Va handbook lender

This article will focus on explaining the basic elements of a VA-guaranteed loan. In the Handbook, a large and long table is presented that explains VA loans subject-by-subject. Next is Downpayment. The lender may require a downpayment if necessary to meet secondary market requirements.

Another element of a VA-guaranteed loan is occupancy. In order to qualify for a VA loan, the borrower must certify that they intend to use the property being purchased as their primary residence. The purpose of the VA loan program is to enable veterans to purchase suitable housing on terms that they can afford, thus enabling them to become homeowners much sooner. This minimizes the risk the lender is taking on the loan and gives them an incentive to offer VA loans.

Another element of a VA loan is how the interest rate and points are calculated. They are actually negotiated between the lender and the veteran. Paying for points means giving cash up-front at closing in exchange for a lower interest rate. The VA knows that it cannot possibly write a rule or guideline for every possible scenario, and it encourages the underwriters to be flexible in working with borrowers to get them their house.

The veteran must have satisfactory credit and a satisfactory ability to repay the loan. IRRRLs are awesome because no appraisal or underwriting is required and closing costs can be rolled into the loan amount.

The last three elements of a VA loan covered in this table are the funding fee, closing costs, and security instruments. Closing costs are limited by VA regulations and will be covered more in-depth in future posts. Security instruments are notes or mortgage forms that lenders can use as long as they contain the VA-required clauses. In our last article, we covered the basic elements of a VA loan and covered some important but basic points.

In other words, what kind of properties are allowed to be purchased with a VA loan and what purposes are those properties allowed to serve if they are to be financed with a VA loan? There are fairly strict rules on what properties can be purchased and why; this is in order to keep the VA loan program from being used contrary to its purpose. The purpose of the VA loan program is to enable veterans to obtain suitable housing on terms more favorable than they could otherwise receive.

The VA will only guarantee loans to eligible veterans for specific purposes. The first one is the most obvious: to purchase or construct a residence. This includes a condo that is going to be both owned and occupied by the borrowing veteran. The loan can also include the purchase of the land that the property is on, and can finance the construction of a home on land that the veteran already owns. The property cannot have more than four family units and one business unit.

The exception to this rule is in the event of a joint VA-loan, if two VA-eligible borrowers apply for a loan together they may be allowed to purchase a larger property. A VA loan can also be used to refinance an existing VA loan or a conventional loan in order to obtain a lower interest rate.

A VA loan can be used to refinance any existing mortgage loan or any other indebtedness that is secured by a lien on the home that the veteran is occupying as their primary residence. Borrowers can also use a VA loan to finance repairs, alterations, or improvements to the home that they already own and occupy, and can even purchase a new home and get money for improvements at the same time. These improvements can include but are certainly not limited to energy-efficient upgrades such as a solar heating system, cooling system, or other energy-efficient improvements.

If a condo project is not on the approved list, a borrower can submit it for approval. The VA will also approve loans to purchase a farm residence, as long as the veteran intends to occupy it. In addition, if the loan is also including the purchase of the farmland, the farmland is appraised at its residential value only. There are plenty of purchases that are specifically outlined as ineligible.

For example, land cannot be purchased with the intent of improving it or building upon it at some future date; the borrower must be intending to build and occupy a house on the land immediately after purchase. The VA will not approve the purchase or construction of a building for investment purposes, or the purchase or construction of a combined residential and business property unless it meets the following conditions:.

The VA will also not approve the purchase of more than one separate residential unit or lot unless the veteran will occupy one unit and there is evidence of the following:.

Generally speaking, the borrower is not able to receive any cash at closing a VA loan. In the last article, we talked about eligible purchases for the VA loan program. We discussed that the borrower must be intending to occupy the home as his or her primary residence as well as many other requirements for a property to be purchased using the VA loan program.

The VA loan program is unique among home loan programs for the way it addresses maximum loan amounts, and it can often confuse borrowers who are trying to learn about the VA loan program and see if it will work for their situation. The VA loan program is unique because it actually has no stated maximum dollar amount for its loans.

There are, of course, limitations on the size of the VA loan, but they are completely contextual in nature. There are two primary factors that will determine the maximum amount the VA loan can be made for. The first one is for lenders selling their VA loans through a secondary market.

