VA Training
VA LOAN APPROVAL REQUIREMENTS
To obtain a VA loan, the law requires that:
the applicant must be an eligible veteran who has available entitlement;
the loan must be for an eligible purpose;
the veteran must occupy the property as a home within a reasonable period of time after
closing the loan;
the veteran must be a satisfactory credit risk;
the income for the veteran and spouse, if any, must be shown to be stable and sufficient
to meet the mortgage payments, cover the costs of owning a home, taking care of other
obligations and expenses and have enough left over for family support.
Note: In community property states information concerning a spouse may be requested and
considered in the same manners as for the veteran, even if the spouse will not be contractually
obligated on the loan.
IS THE VETERAN ELIGIBLE?
How to obtain a Certificate of Eligibility (COE) and Determine Eligibility.
•Automated COE’s are obtained through the VA’s WebLGY system.
•If WebLGY is unable to process an Automated COE, required documents can be
scanned and uploaded through the website and the COE will be emailed. The DD-214
will be required for this type of processing.
REVIEWING THE COE
•Is the veteran a first time
or subsequent user?
•Is the veteran exempt
from the funding fee?
•Is there sufficient
entitlement for your loan
amount?
•Are there any special
conditions that must be
met?
COE CONDITIONS
Condition
Condition Description
Active Duty Service
Member
Valid unless discharged or released subsequent to date of this certificate. A
certification of continuous active duty as of date of note is required.
Subsequent Use
Funding Fee
Entitlement code of ‘5’ indicated previously used entitlement has been restored.
The veteran must pay a subsequent funding fee on any future loan unless veteran is
exempt.
Regular Military
No condition description.
Reservist/National
Guard Funding Fee
Entitlement is based on service in the Selected Reserve and/or National Guard so
increased Funding Fee is required.
One time Restoration
Entitlement previously use for 00-00-0-0000000 has bee restored without disposal
of the property, under provision of 38 U.S.C. 3702b (4). Any future restoration
requires disposal of all property obtained with a VA loan.
Refinance Restoration
(Cash out)
The Certificate of Eligibility is valid only for “cash out” refinance loan on the
property that secured VA loan number 00-00-0-0000000. VA guaranty on a “cash
out” refinance loan is limited to the basic entitlement shown on this certificate.
FUNDING FEE CHARTS
Purchase and Construction Loans
Veteran Type
Down Payment
Regular Military
National
Guard/Reserves
0 – 4.99%
5% - 9.99%
10% or more
Percentage for
First-Time Use
2.15%
1.50%
1.25%
0 – 4.99%
5% - 9.99%
10% or more
2.40%
1.75%
1.50%
Percentage for
Subsequent Use3.30%
1.50%
1.25%
3.30%
1.75%
1.50%
Cash-Out/Regular Refinancing Loans
Veteran Type
Percentage for FirstTime Use
Percentage for
Subsequent Use
Regular Military
2.15%
3.3%
Reserves/National Guard
2.4%
3.3%
FUNDING FEE CHARTS
IRRRL’S
Veteran Type
Percentage for FirstTime Use
Percentage for
Subsequent Use
Regular Military
.50%
.50%%
Reserves/National Guard
.50%
.50%
Other Types of Loans
Veteran Type
Loan Assumptions
Percentage for Type of Veteran Whether FirstTime or Subsequent Use
.50%
RESIDUAL INCOME REQUIREMENTS
•Residual income is the amount of net income remaining (after deduction of debts and
obligations and monthly shelter expenses) to cover family living expenses such as food, health
care, clothing, and gasoline. They vary according to loan size, family size, and region of the
country.
•Count all members of the household (without regard to the nature of the Relationship) when
determining “family size,” including:
 an applicant’s spouse who is not joining in title or on the note, and any other
individuals who depend on the applicant for support. For example, children from a
spouse’s prior marriage who are not the applicant’s legal dependents. Reduce the
residual income figure (from the following tables) by a minimum of five percent if:
 the applicant or spouse is an active-duty or retired serviceperson, and there is a clear
indication that he or she will continue to receive the benefits resulting from use of
military-based facilities located near the property.
•Residual income requirement may be reduced by 5% if the applicant or spouse is an activeduty serviceperson.
RESIDUAL INCOME REQUIREMENTS
Calculating the Residual Income
Line 19 – Maintenance & Utilities
•Calculate M&U costs using 14 cents
per square foot (above grade).
For example: A 1500 square foot
home would have a M&U cost of
$210 (1500 x .14 = $210)
Lines 32-35 – Deductions
•Federal and state taxes are based off
the gross income, borrowers filing
status and number of exemptions.
