Mitchell6024/quickb · Datasets at Hugging Face

id stringlengths 36 36	text stringlengths 1 400	source stringclasses 1 value
54e64ccc-5e17-47d9-af54-1adfecaa11cf	What if Construction Is Not Fully Completed and Loan Proceeds are not Fully Disbursed? (one-time close) If the construction is not fully completed and loan proceeds are not fully disbursed, the guaranty¹¹ will apply only to the proper pro rata part of the loan.	VA_Guidelines.txt
c7803736-dcff-4881-a51a-dd8a4ca357ac	To calculate the proper pro rata part of the loan: (1) take loan proceeds disbursed for construction purposes, (2) add any other payments made to the builder by or on behalf of the Veteran, (3) take the lesser of the above total or 80 percent of the value of that portion of the construction completed, and (4) add any loan disbursements made for the purchase of the land on which the construction	VA_Guidelines.txt
ba7451bf-d56b-41cf-8dc6-d916894dc538	purchase of the land on which the construction is situated	VA_Guidelines.txt
c39937ae-5663-44af-8c63-1be88a3ff09f	.	VA_Guidelines.txt
2e060676-cd92-4d10-a811-0e876cba2726	The lender must also certify that any amounts advanced for land is protected by title or lien and that no enforceable liens, for any work done or material furnished for that part of the construction completed and for which payment has been made out of proceeds of the loan exists or can come into exitance.	VA_Guidelines.txt
83d4af59-0da8-4efd-bb2e-a763e63d6792	In the event circumstances make it impracticable to complete construction and fully disburse funds, the lender should contact VA for additional information on obtaining a partial guaranty. r. Two-Time Construction Loan Process This loan type involves the refinance of a non-VA interim construction loan with a VA- guaranteed loan.	VA_Guidelines.txt
1271fc51-ef5b-40bb-bc47-e21ff8d86786	Interim construction loans are construction loans that do not provide for permanent financing. The following provides a general guide for lenders to follow when processing a VA two- time construction loan.	VA_Guidelines.txt
657d93be-eb88-4f7d-a7aa-7415d3c12c27	As VA prefers for the appraisal on a two-time construction loan to be ordered after the dwelling is 100% complete, this general guide does not address instances where the lender orders the appraisal prior to completion of the dwelling. (1) Verify the Veteran’s eligibility and entitlement. (Chapter 2) (2) Close the non-VA interim construction loan. (3) The construction takes place	VA_Guidelines.txt
0e3731ad-6fe0-470a-81a1-cf6dd82ade33	. (3) The construction takes place. (4) Order the VA appraisal after construction is complete as “New Construction.” (Chapter 10) (5) Issue the NOV. (Chapter 13) (6) Underwrite the loan using VA’s underwriting guidelines. (Chapter 4) (7) Close the loan after all NOV requirements are met. (Chapter 5) (8) Pay the VA Funding Fee within 15 days of loan closing	VA_Guidelines.txt
d8a2c045-9ade-4324-af83-ba6f69c47083	. (Chapter 8) (9) Issue the Loan Guaranty Certificate. (Chapter 5) Continued on next page 11 38 CFR 36.4305 7-18 VA Lenders Handbook 26-7 Chapter 7: Loans Requiring Special Underwriting, Guaranty, and Other Considerations Topic 2: Construction/Permanent Home Loans, continued s.	VA_Guidelines.txt
b1a57be1-3252-48c8-b211-ea50d3ec4a09	Construction Complaint Process VA assistance with construction complaints will be limited to defects in equipment, material, and workmanship reported during the required 1-year VA builder’s warranty period. t.	VA_Guidelines.txt
f8ff955a-f619-45b2-a67e-aab204810f8b	Construction Loan Comparison Table 7: Comparison of VA Construction Loan Types and Cash-Out Refinance Loans Loan Feature One-Time Close Two-Time Close Cash-Out Refinance Appraisal Prior to Preferred: After Preferred: After Timing Commencement of Dwelling is 100% Dwelling is 100% Construction Complete Complete Purchase or Purchase Purchase Refinance Refinance for VA Purposes Appraisal Type	VA_Guidelines.txt
96b535dd-1d15-40cc-bd10-ab1f9a4d031e	Refinance for VA Purposes Appraisal Type Proposed – Per Plans Preferred: Built Less Refer to Chapter 10 and Specs than One Year and Never Occupied Maximum Loan Lesser of: Lesser of: 100% of the Amount a	VA_Guidelines.txt
0f4ccf8c-ea6c-4d7c-851e-0f2c7043457f	.	VA_Guidelines.txt
4003f24e-885c-4d4e-a3c5-2287f457f440	Acquisition Cost, a. Acquisition Cost, Reasonable Value or or b. VA Reasonable b. VA Reasonable Value. Value. Plus, the applicable Plus, the applicable VA Funding Fee VA Funding Fee Cash to Veteran No No Yes, the Veteran may Acceptable? receive proceeds from the loan and/or satisfy other debts Can Equity be Yes Yes No Considered for VA Funding Fee Rate Reduction?	VA_Guidelines.txt
f516a1e2-56e1-4427-9c66-211f83b57444	Do VA’s No No Yes refinancing (The refinance of an NTBs apply? interim construction loan is an NTB.) Continued on next page 7-19 VA Lenders Handbook 26-7 Chapter 7: Loans Requiring Special Underwriting, Guaranty, and Other Considerations Topic 2: Construction/Permanent Home Loans, continued u.	VA_Guidelines.txt
052dd7da-90ed-4bc0-9d38-e97380f877d7	Funding Fee Downpayment Examples This section provides examples of construction loan downpayment scenarios and the appropriate amount to enter into FFPS as the Purchase Price and the Downpayment amount.	VA_Guidelines.txt