Secondary market loans are sold through a third party service, such as the Government National Mortgage Association, and those third party services often prescribe maximum loan amounts. VA loans are not granted an exception to those limits. The second factor that determines the maximum loan amount is the reasonable value of the property shown on the Notice of Value NOV provided by the official VA appraisal.

These include construction loans, installment land sales contracts, and loans assumed by the borrower at an interest rate higher than that for proposed refinancing loan. The VA reasonable value, minus? VA funding fee. GPM loans on new homes have a maximum of The great majority of consumers have no interest in a GPM and many lenders do not even offer them. Down payments can interact with the maximum loan amount for VA loans.

There are, however, two instances where the VA will require a down payment. Lenders may require a downpayment under certain circumstances, such as when a veteran has less than full entitlement available. In the last article, we talked about the maximum loan amounts available for VA loans and established that usually, the only restriction is the reasonable value of the home as determined by the official VA appraisal.

However, there are plenty of other rules that determine whether a borrower can use a VA loan to purchase a property. To fulfill this requirement, the veteran must either already live in the home such as in a refinance , or certify his or her intent to move into the home within a reasonable time after closing. For IRRRLs, the veteran simply needs to certify that they previously occupied the home; they do not need to currently live in it. The Handbook provides an example of this.

An active servicemember purchases a home with a VA loan then is transferred to a duty station overseas. The servicemember rents out the home then can refinance with an IRRRL because he previously occupied the home. The only way a time frame longer than 60 days can be considered reasonable is if both of these conditions are met:.

Even if the above conditions are met, dates further than 12 months in advance will generally not be considered reasonable by the VA. There are not many circumstances which warrant the purchasing of a home more than a year before you intend to move in. However, the veteran him or herself does not necessarily need to occupy the home within that time frame in order to satisfy the occupancy requirement.

A spouse can satisfy the occupancy requirement if the veteran is unable to personally occupy the home due to any employment conflicts besides military service.

Often a veteran nearing retirement from the military will be looking to plan ahead and find a home to move to after retiring. Retiring further than 12 months from the application date will not qualify. Occupancy can also be delayed or interrupted if there are extensive renovations or improvements being made to the house as part of the loan. Veterans whose current work takes them away from their home a great deal or even the majority of the time will need to have a history of continuous residence in the community and there should be no indication that the veteran has established or intends to establish a primary residence elsewhere.

Seasonal homes do not fulfill the occupancy requirement. In this article, we will be discussing the how interest rates are calculated for VA loans and how VA policies surrounding discount points. Previously in Chapter 3, we talked in depth about the occupancy requirement and how it can be satisfied, as well as the maximum loan amounts a borrower can get a VA loan. We also gave a brief overview of the basic elements of a VA loan.

In the past, the VA prescribed the interest rate for VA loans. They no longer do. Instead, the interest rate is negotiated between the borrower and the lender.

The VA has found that this method allows the borrower and lender to agree on a generally more favorable interest rate than the VA would set in the past. The VA has also found that more lenders are willing to offer VA loans when they have the flexibility to set different interest rates. Once the rate has been locked-in, the borrower and lender are expected to honor it and any other agreements they have entered into which affect the interest rate.

The VA does have a process that needs to be followed for the interest rate to change, however. If the increase is more than one percent, the loan needs to be re-underwritten to make sure the veteran still qualifies for the loan, the change must be documented, and a new or corrected Uniform Residential Loan Application URLA , must be furnished.

The borrower must initial and date next to any changes. They must also include a letter or statement from the agency whether it be federal or state that states clearly that the lender in question is periodically examined and supervised by their agency.

This is valuable information for borrowers to be aware of because they can know that either the VA is personally evaluating the loan application to approve the arrangement, or the lender has gone through fairly onerous steps to gain permission from the VA to approve them themselves.

This is one way that the VA ensures safety and protection for those taking advantage of the VA loan program. Once a lender is supervised, and for as long as it is considered supervised, they must provide documentation for any ongoing agency relationships to the VA. For any of these agents, the lender must provide two things to the VA no later than January 31st of each year. The VA may also request additional information alongside the list of agents being renewed and the renewal fee.