*See website below for automated
calculation of the deductions
•Retirement and Social Security is
calculated using 7.65% of the gross
income for W-2 borrowers and 15.3%
for self-employed borrowers.
*Paycheck calculator for calculating federal and state taxes:
http://www.adp.com/tools-and-resources/calculators-and-tools/payroll-calculators/salary-paycheck-calculator.aspx
RESIDUAL INCOME REQUIREMENTS
Table of Residual Income by Region for loan amounts of $79,999 and below
Family Size
Northeast
Midwest
South
West
1
$390
$382
$382
$425
2
$654
$641
$641
$713
3
$788
$772
$772
$859
4
$888
$868
$868
$967
5
$921
$902
$902
$1,004
Over 5
Add $75 for each additional member up to a family of seven
Table of Residual Income by Region for loan amounts of $80,000 and above
Family Size
Northeast
Midwest
South
West
1
$450
$441
$441
$491
2
$755
$738
$738
$823
3
$909
$889
$889
$990
4
$1,025
$1,003
$1,003
$1,117
5
$1,062
$1,039
$1,039
$1,158
Over 5
Add $75 for each additional member up to a family of seven
RESIDUAL INCOME REQUIREMENTS
KEY TO GEOGRAPHIC REGIONS USED IN THE PRECEDING TABLES
Northeast
Connecticut
Maine
Massachusetts
New Hampshire
New Jersey
New York
Pennsylvania
Rhode Island
Vermont
Midwest
Illinois
Indiana
Iowa
Kansas
Michigan
Minnesota
Missouri
Nebraska
North Dakota
Ohio
South Dakota
Wisconsin
South
Alabama
Arkansas
Delaware
District of Columbia
Florida
Georgia
Kentucky
Louisiana
Maryland
Mississippi
North Carolina
Oklahoma
Puerto Rico
South Carolina
Tennessee
Texas
Virginia
West Virginia
West
Alaska
Arizona
California
Colorado
Wyoming
Hawaii
Idaho
Montana
Nevada
New Mexico
Oregon
Utah
Washington
QUALIFYING REQUIREMENTS
Standard VA DTI ratio of 41% may be exceeded if sufficient residual income and compensating
factors are present
Maximum 50% DTI allowed with AUS approval
Ratios between 50.01%-55% allowed wit h AUS approval, second signature¹, and acceptable SNMC
compensating factors listed on Loan Analysis and Ratio Checklist form
VA Jumbo loan amounts > $417,000.00 maximum 50% DTI with AUS approval
Non-traditional credit on government loans has been eliminated. All loans must have at least one
occupant borrower with a traditional credit history.
QUALIFYING REQUIREMENTS
FICO Requirements
Purchase
Occupancy
Max Loan Amount
Units
LTV
CLTV
FICO
Primary
≤$417,000
1-4
100%
100%
620
Primary
$417,001 - $700,000
1-4
n/a
n/a
680
Cash Out/Regular Refinance
Occupancy
Max Loan Amount
Units
LTV
CLTV
FICO
Primary
≤$417,000
1-4
90%
90%
620
Primary
$417,001 - $700,000
1-4
90%
90%
680
IRRRL
Occupancy
Max Loan Amount
Units
LTV
CLTV
FICO
Primary
≤$417,000
1-4
100%
100%
660
Credit
•Bankruptcy and Foreclosure – 2 year seasoning
•Can be manually underwritten if AUS “Refer”
•Borrower must have a least 12 months of clean credit
•Unpaid collection accounts are considered current derogatory credit
Additional requirements
•Veteran must complete Child Care Expense Certification. Expense added to debt
•Veteran required to give nearest living relative name and address
•If Veteran is closing with a Power of Attorney and is Active Duty an Alive and Well Cert is
required
•A Termite inspection or Soil Treatment for new construction is required in most States
•Builder on new construction must be VA approved
•VA has an approved condo list
.
OCCUPANCY
Occupancy requirements are:
•Veterans purchasing a primary residence, refinancing, and or improving their home must
certify that they intend to occupy the property.
•If the buyer is on active duty, a spouse may certify occupancy. Single or married service
members deployed from their permanent duty station are considered to be in a temporary
duty status and are able to certify intent to occupy.
•Non-occupant co-borrowers are not allowed.
Documentation Requirements
VA has certain documentation that lenders must obtain when processing a loan application for a veteran.
These requirements can be found in Chapter 4 and 5 of the VA Lender’s Handbook.
Following is a list of the documents required when processing a VA loan.