d432d066-cebb-4c18-a817-5cbf7c9c4a92	Table 8: Construction Loans – Veteran Purchased the Land Within One Year of Close Lenders should use this table in cases where the Veteran purchased the land within one year of closing of the VA-loan.	VA_Guidelines.txt
93d7feaf-6749-48a2-8429-1b53e3cc2627	Item Description Example 1 Example 2 Example 3 A Cost to Acquire Land $100,000 $30,000 $100,000 B Balance Owed on Land $0 $20,000 $60,000 C Contract to Construct + $300,000 $300,000 $300,000 Permits and Reserves (if applicable) D Acquisition Cost (B+C) $300,000 $320,000 $360,000 E Reasonable Value (Per NOV) $350,000 $375,000 $500,000 F Land Value (if given) n/a $80,000 n/a G Max Loan Amount	VA_Guidelines.txt
8cf8978d-af86-4fd3-8c9c-9763b036fb78	(if given) n/a $80,000 n/a G Max Loan Amount $300,000 + $320,000 + $360,000 + (Lesser of D or E) applicable FF applicable FF applicable FF H Purchase Price in FFPS $400,000 $380,000 $500,000 (Greater of: E	VA_Guidelines.txt
050769ea-6e09-474b-bf69-043ca036b493	., (A+C), or (C+F)) I Downpayment in FFPS $100,000 $60,000 $140,000 (H-G) Continued on next page 7-20 VA Lenders Handbook 26-7 Chapter 7: Loans Requiring Special Underwriting, Guaranty, and Other Considerations Topic 2: Construction/Permanent Home Loans, continued u.	VA_Guidelines.txt
1355f386-6b93-43c4-a079-36f4c09386b4	Funding Fee Downpayment Examples, continued Table 9: Construction Loans – Land Purchased More than One Year Before Close Lenders should use this table in cases where the Veteran purchased the land more than one year prior to the closing of the VA-loan.	VA_Guidelines.txt
e449525c-bde6-42c9-9088-7f486a907793	Item Description Example 1 Example 2 Example 3 A Cost to Acquire Land n/a n/a n/a B Balance Owed on Land $0 $60,000 $0 C Contract to Construct + $300,000 $300,000 $300,000 Permits and Reserves (if applicable) D Acquisition Cost (B+C) $300,000 $360,000 $300,000 E Reasonable Value (Per NOV) $350,000 $350,000 $350,000 F Land Value (if given) Not Given Not Given $75,000 G Max Loan Amount $300,000 +	VA_Guidelines.txt
1f6894e9-b7cf-44f6-9acc-902b03ac7b3d	Not Given $75,000 G Max Loan Amount $300,000 + $350,000 + $300,000 + (Lesser of D or E) applicable FF applicable FF applicable FF H Purchase Price in FFPS $350,000 $360,000 $375,000 (Greater of D, E, or (C+F)) I Downpayment in FFPS $50,000 $10,000 $75,000 (H-G) Table 10: Construction Loans – Land was Gifted Lenders should use this table in cases where the land was gifted or inherited by the	VA_Guidelines.txt
60e118ce-c4b1-4329-b944-823b46bfff37	where the land was gifted or inherited by the Veteran free of encumbrance	VA_Guidelines.txt
c5100eea-c960-4e80-9c7d-259ac7ccf49f	.	VA_Guidelines.txt
badb4074-5abe-4c7a-b862-4df6d5f0b8f2	Item Description Example 1 Example 2 A Cost to Acquire Land n/a n/a B Balance Owed on Land $0 $0 C Contract to Construct + Permits $300,000 $300,000 and Reserves (if applicable) D Acquisition Cost (B+C) $300,000 $300,000 E Reasonable Value (Per NOV) $350,000 $290,000 F Land Value (if given) Not Given Not Given G Max Loan Amount $300,000 + $290,000 + (Lesser of D or E) applicable FF applicable FF	VA_Guidelines.txt
cbbd35c2-63b3-4a08-bd72-08cafbf5106e	+ (Lesser of D or E) applicable FF applicable FF H Purchase Price in FFPS (Greater $350,000 $300,000 of D or E) I Downpayment in FFPS (H-G) $50,000 $10,000 7-21 VA Lenders Handbook 26-7 Chapter 7: Loans Requiring Special Underwriting, Guaranty, and Other Considerations Topic 3: Energy Efficient Mortgages Change Date: March 11, 2019 · This chapter has been revised in its entirety	VA_Guidelines.txt
23a7798d-953b-45dd-adb4-514889df51f3	. a.	VA_Guidelines.txt
d90855d2-9a1e-4358-84ae-600514a2f041	What are EEMs? Energy Efficient Mortgages (EEMs) are loans to cover the cost of making energy efficiency improvements to a dwelling. They can be made in conjunction with a: · VA loan for the purchase of an existing dwelling, or · VA refinancing loan secured by the dwelling.	VA_Guidelines.txt
2a020dcf-01ad-4b26-8471-64659d92891d	Acceptable energy efficiency improvements include, but are not limited to: · solar heating systems, including solar systems for heating water for domestic use; · solar heating and cooling systems; · caulking and weather-stripping; · furnace efficiency modifications limited to replacement burners, boilers, or furnaces designed to reduce the firing rate or to achieve a reduction in the amount of	VA_Guidelines.txt
6d3cf83b-7d91-4894-a7de-bce589517ce7	rate or to achieve a reduction in the amount of fuel consumed as a result of increased combustion efficiency, devices for modifying flue openings which will increase the efficiency of the heating system, and electrical or mechanical furnace ignition systems which replace standing gas pilot lights; · clock thermostats; · new or additional ceiling, attic, wall and floor insulation; · water heater	VA_Guidelines.txt
46e3936a-967a-405b-83a1-06dd9d118bfb	attic, wall and floor insulation; · water heater insulation; · storm windows and/or doors, including thermal windows and/or doors; · heat pumps; and · vapor barriers	VA_Guidelines.txt
5d9f879d-af61-476b-84ac-156c3e7ca7ed	. b.	VA_Guidelines.txt
365b911a-9a03-4018-b482-488d45ae3244	Borrower Notice on the NOV Information on EEMs is provided to a Veteran who applies for a loan which requires an NOV (a loan for a home purchase or regular “cash-out” refinance). The NOV includes the following notice to the Veteran: “The buyer may wish to contact a qualified person/firm for a home energy audit to identify needed energy efficiency improvements to the property.	VA_Guidelines.txt
