Wholesale VA Guidelines - Endeavor America Loan Services

Transcription

Wholesale VA Guidelines
Introduction
These VA Program Guidelines provide a general overview of the VA products and policies eligible for delivery to EA for financing consideration. The details are based on the
policies outlined in the VA Handbook. This document should be used solely as a reference to EA’s interpretation of the VA Handbook and does not constitute a commitment to
lend.
Product Overview – Endeavor America currently offers the following VA loan programs:
High Balance
Standard
Advantage
IRRRL
 30 year Fixed
 30 year Fixed
 15 year Fixed
 30 year Fixed
 15 year Fixed
 30 year Fixed
 15 year Fixed
> $417,000 loan amount
620 min FICO
580 - 619 FICO
No FICO
580 FICO with No Appraisal
AUS Refer
Maximum Base Loan1
Principal Residence
Base Loan
Purpose
Units
LTV
FICO
Purchase, Cash-out, IRRRL
1–4
100%
580
Conforming
IRRRL No Appraisal
1
Unlimited
580
Purchase, Cash-out, IRRRL
1–4
100%
580
High Balance
IRRRL No Appraisal
1
Unlimited
620
Second Home and Investment Property
Conforming
IRRRL
1–4
100%
580
High Balance
IRRRL
1–4
100%
600
Funding Fee
Type of Veteran
Down Payment
1st Time
Subsequent
Purchase
0% - <5%
2.15%
3.30%
Regular Military
5% to < 10%
1.50%
1.50%
≥ 10%
1.25%
1.25%
0% - <5%
2.40%
3.30%
5%
to
<
10%
1.75%
1.75%
Reservists/National Guard
≥ 10%
1.50%
1.50%
Cash-out Refinance
Regular Military
2.15%
3.30%
Reservists/National Guard
2.40%
3.30%
IRRRL: Regular Military AND Reservists/Nat. Guard
0.50%
0.50%
Endeavor America Loan Services
VA Guidelines
Units
Conforming
High Balance
1
$75,000 - $417,000
$417,001 - $1,200,000
NOTE: VA’s max guarantee amount will only be based on the One-Unit (single family) limit.
Maximum Potential Guaranty2, 3, 4
Base Loan
Guaranty
≤ $45,000
50% of Loan
$45,001 - $56,250
$22,500
$56,251 - $144,000
40% of Loan with a maximum of $36,000
$144,001 - $417,000
25% of the Loan with a maximum of $104,250
> $417,0015
Lesser of 25% of VA county limit, OR
25% of loan amount
NOTES
1. Maximum guaranty is 25% of VA high costs county limit.
2. VA guaranty or combination of guaranty plus down payment/ subject
equity must equal ≥ 25% of the total loan amount including funding fee.
08/19/2016
3. The maximum guaranty is the lesser of available entitlement or the
maximum potential guaranty amount indicated above.
4. Minimum guaranty of 25% is required on IRRRLs.
5. CLTV is unlimited. The maximum LTV is 100% unless stated
otherwise in a subtopic in the EALS Wholesale VA Guidelines.
6. Max cash-out on manufactured homes with LTVs greater than 85% is $500.00.
7. <640 revolving debts to be paid off to qualify must also be closed.
8. EA does not make exceptions/overrides to GSE guidelines.
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Endeavor America’s Credit Philosophy .................................................................................................................................................................................................... 9
Ability to Repay ........................................................................................................................................................................................................................................ 9
Age of Documents .................................................................................................................................................................................................................................... 9
Credit Documents ................................................................................................................................................................................................................................ 9
Title Report .......................................................................................................................................................................................................................................... 9
Appraisal .............................................................................................................................................................................................................................................. 9
Appraisal .................................................................................................................................................................................................................................................. 9
General Information ............................................................................................................................................................................................................................ 9
Appraisal Form Requirements ........................................................................................................................................................................................................... 10
Acreage .............................................................................................................................................................................................................................................. 10
Age Restricted Properties (55+ senior communities allowed) ........................................................................................................................................................... 10
Carbon Monoxide Detectors .............................................................................................................................................................................................................. 10
Farm Residence .................................................................................................................................................................................................................................. 11
Inspection Requirements ................................................................................................................................................................................................................... 11
Minimum Property Requirements ..................................................................................................................................................................................................... 11
New/Existing Construction ................................................................................................................................................................................................................ 11
New/Existing < 1 Year Exhibits and Inspections ................................................................................................................................................................................ 12
Proposed/Under Construction ........................................................................................................................................................................................................... 13
Proposed/Under Construction Exhibits and Inspections ................................................................................................................................................................... 13
Notice of Value (NOV) ........................................................................................................................................................................................................................ 15
Property Listed for Sale ...................................................................................................................................................................................................................... 15
Assets ..................................................................................................................................................................................................................................................... 16
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Cash to Close ...................................................................................................................................................................................................................................... 16
Bank Statements – Large Deposits..................................................................................................................................................................................................... 16
Business Funds ................................................................................................................................................................................................................................... 16
Documentation .................................................................................................................................................................................................................................. 16
Down Payment ................................................................................................................................................................................................................................... 16
Earnest Money ................................................................................................................................................................................................................................... 17
Gift Funds ........................................................................................................................................................................................................................................... 17
Retirement Account ........................................................................................................................................................................................................................... 17
Sale of Home ...................................................................................................................................................................................................................................... 17
Assumability ....................................................................................................................................................................................................................................... 17
Borrower Eligibility ................................................................................................................................................................................................................................. 18
Other Eligible Borrowers .................................................................................................................................................................................................................... 18
Foreign Address ................................................................................................................................................................................................................................. 19
CAIVRS .................................................................................................................................................................................................................................................... 19
Certificate of Eligibility ........................................................................................................................................................................................................................... 19
Automated Certificates of Eligibility (ACE)......................................................................................................................................................................................... 19
Credit and Obligations ........................................................................................................................................................................................................................... 20
30-Day Charge Accounts .................................................................................................................................................................................................................... 20
Alimony/Child Support....................................................................................................................................................................................................................... 20
Bankruptcy ......................................................................................................................................................................................................................................... 20
Chapter 7........................................................................................................................................................................................................................................ 20
Chapter 13...................................................................................................................................................................................................................................... 20
Child Care Expenses ........................................................................................................................................................................................................................... 21
Co-Signed Loans ................................................................................................................................................................................................................................. 21
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Consumer Credit Counseling.............................................................................................................................................................................................................. 21
Collections and Delinquent Accounts ................................................................................................................................................................................................ 21
Deferred Student Loans ..................................................................................................................................................................................................................... 21
Delinquent Federal Debt .................................................................................................................................................................................................................... 21
Foreclosures ....................................................................................................................................................................................................................................... 22
Inquiries ............................................................................................................................................................................................................................................. 22
Housing History .................................................................................................................................................................................................................................. 22
Job Related Expenses ......................................................................................................................................................................................................................... 22
Judgments/Tax Liens .......................................................................................................................................................................................................................... 22
Modified / Restructured Loans .......................................................................................................................................................................................................... 22
Non-Traditional Credit ....................................................................................................................................................................................................................... 23
Payoff of Debt to Qualify ................................................................................................................................................................................................................... 23
Significant Debt .................................................................................................................................................................................................................................. 23
Short Sales.......................................................................................................................................................................................................................................... 24
Community Property States ................................................................................................................................................................................................................... 24
Conversion of Primary Residence .......................................................................................................................................................................................................... 25
Conversion of a Primary Residence to a Second Home ..................................................................................................................................................................... 25
Conversion of a Primary Residence to a Rental Property .................................................................................................................................................................. 25
Pending Sale of Real Estate ................................................................................................................................................................................................................ 25
Disaster Re-Inspections .......................................................................................................................................................................................................................... 25
Escrow Holdbacks .................................................................................................................................................................................................................................. 26
Eligible Properties .................................................................................................................................................................................................................................. 27
Ineligible Properties ............................................................................................................................................................................................................................... 28
Eligible Transactions............................................................................................................................................................................................................................... 28
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Ineligible Products or Transactions ........................................................................................................................................................................................................ 29
Employment/ Income Verification ......................................................................................................................................................................................................... 29
Active Duty Military ........................................................................................................................................................................................................................... 29
Allowances on LES .............................................................................................................................................................................................................................. 30
Basic Allowances ................................................................................................................................................................................................................................ 30
Flight Pay, Overseas Pay, Combat Pay ............................................................................................................................................................................................... 30
Special Separation Benefit (SSB) ........................................................................................................................................................................................................ 30
Voluntary Separation (VSI) ................................................................................................................................................................................................................. 30
Auto Allowances ................................................................................................................................................................................................................................ 31
Unreimbursed Business Expenses ..................................................................................................................................................................................................... 31
Disability Income ................................................................................................................................................................................................................................ 32
Foster Care ......................................................................................................................................................................................................................................... 32
Non-Taxable Income .......................................................................................................................................................................................................................... 32
Rental Income .................................................................................................................................................................................................................................... 33
Reserve/National Guard .................................................................................................................................................................................................................... 33
Retirement ......................................................................................................................................................................................................................................... 34
AUS Income Documentation .................................................................................................................................................................................................................. 35
Documentation .................................................................................................................................................................................................................................. 35
Alimony/Child Support....................................................................................................................................................................................................................... 35
Gap in Employment............................................................................................................................................................................................................................ 35
Current Employment.......................................................................................................................................................................................................................... 35
Documentation .................................................................................................................................................................................................................................. 36
Previous Employment ........................................................................................................................................................................................................................ 36
De-Minimis Self-Employment ............................................................................................................................................................................................................ 36
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Documentation .................................................................................................................................................................................................................................. 37
Self-Employed: Personal Tax Returns ................................................................................................................................................................................................ 37
Self-Employed: Commissioned Borrower .......................................................................................................................................................................................... 37
Self-Employed: Profit & Loss Statements and Balance Sheets .......................................................................................................................................................... 37
Self-Employed: Business Returns ....................................................................................................................................................................................................... 37
Entitlement ............................................................................................................................................................................................................................................ 38
Guaranty ................................................................................................................................................................................................................................................ 40
Escrow Waivers ...................................................................................................................................................................................................................................... 40
Fees and Charges ................................................................................................................................................................................................................................... 41
Funding Fee ............................................................................................................................................................................................................................................ 42
Insurance ................................................................................................................................................................................................................................................ 43
Real Estate Taxes.................................................................................................................................................................................................................................... 43
Homestead Tax Exemptions................................................................................................................................................................................................................... 43
Interested Party Concessions ................................................................................................................................................................................................................. 43
Manufactured Homes ............................................................................................................................................................................................................................ 43
Restrictions ........................................................................................................................................................................................................................................ 43
General Eligibility Requirements – Title II .......................................................................................................................................................................................... 44
Credit Score ........................................................................................................................................................................................................................................ 45
HUD Red Tags..................................................................................................................................................................................................................................... 45
HUD Data Plate .................................................................................................................................................................................................................................. 46
Ineligible properties ........................................................................................................................................................................................................................... 46
Insurance ............................................................................................................................................................................................................................................ 46
Modular Homes ................................................................................................................................................................................................................................. 46
New Construction .............................................................................................................................................................................................................................. 47
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Title Binder ......................................................................................................................................................................................................................................... 48
Well and Septic .................................................................................................................................................................................................................................. 48
Maximum Term ...................................................................................................................................................................................................................................... 48
Occupancy .............................................................................................................................................................................................................................................. 48
Power of Attorney.................................................................................................................................................................................................................................. 49
Qualifying ............................................................................................................................................................................................................................................... 49
Qualifying (continued) .......................................................................................................................................................................................................................... 50
Reserves ................................................................................................................................................................................................................................................. 50
Interest Rate Reduction Refinance (IRRRL) ............................................................................................................................................................................................ 50
Non-Credit Qualifying ............................................................................................................................................................................................................................ 50
General Guidelines ............................................................................................................................................................................................................................. 50
Borrower Eligibility ............................................................................................................................................................................................................................. 50
Credit Score ........................................................................................................................................................................................................................................ 51
Funding Fee ........................................................................................................................................................................................................................................ 51
Guaranty ............................................................................................................................................................................................................................................ 52
Loan Limit ........................................................................................................................................................................................................................................... 52
Matrix (LTC, Score, Units) .................................................................................................................................................................................................................. 52
Mortgage Verification ........................................................................................................................................................................................................................ 52
Net Tangible Benefit .......................................................................................................................................................................................................................... 53
Occupancy .......................................................................................................................................................................................................................................... 53
Online Status Inquiry (in lieu of COE) ................................................................................................................................................................................................ 53
Recently Listed Property .................................................................................................................................................................................................................... 53
Subordinate Financing ....................................................................................................................................................................................................................... 53
Social Security Validation ................................................................................................................................................................................................................... 53
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Rate Decrease and Maximum Term................................................................................................................................................................................................... 54
Loan Documentation.......................................................................................................................................................................................................................... 54
Credit Qualifying .................................................................................................................................................................................................................................... 55
Income/Assets.................................................................................................................................................................................................................................... 55
IRRRL with NO Appraisal ........................................................................................................................................................................................................................ 55
Residual Income Requirement ............................................................................................................................................................................................................... 56
Secondary Financing .............................................................................................................................................................................................................................. 57
Underwriting .......................................................................................................................................................................................................................................... 58
Automated Underwriting (AUS) ......................................................................................................................................................................................................... 58
Manual Downgrades .......................................................................................................................................................................................................................... 58
Manual Underwriting ......................................................................................................................................................................................................................... 59
Compensating Factors ....................................................................................................................................................................................................................... 59
VA Guidelines
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Endeavor America’s Credit Philosophy
Endeavor America credit philosophy is to offer loan programs with minimal overlays to our clients. Endeavor America evaluates each loan individually based
solely on the borrower(s) creditworthiness and in accordance with the following principles:
 All loans must be submitted to Desktop Underwriter (DU) or Loan Prospector (LP) using a Credco credit report and receive an Approve or Accept rating
with the exception of IRRRL. Loans that receive AUS Refer may be manually underwritten with a DTI ≤ 50% and ≥ 120% residual income.
 All VA policies as outlined in the VA Handbook and applicable circulars have been met.
 All requirements of the DU Approve/Eligible or LP Accept/Eligible recommendation have been met for AUS-approvals.
 All prudent factors have been weighed and evaluated on the loan file and no reasonable doubt remains about the borrower’s ability to meet the terms
of the loan.
Topic
Ability to Repay
Age of Documents
Guidelines
Endeavor America will verify borrower’s income, employment, assets, credit, recurring expenses and other aspects of the loan to
make ensure the borrower can reasonably repay the loan in accordance to VA guidelines. The EALS underwriter must complete an
Ability-to-Repay form for purchases and cash-out refinances which will be retained in the loan file.
Credit Documents (credit report, employment, income, and assets) must be no more than:
 Existing Property: 120 days from the Note date.
 New Construction: 120 days from the Note date.
Title Report
 90 days from the Note date.
Appraisal
180 days from the issuance date of the VA Notice of Value (NOV).
Appraisal
VA Guidelines
General Information
 Endeavor America requires all brokers to be sponsored to transact VA loans. Loans from broker with pending sponsorship will
be reviewed on a case by case basis and the broker may not process more than four loans on an annual basis.
 Transferred Appraisals must reflect the “Any Qualified Veteran” in the borrower field as per VA Circular 26-14-26.
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Appraisal
(continued)
Appraisal Form Requirements
 Form 1004 is for 1-unit single family property and the appraisal report must include:
 Interior photos of the
 Kitchen
 Examples of physical deterioration, if present
 All bathrooms
 Examples of recent updates such as restoration, remodeling and
renovation, if present
 Main living area




