the property is not going to be owner occupied by the Veteran, a written statement that the property was once owner occupied by the Veteran must be provided.
Condo and PUD projects do not have to be re-warranted.
The principal and interest payment on the new loan must be less than the principal and interest of the loan being refinanced UNLESS:
The VA ARM is being refinanced to a fixed rate loan.
Term of new loan is shorter than the term of the previous VA guaranteed loan.
Energy efficient improvements are included in the IRRRL (see section 7.03 of the VA Handbook)
NOTE: Lender must certify the Veteran is able to make the new payment amount in cases where the PITI is increasing by 20% or more.

33. Financed Properties:
Refer to Certificate of Eligibility (entitlement)

34. Mortgages to One Borrower:
No limit as long as they are not VA.

35. Seller Contributions:
Sales concessions may not exceed 4% of the value – any amount over 4% must be subtracted from the purchase price and value in determining the LTV
Concessions include payment by the seller of the buyer’s VA funding fee, prepaid taxes and insurance, gifts such as a television set or microwave oven, extra discount points paid to provide permanent interest rate buydowns, escrowed funds to provide temporary interest rate buydowns or the payoff of credit balances on behalf of the buyer. (This list is not all inclusive)
Normal discount points and payment of the buyer’s closing costs will not be considered a concession for purposes of determining if total concessions are within the established limit.

36. Appraiser Requirements:
Must meet all requirements as established by VA.

37. Appraisals:
The appraisal of any property eligible to be security for a VA loan can be processed by the lender under the LAPP program except the following (which must be submitted to the VA for issuance of a CRV):

Master appraisals

Foreclosure appraisals

Those involving partial release of VA loan security

Those involving HUD value determinations

The information in the report must be accurate, internally consistent, written in clearly understandable language, fully supported, and sufficiently documented to VA standards.

The LAPP or CRV for existing or new construction, the report must be dated within 120 days, but no more than six (6) months before the note date.

For proposed or under construction, the report must be dated within 120 days, but no more than twelve (12 months) before the note date.

If the appraisal (LAPP or CRV) is greater than 120 days old, the original appraiser or qualified appraiser must certify that the subject property has not declined in value since the date of the original appraisal.

Properties appraised in "Fair Condition" are unacceptable. The property must be brought up to at least "Average Condition" and meet VA MPRs prior to loan closing. A final inspection showing the work has been completed must be included in the file. Lenders and fee appraisers should use their own letterhead when certifying that required repairs have been satisfactorily completed. Escrow holdbacks may be permitted.

38. Documents:
VA Fixed Rate

Note - Fixed multi-state VA2663

Deed of Trust VA266303

Assumption Rider BFS 438

VA ARM

Note – VMP 544

ARM Rider – VMP 545

39. Completion Escrows:
VA must approve repair escrows if the appraisal was done under the CRV basis, but is at the underwriter’s discretion if the appraisal was done under the LAPP basis. The appraiser’s report must recommend escrow. The duration of escrow must be reasonable.

Typically, the type of work or repairs involve exterior painting, landscaping, swimming pool construction, or completion of new construction items delayed due to adverse weather conditions. An escrow holdback may be used only for the following reasons:

Construction items that need to be completed but do not affect the livability of the dwelling.
The dwelling is habitable, safe and essentially complete.
The deferred work cannot be acceptable completed prior to loan closing.
All other conditions for approval of the loan have been met.
The incomplete work cannot prevent the issuance of a Certificate of Occupancy, if applicable.
Holdbacks Not Permitted:

Structural repairs
Foundation work
Roofs

40. Construction to Permanent:
See VA underwriter for guidance.

41. Special Requirements / Restrictions:
Section 32 loans are not allowed.

Maximum interest credit allowed at closing is 5 days. No exceptions.

Manufactured Homes

Must meet all Lender Manufactured Homes guidelines.

Not allowed on Buydowns

Not allowed with Cashout

Owner Occupied properties only

Not allowed on Leased Land (leaseholds)

Not allowed on ARM programs (V31T and VJ31T)