Revised: August 21, 2015 Page 1
Finance Type Purchase, Cash-Out and Rate & Term Refinance, Interest Rate Reduction Refinance Loan (IRRRL)
Occupancy Owner Occupied only, Second Homes not allowed, Investment properties not allowed
Product Codes
V15, V20, V25, V30, V15HB, V30HB, V15IRRRL, V20IRRRL, V25IRRRL, V30IRRRL, V15HBIRRRL, V30HBIRRRL, V15NAIRRRL, V30NAIRRRL
Loan Amounts < = $417,000 Loan Amounts $417,000 to $700,000
Max LTV/CLTV Min FICO Subject Required Reserves Max LTV/CLTV Min FICO Subject Required Reserves Purchase 100% 620
Follow AUS 100% 660 Follow AUS
IRRRL 100% 640
Follow AUS 100% 660 Follow AUS
Rate & Term 100% 640
Follow AUS 100% 660 Follow AUS
Cash-Out 90% 640
Follow AUS 90% 680 Follow AUS
Age of Documents
Appraisal: 120 days Assets: 120 days
Revised: August 21, 2015 Page 2
Underwriting Method
AUS: All VA loans must be submitted through DU or LP or comply with Manual Underwriting criteria noted below:
VA Jumbo loans must receive an LP Accept or DU Approve/Eligible. Manual Underwriting is ineligible for these loans.
Manual Underwriting: AUS REFER: Loan must meet manual underwriting guidelines. IRRRLs: All IRRRLs must be manually underwritten. Do not run through AUS.
Manual Downgrade: A manual downgrade from an approved decision to a REFER/Manual Underwriting decision is required if additional information affects the overall insurability or eligibility of the mortgage.
Borrower Eligibility
Eligible: U.S. citizens
Permanent resident aliens, with proof of lawful permanent residence
Non-permanent resident alien immigrants with proof of lawful permanent residence Inter vivos revocable trusts
Non-occupancy co-borrowers (are allowed with restrictions) Ineligible:
Partnerships Corporations
Non-Revocable Inter Vivos Trust Foreign Nationals
Revised: August 21, 2015 Page 3 Credit
All borrowers must have a minimum of one credit score. Non-traditional credit is not allowed.
◦ Minimum qualifying credit score required is 620 purchase.
◦ Minimum qualifying credit score required is 640 for Cash-Out (rate/term) refinance. ◦ Minimum qualifying credit score required is 640 for IRRRL.
◦ Minimum qualifying credit score required is 660 for loan amounts over $417,000
Derogatory Credit
◦ 2 years elapsed since the discharge of Chapter 7, Chapter 13 Bankruptcy or Deed in Lieu/Short Sales when the borrower was not delinquent at transfer
◦ 2 years elapsed since completion of Foreclosure, Deed in Lieu/Short Sale.
◦ If the borrower has any mortgage lates within the 12 months prior to the short sale, the waiting period is three years.
◦ All judgments must be paid in full or subject to a repayment plan with a history of timely payments.
Down Payment
Down payment: no minimum down payment or cash investment required unless veteran's available entitlement is less than 25% of the total loan amount, including funding fee OR co-borrower is not a veteran or the spouse of the veteran borrower.
Gift Funds: are allowed with no exception
Asset Requirements: Veterans 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 he or she has paid or will pay the difference in cash from his or her own resources
Eligible Mortgage Products Fixed Rate: 15, 20, 25, and 30 year terms. High Balance is only allowed on a 30 year term
Eligible Property Types
1 - 4 units Condominiums PUDs
Leaseholds
Revised: August 21, 2015 Page 4 Exclusionary Lists All borrowers must be screened by CAIVRS to determine there have been no late payments on Federal
debt obligations.
Funding Fee
◦ The Funding Fee may be financed in the loan.
◦ The following Veterans are exempt from paying the funding fee: - 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
- Veterans who are rated by VA as eligible to receive compensation as a result of pre-discharge disability exam and rating
- Veterans entitled to receive compensation, but who are not presently in receipt of the compensation because they are on active duty
- 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.