 Clear, original photos of the front and rear with different views of the subject sides in each photo, subject street views and
front view of each comparable. Appraiser to comment if photos from multiple listing service are used (e.g. gated community).
 Include photos of any improvement, site feature or view that would affect the final market value.
Form 1004C for manufactured housing
Form 1073 is required for attached condominiums
Form 1025 is required on 2-4 unit properties
Form 2055 Exterior Appraisal with 1004MC for single family (Forms 1075 & 1004MC for condos) are required for IRRRLs
Acreage
Acreage must be common for the area
Age Restricted Properties (55+ senior communities allowed)
 The appraisal must reflect the impact that the restrictions have on the property’s value and marketability.
 The appraisal must be supported by comparables with similar restrictions.
 Borrower(s) must acknowledge the restriction terms by signing a Resale Restriction Notice at closing.
Carbon Monoxide Detectors
 If required by the state, the property and the carbon monoxide detectors are missing or nonfunctional:
 “As-is” appraisal requires a 1004D completed by the appraiser or a Lender Certification along with supporting photo(s) to
verify the detectors have been installed and/or are currently functioning on every floor of the property.
 “Subject to” appraisal requires a 1004D completed by the appraiser to verify the detectors have been installed and/or are
currently functioning on every floor of the property.
 Carbon monoxide detectors should not be listed as a MPR on the appraisal report.
VA Guidelines
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Appraisal
(continued)
Farm Residence
 The property must be occupied by the veteran as the primary residence and cannot be income producing.
 VA only gives value to the home and the physical buildings attached to the land that support the residence.
 The valuation cannot include any income producing aspects such as livestock, crops, equipment and/or supplies.
 The loan cannot cover the nonresidential value of the farm land.
Inspection Requirements
 Appraiser must look for and report evidence of wood destroying insect infestation, fungus growth, and dry rot, in addition to any
other VA requirements.
 Refer to VA Circular 26-14-8 for guidance on repair inspection processing procedures.
Minimum Property Requirements
 Subject property’s overall condition must meet VA’s Minimum Property Requirements (MPRs) for safety, sanitation and
soundness.
 All readily observable repairs recommended by the VA appraiser must be satisfied prior to closing.
Reference: VA LH, Chapter 12 and applicable VA circulars.
New/Existing Construction (completed less than 1 year and never occupied)
 Builder must be VA approved with a valid VA builder ID number prior to NOV issuance, and
 Construction is 95% completed in accordance with VA MPRs with only customer preferences left (interior wall finishes, floor
coverings, appliances, counter tops, fixtures – sinks and toilets, equipment – range, dishwasher, disposals, air conditioning
compressors (not central A/C), minor trim work, insulation, final grading, sodding/seeding, etc.)
VA Guidelines
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Appraisal
(continued)
VA Guidelines
New/Existing < 1 Year Exhibits and Inspections
 Subterranean Termite Soil Treatment Builder’s Guarantee (Form NPCA-99a/ NPMA-99-A) unless state specific form is more
stringent.
 Form NPCA-99b/ NPMA-99-B is also required if builder treated with soil termiticide.
 If property is over 95% complete, a termite inspection report may be used.
 1-year Builder’s Warranty (Warranty of Completion of Construction, VA Form 26-1859 or HUD Form 92544) if property was
inspected at least 3 times during the construction process. NOV requirements are:
 VA “Not Inspected” Acknowledgment for New Construction with 1-Year Builder’s Warranty (NOV item 12a), AND
"I am aware that VA did not inspect this property during construction and that VA assistance with construction complaints will
be limited to defects in equipment, material and workmanship reported in writing during the one-year VA builder warranty
period.”
 1-year Builder’s Warranty on VA Form 26-1859, Warranty of Completion of Construction
 OR, if 10-year protection plan, NOV requirements are:
 Evidence of enrollment in a 10-year insurance protection plan acceptable to HUD, AND
 VA “Not Inspected” Acknowledgment for New Construction with 10-Year Warranty (NOV items 12b and 13)
"I am aware that VA did not inspect this property during construction and that it does not qualify for VA assistance with
construction complaints.”
 Builder Certification on company letterhead, signed and dated by the builder, architect or engineer.
 “I certify that the construction exhibits for [subject legal address] met all local code requirements and are in substantial
conformity with VA Minimum Property Requirements, including the energy conservation standards of the 1992 Council of
American Building Officials’ Model Energy Code and the requirement for lead-free water piping.”
 VA also accepts the HUD Form 92541
 Lead/water distribution system from builder
 Off street improvements – unless SAR has evidence that the streets, drainage, water and sewer have been completed and
accepted for maintenance by the local authority (i.e., the subject is a new home in an older established neighborhood).
 Clear Final Inspection with photos using VA Form 26-1839, VA Compliance Inspection Report
 Certificate of Occupancy
 Well & Septic, if applicable
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Appraisal
(continued)
Proposed/Under Construction
 Builder must be VA-approved, and
 Property must be constructed in accordance with VA Minimum Property Requirements (MPRs) and any applicable VA circulars.
Proposed/Under Construction Exhibits and Inspections
 Certificate of Occupancy
 Warranty of Completion of Construction (VA Form 26-1859 or HUD Form 92544)
 Description of Materials (VA Form 26-1852) signed & dated by the builder and veteran borrower
 Plans of the
 Plot, identifying locations of the well/septic systems (if applicable)
 All exterior building elevations
 All floor levels
 Foundation or basement plan
 Sectional wall details
 Builder Certification on company letterhead, signed and dated by the builder, architect, or engineer.
 “I certify that the construction exhibits for [subject legal address] met all local code requirements and are in substantial
conformity with VA Minimum Property Requirements, including the energy conservation standards of the 1992 Council of
American Building Officials’ Model Energy Code and the requirement for lead-free water piping.”
 VA also accepts the HUD’s Builder Certification of Plans, Specifications and Site (Form HUD-92541)
 Construction Inspections must be completed to ensure:
 Property was built according to the plans and specifications
 Property meets VA’s Proposed Construction MPRs [Refer to VA LH, Section 12.02]
VA Guidelines
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Appraisal
(continued)
IF Property is appraised as:
without 10-Year Insured
Protection Plan and 1-year
Builder Warranty
Construction Inspections and Warranty
Requirements
 1-year builder warranty
 Either one of the following compliance Inspections:
 Local building authority completes inspections at three stages of construction
and issues Certificate of Occupancy (CO) or equivalent,
Stage 1/Foundation: completion of excavation and foundation walls
Stage 2/Framing: completion of the superstructure AND below superstructure
Stage 3/Final: completion of all onsite and offsite improvements
 IF local building authority does not issue CO, VA will accept copies of the
inspections OR written statement from local authority that the required 3
inspections were performed satisfactorily as evidence completion in accordance
with all applicable local building codes.
with 10-Year Insured
Protection Plan and 1-year
Builder Warranty
 BOTH 1-year builder warranty and 10 year HUD accepted insured protection plan
Existing Construction with
major alterations,
improvements, or repairs
 VA or LAPP underwriter will determine on case-by-case basis, based on the nature
are required.
 If local authority does not perform the required inspections, then the lender must
certify the property is 100% complete (both on-site and off-site improvements) and
that property meets VA’s MPRs for existing construction.
of the work:
 which regular or special inspections are required, if appropriate, and
 appraiser or lender will certify satisfactory completion.