74a5d4a6-22b3-4a53-bb8c-8077e97e63da	In some localities, the utility company may perform this service. The mortgage amount may be increased as a result of making energy efficiency improvements such as: Solar or conventional heating/cooling systems, water heaters, insulation, weather-stripping/caulking, and storm windows/doors.	VA_Guidelines.txt
21690ef7-1797-4dd0-8161-ee448ca5cb41	Other energy related improvements may also be considered.” Continued on next page 7-22 VA Lenders Handbook 26-7 Chapter 7: Loans Requiring Special Underwriting, Guaranty, and Other Considerations Topic 3: Energy Efficient Mortgages, continued b.	VA_Guidelines.txt
7f8f56f3-e102-4f0e-8c15-675d4600b580	Borrower Notice on the NOV, continued The mortgage may be increased by: · Up to $3,000 based solely on the documented costs, · Up to $6,000 provided the increase in monthly mortgage payment does not exceed the likely reduction in monthly utility costs, or · VA does not permit EEMs more than $6,000 (38 U. S. C. §3710(d)). c.	VA_Guidelines.txt
102878d1-4473-4fd4-a8bd-37cd53758d9d	S. C. §3710(d)). c. Underwriting Considerations Energy efficiency improvements up to $3,000: The resulting increase in loan payments will normally be offset by a reduction in utility costs.	VA_Guidelines.txt
f3628564-5955-46cd-84af-c6ec4ec68aa8	Energy efficiency improvements more than $3,000, up to $6,000: The lender must make a determination that the increase in monthly mortgage payments does not exceed the likely reduction in monthly utility costs, and must rely on locally available information provided by utility companies, municipalities, state agencies or other reliable sources, and document the determination.	VA_Guidelines.txt
e967c636-6b3f-4b25-8492-85e798876337	Energy efficiency improvements in conjunction with an Interest Rate Reduction Refinancing Loan (IRRRL). If the monthly payment (Principal, Interest, Taxes, and Insurance (PITI)) for the new loan exceeds the PITI of the loan being refinanced by 20 percent or more, the lender must certify to having determined that the Veteran qualified for the higher payment. d.	VA_Guidelines.txt
19aaef20-bce2-40a6-9707-a2729a17cab8	Documentation Required with Closed Loan Package Energy efficiency improvements up to $3,000: Evidence of the cost of improvements such as a copy of the bid(s) or contract itemizing the improvements and their cost.	VA_Guidelines.txt
24466c6c-8edc-4c1c-8974-ffe78057dc65	Improvements more than $3,000, up to $6,000: Evidence of the cost of improvements such as a copy of the bid(s) or contract itemizing the improvements and their cost, and the lender’s determination that the increase in monthly mortgage payments does not exceed the likely reduction in monthly utility costs.	VA_Guidelines.txt
9a534f4d-125e-4523-b0f0-f44d2c9340e0	IRRRL with significant increase in payments: If the cost of the improvements cause the new loan payment (PITI) to be 20 percent or higher than the old payment (on the loan being refinanced), then include the lender’s certification that it has determined that the Veteran qualified for the higher payment.	VA_Guidelines.txt
bdcedb62-4d23-4889-a73d-4e486bad095f	Continued on next page 7-23 VA Lenders Handbook 26-7 Chapter 7: Loans Requiring Special Underwriting, Guaranty, and Other Considerations Topic 3: Energy Efficient Mortgages, continued b.	VA_Guidelines.txt
628aa966-237e-4c3c-af73-a7cee18d51e1	Borrower Notice on the NOV, continued The mortgage may be increased by: · Up to $3,000 based solely on the documented costs, · Up to $6,000 provided the increase in monthly mortgage payment does not exceed the likely reduction in monthly utility costs, or · VA does not permit EEMs more than $6,000 (38 U. S. C. §3710(d)). c.	VA_Guidelines.txt
9179767b-6974-43d4-acc2-0f6d9410ce22	S. C. §3710(d)). c. Underwriting Considerations Energy efficiency improvements up to $3,000: The resulting increase in loan payments will normally be offset by a reduction in utility costs.	VA_Guidelines.txt
14b5cb71-7b6d-4633-8fe7-1607cb8e0ddc	Energy efficiency improvements more than $3,000, up to $6,000: The lender must make a determination that the increase in monthly mortgage payments does not exceed the likely reduction in monthly utility costs, and must rely on locally available information provided by utility companies, municipalities, state agencies or other reliable sources, and document the determination.	VA_Guidelines.txt
6cadccf5-c557-446f-a07d-3e02170ecb0b	Energy efficiency improvements in conjunction with an Interest Rate Reduction Refinancing Loan (IRRRL). If the monthly payment (Principal, Interest, Taxes, and Insurance (PITI)) for the new loan exceeds the PITI of the loan being refinanced by 20 percent or more, the lender must certify to having determined that the Veteran qualified for the higher payment. d.	VA_Guidelines.txt
e2ae1b41-b077-4d50-97d6-b152b4f91f5b	Documentation Required with Closed Loan Package Energy efficiency improvements up to $3,000: Evidence of the cost of improvements such as a copy of the bid(s) or contract itemizing the improvements and their cost.	VA_Guidelines.txt