Certificate of Eligibility (VA Form 26-8320).
Documentation Requirements
VA has certain documentation that lenders must obtain when processing a loan application for a veteran.
These requirements can be found in Chapter 4 and 5 of the VA Lender’s Handbook.
Following is a list of the documents required when processing a VA loan.
Certificate of Eligibility (VA Form 26-8320).
URLA (Uniform Residential Loan Application).
Documentation Requirements
VA has certain documentation that lenders must obtain when processing a loan application for a veteran.
These requirements can be found in Chapter 4 and 5 of the VA Lender’s Handbook.
Following is a list of the documents required when processing a VA loan.
Certificate of Eligibility (VA Form 26-8320).
URLA (Uniform Residential Loan Application).
HUD/VA Addendum to URLA (VA Form 26-1802-a) pages 1 & 2.
Documentation Requirements
VA has certain documentation that lenders must obtain when processing a loan application for a veteran.
These requirements can be found in Chapter 4 and 5 of the VA Lender’s Handbook.
Following is a list of the documents required when processing a VA loan.
Certificate of Eligibility (VA Form 26-8320).
URLA (Uniform Residential Loan Application).
HUD/VA Addendum to URLA (VA Form 26-1802-a) pages 1 & 2.
Residential Mortgage Credit Report or 3 File Merged Credit Report.
Documentation Requirements
VA has certain documentation that lenders must obtain when processing a loan application for a veteran.
These requirements can be found in Chapter 4 and 5 of the VA Lender’s Handbook.
Following is a list of the documents required when processing a VA loan.
Certificate of Eligibility (VA Form 26-8320).
URLA (Uniform Residential Loan Application).
HUD/VA Addendum to URLA (VA Form 26-1802-a) pages 1 & 2.
Residential Mortgage Credit Report or 3 File Merged Credit Report.
Counseling Checklist for Military Home Buyers (VA Form 26-0592). This form is only required for
active duty military.
Documentation Requirements
VA has certain documentation that lenders must obtain when processing a loan application for a veteran.
These requirements can be found in Chapter 4 and 5 of the VA Lender’s Handbook.
Following is a list of the documents required when processing a VA loan.
Certificate of Eligibility (VA Form 26-8320).
URLA (Uniform Residential Loan Application).
HUD/VA Addendum to URLA (VA Form 26-1802-a) pages 1 & 2.
Residential Mortgage Credit Report or 3 File Merged Credit Report.
Counseling Checklist for Military Home Buyers (VA Form 26-0592). This form is only required for
active duty military.
Verification of VA Benefits (VA Form 26-8937) if applicable.
Documentation Requirements
VA has certain documentation that lenders must obtain when processing a loan application for a veteran.
These requirements can be found in Chapter 4 and 5 of the VA Lender’s Handbook.
Following is a list of the documents required when processing a VA loan.
Certificate of Eligibility (VA Form 26-8320).
URLA (Uniform Residential Loan Application).
HUD/VA Addendum to URLA (VA Form 26-1802-a) pages 1 & 2.
Residential Mortgage Credit Report or 3 File Merged Credit Report.
Counseling Checklist for Military Home Buyers (VA Form 26-0592). This form is only required for
active duty military.
Verification of VA Benefits (VA Form 26-8937) if applicable.
Verification of Deposit (VA Form 26-8497) or original or certified true copies of the last two bank
statements.
Documentation Requirements
VA has certain documentation that lenders must obtain when processing a loan application for a veteran.
These requirements can be found in Chapter 4 and 5 of the VA Lender’s Handbook.
Following is a list of the documents required when processing a VA loan.
Certificate of Eligibility (VA Form 26-8320).
URLA (Uniform Residential Loan Application).
HUD/VA Addendum to URLA (VA Form 26-1802-a) pages 1 & 2.
Residential Mortgage Credit Report or 3 File Merged Credit Report.
Counseling Checklist for Military Home Buyers (VA Form 26-0592). This form is only required for
active duty military.
Verification of VA Benefits (VA Form 26-8937) if applicable.
Verification of Deposit (VA Form 26-8497) or original or certified true copies of the last two bank
statements.
Verification of Employment (VA Form 26-8498) or equivalent. Or alternative documentation as
described in Chapter 4, section 2e, of the VA Lender’s Handbook.
Documentation Requirements
VA has certain documentation that lenders must obtain when processing a loan application for a veteran.
These requirements can be found in Chapter 4 and 5 of the VA Lender’s Handbook.
Following is a list of the documents required when processing a VA loan.
Certificate of Eligibility (VA Form 26-8320).