New/Existing Construction
< 1-year-old
 EITHER 1-Year Builder’s Warranty of Completion of Construction (VA Form 26-1859
or HUD Form 92544) , or
 10-Year HUD accepted insured protection plan
Existing Construction (1-yearold)
VA Guidelines
 NO warranty is required.
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 Changes to Exhibits: change is limited to substitution of mechanical equipment of equal value.
Appraisal
(continued)
After the appraisal was completed, use VA Form 26-1844, Request for Acceptance of Changes in Approved Drawings and
Specifications. VA staff must approve any VA Form 26-1844
Notice of Value (NOV)
 The Notice of Value (NOV) is issued by an Endeavor America SAR (Staff Appraisal Reviewer) on LAPP cases based on appraisal
report completed by the VA fee appraiser. Cases ordered as IND in webLGY will be reviewed by the Regional Loan Center.
 The veteran must receive a copy of the NOV within five days of the NOV issuance.
 NOV is valid for six months
 SAR must issue the NOV at the fee appraiser’s value estimate reflected in the appraisal report.
SAR must consider the local requirements [VA web link: http://www.benefits.va.gov/HOMELOANS/appraiser_cv_local_req.asp
Property Listed for Sale
 For refinances including IRRRLs, a property listed for sale at the time of the loan application is ineligible for financing with
Endeavor America.
 There is no minimum waiting requirement for properties with expired listings, or have had their listing cancelled or removed
prior to the loan application.
VA Guidelines
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Assets
VA Guidelines
 Endeavor America requires the Borrower(s) have sufficient assets to meet the down payment, closing costs not financed into the
loan and the difference between the purchase and sales price (if higher), and cash reserves.
 AUS DU/LP findings will be followed with the exception of Verification of Deposits, which are not accepted by EALS.
Cash to Close
 Verify sufficient cash to cover any veteran-paid closing costs or points and
 Verify the difference between the sales price and loan amount IF the sales price exceeds the NOV.
Bank Statements –
Large Deposits
Borrower’s explanation with source of funds documentation is required for:
 Large deposits which refers to a deposit amount that exceed 25% of the total qualifying income (or less
at underwriter’s discretion).
 Unless readily identified deposit source such as federal/state tax refund, SSA benefit, payroll direct
deposit, etc.
 Current balance is significantly higher than average balance
 Any bank account opened within 90 days of application date.
Business Funds
 Document borrower’s ownership (e.g. business license, corporate/partnership returns)
 Used for down payment and closing costs (cannot be used for cash reserves)
 CPA provides a letter stating:
 Borrower has full use of business funds.
 No repayment is required and funds are not an advancement against future earnings/cash
distributions.
 The withdrawal of funds does not have negative impact on business and comment on future tax
implications.
Documentation
 AUS Approve/Accept Loans: Obtain most recent bank statement for each account
 AUS Refer/Manual Approval Loans: Obtain most recent two consecutive months for each account
Down Payment
No down payment is required by VA (provided the borrower has full entitlement) unless:
 the sales price exceeds the appraised value, or
 the requested loan amount exceeds VA county loan limit:
http://www.benefits.va.gov/homeloans/purchaseco_loan_limits.asp
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Assets
(continued)
Earnest Money
 Verify earnest money deposit (EMD) if:
 EMD will be credited back to the veteran borrower at closing
 EMD exceeds 2% of sales price
 Appears excessive based on the borrower’s accumulated savings history.
 Document as follows:
 Copy of the canceled check and deposit holder’s acknowledgment of receipt.
 Bank statements to source the deposit check as determined by the AUS findings.
Gift Funds
Gift letter must:
 Certify the gift was not sourced from an interested party to the transaction (e.g. seller, realtor,
builder, loan originator, etc.)
 Include donor’s name and address, gift amount and date given, donor’s source account
 Executed by the donor and recipient(s)
Document Requirements:
 Donor’s ability must be documented from an acceptable source (not an interested party). Cashon-hand is not acceptable.
 Document the gift transfer
NOTE: Gifts of Equity are not allowed and are not recognized by VA.
Retirement Account
Sale of Home
 60% of the vested balance can be considered as cash reserves
 If using retirement funds for reserves, document the terms of withdraw


Assumability
VA Guidelines

AUS Approve/Accept Loans: Obtain an executed HUD-1 Settlement Statement (loan applications
on/before 10/02/2015) or Closing Disclosure (loan applications on/after 10/03/2015) or
equivalent closing statement If relocation, obtain buyout agreement.
AUS Refer/Manual Approval Loans: Additionally, verify source of funds for payment of any
differences between sales price and loan amount plus closing costs, if sales price exceeds the
NOV.
A VA mortgage is assumable by qualified Borrower(s) during the life of the loan.
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Borrower Eligibility
For veterans who served active duty and were honorably discharged, the minimum service periods shown in the following table are
based on continuous days of active duty.
Eligible Veterans
Era
World War II
Post World War II
Korean
Post-Korean
Vietnam
Post-Vietnam
Persian Gulf
Dates
09/16/1940 – 07/25/1947
07/26/1947 – 06/26/1950
06/27/1950 – 01/31/1955
02/01/1955 – 08/04/1964
08/05/1964 – 05/07/1975
05/08/1975 – 09/07/1980
09/08/1980 – 08/01/1990
09/08/1980 – present
Minimum Service Requirement
90 days
181 days
90 days
181 days
90 days
181 days
2 years: Enlisted after 09/07/1980 and Officer after 10/16/1981
2 years OR full period called to active duty, not less than 90 days
Other Eligible Borrowers
Additionally, the following table addresses identifies other eligible borrowers including Reserves/National Guards. The service
times for Reservists and Nation Guards can be pieced together and do not have to be consecutive.
Active Duty, Reserves/National Guards
Active duty member
Active Reserve or National Guard
 90 days minimum wartime service when called up under U.S.C. Title 10
 181 days minimum peacetime service of continuous active duty.
 6 years in Selected Reserves
 Except if discharged due to a service connected disability before completion of 6 years.
 Honorably discharged from service unless:
 Inactive status awaiting final discharge, or
 Still serving
Spouses
Unmarried surviving spouse
POW/MIA Spouse
VA Guidelines
 No time requirement.
 Veteran must have died on active duty or from a service-connected disability.
 VA Form 26-1817, Request for Determination of Loan Guaranty Eligibility – Unmarried Surviving
Spouses must be completed and submitted to applicable VA Eligibility Center in Winston Salem, NC.
or Atlanta, GA.
 A loan obtained with a surviving spouse COE requires an affidavit at closing that the surviving spouse
is not married.
 Veteran must have been POW or MIA for 90 days.
08/19/2016
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(continued)
CAIVRS
Certificate of
Eligibility
Foreign Address
 Borrowers currently residing in a foreign country must have a primary residence or second home in the U.S.
 The borrower’s U.S. residence must be reflected as the present address on the loan application.
 The borrower’s foreign address must be reflected as the mailing address on the loan application.
 A LOE from the borrower must be obtained to explain the borrower’s current residency situation.
 Perform and document a CAIVRS screening on each veteran and any co-obligor. An applicant cannot be considered a satisfactory
credit risk if he or she is presently delinquent or in default on any debt to the federal government until the delinquent account
has been brought current or satisfactory arrangements have been made between the veteran and the federal agency.
 CAVIRS is not required for non-purchasing spouses in community property states.
Certificate of Eligibility (COE)
 The Certificate of Eligibility (COE) shows the available entitlement amount that VA will use to guaranty the loan.
 The borrower who is using his/her entitlement to guarantee the loan must be listed as the primary borrower.
 COE can be obtained by sending to the appropriate VA Eligibility Center the following documentation:
 VA Form 26-1880
 Proof of service documentation (DD214, active duty statement of service, or Reserve/National Guard points statement)
 Copy of HUD-1 Settlement Statement (loan applications on/before 10/02/2015) or Closing Disclosure (loan applications
on/after 10/03/2015) if veteran had a previous VA home that was sold
Automated Certificates of Eligibility (ACE)
 Lenders can obtain an online COE through the ACE system accessed on VIP website: http://vip.vba.va.gov
 ACE certificate has an authorization number for authenticity
 ACE cannot make all determinations for
 Reserves/National Guard
 Prior VA loan foreclosure
 Insufficient time/discharge type
 Unmarried surviving spouse
VA Guidelines
08/19/2016
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Credit and
Obligations
30-Day Charge
Accounts
 Open 30-day charge accounts (monthly payment reported as equal to outstanding balance or as $0)
requires the balance to be paid in full every month. If additional liquid assets are verified to sufficiently
cover the unpaid balance, the debts may be excluded from the DTI. Otherwise, the entire outstanding
balance must be included in the DTI.
Alimony/Child
Support
 Verify the payment amount and current status of the account
 Delinquent child support must be considered in the overall creditworthiness
 If the account is >90 days past due and there is no repayment arrangement, downgrade to a Refer.
Bankruptcy
Chapter 7
o AUS Approve/Accept: a Chapter 7 bankruptcy may be disregarded if discharged more than 2 years
ago.
o Manual underwrites or AUS Refer allow Chapter 7 that was discharged within 1-2 years provided both
requirements are met:
 Obtain complete and thorough documentation trail of the circumstances that led up to the
bankruptcy were beyond the borrower’s control (e.g. unemployment, prolonged strikes, medical bills
not covered by insurance).
 Document reestablished credit with four consumer debts opened after the bankruptcy with
satisfactory 12 months pay history
o Bankruptcy discharged within the past 12 months is not permitted.
Chapter 13
o Documentation of debt restructure
o Most recent 12 months acceptable payment history in accordance to the Ch. 13 Approved Plan.
o Court’s approval to proceed with VA loan
 If borrower converts a Chapter 13 into Chapter 7 that was subsequently discharged within the past 12
months, then refer to Chapter 7 guidance above.
VA Guidelines
08/19/2016
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Credit and
Obligations
(continued)
Child Care Expenses
o Child care letter is required for all children 13-years-old or younger (state specific requirement
supersedes) and must include: child care costs, name and address of the provider)
o Child care expenses must be included in the DTI and residual income
o If there is no child care expense, obtain an explanation.
Co-Signed Loans
A co-signed loan may be excluded from the borrower’s monthly obligations with:


Documentation loan payments are being made by someone else, AND
Verification that the loan is current and being paid on time
Late payments reported on debts assigned to the ex-spouse in a divorce do not need to be charged to the
borrower, if the delinquencies occurred after the divorce.
Consumer Credit
Counseling
Consumer Credit Counseling Services (CCCS) is acceptable if ALL of the following are met:
o
o
o
o
VA Guidelines
Documentation of debt restructure is required
Acceptable 12 months payment history of debts included in the consumer’s debt restructure.
Counseling agency provides written authorization to proceed with new VA loan.
 AUS Approve/Accept loans: the credit has met VA guidelines and the CCCS is not
impacting the loan. Consequently, a written authorization is not necessary.
Any additional requirements per AUS findings.
Collections and
Delinquent Accounts
o Delinquent accounts including collections do not necessarily have to be satisfied prior to closing,
subject to the underwriter’s discretion and the AUS findings.
o Reestablished credit with 12 months satisfactory payments after the date of the last late payment if
prior derogatory payments didn’t involve a bankruptcy.
Deferred Student
Loans
o Qualify with the monthly for ALL student loans due within 12 months of closing.
o Education loans with > 12 months verified deferment may be excluded in the debt calculation.
Delinquent Federal
Debt
o Any delinquent federal debt (e.g. student loans; tax liens; etc.) must be brought current, paid in full,
resolved with satisfactory repayment plan between the federal agency and the borrower.
o Written verification is required from the federal agency to document that the delinquency has been
paid in full, or repayment arrangements have been established.
o Even though a debt may be satisfied, it doesn’t take away from the fact the delinquency occurred and
must be considered in the credit risk analysis.
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Credit and
Obligations
(continued)
Foreclosures
o Two (2) years minimum seasoning (from application date) is required for prior foreclosure and deed-inlieu of foreclosure on both AUS Approved and manually underwritten loans.
o If prior VA foreclosure, check the COE to ensure sufficient entitlement and/or restoration of
entitlement.
o A detailed explanation with documentation is required to support the situation(s) that caused the
foreclosure or deed-in-lieu- were beyond the borrower’s control and unlikely to reoccur.
o Must have reestablished credit with no housing or installment late payments after the foreclosure.
Inquiries
o Borrowers must address ALL inquiries within the past 120 days listed on the credit report and
specifically addressing the reason and the disposition of each inquiry.
o No explanation is required on AUS Approve/Accept
Housing History
o AUS Approved loans, rental verifications are not typically required
o Mortgage history with more than one (1) X 30 days late within the past 12 months require an
explanation and must be manually underwritten.
o Mortgages not reporting on the credit report with more than one (1) X 30 requires a manual
downgrade.
Job Related Expenses
o Job related expenses include: childcare expenses for children < 13-years-old, significant commuting
costs of 50+ miles each way, undisclosed debt(s) on paystubs, and/or unreimbursed business expenses.
Such expenses must be included in the DTI and residual income calculations.
Judgments/Tax Liens
Modified /
Restructured Loans
VA Guidelines
o
All judgments/tax liens must be satisfied prior to or at closing, or evidence provided of a
repayment plan and timely payments for the most recent consecutive two (2) months. Payments
may not be prepaid to meet the two consecutive payments.
o Purchase and refinance transactions where the borrower has had a modified/restructured mortgage
may be acceptable as follows:
o The modification/restructure adjusted the terms and/or payment only.
o The mortgage must be current with no lates within the last 12 months.
o oA modification that has been restructured to reduce the principal balance must meet the
requirements of a short sale. (see short sale guidelines for details)
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Credit and
Obligations
(continued)
Non-Traditional
Credit
Endeavor America requires most loans to receive an AUS Approve/Accept. Loans with borrowers who
have insufficient credit and non-traditional credit are manually underwritten with a 41% maximum DTI.
Borrower’s payment habits may be determined with alternative credit reference from non-traditional
sources of credit such as rent, utilities, cell phones, car insurance, or other expenses the borrower pays
over time.
o Each credit reference should provide the most recent 12-months payment history and current account
rating with creditor phone number validated through third party public sources.
o Non-traditional sources of credit cannot be used to offset poor credit history.
VA Guidelines
Payoff of Debt to
Qualify
o Revolving debt may be paid off to qualify. The following documentation is required to show revolving
debt paid:
o Credit supplement showing debts have been paid off.
o Borrower must document sufficient funds required to pay off debt.
o If <640 FICO revolving debt being paid off to qualify must also be closed. The following documentation
is required to show revolving debt paid and closed:
o Credit supplement showing debts have been paid off and closed.
o Borrower must document sufficient funds required to pay off debt.
o A copy of the payoff and close out letter from the creditor must be provided.
o If the seller is willing to pay off the borrower’s revolving debt to qualify, the following apply:
o Total amount of debt to be paid by the seller must be part of the seller concession not to exceed
4%.
o Payoff statement provided by the creditor; if <640 close out letters are also required to close the
revolving accounts, and
o Reflected on the closing disclosure.
Significant Debt
o Any debt that will have significant impact on the veteran-borrower’s ability to meet their standard
family living expenses must be included in calculating the debt ratio (VA defines significant as any debt
that exceeds 2% of the total effective income used to qualify).
o This guideline also applies to debts with <10 monthly payments remaining.
o Underwriter may consider if there are reserves to cover the debt after closing or a source of
income they were unable to use as “effective income.” Comments for excluding payments in DTI
should be included in the Remarks section of the Loan Analysis.
08/19/2016
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Credit and
Obligations
(continued)
Community
Property States
VA Guidelines
Short Sales
o
o
There is no waiting period when the borrower has a short sale appearing on their credit report
All loans must be documented according to the AUD findings, or manual underwriting guidelines
Community property states: Alaska (optional), Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington,
Wisconsin.
 If the borrower resides in a community property state OR if the subject property is located in a community property state:
 Debts of the non-purchase spouse must be considered in the debt-to-income ratio and in the residual income
calculation.
o Obligations specifically excluded by state law need not be counted with satisfactory documentation to
support the exempted debts.
 The greater of the reported monthly payment or 5% of the outstanding balance must be counted as the monthly
obligation.
 Judgments, liens, and any other delinquent credit that would compromise Endeavor America’s first lien position must be
paid off prior to closing. Other delinquent debts would only be required to be paid off at the EALS underwriter’s discretion.
 If the non-purchasing spouse doesn’t have a SSN, a credit report is still required with public records search.
 CAVIRS is not required for non-purchasing spouses in community property states.
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Conversion of
Primary Residence
Conversion of a Primary Residence to a Second Home
 The veteran must qualify with the monthly housing expenses for both the departing residence and the subject transaction.
 Required reserves as determined per the AUS recommendation.
Conversion of a Primary Residence to a Rental Property
 Rental income of the departed residence is calculated on a 75% of:
 Fair market rent as established by a state licensed appraiser’s current Market Rent Analysis, or;
 Monthly gross rent from an executed lease agreement with security deposit receipt.
 Any positive cash flow cannot be used as qualifying income. Rental income is allowed only to offset the mortgage payment
and the mortgage debt should be listed on the loan analysis as a “rental offset.” If the cash flow is negative, this must be
considered as a debt.
 Reserves are not required unless necessary to maintain AUS Approve/Accept recommendation.
Pending Sale of Real Estate
 When the veteran intends to sell the property but the sale will not close prior to the new VA purchase;
 Veteran must qualify with the PITI on both the current residence and the new primary purchase;
 Veteran must document minimum cash reserves of:
o Six (6) months PITI for both properties, or;
o Two (2) months PITI for both properties is able to document a minimum of 30% equity in the current
residence.

Disaster ReInspections
VA Guidelines
Appraisal inspected on/before a declared disaster incident period end date:
 A re-inspection/exterior only appraisal on either form 1004D or form 2055 is required.
 If the re-inspection indicates damage, the extent of damage must be addressed. Completion of repairs is required
prior to funding as evidenced by form 1004D, with photos.
08/19/2016
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
Appraisal inspected after a declared disaster incident period end date:
 The appraisal must contain the following commentary/evidence: Property is free from damage and the disaster has
no effect on the marketability.
 An interior inspection is required in all disaster-disaster areas for one year from the date of the disaster declaration.
 The appraiser must provide current photos of the subject property and comparable sales. Photos from MLS or the
appraiser’s database are not acceptable.

Property Valuation Update, PIW, Exterior Appraisals (forms 2055, 1075):
 Not allowed until one year after disaster declaration date.

VA Guaranty Eligibility: Any loan funded prior to the disaster is eligible for VA guaranty without regard to the disaster.
 For any unfunded loan that was appraised on/before the disaster date, the following certifications are required:
o Lender Certification must be signed and dated by an EA underwriter – “This is to affirm that the property
which is the security for VA loan number _____________ has been inspected to ensure that it was either
not damaged in the recent disaster or has been restored to its pre-disaster condition, or better.”
o Veteran Certification must be signed and dated by the veteran – “I have inspected the property located at
__________________________________ and find its condition now to be acceptable to me. I understand
that I will not be charged for any disaster-related expenses, and now wish to close the loan.” (for purchase
transactions)
Disaster ReInspections
(continued)
Escrow Holdbacks
VA Guidelines
The escrow of funds can permit the borrower to gain occupancy of the dwelling prior to completion of certain items which must be
postponed due to weather conditions or other circumstances. Such items include, but are not limited to:
o Walkways, driveways, and retaining walls
o Exterior painting
o Landscaping
o Garages
08/19/2016
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Escrow Holdbacks
(Continued)
Eligible Properties
Endeavor America Loan Services permits the escrow of funds necessary to complete the unfinished work with the following
requirements:
o Withholding 1 ½ times the dollar amount necessary to complete the postponed items (estimated by a third party) a bid and
or invoice from a licensed professional is required to determine the total costs of repairs required.
o Holding funds in a proper, secure manner
o Releasing the funds once the postponed items have been satisfactorily completed.
o Construction of the dwelling must be complete and the house must be suitable for immediate occupancy
o Postponement of the improvements must be beyond the control of the builder/seller (borrower in the case of a refinance)
o Escrows limited to landscaping only and less than $500.00 do not require an escrow holdback
o Completion of the escrow agreement at closing (VA Form 26-1849)
o Completion of the Completion Inspection Report once work has been completed (VA Form 26-1839)
The following properties are permitted under the VA Home Loan Program:
 1-Unit single family and 2-4 multi-unit residential properties
 VA approved condo (VA web link: https://vip.vba.va.gov/portal/VBAH/VBAHome/condopudsearch)
 PUDs that meet all VA requirements
 Manufactured homes classified as real estate and meets VA requirements (single or double-wide)
 New construction by VA approved builder
 95% completed construction except for customer preferences
 Completed less than 1 year and never occupied
 Proposed and Under Construction by a VA approved builder
Note: EA only provides the permanent financing; not construction draws.
VA Guidelines
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Ineligible
Properties
Eligible
Transactions
VA Guidelines
Ineligible Property Types
A property is ineligible if any of the following conditions are present:
 Marijuana grow facilities for income and/or personal use are on the premises
 Hawaii homes located in Lava Flow Hazard Zones 1 or 2, as determined by the USGS
 Condominium is not VA approved
 Condominiums or manufactured homes with less than 400 square feet
 Manufactured home not permanently affixed to the lot and is not considered real estate under the law
 Ownership NOT fee simple (e.g. cooperative, leasehold, ground rental arrangements)
 Property that cannot meet VA’s minimum property standards
 Property has Chinese drywall
 Property location in any of the following:
 A Special Flood Hazard Area (SFHA) and flood insurance is not available
 A SFHA and is proposed/under/new construction with elevation of the lowest floor below the 100-year flood level
 An area subject to regular flooding for whatever reason(s), regardless if it’s in SFHA.
 A Coastal Barrier Resources System area
 An Airport Noise Zone 3, if proposed or under construction
 A transmission line easement involving high-pressure gas or liquid petroleum or high voltage electricity, if any part of the
residential structure is located within the easement
 An area susceptible to geological or soil instability (earthquakes, landslides, or other history of unstable soils) if
proposed/under/new construction and the builder cannot provide evidence that either the site is not affected or the
problem has been adequately addressed in the engineering design.
 On-frame modular
 SFH with acreage exceeding 30 acres
 Manufactured: single wide with land to value ratio exceeding 30%, double/triple exceeding 50%
 Pace/Hero loans and energy loans that are paid through annual tax assessments are not eligible unless paid off prior to
closing.
Purchase
 Principal residences only
Refinance
 Interest Rate Reduction Refinance Loan (IRRRL) may be second home/investment property previously occupied by veteran
 Cash-Out/regular refinance (debt consolidation, rate and term reduction, home improvement, spousal buyout, equity takeout)
- A cash-out refinance is a loan that refinances any type of lien against the secured property, including existing
mortgages, tax or judgment liens. Properties that are owned free and clear are not eligible for cash-out refinancing.
08/19/2016
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Ineligible Products
or Transactions
Employment/
Income
Verification
VA Guidelines
Ineligible Products or Transactions
 Co-signer who is not a legal spouse to the veteran
 Energy Efficient Mortgages (EEMs)
 Living and Land Trust
 Loans with non-occupying borrowers
 Non-arms-length transaction on a short sale when the seller and buyer are related
 Supplemental loans
 Temporary buydowns
 Transactions resulting in less than 25% guaranty
 Unsecured loans or loans secured by less than a first lien
 VA Adjustable Rate Mortgages (ARMs)
 VA Prior Approval loans:
 Loans made to two (2) or more veterans who will be using entitlement
 Loans made to veterans receiving VA non-service related pension
 Loans made to veterans rated incompetent by the Department of Veteran’s Affairs
 VA IRRRLs currently delinquent at the time of application or closing
Active Duty Military
o If the borrower’s active duty release date or the end of the contract term is within 12 months of the
closing date, obtain any of the following:
 Document re-enlistment date beyond the 12-month period from the closing.
 A statement from the service member that he/she intends to re-enlist or extend his/her
period of active duty to date beyond the 12-month period plus a statement from his/her
commanding officer confirming the service member is eligible to re-enlist or extend his/her
active duty and that there is no reason re-enlistment or extension of active duty will not be
granted.
 Verification of a valid offer of local civilian employment following the release from active
duty.
08/19/2016
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Employment/
Income
Verification
(continued)
Active Duty Military
(continued)
o
o
Allowances on LES
o
Leave and Earnings Statement (LES) dated 120 days prior to the Note date is required.
Basic Allowances
o
Non-taxable basic allowances may be used as effective income such as: quarters (BAH),
subsistence (BAS), and clothing.
BAH is verified with form Stats of Housing Availability/DD Form 1747 that confirms borrower
will not have housing accommodations available and that borrower has authorization to
secure non-military housing.
o
VA Guidelines
Documentation of strong mitigating factors such as: >10% down payment; significant cash
reserves; and evidence of strong ties to community with adequate non-military spouse income
so that only minimal income is needed from the active duty service member to qualify.
A statement from the service member that he/she intends to re-enlist or extend his/her
period of active duty to date beyond the 12-month period plus a statement from his/her
commanding officer confirming the service member is eligible to re-enlist or extend his/her
active duty and that there is no reason re-enlistment or extension of active duty will not be
granted.
Flight Pay, Overseas Pay,
Combat Pay
o
o
Other taxable allowances include: flight or hazard pay, pro-pay, overseas pay, and combat pay.
May be used as effective income if documented as follows:
 Document amount and history of receipt.
 Verify continuance consistent with the nature of the service member’s duties (e.g.
flight pay for a pilot).
Special Separation
Benefit (SSB)
o
o
Special Separation Benefit (SSB) is a one-time lump sum that is taxable in the year of receipt.
SSB is considered as a cash reserve (not effective income).
Voluntary Separation
(VSI)
o
o
o
VSI is paid annually and is taxable in the year of receipt.
VSI may be used as qualifying income.
Payment period is calculated by multiplying the service member’s years of service times two.
08/19/2016
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Employment/
Income
Verification
(continued)
Auto Allowances

