Basic Elements of a Louisville Kentukcy VA-Guaranteed Loan
Change Date |
April 10, 2009, Change 9
|
a. General rules |
The following table provides general rules and information critical to understanding a VA loan guaranty. Exceptions and detailed explanations have been omitted. Instead, a reference to the section in this handbook that addresses each subject is provided. |
| Subject | Explanation | Section |
| Maximum Loan Amount | VA has no specified dollar amount(s) for the “maximum loan.” The maximum loan amount depends upon:
|
3 of this chapter |
| Downpayment | No downpayment is required by VA unless the purchase price exceeds the reasonable value of the property, or the loan is a Graduated Payment Mortgage (GPM). The lender may require a downpayment if necessary to meet secondary market requirements. |
3 of this chapter |
| Amount of Guaranty | Guaranty is the amount VA may pay a lender in the event of loss due to foreclosure. |
4 of this chapter |
| Occupancy | The veteran must certify that he or she intends to personally occupy the property as his or her home. |
5 of this chapter |
Continued on next page
1. Basic Elements of a VA-Guaranteed Loan, Continued
| a. General rules (continued) |
| Subject | Explanation | Section |
| Interest Rate and Points | Interest rate and points are negotiated between the lender and veteran.
|
6 and 7 of this chapter |
| Purpose of Guaranty | To encourage lenders to make VA loans by protecting lenders/loan holders against loss, up to the amount of guaranty, in the event of foreclosure. |
11 of this chapter |
| Underwriting | Flexible standards. The veteran must have:
- stable income - residual income (net effective income minus monthly shelter expense) in accordance with regional tables, and - acceptable ratio of total monthly debt payments to gross monthly income (A ratio in excess of 41% requires closer scrutiny and compensating factors.). |
|
| IRRRLs (Streamline Refinancing Loans) | Used to refinance an existing VA loan at a lower interest rate.
Note: A fixed rate loan to refinance a VA Adjustable Rate Mortgage (ARM) may be at a higher interest rate. |
1 and 2 of chapter 6 |
Continued on next page
1. Basic Elements of a VA-Guaranteed Loan, Continued
| a. General rules (continued) |
| Subject | Explanation | Section |
| Funding Fee | The veteran must pay a funding fee to help defray costs of the VA home loan program.
|
8 of Chapter 8
|
| Closing costs | Those payable by the veteran are limited by regulation to a specific list of items plus a one percent flat charge by the lender.
|
2, 4, and 7 of chapter 8 |
| Security Instruments | The lender may use any note or mortgage forms they wish as long as they contain certain VA-required clauses, samples of which may be found at: http://www.homeloans.va.gov/lenderssampdocs.htm. |
1 of chapter 9 |
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