URLA (Uniform Residential Loan Application).
HUD/VA Addendum to URLA (VA Form 26-1802-a) pages 1 & 2.
Residential Mortgage Credit Report or 3 File Merged Credit Report.
Counseling Checklist for Military Home Buyers (VA Form 26-0592). This form is only required for
active duty military.
Verification of VA Benefits (VA Form 26-8937) if applicable.
Verification of Deposit (VA Form 26-8497) or original or certified true copies of the last two bank
statements.
Verification of Employment (VA Form 26-8498) or equivalent. Or alternative documentation as
described in Chapter 4, section 2e, of the VA Lender’s Handbook.
Original or certified copy of pay stubs covering last 30 days income.
Documentation Requirements
VA has certain documentation that lenders must obtain when processing a loan application for a veteran.
These requirements can be found in Chapter 4 and 5 of the VA Lender’s Handbook.
Following is a list of the documents required when processing a VA loan.
Certificate of Eligibility (VA Form 26-8320).
URLA (Uniform Residential Loan Application).
HUD/VA Addendum to URLA (VA Form 26-1802-a) pages 1 & 2.
Residential Mortgage Credit Report or 3 File Merged Credit Report.
Counseling Checklist for Military Home Buyers (VA Form 26-0592). This form is only required for
active duty military.
Verification of VA Benefits (VA Form 26-8937) if applicable.
Verification of Deposit (VA Form 26-8497) or original or certified true copies of the last two bank
statements.
Verification of Employment (VA Form 26-8498) or equivalent. Or alternative documentation as
described in Chapter 4, section 2e, of the VA Lender’s Handbook.
Original or certified copy of pay stubs covering last 30 days income.
Sales contract or other purchase agreement.
Documentation Requirements
VA has certain documentation that lenders must obtain when processing a loan application for a veteran.
These requirements can be found in Chapter 4 and 5 of the VA Lender’s Handbook.
Following is a list of the documents required when processing a VA loan.
Certificate of Eligibility (VA Form 26-8320).
URLA (Uniform Residential Loan Application).
HUD/VA Addendum to URLA (VA Form 26-1802-a) pages 1 & 2.
Residential Mortgage Credit Report or 3 File Merged Credit Report.
Counseling Checklist for Military Home Buyers (VA Form 26-0592). This form is only required for
active duty military.
Verification of VA Benefits (VA Form 26-8937) if applicable.
Verification of Deposit (VA Form 26-8497) or original or certified true copies of the last two bank
statements.
Verification of Employment (VA Form 26-8498) or equivalent. Or alternative documentation as
described in Chapter 4, section 2e, of the VA Lender’s Handbook.
Original or certified copy of pay stubs covering last 30 days income.
Sales contract or other purchase agreement.
Notice of Value (NOV)
Documentation Requirements
VA has certain documentation that lenders must obtain when processing a loan application for a veteran.
These requirements can be found in Chapter 4 and 5 of the VA Lender’s Handbook.
Following is a list of the documents required when processing a VA loan.
Certificate of Eligibility (VA Form 26-8320).
URLA (Uniform Residential Loan Application).
HUD/VA Addendum to URLA (VA Form 26-1802-a) pages 1 & 2.
Residential Mortgage Credit Report or 3 File Merged Credit Report.
Counseling Checklist for Military Home Buyers (VA Form 26-0592). This form is only required for
active duty military.
Verification of VA Benefits (VA Form 26-8937) if applicable.
Verification of Deposit (VA Form 26-8497) or original or certified true copies of the last two bank
statements.
Verification of Employment (VA Form 26-8498) or equivalent. Or alternative documentation as
described in Chapter 4, section 2e, of the VA Lender’s Handbook.
Original or certified copy of pay stubs covering last 30 days income.
Sales contract or other purchase agreement.
Notice of Value (NOV)
Uniform Residential Appraisal Report (Freddie Mac Form/Fannie Mae Form 1004, including all
attachments, photos and any document(s) revising or correcting the fee appraiser’s original report.
INCOME
Standard Documentation
Verification of employment
Paystubs covering last 30 days income/Active duty veterans Leave and Earnings Statement (LES)
Most recent 2 yrs W-2’s
Most recent 2 yrs tax returns
Most recent 2 yrs tax transcripts
Income claimed by an applicant that is not or cannot be verified should not be given
consideration.
A minimum of two years employment should be verified (including past employers if needed).
An original or certified copy of the applicant’s pay stub, when furnished by the employer, must
be provided.
The employment verification should be compared with the pay stub for consistency.