Generally, auto allowances are paid to cover specific expenses related to the applicant’s
employment and may be used to offset a corresponding car payment.
Unreimbursed Business
Expenses

2106 expenses for the non-borrowing spouse do not need to be subtracted from the
borrower’s income as long as the spouse’s 1040 wages offset these expenses.
All other non-borrowing spouse’s losses, including Schedule E losses, must be subtracted from
the borrower’s income.

Loan applications dated June 1, 2016 or later:
For a borrower who qualifies using commission income of less than 25% of the total annual
employment income


IRS Form 2106 expenses are not required to be deducted from income even if they are
reported on IRS Form 2106 and are not required to be added as a monthly liability
Tax returns are not required to document the source of income and deductions
For a borrower earning commission income that is 25% or more of annual employment
income, IRS Form 2106 expenses must be deducted from gross income regardless of the
length of time the borrower has filed the expenses with the IRS


Tax returns are required to document the source of income and deductions
Exception to this policy: auto lease or loan payments are included as a debt, not subtracted
from the income
If the borrower reports an auto allowance as part of the monthly qualifying income, the
Underwriter must determine if the auto expenses reported on IRS Form 2106 should be
deducted from income or treated as a liability


VA Guidelines
If the reported expense exceeds the auto allowance, the amount must be deducted from
income
If the reported expense is less than the auto allowance, the amount must be treated as net
income and added to the monthly income
08/19/2016
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Employment/
Income
Verification
(continued)
Disability Income



Disability income will be considered as acceptable income provided it can be documented by
furnishing a recent copy of the respective letter of benefits or allotment setting forth the
terms of the income.
Disability income may only be used if it can be documented that the benefits must be on-going
for a minimum of three (3) years.
Temporary/short term disability income is not considered consistent or a stable source of
income and cannot be used for qualifying purposes.

Foster Care
Non-Taxable Income
Foster care income may only be used to balance the expenses of caring for the foster children against
any increased residual income requirements with documented history and verified continuance.




VA Guidelines
Non-taxable income may be “grossed up” only to calculate the debt ratio but not for the
residual income calculation. The “grossed up” income must be annotated in the “Remarks”
section of the Loan Analysis.
The percentage of non-taxable income that may be added back is based on the appropriate
tax rate for the income amount reflected on the borrower’s tax returns.
Do NOT add non-taxable income to taxable income before “grossing up.”
The following non-reportable income may be grossed up 25%:
o VA disability,
o Child support,
o BAH, and
o BAS.
08/19/2016
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Employment/
Income
Verification
(continued)
Rental Income
2-4 Unit Subject Property


2-4-unit subject property rental income can be used to qualify if the following are both met:
 Evidence indicates the borrower has a reasonable likelihood of success as a landlord;
and
o Document the borrower’s prior experience in managing rental units or other
background involving both property maintenance and rental.
 Borrower has a minimum six (6) months PITI reserves
Subject rental income is calculated based on 75% of:
 Verified rent collected on the units for an existing property; or
 Fair market rent per appraiser’s opinion on proposed construction

Other Real Estate Owned
Reserve/National Guard
VA Guidelines


Three (3) months PITI reserves for each rental property owned, and;
Rental cash-flow based on Schedule E from most recent two (2) years personal tax returns,
signed and dated by the borrower. Depreciation claimed as a deduction may be added back
to the rental cash-flow.
 For rental properties with <12 months rent history, underwriter’s determination to
use rent will be based on:
o Documented borrower’s prior experience in managing rental units or
background involving both property maintenance and rental; and
o Obtain executed lease(s) on the property; and
o The strength of the local rental market.

Borrower must indicate whether his/her income will change in any part due to his/her
participation in the Reserve/National Guard; and
 If Reserve/National Guard income will probably continue based on the total length of
service, then this income may be used to qualify
 If continuance is not likely, the income may be used to offset debt that has only 10-24
months of payment remaining.
08/19/2016
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Employment/
Income
Verification
(continued)
VA Guidelines
Reserve/National Guard
(continued)

For recently activated Reserve/National Guard, the underwriter must determine the
borrower’s income upon unit activation. Underwriter must also comment in the VA
Analysis/26-6393 the reason(s) for using/not using Reserve/National Guard income.
 If income will be reduced by borrower leaving current job, the underwriter must
carefully evaluate the impact to the borrower’s ability to repay (ATR) the loan as well
as manage their current expenses.
 If income will increase, then consider if the likelihood the income will continue beyond
a 12-month period.
Retirement

Non-taxable pension can be grossed up for debt ratio but not to meet the required residual
income.
08/19/2016
Page 34 of 59
AUS Income
Documentation
AUS Approve/Accept
Documentation
Alimony/Child Support


Gap in Employment

Current Employment


VA Guidelines
Most recent three (3) months bank
statements to document receipt of
deposit.
Divorce decree (front and all
applicable pages) that provide details
of support payments and prove three
(3) year continuance.
No explanation for employment gap
is required if both of the following
conditions are met:
 Gap <60 days employment
gap
 >6 months at new
employment
Verbal VOE with 3rd part employer
validation
Most recent paystub that covers at
least one (1) full month of
employment including:
 Year-to-date information
 Bonus information
 Overtime information
08/19/2016
AUS Refer

12 months receipt for manual approval.

An explanation is required for each
employment gap >30 days.

Same as Approve/Accept
Page 35 of 59
AUS Income
Documentation
(continued)
Previous Employment
De-Minimis SelfEmployment
VA Guidelines
AUS Approve/Accept
Documentation

No VOE is required if borrower has
been on current job for one (1) year
with W-2s for previous year.
 No W-2s are required for active duty
borrowers.
 No W-2s are required if all of the
following are met:
 Borrower with same
employer >2 years
 Verbal VOE verifies length of
employment and current
status (still employed)
 Qualifying with current base
pay only (rather than total
earnings)
 Bonus, overtime, or
secondary income is not
needed to qualify
 Borrower is not selfemployed or commissioned
“De-minimis” self-employment is not
considered. De-minimis employment refers
to a business activity with income/loss that is
less than 5% of total monthly income.
08/19/2016
AUS Refer

Obtain a written VOE or any of the following
to verify past two (2) year period:
 W-2s or W-2 transcripts
 Tax transcripts

Page 36 of 59
AUS Income
Documentation
(continued)
Self-Employed: Personal
Tax Returns
Self-Employed:
Commissioned Borrower
Self-Employed: Profit &
Loss Statements and
Balance Sheets
Self-Employed: Business
Returns
VA Guidelines
AUS Approve/Accept
Documentation
Most recent two (2) years signed personal tax
returns with all applicable schedules and
referenced statements


Most recent two (2) years signed
1040s with all applicable schedules
Written VOE fully completed
including the following:
 YTD paid commissions
 Basis for payment
 When commissions are paid
AUS Refer
Not required
Obtain YTD P&L and Balance Sheet if >7 months have
elapsed since the last business year tax ending date.
No business tax returns are required if all of
the following are met:
 Document borrower’s ownership for
the past five (5) years
 Business funds are not used for
closing costs or down payment
 No personal revolving/installment
debt being paid by the business
 Business structure has not changed in
the past five (5) years
Obtain most recent two (2) years business tax returns
with all schedules and referenced statements.
08/19/2016
Page 37 of 59

Available entitlement will be shown on the COE and is determined by the Veterans Administration based on the borrower’s
military service.
 $36,000 = Basic Entitlement for loans amounts up to $144,000
 $68,250 = Bonus Entitlement for loan amounts over $144,000. Maximum entitlement is 25% of the VA high-cost
county limit

Full Entitlement: If a borrower has never had a VA loan or if the previous VA loan has been paid off and the borrower has no
other outstanding VA loans.
 Full entitlement + down payment (if any) = Final Entitlement/Guaranty. Divide Final Entitlement/Guaranty by the
total loan amount = % of Guaranty.
 VA Entitlement, or combination of VA Entitlement + down payment and/or equity, must = >25% of the loan including
the funding fee.