186eda20-d1d5-4881-9ed9-a0d5bfb7fedb	Improvements more than $3,000, up to $6,000: Evidence of the cost of improvements such as a copy of the bid(s) or contract itemizing the improvements and their cost, and the lender’s determination that the increase in monthly mortgage payments does not exceed the likely reduction in monthly utility costs.	VA_Guidelines.txt
1f77e7dd-90bf-43c9-be1d-c066d66b386c	IRRRL with significant increase in payments: If the cost of the improvements cause the new loan payment (PITI) to be 20 percent or higher than the old payment (on the loan being refinanced), then include the lender’s certification that it has determined that the Veteran qualified for the higher payment.	VA_Guidelines.txt
b9237023-aae8-4aad-bb91-8a185dc8e7fd	Continued on next page 7-23 VA Lenders Handbook 26-7 Chapter 7: Loans Requiring Special Underwriting, Guaranty, and Other Considerations Topic 3: Energy Efficient Mortgages, continued e. How to Calculate Guaranty and Entitlement Use? Guaranty is calculated on an EEM as described in the following table.	VA_Guidelines.txt
d1700222-e13f-4fcd-a3f8-635362c5c72e	Table 8: How to Calculate Guaranty and Entitlement Use for EEM Step Action 1 Calculate guaranty on the loan without the portion attributable to the energy efficiency improvements. 2 Calculate guaranty on the energy efficiency improvements portion by applying the same percentage used in Step 1. 3 Add the results of Steps 1 and 2 to arrive at guaranty on the entire loan.	VA_Guidelines.txt
6972aa09-4280-4ffb-aaf6-9f0139e6a191	However, the Veteran’s entitlement will only be charged the amount arrived at in Step 1; it is based upon the loan amount before adding the cost of the energy efficiency improvements. Example 1: If a Veteran has full entitlement and applies for a loan of $80,000, plus $6,000 in energy efficiency improvements, VA will guarantee 40 percent of the full loan amount of $86,000.	VA_Guidelines.txt
79d37ded-7bfa-4d89-9e3a-6023e6e3263d	Thus, the dollar amount of the guaranty will be $34,400, even though the charge to the Veteran’s entitlement is only $32,000.	VA_Guidelines.txt
5384aa81-a770-4e4c-a04c-28db08428155	Example 2: If a Veteran with full entitlement applies for a $144,000 loan to purchase a home, and adds $6,000 in energy efficiency improvements, the 25 percent guaranty on the loan will only require the use of $36,000 entitlement, but the dollar amount of guaranty will be $37,500. f.	VA_Guidelines.txt
5d946eb9-e234-4ba7-b89c-d536b1acb7f5	How to Calculate the Funding Fee Calculate the funding fee based on the full loan amount including the cost of the energy efficiency improvements. Continued on next page 7-24 VA Lenders Handbook 26-7 Chapter 7: Loans Requiring Special Underwriting, Guaranty, and Other Considerations Topic 3: Energy Efficient Mortgages, continued g.	VA_Guidelines.txt
52ffb04e-7fc8-4d70-89a1-43a3b8c56f0f	Improvements Not Completed Before Closing If the energy efficiency improvements are not completed before closing, the lender may establish an escrow and close the loan. · A formal escrow is not required. · Only the amount needed to complete the improvements must be withheld.	VA_Guidelines.txt
cc42e9c0-144d-461c-8d70-737bc8666990	Check the appropriate block in item 23, VA Form 26-1820, Report and Certification of Loan Disbursement. · No additional documentation concerning the escrowed/earmarked funds must be submitted when reporting the closed loan. Generally, the improvements should be completed within 6 months from the date of loan closing.	VA_Guidelines.txt
1243e7f5-c0cc-41c5-b8f8-52cf30d19164	Provide written notification to VA when improvements are completed and the escrow funds are disbursed. Escrow requirements concerning completion of improvements are listed in Chapter 9 of this handbook. · Assure the funds are properly applied to the costs of improvements.	VA_Guidelines.txt
b19f609d-b272-43b1-9533-31b69e48ff79	If, after a reasonable time, the lender determines that the improvements will not be completed: · Apply the balance of the escrowed/earmarked funds to reduce the principal balance on the loan, and · Provide written notification to VA that this has been done. h. Reimbursement to the Veteran out of IRRRL Proceeds The Veteran generally may not obtain cash proceeds from an IRRRL.	VA_Guidelines.txt
f4723912-5956-4d07-87bc-a742ba0f0ebb	There is one exception.	VA_Guidelines.txt
4e6355d5-30ea-40e5-92bd-f6ca924bb4ad	Up to $6,000 of IRRRL loan proceeds may be used to reimburse the Veteran for the cost of energy efficiency improvements completed within the 90 days immediately preceding the date of the loan	VA_Guidelines.txt
9b719292-3c0b-4073-945f-8af75705c5be	. 7-25 VA Lenders Handbook 26-7 Chapter 7: Loans Requiring Special Underwriting, Guaranty, and Other Considerations Topic 4: Loans for Alteration and Repairs Change Date: March 11, 2019 · This chapter has been revised in its entirety. a.	VA_Guidelines.txt
2c4d89c6-41f1-48bc-8fbd-872a5a034f60	Description VA may guarantee a loan for alteration and repair: · Of a residence already owned by the Veteran and occupied as a home, or · Made in conjunction with a purchase loan on the property. The alterations and repairs must be those ordinarily found on similar property of comparable value in the community. b.	VA_Guidelines.txt
f7dcaf64-3af5-4ed2-945b-51c22f554fd1	Value Considerations The cost of alterations and repairs to structures may be included in a loan for the purchase or regular “Cash-Out” refinance of improved property to the extent that their value supports the loan amount	VA_Guidelines.txt