Ineligible Property Types
Condotels
Mixed-use properties
Non-owner occupied properties
Attached new construction PUDs that do not meet the 50% presale requirement not permitted Manufactured homes
Modular On-Frame properties Co-operatives
Native American Leasehold Estates Working farms, ranches and orchards
Condominiums without Homeowner’s Associations are ineligible 2-4 Unit in Illinois
Revised: August 21, 2015 Page 5 IRRRL
Eligible Properties:
1 - 4 Units Condo/Townhouse/PUD Credit:
◦ Minimum qualifying credit score required on a VA IRRRL is 640.
◦ IRRRLs require a tri-merged credit report; a "mortgage only" credit report is no longer accepted. Note: DO NOT RUN AUS.
◦ All VA loans must be current and can have no more than 0X30 day late payments in the past 12 months.
Assets:
◦ Verification only required when borrower must bring funds to close. Employment/Income:
◦ Verbal Verification of Employment must be performed on ALL IRRRLs. ◦ VA IRRRL loans in the State of Colorado
- Income must be stated on the application - No verification of income is required - No analysis of income is performed Appraisal Requirements:
◦ All VA IRRRL's require a minimum of a Conventional Form 2055 Exterior Appraisal Report along with a Market Conditions Addendum
◦ The conventional appraisal MUST support the loan amount or the Funding Fee cannot be rolled into the loan.
Transaction Details:
◦ The balance of the old loan plus allowable fees, closing costs & pre-paids up to 2 discount points, and funding fee.
◦ No proceeds may be allowed to payoff secondary liens or other debts.
Loan Limits
• For a list of high cost counties, refer to VA County Loan Limits for High Cost Counties (see below) • Maximum base loan amount cannot exceed $700,000.
Revised: August 21, 2015 Page 6 Loan Purpose
Purchase Cash-out
Rate & Term Refinance
Interest Rate Reduction Refinance Loans (IRRRLs)
Occupancy
Owner Occupied only
Second Homes and Investment properties (IRRRLs) are not allowed
◦ Veteran is required to occupy the subject property when financed as a VA purchase or cash-out refinance transaction within 60 days of loan closing.
◦ The veteran's spouse who occupies the home satisfies the occupancy requirement when the veteran cannot occupy the home due to active-duty assignment.
◦ Active-duty veterans must occupy within 12 months of loan closing.
◦ Veterans who will retire within 12 months of loan closing satisfy occupancy requirement when the following is presented:
◦ Copy of veteran's application for retirement submitted to current employer (must indicate a retirement date within 12 months of loan closing).
◦ Evidence borrower will meet ratio and residual income requirements using post-retirement income.
Maximum Number of Financed Properties
◦ VA does not limit the number of properties or VA loans a veteran may have.
Qualifying Ratios
Qualifying ratios maximum of 55%
- The maximum ratios for a manual underwrite are 31%/43%, but may be expanded to 50% with strong compensating factors.
Recently Listed Properties
Subject property listed for sale must be taken off the market one day prior to the application. Required Documentation:
- Letter of Intent signed by the Borrower acknowledging they do not intend to relist the property for 12 months after the note date.
Reserves
Follow AUS
For investment properties:
Revised: August 21, 2015 Page 7 Residual Income
VA has specific residual income requirements:
- Residual Income is the borrower's net effective income minus monthly shelter expenses
- Residual Income must be in accordance with regional table and is a required calculation in addition to DTI. See section 701 for details.
Sales Concessions Sales concessions cannot exceed 4% of the established reasonable value of the property (NOV). Does not include normal discount points and payment of the buyer's closing costs.
State Restrictions
Texas - cash-out refinances that result in cash back to the borrower are not eligible.
Nevada - the VA requires that purchase transaction loans secured by properties located in Fallon, NV, and serviced by the City of Fallon Municipal Water System include a veteran signed "Purchaser Acknowledgement and Release" form.
Illinois - no investment properties; no 2-4 units.
Hawaii - for properties with water catchment systems, see Property Inspections