The Handbook is clear in putting the burden on the lenders to remember to send in the list and the renewal fees, rather than assuring them that the VA will issue annual reminders to do so. If a non-supervised lender intends to remain non-supervised but would like automatic authority to approve loans without having to submit to the VA for prior approval, they should fill out VA Form , called the Application for Authority to Close Loans on an Automatic Basis-Nonsupervised Lenders, and send it to their regional VA office.

The lender must also submit the documentation specified below, any fees, and any updates to the information provided in the original application. Additional documentation for lenders qualifying based on experience as agent.

A senior officer of the lender must nominate at least one full-time qualified employee to act as an underwriter who has either:. For all underwriters. Note : For purposes of determining whether the experience criteria are met, IRRRLs do not count as processing, pre-underwriting or underwriting.

Additional documentation for underwriters qualifying based on ARU designation. Current assets are defined as cash or other liquid assets convertible into cash within 1 year. Current liabilities are debts that must be paid within one year , or. For all lenders. Additional requirement if qualifying based on net worth. Adjusted net worth must be calculated by a CPA in accordance with the requirements in section 14 of this chapter.

Lines Of Credit. Unrestricted means funds are available upon demand to close loans and are not dependent on prior investor approval. Letter s from the company ies verifying the amount s and unrestricted nature of the warehouse lines of credit.

If the lender customarily sells loans it originates, it must have a minimum of two permanent investors. Names, addresses and telephone numbers of two or more permanent investors. Quality Control Plan. The lender must implement a written quality control plan which ensures compliance with VA requirements and meets the criteria outlined in section 15 of this chapter.

Copy of quality control plan which meets the criteria outlined in section 15 of this chapter Liaison. The lender must designate one qualified employee and an alternate to be the primary liaison with VA. VA Form contains a space in which to indicate liaison selections.

Sanctions For Prior Acts. There must be no factors indicating the lender would not exercise the necessary care and diligence. A statement of facts is required in any case where:. Areas that are not affected by the disaster will likely not receive any instructions regarding it. From this point on, the regional VA office that has provided the new lender with these things will become the primary point of contact between the lender and the VA.

Any questions, concerns, training requests, or any other requests or issues should be brought up with the regional office first. Borrowers can get frustrated with any delays to getting their VA loan, but they should know that the lender is required to first go through the regional VA office before going higher up. The VA allows that as soon as the lender is familiar enough with the VA loan program to begin making VA loans without violating any of the laws, regulations, and procedures, they may begin to do so.

At this point, the process becomes different for supervised and nonsupervised lenders. For a nonsupervised lender, they will need to submit every single loan they wish to close on to the VA for prior approval first. If they wish to have automatic authority, they will need to go through the application process.

For supervised lenders, they can immediately begin making and closing on VA loans without prior approval unless it is one of the loan types mentioned in Chapter 1 Part 1 of this series. If a lender is supervised by any of those agencies, then they need not submit the majority of VA loans to the VA for prior approval. The lender indicates which if any of the agencies they are supervised by in the initial application process.

While there may be some additional documentation required, it is handled on a case by case basis. Interestingly, the VA recognizes the supervision of the states of Illinois or New Jersey also as sufficient supervision. However, the supervision of these states only applies to offices and loans inside those states. For a lender that is supervised by either of these states, they are asked for certain information during the initial application process. Illinois lenders need a copy of their state license from the Office of Banks and Real Estate.

The Handbook does not list any other states that can count as supervisory entities. As a borrower, you should ask any prospective lenders whether they are supervised or nonsupervised and if they are nonsupervised, whether they have the automatic authority or not. There are a few more important details regarding nonsupervised lenders applying for automatic authority that the Handbook covers, and, therefore, will be covered here.

Firstly, a lender that has been granted automatic authority can use that authority anywhere in the country; they are not limited to the state in which their main office resides.

The lender is then notified via mail on the decision. After getting approved, the lender begins a probationary period of one year.

The lender is closely monitored by the regional VA office during this time, and are carefully checked to ensure quality underwriting, complete loan applications, and full compliance with all VA requirements and procedures.

At the end of the initial year of probation, the VA will send the lender another letter that does one of three things.