INCOME
General Rules About Stability of Income
Type of Income
General Requirement
Standard Income
Minimum of 12 months (may include training or related experience)
Overtime or Part-time
Minimum of 2 years
2nd Job Income
Minimum of 2 years
Public Assistance
That it will continue for at least 3 more years
Workers Compensation
That it will continue into the foreseeable future
Seasonal Income
Carefully document the past history and provide evidence that it will
continue into the foreseeable future
VA Educational Allowance
Can not be used as a source of income
INCOME
Sample Leave and Earnings Statement (LES)
Under the “Entitlements” column, BAS/BAH
can be used as tax free income.
Pay attention to the “Deductions” column
and be aware of items that may not appear on
a credit report (i.e. child support).
Check the “Allotments” section to
determine if any amount is going towards
debts owed by the veteran. This section can
be compared with bank statements.
The “Years of Service” box will show how
long the veteran has been employed by the
military.
A LES that shows zeroes or “Indefinite” in
the field that normally reflects the ending
date of obligated service (ETS) typically means
the person is an officer, and not necessarily
subject to a specific term of service (i.e. 2
years, 4 years, etc.).
RENTAL INCOME
Multi-Unit Property Securing the VA Loan
Verify:
•Cash reserves totaling at least 6 months PITI, and
•Documentation of the applicant’s prior landlord or property maintenance experience
•The amount of rental income used on existing units would be based on 75% of the verified prior rent,
unless a higher percentage can be documented.
•If the units are proposed property, then VA would require a letter from the appraiser stating the “fair
rental value” and a vacancy/operating cost reduction of that rental figure
Rental of existing property
Existing single-family property may be used to “off-set” the mortgage payment if there is a positive cash-flow,
and there is no indication the property will be difficult to rent. A copy of the lease should be furnished (if
available) and it is the underwriter’s responsibility to be familiar with the local rental market. On “off-setting”
the mortgage payment, the debt should still be listed on the loan analysis, but shown as a “rental offset.”
•If the existing single-family property is located in a weak rental market or has a negative
cash flow, the rental income and expenses must be listed separately on the loan analysis.
Other Rental Property
If the applicant has other rental property cash reserves equaling three months PITI + previous 2 years tax
returns showing rental income generated by the property.
•The strength of the local rental market should be evaluated to determine the property will not be
difficult to rent. Depreciation & interest may be added back when tax returns are used to determine
effective income.
REFINANCES
Cash-Out/Regular Refinance vs. IRRRL
What is a VA Cash-Out/Regular Refinancing Loan?
A cash-out refinancing loan is a VA-guaranteed loan that refinances any type of lien or liens against the
secured property. The liens to be paid off may be:
•current and
•from any source, such as
–tax or judgment liens, or
–VA, FHA, or conventional mortgages.
Loan proceeds beyond the amount needed to pay off the lien(s) may be taken as cash by the borrower
for any purpose acceptable to the lender.
The loan must be secured by a first lien on the property.
What is an IRRRL?
An IRRRL is a VA-guaranteed loan made to refinance an existing VA-guaranteed loan, generally at a
lower interest rate than the existing VA loan, and with lower principal and interest payments than the
existing VA loan.
Generally, no appraisal, credit information or underwriting is required on an IRRRL, and any lender may
close an IRRRL automatically.
CASH-OUT/REGULAR REFINANCES
•Must have an existing lien to pay off. Free and clear properties are not eligible.
•All refinances are considered cash out. VA does not offer a rate and term refinance.
•Borrower must be on title and on current lien to be eligible for cash out refinance.
•VA cash out transactions not allowed in Texas
•Primary Residence Only
IRRRL’S
•Primary Residence only
•Must meet a required Net Tangible Benefit
•The total loan amount (base loan amount including funding fee) cannot exceed 100% LTV
•Maximum loan term is the original loan team of the VA loan being refinanced plus 10
years, but not to exceed 30 years and 32 days
•Minimum Fico of 660, credit report is used to validate credit score and mortgage history
only
•No mortgage lates allowed in the last 12 months
•A borrower must have made all mortgage payments within the month due for the
preceding 12 months at the time of application
IRRRL’S (continued)
•If current mortgage has less than 12 months, a prior mortgage to equate 12 consecutive
payments is required. (Rent rating not acceptable)
•In all cases a borrower must have made at least 6 mortgage payments in the month due for
the current mortgage
•Subordinate financing is not allowed
•Employment must be verified at underwriting and again prior to funding. Self-employment
can be verified by any third party source such as CPA letter, copy of business license, etc.
Income is not required.
•In most cases, a full conventional appraisal must be obtained