c9570303-6eae-486b-bbba-5e12eab5b20b	. 7-26 VA Lenders Handbook 26-7 Chapter 7: Loans Requiring Special Underwriting, Guaranty, and Other Considerations Topic 5: What is a Supplemental Loan Change Date: March 11, 2019 · This chapter has been revised in its entirety. a.	VA_Guidelines.txt
b7195ce7-9ff2-4f12-b4a5-2bf6eb4ab7f6	What is a Supplemental Loan? A supplemental loan is a loan for the alteration, improvement, or repair of a residential property. The residential property must secure an existing VA- guaranteed loan, and be owned and occupied by the Veteran, or the Veteran will reoccupy upon completion of major alterations, repairs, or improvements.	VA_Guidelines.txt
1ace71a4-d5c7-44c8-a5bf-dc4d6a5e9092	The alterations, improvements, or repairs must: · Be for the purpose of substantially protecting or improving the basic livability, or utility of the property, and · Be restricted primarily to the maintenance, replacement, improvement or acquisition of real property, including fixtures. Installation of features such as barbecue pits, swimming pools, etc., does not meet this requirement.	VA_Guidelines.txt
7e65d8e7-c130-4ba4-90d0-989c84794faf	No more than 30 percent of the loan proceeds may be used for the maintenance, replacement, improvement, repair, or acquisition of non- fixtures or quasi-fixtures such as refrigeration, cooking, washing, and heating equipment. The equipment must be related to or supplement the principal alteration for which the loan is proposed. b.	VA_Guidelines.txt
f87ac91c-b8e3-488f-a64b-e1c80df18b66	Required Lien and Maximum Loan Term It is the lender’s responsibility to obtain an effective lien of the required dignity (lien position).	VA_Guidelines.txt
6d61c2da-005a-4856-a65d-3cf6851787fe	Possible methods to secure a supplemental loan are: · Through an open-end provision of the instrument securing the existing loan, · Through an amendment of the existing loan security instrument, · By taking a new lien to cover both the existing and the supplemental loans, or · By taking a separate lien immediately junior to the existing lien.	VA_Guidelines.txt
b94fdd79-2732-4ad4-aef8-7fc64cba8107	The maximum loan term is: · 30 years if amortized, or · 5 years if not amortized. Continued on next page 7-27 7-27 VA Lenders Handbook 26-7 Chapter 7: Loans Requiring Special Underwriting, Guaranty, and Other Considerations Topic 5: What is a Supplemental Loan, continued c.	VA_Guidelines.txt
71df3ea9-4f2d-41ee-8cfc-ea9a17c8ed16	Other Requirements The existing loan must be current with respect to taxes, insurance, and amortized payments, and must not otherwise be in default unless a primary purpose of the supplemental loan is to improve the ability of the borrower to maintain the loan obligation. The making of a supplemental loan can never result in any increase in the rate of interest on the existing loan.	VA_Guidelines.txt
8fa47f7f-c3eb-407f-8808-f5c291411bac	A supplemental loan to be written at a higher rate of interest than that payable on the existing loan must be evidenced by a separate note from the existing loan. d.	VA_Guidelines.txt
8dc63fd8-c485-4495-8c98-50a3a6d7531a	Prior Approval or Automatic Loan Closing A supplemental loan will require the prior approval of VA if the: · loan is to be made by a lender that does not have authority to close loans on an automatic basis or · loan is to be made by a lender that does not have authority to close loans on an automatic basis; or · an obligor liable on the currently outstanding obligation will be released from	VA_Guidelines.txt
bac3c2c9-dde2-4eab-b16e-04045428cd7e	outstanding obligation will be released from personal liability by operation of law or otherwise	VA_Guidelines.txt
49d6e6f8-61d2-4c1a-b194-a3b6297eabc1	. e.	VA_Guidelines.txt
ba1aab30-2560-4999-aca9-1ce67327bf3e	Procedures Submit a statement describing the alterations, improvements, or repairs made or to be made with the prior approval application (or loan closing package, if closed automatically). In addition, report the amount outstanding on the existing loan as of the date of closing of the supplemental loan in the loan closing package.	VA_Guidelines.txt
5ff63d9a-c5e1-4ff2-84cd-7a37660b7107	If the cost of the repairs, alterations, or improvements exceeds $3,500: an NOV and compliance inspections are required. If the cost of the repairs, alterations, or improvements does not exceed $3,500: an NOV and compliance inspections are not required. Instead, a statement of reasonable value may be submitted. The statement must be completed and signed by a VA-designated appraiser.	VA_Guidelines.txt
ee31ad43-5a09-4129-8f28-16fddb934a7a	A VA-designated appraiser is an individual nominated by the lender (who may be an officer, trustee, or employee of the lender or its agent) who has been approved by the local VA office. The statement must specify the: · work done or to be done, · purchase price or cost of the work and material, and · purchase price or cost does not exceed the reasonable value.	VA_Guidelines.txt
5f88391c-a8a0-4711-9aad-48de3d0c9d37	Continued on next page 7-28 VA Lenders Handbook 26-7 Chapter 7: Loans Requiring Special Underwriting, Guaranty, and Other Considerations Topic 5: What is a Supplemental Loan, continued e.	VA_Guidelines.txt
