UNDERWRITING GUIDELINES - VA
MAXIMUM MORTGAGE AMOUNT (Set by the
secondary market)
$203,000.
QUALIFICATION RATIOS Total Housing Expense Ratio Utilize geographic
residual income guidelines. Total Debt Expense Ratio 41%.
UNDERWRITING RATIOS BASED ON
Gross monthly income.
Social Security income, alimony, public assistance payments, child support or maintenance
payments to the extent such payments are likely to continue into the foreseeable future
(for public assistance, minimum of 3 years).
COMPENSATING FACTORS that can justify higher underwriting ratios (These
lists are not all-inclusive or in order of priority)
Conservative use of consumer credit.
Demonstrated excellent long-term credit use.
Minimal consumer debt.
Long-time employment history.
Significant liquid assets available after settlement.
Downpayment on a home purchase (most VA loans are no money down) or equity in a refinance.
Little or no increase in monthly shelter expense.
Military benefits.
Borrower is a previous homeowner and has demonstrated a satisfactory homeownership
experience.
High residual income.
Low debt-to-income ratio.
Participation in homeownership counseling programs.
BANKRUPTCY POLICIES
If a Chapter 7 bankruptcy of a veteran (who is not self-employed) occurred within the past
2-3 years, it is probably not possible to determine him/her a satisfactory credit risk
unless the veteran has a satisfactory payment record on consumer credit since bankruptcy;
and bankruptcy was due to circumstances beyond veteran's control.
A bankruptcy discharged more than 5 years ago may be disregarded. A bankruptcy discharged
between 3 and 5 years ago may also be disregarded, depending upon the circumstances of the
bankruptcy, and submission of evidence that the borrower's obligations have been timely
met.
Different considerations apply for self-employed and Chapter 13 bankruptcies.
INVESTOR LOANS
No investors.
REFINANCES
Interest rate reduction loan is limited to a maximum of existing indebtedness plus
allowable closing costs and a reasonable discount, and plus up to $6,000 in energy
efficient improvements.
Cash Back:
A borrower can receive cash back for purposes acceptable to the lender as long as the loan
does not exceed 90% of the appraised value of the property.
Second Home:
Ineligible.
MINIMUM DOWNPAYMENT
Difference between appraised value and selling price.
SELLER CONTRIBUTION LIMITS
Concessions which exceed 4% of the established reasonable value of the property are
considered excessive.
Normal discount points and payments of the buyer's closing costs will not be considered a
concession.
ANNUAL PAYMENT INCREASE LIMITS
Scheduled (GPMs)
Increases 7.5% per year for the first 5 years. At the beginning of the 6th year payments
level off for the remaining term.
Scheduled (Buydowns)
Minimum or maximum terms of the buydown will not be limited to specific criteria, it is
lender's responsibility to review and determine acceptability of plan.
Borrowers typically qualified on the full payment amount.
Unscheduled (capped 1-year ARMs)
1% change per year.
5% life cap for interest rate increases.
Underwritten at 1 percentage point above the initial interest rate.
Temporary buydowns not permitted.
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