Partial Entitlement: If a borrower has previously used his/her eligibility on another property which will not be restored, only
the remaining entitlement amount is available for use for the new VA loan.

Restoration of Entitlement:
 Not required prior to closing if the following are met:
o IRRRLs
o Veteran borrower will restore his/her entitlement with the sale of the existing residence closing
simultaneously with the new residence.
 IS required when one of the following is true:
o Property securing the VA guaranteed loan has been sold and the loan has been paid in full
o Cash-out refinance of an existing VA loan
o A qualified veteran buyer has assumed the outstanding VA loan balance, and
 Substituted his/her entitlement for the same amount originally used on the loan, and
 Our borrower has obtained a release of liability.
o Note: ONE TIME ONLY (One Time Restoration), the original VA loan has been repaid in full, however, the
property was not disposed.
Entitlement
VA Guidelines
08/19/2016
Page 38 of 59

Entitlement
(continued)

1.
2.
3.
4.
5.
6.
VA Guidelines
If any of the above is true, the veteran must restore his/her entitlement prior to closing by forwarding the following
documentation to the applicable Eligibility Center:
o Completed VA Form 26-1880
o Proof of military service
o Copy of signed and dated loan application (1003) for subject transaction
Supporting documentation proving the disposition of the prior debt, such as Final HUD-1 Settlement Statement
(loan applications on/before 10/02/2015) or Closing Disclosure (loan applications on/after 10/03/2015), assumption
paperwork, paid Note/paid in full statement from the prior lender, or statement that the loan will be used to
refinance an existing primary residence. If the borrower is purchasing a home and will restore his entitlement with
the sale of the existing residence simultaneously,
o VA considers closings within a seven (7) day period as simultaneous closings. The original COE will reflect
less than full entitlement and the debt listed on the COE must be paid in full with the statement of the
existing residence, thereby restoring full entitlement for guaranty
 Simultaneous Closings ONLY: The following must be in the loan file to restore the entitlement at the
time of insuring
 Original COE
 Completed VA Form 26-1880 showing the property has been sold
 Proof of military service
 Evidence of the disposition of the prior debt such as Final HUD-1 Settlement Statement
(loan applications on/before 10/02/2015) or Closing Disclosure (loan applications on/after
10/03/2015), paid in full statement from prior the lender
Entitlement Code – Use the separation, effective, or discharge date to determine the code as follows:
World War II
7. Spouse of POW/MIA
Korean War
8. Post-World War II
Post-Korean War
9. Post-Vietnam War
Vietnam War
10. Persian Gulf War
Entitlement Restored
11. Selected Reserves
Un-Remarried Surviving Spouse
08/19/2016
Page 39 of 59

Guaranty


Endeavor America requires a minimum of a 25% guaranty fee for veterans with full entitlement.
 VA entitlement solely, or a combination of entitlement plus down payment, and subject property equity, must equal
>25% of the total loan amount including the funding fee.
 If <25% guaranty, EA underwriter must provide calculations used to determine the full 25% guaranty.
EA maximum exposure, inclusive of the VA entitlement, is limited to 75% of the lesser of the sales price or appraised value.
The maximum guaranty is lesser of the veteran’s available entitlement or the maximum potential guaranty amount as noted
below:
Loan Amount
Up to $45,000
$45,001 to $56,250
$56,251 to $144,000
$144,001 to $417,000
>$417,001
Maximum Potential Guaranty*
50% of the loan amount
$22,500
40% of the loan amount with a maximum of $36,000
25% of the loan amount with a maximum of $104,250
The lesser of 25% of the VA county loan limit, or 25% of the loan
amount
Special Requirements
Minimum guaranty of 25% on IRRRLs
Guaranty will never exceed 175% of the
Freddie Mac loan limit for a single family
residence in the county where the subject
property is located.
*Maximum entitlement is 25% of the VA high cost county limit
Escrow waivers are not allowed under any circumstances
Escrow Waivers
VA Guidelines
08/19/2016
Page 40 of 59
Fees and Charges
VA allows for the borrower to pay all fees and charges provided they are reasonable and customary. The following table identifies the
veteran-paid fees and charged allowed by Endeavor America in consideration of VA regulations. If the seller is paying for allowable
closing costs and prepaids, the loan approval condition must read “Seller to credit borrower up to $_________ toward closing costs
and prepaids.”
Allowable Veteran-Paid Fees/Charges

















VA Guidelines
Flat fee (1% maximum)
Appraisal reconsideration fees if borrower requests the
value reconsideration
Courier/Express mail fees (refinance only)
Credit report and evaluation fees not exceeding $50
Discount points
Environmental protection lien
Flood certification fees from a 3rd party not included in the
appraisal report
Hazard and Flood Insurance premiums
MERS fee
Pest Inspection (refinances only)
Prorated taxes, assessments, and initial deposits for escrow
accounts
Recordation taxes and fees
Survey and Plot Plan
Title examination and insurance
VA appraisal fee
VA Compliance inspector’s fee
Well and Septic inspection fees
1% Flat Fee (Unallowable Fees/Charges)






Amortization schedules
Attorney’s services other than for title work
Commitment fee
Document preparation fee
Escrow fees and charges
Fees for preparing Truth-in-Lending (TIL) Statement for loan
applications dated on/before 10/02/15 or Closing Disclosure
(CD) for loan applications dated on/after 10/03/15.
 Fees charged by Loan Brokers, Real Estate Agents, Finders or
other third parties
 Lender’s Inspection fee
 Lender’s Appraisal fee
 Loan application and processing fee
 Loan closing or settlement fees
 Notary fees
 Pest Inspection (purchase transaction)
 Photographs
 Postage and other mailing fees
 Preparing loan papers or conveyance fees
 Tax service fees
 Trustee fees
 Underwriting fees
*Unallowable fees must be paid by the seller
08/19/2016
Page 41 of 59
Funding Fee
The VA Funding Fee (FF) may be financed into the loan amount or paid in cash (upfront).
 For conforming loan amounts, the funding fee may not be split between financing and cash payment.
 For high balance loan amounts, only the portion of the total funding fee that exceeds the county limit may be financed into
the loan amount if the combined loan amount plus the funding fee exceeds the county limit
(http://www.benefits.va.gov/homeloans/purchaseco_loan_limits.asp).
 When the borrower pays the funding fee in cash, the following must be documented:
 Funds must be sourced and seasoned
 Large deposits must be addressed
 When the seller pays any portion of the funding fee, it is considered a seller concession.
Veterans may be exempt from the funding fee as verified on the COE or Verification of VA Benefits (VA Form 26-8937) only if the
following exceptions are allowed:
 Veteran receives 10% disability from VA.
 Veteran receives military pension from VA in lieu of compensation.
 Veteran is rated by VA as eligible to recent compensation as a result of pre-discharge disability exam.
 Surviving spouse of a Veteran who died as a result of active duty injuries.
Type of Veteran
Down Payment
First Time Use %
Subsequent Use %
0% to < 5%
2.15%
3.30%
5% to < 10%
1.50%
1.50%
> 10%
1.25%
1.25%
0% to < 5%
2.40%
3.30%
5% to < 10%
1.75%
1.75%
> 10%
1.50%
1.50%
Purchase
Regular Military
Reservist / National Guard
Cash-out Refinance
Regular Military
N/A
2.15%
3.30%
Reservist / National Guard
N/A
2.40%
3.30%
Interest Rate Reduction Refinance (IRRRL)
Regular Military AND Reservist / National Guard
VA Guidelines
08/19/2016
0.50%
0.50%
Page 42 of 59
Insurance
All loan files must contain evidence of sufficient hazard insurance, title, and flood insurance policies in accordance with VA policies.
Endeavor America requires minimum coverage equal to the lesser of the replacement costs or the total loan amount.
Real Estate Taxes
CA Properties
All Other States
Homestead Tax
Exemptions
Interested Party
Concessions
Use the amount on the Title Report unless
the tax information sheet completed by the
Title company shows a higher amount.



4% is the maximum seller concession permitted on all LTVs for purchase transactions.
VA’s 4% rule does not include seller assistance for standard closing costs as described in the Fees and Charges section.
Seller concession or combination concessions (paid by seller or any party involved in the transaction) that exceeds 4% of the
lesser of the appraised value or sales price, is considered excessive.
Seller concessions included, but are not limited to the following:
 VA Funding Fee
 Buyer’s property taxes, insurance, or association dues
 Gifts to entice buyers to purchase (new appliance packages, swimming pools/spas, television(s), etc.)
 Payment of extra points to provide permanent interest rate buydowns
 Payoff of a buyer’s credit balances or judgments, collections, charge-offs, etc.
Endeavor America will lend on manufactured homes on purchase, rate & term, cash-out, and IRRRL transactions that comply with
applicable requirements below.
Restrictions



VA Guidelines
Refinance
Use the amount on the Title Report unless the
Property was purchased in the last 12 months.
Then use the higher of the amount on the Title
Report or 1.25% of the previous sales price.
Use the amount on the Title Report or tax
certification.
All loans must qualify with the full tax assessment, the homestead exemption may be applied at closing for setting up escrows only if
the title company confirms that the borrower has qualified for the exemption and the exemption will be applied during the current
tax yearly billing cycle.

Manufactured
Homes
Purchase
Use the higher of the actual amount on the
Title Report or 1.25% of the sales price.
Maximum loan amount is the lesser of the county limit or $417,000.
Maximum land value ratio cannot exceed 30% for single-wide and 50% for double and triplewide units.
Cash-out refinances with LTVs greater than 85% are limited to < $500 maximum cash back to
the borrower for the following purposes: debt consolidation, rate and term reduction, home
improvement, and spousal buy-out.
08/19/2016
Page 43 of 59
Manufactured
Homes
(continued)
General Eligibility
Requirements – Title II
A manufactured home (MH) is constructed to the Federal Code, Model Manufactured Home
Installation, and Safety Standards. The dwelling is built on a steel chassis, assembled in units at the
factory, and then transported to the site. To be eligible for financing, all manufactured homes must
comply with the following:







Minimum floor area of 400 square feet.
Constructed after June 15, 1976, in conformance with the Federal Manufactured Home
Construction and Safety Standards (HUD Code), as evidenced by an affixed certification label
in accordance with 24 CFR.
Be classified and treated as real estate by local authority
Mortgage must cover both the manufactured home and its site.
Built and remains on a permanent chassis.
Designed for occupancy as a principal residence and installed with a permanent foundation
(see VA pamphlet 26-7).
Fee simple title with Alta 7 endorsement.
Additions, Modifications – Additions or structural modifications may put the home at risk if the changes were not performed in
accordance with the HUD code.
Special State
Requirements
 Appraiser must describe any additions/modifications made to the MH since its initial site
placement.
(continued)


VA Guidelines
Appraiser must notify the lender if it is suspected that an addition/modification poses
a risk to the structural integrity of the home.
Additions/Modifications must comply with the:
 Federal Manufactured Home Construction and Safety Standards (CFR3280), AKA HUD
Code.
 Permanent Foundation Guidelines for Manufactured Housing, an Engineer’s
Certification is required.
08/19/2016
Page 44 of 59
Manufactured
Homes
(continued)
Additions, Modifications –
Special State
Requirements
(continued)
Credit Score
HUD Red Tags

Endeavor America requires a minimum qualifying FICO score of:


580 score for double-wide and triple-wide
620 score for single-wide

All MHs must have a HUD label (commonly known as the “red tag”), a metal tag affixed
outside.

A multi-wide unit has multiple HUD tags; one for each transported section/unit.