18fb4f1e-4607-4fce-afc3-592e33bf454e	Procedures, continued In lieu of VA compliance inspections, the lender must submit a certification as follows: “The undersigned lender certifies to the Department of Veterans Affairs that the property as repaired, altered, or improved has been inspected by a qualified individual designated by the undersigned, and based on the inspection report, the undersigned has determined that the repairs,	VA_Guidelines.txt
753965fc-8d8c-4e4c-ba46-a43f423e8233	the undersigned has determined that the repairs, alterations, or improvements financed with the proceeds of the loan described in the attached VA Form 26-1820, appear to have been completed in substantial conformance with related contracts	VA_Guidelines.txt
73ced00c-cd09-4a90-876d-77004070eef9	.” f.	VA_Guidelines.txt
4e561bd6-c3d2-43f7-b5f9-50901d0dfcd3	Guaranty and Entitlement If the supplemental loan will not be consolidated with a related outstanding guaranteed loan the: · Veteran must have sufficient entitlement for the new loan, and · VA will issue a new LGC solely for supplemental loans. If the supplemental loan will be consolidated with a related outstanding guaranteed loan, VA will issue a new modified guaranty certificate.	VA_Guidelines.txt
80294604-1d3f-4241-8b84-c8725043029a	Continued on next page 7-29 VA Lenders Handbook 26-7 Chapter 7: Loans Requiring Special Underwriting, Guaranty, and Other Considerations Topic 5: What is a Supplemental Loan, continued e.	VA_Guidelines.txt
b0e4abbb-93a5-490d-a8bc-a6b8bb334af0	Procedures, continued In lieu of VA compliance inspections, the lender must submit a certification as follows: “The undersigned lender certifies to the Department of Veterans Affairs that the property as repaired, altered, or improved has been inspected by a qualified individual designated by the undersigned, and based on the inspection report, the undersigned has determined that the repairs,	VA_Guidelines.txt
437f22f2-82ff-4df4-90a0-369dfca0f114	the undersigned has determined that the repairs, alterations, or improvements financed with the proceeds of the loan described in the attached VA Form 26-1820, appear to have been completed in substantial conformance with related contracts	VA_Guidelines.txt
22e2f3b1-0b06-4f40-83df-53d3747b1d36	.” f.	VA_Guidelines.txt
42e99b41-a8e1-4ab1-9171-dd7f5dc38e88	Guaranty and Entitlement If the supplemental loan will not be consolidated with a related outstanding guaranteed loan the: · Veteran must have sufficient entitlement for the new loan, and · VA will issue a new LGC solely for supplemental loans. If the supplemental loan will be consolidated with a related outstanding guaranteed loan, VA will issue a new modified guaranty certificate.	VA_Guidelines.txt
b695438e-dd15-4f7b-9e2f-acb551a5e9dc	Continued on next page 7-29 VA Lenders Handbook 26-7 Chapter 7: Loans Requiring Special Underwriting, Guaranty, and Other Considerations Topic 5: What is a Supplemental Loan, continued g. Procedure If the Veteran has no available entitlement, VA can still guarantee the supplemental loan provided the lender is the holder of the Veteran’s existing loan and the loans are to be consolidated.	VA_Guidelines.txt
94730f4d-9fa3-4a7b-85bc-03e73e895991	The amount of the modified guaranty will be the maximum guaranty effective on the existing loan at the time the supplemental loan is closed. To calculate the percentage of guaranty applicable to the combined indebtedness take the result of Step 1, and divide by the result of Step 3.	VA_Guidelines.txt
3684cb70-e7d2-42ea-961a-5139360f8de7	Follow the steps in the table below to calculate the percentage of guaranty applicable to the combined indebtedness.	VA_Guidelines.txt
3082102c-6402-4ef0-917f-a25544c4b21c	Table 9: Supplemental Loan Procedure Step Action 1 Take the balance of the existing loan at the time of closing of the supplemental loan and multiply by the percentage of guaranty for the existing loan, as shown on the guaranty certificate	VA_Guidelines.txt
c911dd45-b3ea-40ec-b007-435b1a856ea7	. 2 Calculate the amount of guaranty that would be issued on the supplemental loan as an independent loan (do not exceed the amount of entitlement available to the Veteran). 3 Take the balance of the existing loan and add the amount of the supplemental loan. 4 Take the result of Step 1 above and add the result of Step 2 above. 5 Divide by the result of Step 3 above	VA_Guidelines.txt
b49aded8-6771-47d2-9040-f0eb0bc61d5b	. 5 Divide by the result of Step 3 above. 7-30 VA Lenders Handbook 26-7 Chapter 7: Loans Requiring Special Underwriting, Guaranty, and Other Considerations Topic 6: Adjustable-Rate Mortgages Change Date: March 11, 2019 · This chapter has been revised in its entirety. a.	VA_Guidelines.txt
5d55f716-f245-4e45-b786-817b22f9789d	General Information Concerning ARMs An ARM loan offers adjustable interest rates based on negotiated initial fixed interest rates coupled with periodic adjustments to the interest rate over time. Hybrid ARMs have longer initial fixed rates of 3, 5, 7, or 10 years, while a “traditional” ARM allows for an annual adjustment after 1 year. b.	VA_Guidelines.txt
24a8a59d-cad8-4932-9956-f7ff2ff112b2	Interest Rate Adjustments Traditional ARMs: Interest rate adjustments occur on an annual basis. The annual interest rate adjustments are limited to a maximum increase or decrease of one percentage point. Additionally, interest rate increases are limited to a maximum of five percentage points over the life of the loan.	VA_Guidelines.txt

54e64ccc-5e17-47d9-af54-1adfecaa11cf

What if Construction Is Not Fully Completed and Loan Proceeds are not Fully Disbursed? (one-time close) If the construction is not fully completed and loan proceeds are not fully disbursed, the guaranty¹¹ will apply only to the proper pro rata part of the loan.

VA_Guidelines.txt

c7803736-dcff-4881-a51a-dd8a4ca357ac

To calculate the proper pro rata part of the loan: (1) take loan proceeds disbursed for construction purposes, (2) add any other payments made to the builder by or on behalf of the Veteran, (3) take the lesser of the above total or 80 percent of the value of that portion of the construction completed, and (4) add any loan disbursements made for the purchase of the land on which the construction

VA_Guidelines.txt

ba7451bf-d56b-41cf-8dc6-d916894dc538

purchase of the land on which the construction is situated

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c39937ae-5663-44af-8c63-1be88a3ff09f

.

VA_Guidelines.txt

2e060676-cd92-4d10-a811-0e876cba2726

The lender must also certify that any amounts advanced for land is protected by title or lien and that no enforceable liens, for any work done or material furnished for that part of the construction completed and for which payment has been made out of proceeds of the loan exists or can come into exitance.

VA_Guidelines.txt

83d4af59-0da8-4efd-bb2e-a763e63d6792

In the event circumstances make it impracticable to complete construction and fully disburse funds, the lender should contact VA for additional information on obtaining a partial guaranty. r. Two-Time Construction Loan Process This loan type involves the refinance of a non-VA interim construction loan with a VA- guaranteed loan.

VA_Guidelines.txt

1271fc51-ef5b-40bb-bc47-e21ff8d86786

Interim construction loans are construction loans that do not provide for permanent financing. The following provides a general guide for lenders to follow when processing a VA two- time construction loan.

VA_Guidelines.txt

657d93be-eb88-4f7d-a7aa-7415d3c12c27

As VA prefers for the appraisal on a two-time construction loan to be ordered after the dwelling is 100% complete, this general guide does not address instances where the lender orders the appraisal prior to completion of the dwelling. (1) Verify the Veteran’s eligibility and entitlement. (Chapter 2) (2) Close the non-VA interim construction loan. (3) The construction takes place

VA_Guidelines.txt

0e3731ad-6fe0-470a-81a1-cf6dd82ade33

. (3) The construction takes place. (4) Order the VA appraisal after construction is complete as “New Construction.” (Chapter 10) (5) Issue the NOV. (Chapter 13) (6) Underwrite the loan using VA’s underwriting guidelines. (Chapter 4) (7) Close the loan after all NOV requirements are met. (Chapter 5) (8) Pay the VA Funding Fee within 15 days of loan closing

VA_Guidelines.txt

d8a2c045-9ade-4324-af83-ba6f69c47083

. (Chapter 8) (9) Issue the Loan Guaranty Certificate. (Chapter 5) Continued on next page 11 38 CFR 36.4305 7-18 VA Lenders Handbook 26-7 Chapter 7: Loans Requiring Special Underwriting, Guaranty, and Other Considerations Topic 2: Construction/Permanent Home Loans, continued s.