When the HUD labels are missing:

VA Guidelines
Some states require an inspection of any addition/modification (e.g. Washington state). The
appraiser and underwriter are responsible for knowing the local regulations.
 A certification must be obtained from the local authority that governs manufactured
housing if additions have been made to the dwelling.
 The report must state that the addition meets all applicable local/state codes and
specifications.
 If there is no local authority, then a licensed engineer within the subject state may
certify the addition to the property does not affect the subject’s structural integrity.

The appraiser must notify the lender and condition the appraisal for documentation
verifying the HUD labels were issued to the manufactured home.

Institute for Building Technology (IBTS) maintains data regarding HUD certification
labels and data plates. IBTS can provide the following verifications:
o
HUD Label Verification Letter: Includes label number, serial number, date of
manufacture, manufacturer name and plant location, location of the first
destination (usually the retailer).
o
HUD Data Plate/Compliance Certificate
Reference: VA circular 26-14-24
08/19/2016
Page 45 of 59
Manufactured
Homes
(continued)
HUD Data Plate

There is only one (1) data plate that is made of paper. It is typically found inside the home in
one of three locations:


Adjacent to the electric service panel in the utility room, or

In a kitchen cabinet, or

In a bedroom closet.
Data plates contain the HUD Certification Label Number to assist in ordering the HUD Label
Verification Letter from IBTS.

Ineligible properties
Insurance
Modular Homes
VA Guidelines
It also contains useful information: manufacturer name, serial number, model and
date of manufacture, as well as wind, roof load, and thermal zones.

Appraiser should provide a legible photo of the data plate. Appraiser should report if the data
plate is missing, but need not reject the property if so.

Appraiser should also check the data plate to see if the MH was constructed for the
geographic area for which it was installed. If not, the appraiser must report to the lender who
will make the borrower aware of this fact.
The following property types are ineligible for delivery to Endeavor America:

Condo, Co-Ops, Parks

Leasehold

On-frame modular

Multiple manufactured
units on the same lot

Single family with an
accessory manufactured
home (unless used for
storage use only)
Dwelling coverage is determined by the insurer.

Dwelling is constructed at the factory in modular sections in compliance with the local codes
(state codes) and Uniform Building Codes (UBC) or International Residential Code (IRC).
Although factory-built, it is treated the same as a stick-built home and appraisal form 1004 is
used.
08/19/2016
Page 46 of 59
Manufactured
Homes
(continued)
New Construction

A property delivered to the site within the last 12 months is considered new construction.

For newly constructed MHs, the appraiser must analyze the manufacturer’s invoice and any
other documents that pertains to what the sale included such as:



Payoff of personal debt

Land included in the contract

Personal property was included
Documentation Requirements:

Engineer’s Certification of Foundation

Manufacturer’s Warranty

Certificate of Occupancy

Document purchase price and delivery/setup expenses (sales contract)

Pest soil treatment (NPCA-99a and NPCA-99b or NPMA-99a, NPMA-99b)
An elevation certificate is required if the subject manufactured home is located in a flood
hazard area. If the subject property is located in flood zones A and V, and
 a MH without a basement, the finished grade level beneath must be at or above the
FEMA Special Flood Hazard Area (SFHA) 100 year return frequency elevation.
 MH with a basement, the grade beneath the basement floor shall be at or above the
SFHA.
FEMA Form 81-31 – Elevation Certificate must be dated and executed after the appraisal date.
VA Guidelines
08/19/2016
Page 47 of 59
Manufactured
Homes
(continued)
Title Binder
Well and Septic
Maximum Term
Occupancy

Preliminary title binder must reference an Alta 7 endorsement that will be included in the final
policy.

Title binder to:

Reflect manufactured home has been relinquished from Department of Motor
Vehicles and will be recorded as real property.

Include the improvement tax, that is, what the taxes will be once the manufactured
home is converted to real property.

Survey requirements must be removed from the final title if the above two items are
met.

Borrowers to execute Affixation Affidavit at closing.
Individual water and/or septic systems must meet local health standards, or EPA standards, in the
absence of local standards. The following are required:

Satisfactory well water test completed by the local health department or commercial lab or
licensed sanitary engineer. Well test is valid within 90 days of the closing date.

Satisfactory septic certification may be required when the appraiser indicates a problem with
a septic system, indicates the subject location is in an area with soil percolation problems or is
a condition of the NOV. Septic certification is valid for 90 days from the closing date.
The maximum loan term for a VA home loan is 30 years (and 32 days). The term of the loan may never be longer than the remaining
economic like of the property as verified by the appraisal.
Primary residences only.
 Owner occupancy is generally required within 60 days of closing.
 Primary occupancy can be extended up to 12 months if the veteran borrower has a specific move-in date and
particular reason/future event that is causing the delay.
o Examples: active duty with separation orders of less than 12 months; or single veteran works overseas but
certifies she/he will return quarterly to occupy as their primary home.
 Borrowers must certify they intend to occupy in the subject property for purchase and cash-out refinances.
 Only the legal spouse may also certify and fulfill the occupancy requirement for:
o Active duty military personnel, whom are deployed from their permanent duty station, are considered to be
in a temporary-duty status and able to provide a valid intent to occupy.
Note: Second homes and investment properties are eligible for IRRRL transactions ONLY. Veteran must certify he/she previously
occupied the property as a primary residence. Refer to Interest Rate Reduction Refinance (IRRRL) for additional guidelines.
VA Guidelines
08/19/2016
Page 48 of 59
Power of
Attorney
Qualifying
VA Guidelines
Endeavor America allows for borrower to sign using a power of attorney (POA) provided they meet the requirements as outlined in
the VA Lenders Handbook. At a minimum, Endeavor America requires:
 POA may not be used to execute the initial loan application.
 POA signatures and typed names must match exactly.
 The POA must be legally enforceable and compliant with all state regulations and not include a clause that would prevent a
clear title being conveyed in cases of foreclosure.
 The POA must include written consent from the veteran borrower consenting to the specifics of the loan transaction.
 That at the time of closing, the veteran borrower is alive and well, and if on active duty, not missing in action.
Borrowers must meet VA’s residual income and debt ration requirements.
 Residual income is the net income after shelter, debts, expenses, and taxes are deducted from the gross effective income
that is available for family support. Refer to Interest Rate Reduction Refinance (IRRRL) for the minimum required for the
family size and geographic region of the property location.
 An obviously in adequate residual income alone can be a basis for disapproving a loan. If the residual income is
marginal, the borrower’s credit history and previous housing expense can be considered to determine the adequacy
of the residual income.
 The residual income includes the maintenance and utilities expense which is calculated nationwide at $0.14 per
square feet of the property’s gross living area for the monthly shelter expenses (section C) on the VA Loan Analysis
(26-6393).
08/19/2016
Page 49 of 59
Qualifying
(continued)
VA’s 41% guideline debt ratio may be exceeded with documented significant compensating factors as follows:
 DU Approve/LP Accept: Ratios evaluated by AUS with 120% residual income.
 AUS Refer and manually underwritten loans: Up to 50% DTI maximum.
 VA compensating factors are required to stretch DTI > 41% regardless of AUS recommendation and should be noted
by the Underwriter in the Remarks section of the VA Loan Analysis (26-6393)
 When DTI > 41% and residual income > 120% and the loan receives an AUS Approval, the Underwriter should list the
120% residual as the compensating factor on the Loan Analysis and proceed with following the AUS findings.
 When the DTI > 41% and residual income is equal to the required minimum but less than 120%, regardless of AUS
recommendation, two significant compensating factors must be noted by the Underwriter.
 ALL compensating factors including two significant factors must be noted by the Underwriter to justify the approval
recommendation, and
 A second level approval is required and additional conditions may be requested.
Compensating factors include, but are not limited to the following:


Reserves
Interest Rate
Reduction
Refinance (IRRRL)
Non-Credit
Qualifying


Military benefits
Low DTI ratio


High residual income
Long term employment


Minimal consumer debt
Significant liquid assets

Excellent credit history
Conservative use of consumer
credit
Tax benefits of homeownership


Little or no increase in
shelter expense

Existence of equity in
refinancing loans

Tax credits for childcare expenses

Satisfactory
homeownership
experience
Sizeable down
payment


Verify all assets submitted to AUS that may have bearing on the overall credit analysis.
When rental income is used to qualify, the minimum reserves required are:
 Six (6) months PITI for a 2-4-unit purchase
 Three (3) months PITI for each additional rental property owned.
Interest Rate Reduction Refinance Loan (IRRRL) is a streamline refinance designed to lower the monthly principal and interest
payment on the current VA mortgage. $500 is the maximum cash back to the borrower from adjustments made at closing.
Note: An IRRRL in the state of Texas can receive no cash back (zero).
General Guidelines
VA Guidelines

All IRRRLs must be manually underwritten (do NOT run AUS).

IRRRL must pay off the existing VA guaranteed mortgage reflected on the COE. In some cases,
a copy of the exiting Note may be required to verify the LHG number.
Generally, borrowers obligated on the original VA loan must be the same on the new loan and the
veteran must still own the property.
08/19/2016
Page 50 of 59
IRRRL
(continued)
(continued)
Credit Score
The following table addresses if a refinance can be underwritten as an IRRRL when there is a change in
the borrowers other than the veteran:
Old VA Loan Status
Proposed Status
Yes/No
Unmarried Veteran
Veteran and New Spouse
Yes
Unmarried Veteran
Spouse Only (Deceased Veteran)
No
Veteran
Different Veteran Who Substituted
Entitlement
Yes
Veteran and Spouse
Divorced Veteran Only
Yes
Veteran and Spouse
Veteran and Different Spouse
Yes
Veteran and Spouse
Spouse Only (Deceased Veteran)
Yes
Veteran and Spouse
Divorced Spouse Only
No
Veteran and Spouse
Different Spouse Only (Deceased
Veteran)
No
Veteran and Non-Veteran
(joint obligators)
Veteran Only
Yes
Veteran and Non-Veteran
(joint obligators)
Non-Veteran Only
No
An IRRRL with an exterior appraisal (including a credit qualifying IRRRL) must have a minimum credit
score of:

No Fico; pricing adjustments apply

580 for conforming and high balance primary 2-4 unit

580 for conforming second home and investment 1-4 unit

600 for high balance second home and investment 1-4 unit
An IRRRL without an appraisal is eligible for primary residence only and must have a minimum credit
score as follows:
Funding Fee
VA Guidelines

580 conforming primary 1 unit

620 high balance primary 1 unit

Funding Fee of 0.50% is required on all IRRRLs unless the veteran has a qualifying exemption.
08/19/2016
Page 51 of 59
IRRRL
(continued)
Guaranty
Loan Limit

25% minimum guaranty is required for all IRRRLs regardless of the dollar amount of the
guaranty being transferred from the prior loan.
The maximum total loan amount may include:

The existing VA payoff

VA Funding Fee

Allowable fees and charges

Up to two (2) discount points
Conforming Loans
Matrix
(LTC, Score, Units)
Occupancy
Units
LTV
Credit Score
Principal Residence
1-4
100%
580
Second Home and
Investment
1-4
100
580
High Balance Loans
Mortgage Verification
VA Guidelines
Principal Residence
1-4
100%
580
Second Home and
Investment
1-2
100%
600

Evidence the existing VA loan was current at the time of application and is current at closing.
08/19/2016
Page 52 of 59
IRRRL
(continued)
Net Tangible Benefit

Lower interest rate with PITI or reduce the loan amount

Proposed PITI may increase < 20% when refinancing an ARM/GPM or with a term reduction

If existing loan has a temporary buydown, both the interest rate and P&I must be lower on the
IRRRL for both the buydown period as well as the Note rate.

The recoupment period for all fees and charges (excluding prepaid) does not exceed thirty-six
(36) months, regardless of whether they are financed, paid in cash at closing or POC.
Lender must document the number of months it will take to recoup the closing costs for an IRRRL.
(Calculation: Total closing costs (excluding prepaids) divided by monthly P&I costs savings.)
Occupancy

The veteran or the spouse of the service member must certify that she/he currently or
previously occupied the property as her/his primary residence.
Online Status Inquiry
(in lieu of COE)

Verify the VA case number provided by VA matches the VA case number on the existing loan
before closing the IRRRL.

Online status of existing VA loan can be accessed using the VA website.

Submit the IRRRL status inquiries by:


Recently Listed Property
Subordinate Financing
Social Security Validation
VA Guidelines
The first six digits of the VA lender identification number and an email address is
required.
If the response from the RLC confirms the loan is an active VA guaranteed loan made to the
veteran, a COE will not be required. Use the printout from the RLC.
Properties listed for sale are permitted if the listing was cancelled at least one day prior to the loan
application date.

Existing second mortgage would need to subordinate to the proposed IRRRL.

For a new second, the underwriter must identify there is a benefit to the borrower and the
transactional costs to obtain the second cannot be rolled into the proposed IRRRL.
Verification of the borrower’s social security number is required.
08/19/2016
Page 53 of 59
IRRRL
(continued)
Rate Decrease and
Maximum Term
Maximum Term
Is the original term of the existing loan plus 10 years but may not exceed 30 years plus 32 days
Interest Rate Decrease
The interest rate of the new loan must be less than the interest rate of the existing VA loan unless
refinancing an ARM to a fixed rate.
Loan Documentation
VA Guidelines

VA Loan Summary Sheet (VA Form 26-0286)

IRRRL Worksheet (VA Form 26-8923)

VA Rate Reduction Refinance Certification

Verification of VA Benefits (VA Form 26-8937) to verify if the borrower is exempt of Funding
Fee

VA Loan Analysis (VA Form 26-6393) if credit qualifying

VA Federal Collection Policy Notice (VA Form 26-0503)

Counseling Checklist for Military Homebuyers (VA Form 26-0592) if veteran borrower is on
active duty

Report and Certification of Loan Disbursement (VA Form 26-1820)

Lender’s Certification that prior loan was current (not 30 days or more past due)

Borrower’s Certification that he/she previously occupied the property as a primary residence
08/19/2016
Page 54 of 59
IRRRL
Credit Qualifying
In addition to compliance with all other IRRRL guidelines noted above, the veteran must be credit qualified for the increased monthly
payment if:
 The loan is considered a Higher Priced Mortgage Loan (HPML); or
 The P&I payment will increase > 20% which may occur when
 Refinancing an existing ARM, or
 When the new loan term will be shorter than the original term
Income/Assets

Determine the borrower has stable and reliable income to support the proposed housing
payment along with other recurring monthly obligations

Provide a tri-merged in-file credit report

Provide the following documentation:


Paystubs covering at least the most recent 30-day period

Most recent two (2) years W-2s

Verbal VOE for the borrower’s current employment
Maximum 50% DTI


IRRRL with NO
Appraisal
VA Guidelines
Compensating factors required for DIT > 41% up to 50%
No asset verification required
An IRRRL with No Appraisal option is permitted on conforming and high balance loan amounts if ALL of the below criteria is met:
 1 unit SFR, PUD, manufactured home, and
 Primary residence only, and
 Property cannot be located in an area impacted by a federally declared disaster area within 90 days of closing.
 For pricing purposes, Endeavor America will pull a Plat Data AVM to determine LTV.
 With exception to the appraisal requirement, the loan must comply with ALL other guidelines noted above in the Non-Credit
Qualifying section.
08/19/2016
Page 55 of 59
Residual Income
Requirement
VA requires residual income to ensure the borrower has sufficient income to pay for food, clothing, transportation, medical
expenses, entertainment, and other day-to-day living expenses, after all monthly debts and taxes paid. Per the table below, the
minimum residual income varies according to the loan size, family size, and region of the country for the property location.
NOTE: Endeavor America calculates family size based on the dependents listed on the 1003, and tax returns provided. Paystubs will
not be considered in determining dependents. EA reserves the right to request additional information to document family size to
effectively calculate residual income for qualifying.
Loan Amounts
< $80,000
Family Size
1
2
3
4
5
Over 5
Minimum Residual Income by Region
Northeast
Midwest
South
$390
$382
$382
$654
$641
$641
$788
$772
$722
$888
$868
$868
$921
$902
$902
Add $75 for each additional member up to a family of seven
West
$425
$713
$859
$967
$1,004
Loan Amounts
> $80,000
Family Size
1
2
3
4
5
Over 5
Minimum Residual Income by Region
Northeast
Midwest
South
$450
$441
$441
$755
$738
$738
$909
$889
$889
$1,025
$1,003
$1,003
$1,062
$1,039
$1,039
Add $80 for each additional member up to a family of seven
West
$491
$823
$990
$1,117
$1,158
Northeast
Midwest
South
West
Geographic Regions for Residual Income
Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Vermont
Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, Wisconsin
Alabama, Arkansas, Delaware, District of Columbia, Florida, Georgia, Kentucky, Louisiana, Maryland, Mississippi, North
Carolina, Oklahoma, Puerto Rick, South Carolina, Tennessee, Texas, Virginia, West Virginia
Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington, Wyoming
The residual income figures can be reduced by 5% if the active duty borrower or a retired applicant who will continue to have access
to nearby military-based facilities. This reduction may also be applied to retired military applicants when the property is located
reasonably near a military base or installation.
If non-qualifying spouse elects to provide employment documentation (e.g. paystub and W-2s), the underwriter may consider
removing the spouse from the residual requirement (reduce the number of family members by one). Additionally, if the nonqualifying spouse receives child support for children living with them, the child support may be used to offset the children in the
residual income calculation with adequate documentation: court order, consistent receipt of child support payments, and verified
continuance. The underwriter must document the exception in the remarks section of the loan analysis.
VA Guidelines
08/19/2016
Page 56 of 59
Secondary
Financing
VA Guidelines
Secondary financing is allowed provided the borrower is not placed in a substantially worse position that if the entire amount
borrower had been guaranteed by VA.
Requirement
Assumability
The second lien must be assumable by creditworthy purchasers AND should never restrict the
borrower’s ability to sell the property. Assumption terms must not be more restrictive than VA
requirements.
Cash Back
No cash back to the veteran from either the first or second mortgage when obtained simultaneously
CLTV
EALS doe s not have a CLTV restriction
Documentation
The loan file must include documentation disclosing the source, amount, and repayment terms with the
veteran and co-borrower’s agreement to such terms.
Grace Period
The secondary financing must provide for a reasonable grace period before:
 A late charge becomes due, or
 Commencement of foreclosure proceedings in the event of default.
Interest Rate
 Purchase: Interest rate may not exceed industry standard rates.
 Refinance: If subordinating existing junior lien, the second mortgage rate may exceed the new
VA loan.
Loan Purpose
 Proceeds from the second mortgage may be used for: closings costs, prepaids, and/or down
payment (decreased entitlement or loan exceeding the applicable loan limits).
 Secondary financing may not be used to pay any portion of the excess of the purchase price
over the appraised value.
Qualifying
Veteran must qualify with the second lien payment
Simultaneous Closing Secondary financing must close simultaneously with the VA loan.
Soft/Silent Liens
Soft or Silent Liens that are secured against the property must be entered as secondary financing (not as
gift funds). Such secondary financing has no scheduled repayments and the debt is forgiven over a
period of time under the program guidelines.
Sources
Subordinate financing can be obtained from the following sources:
 Government agency
 Non-profit agency
 Builder
 Seller
 Private individuals
Subordinate Lien
The second mortgage must be subordinate to the VA first mortgage.
Unacceptable Terms
The second mortgage cannot be subject to deed restrictions or equity sharing. The underwriter will
consult VA RLC regarding any unusual terms, interest rate, etc. to determine compliance with VA
requirements.
08/19/2016
Page 57 of 59
Underwriting
VA Guidelines
Automated Underwriting (AUS)
 The use of AUS DU or LP is mandatory for all loans with the exception of IRRRLs.
 A loan may be processed and approved with reduced documentation as described in the recommendation results with the
following AUS risk classifications:
 LP Accept/Eligible
 DU Approval/Eligible
 100% data integrity is required to prevent the AUS risk classification from being invalidated or affecting the loan guaranty. It
is imperative that the data entered into the AUS be accurately verified.
Manual Downgrades
 Any manual downgrade to Refer is required whenever any of the following is present on DU Approve/LP Accept results
 Any mortgage not reporting on the credit report that has more than 1x30 days late payment within the last 12
months.
 Any significant debt or obligation that is currently 90 days or greater past due (NOTE: Significant means a required
payment large enough to cause a severe impact on the family’s resources for any period of time).
 Any new obligation that was obtained since the loan application date and is more than 30 days late.
 Previous mortgage foreclosure or Chapter 7 bankruptcy discharged within two (2) years of the application date.
 Failure to meet specific conditions of the AUS Approve/Accept findings.
 The loan file must be documented according to VA’s Refer policies (AUS documentation relief no longer applies).
 EALS underwriter is required to:
 Comment on the creditworthiness assessment on the VA Loan Analysis Form 26-6393.
 Underwrite the loan file in accordance to VA’s manual underwriting guidelines as described in the VA Lenders
Handbook and all applicable VA circulars.
08/19/2016
Page 58 of 59
Underwriting
(continued)
Manual Underwriting
 Manual underwriting is required on the following transactions:
 AUS DU/LP Refer recommendation may be manually underwritten with maximum of 50% DTI with a minimum 120%
of the required residual income and the presence of compensating factors.
 IRRRL transactions.
 Loans in which the borrower does not have a credit score
o Non-Traditional Credit may be used to determine the borrower’s payment habits.
 Creditor should provide a rating with 12 months payment history (e.g. rent, utilities, car insurance,
etc.)
 Lender must certify the source of the credit reference though phone certification.
o Non-Traditional credit may not be used to offset poor credit history.
 Loans in which a manual downgrade is required. Refer to Manual Downgrades for detailed guidance.
 The loan file must meet all applicable guidelines published in the VA Lenders Handbook and applicable VA circulars as well as
the most recent Endeavor America VA Wholesale Guidelines.
 The loan file must contain documented compensating factors (see below for specific Compensating Factors).
 EALS underwriter is required to:
 Comment on the creditworthiness assessment on the VA loan Analysis Form 26-6393.
Underwrite the loan file in accordance to VA’s manual underwriting guidelines as described in the VA Lender’s Handbook and all
applicable circulars.
Compensating Factors
 Compensating factors are required for AUS Refer or manually underwritten loans.






VA Guidelines
Excellent credit history
Conservative use of consumer credit
Minimal consumer debt
Long-term employment
Significant liquid assets
Large down payment or existence of equity in
refinancing loans
08/19/2016







Little or no increase in shelter expense
Military benefits
Satisfactory homeownership experience
Tax benefits of homeownership
Tax credits for child care
High residual income
Low debt-to-income ratio
Page 59 of 59

Wholesale VA Guidelines - Endeavor America Loan Services

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