VA_Guidelines.txt

b1a57be1-3252-48c8-b211-ea50d3ec4a09

Construction Complaint Process VA assistance with construction complaints will be limited to defects in equipment, material, and workmanship reported during the required 1-year VA builder’s warranty period. t.

VA_Guidelines.txt

f8ff955a-f619-45b2-a67e-aab204810f8b

Construction Loan Comparison Table 7: Comparison of VA Construction Loan Types and Cash-Out Refinance Loans Loan Feature One-Time Close Two-Time Close Cash-Out Refinance Appraisal Prior to Preferred: After Preferred: After Timing Commencement of Dwelling is 100% Dwelling is 100% Construction Complete Complete Purchase or Purchase Purchase Refinance Refinance for VA Purposes Appraisal Type

VA_Guidelines.txt

96b535dd-1d15-40cc-bd10-ab1f9a4d031e

Refinance for VA Purposes Appraisal Type Proposed – Per Plans Preferred: Built Less Refer to Chapter 10 and Specs than One Year and Never Occupied Maximum Loan Lesser of: Lesser of: 100% of the Amount a

VA_Guidelines.txt

0f4ccf8c-ea6c-4d7c-851e-0f2c7043457f

.

VA_Guidelines.txt

4003f24e-885c-4d4e-a3c5-2287f457f440

Acquisition Cost, a. Acquisition Cost, Reasonable Value or or b. VA Reasonable b. VA Reasonable Value. Value. Plus, the applicable Plus, the applicable VA Funding Fee VA Funding Fee Cash to Veteran No No Yes, the Veteran may Acceptable? receive proceeds from the loan and/or satisfy other debts Can Equity be Yes Yes No Considered for VA Funding Fee Rate Reduction?

VA_Guidelines.txt

f516a1e2-56e1-4427-9c66-211f83b57444

Do VA’s No No Yes refinancing (The refinance of an NTBs apply? interim construction loan is an NTB.) Continued on next page 7-19 VA Lenders Handbook 26-7 Chapter 7: Loans Requiring Special Underwriting, Guaranty, and Other Considerations Topic 2: Construction/Permanent Home Loans, continued u.

VA_Guidelines.txt

052dd7da-90ed-4bc0-9d38-e97380f877d7

Funding Fee Downpayment Examples This section provides examples of construction loan downpayment scenarios and the appropriate amount to enter into FFPS as the Purchase Price and the Downpayment amount.

VA_Guidelines.txt

d432d066-cebb-4c18-a817-5cbf7c9c4a92

Table 8: Construction Loans – Veteran Purchased the Land Within One Year of Close Lenders should use this table in cases where the Veteran purchased the land within one year of closing of the VA-loan.

VA_Guidelines.txt

93d7feaf-6749-48a2-8429-1b53e3cc2627

Item Description Example 1 Example 2 Example 3 A Cost to Acquire Land $100,000 $30,000 $100,000 B Balance Owed on Land $0 $20,000 $60,000 C Contract to Construct + $300,000 $300,000 $300,000 Permits and Reserves (if applicable) D Acquisition Cost (B+C) $300,000 $320,000 $360,000 E Reasonable Value (Per NOV) $350,000 $375,000 $500,000 F Land Value (if given) n/a $80,000 n/a G Max Loan Amount

VA_Guidelines.txt

8cf8978d-af86-4fd3-8c9c-9763b036fb78

(if given) n/a $80,000 n/a G Max Loan Amount $300,000 + $320,000 + $360,000 + (Lesser of D or E) applicable FF applicable FF applicable FF H Purchase Price in FFPS $400,000 $380,000 $500,000 (Greater of: E

VA_Guidelines.txt

050769ea-6e09-474b-bf69-043ca036b493

., (A+C), or (C+F)) I Downpayment in FFPS $100,000 $60,000 $140,000 (H-G) Continued on next page 7-20 VA Lenders Handbook 26-7 Chapter 7: Loans Requiring Special Underwriting, Guaranty, and Other Considerations Topic 2: Construction/Permanent Home Loans, continued u.

VA_Guidelines.txt

1355f386-6b93-43c4-a079-36f4c09386b4

Funding Fee Downpayment Examples, continued Table 9: Construction Loans – Land Purchased More than One Year Before Close Lenders should use this table in cases where the Veteran purchased the land more than one year prior to the closing of the VA-loan.

VA_Guidelines.txt

e449525c-bde6-42c9-9088-7f486a907793

Item Description Example 1 Example 2 Example 3 A Cost to Acquire Land n/a n/a n/a B Balance Owed on Land $0 $60,000 $0 C Contract to Construct + $300,000 $300,000 $300,000 Permits and Reserves (if applicable) D Acquisition Cost (B+C) $300,000 $360,000 $300,000 E Reasonable Value (Per NOV) $350,000 $350,000 $350,000 F Land Value (if given) Not Given Not Given $75,000 G Max Loan Amount $300,000 +

VA_Guidelines.txt

1f6894e9-b7cf-44f6-9acc-902b03ac7b3d

Not Given $75,000 G Max Loan Amount $300,000 + $350,000 + $300,000 + (Lesser of D or E) applicable FF applicable FF applicable FF H Purchase Price in FFPS $350,000 $360,000 $375,000 (Greater of D, E, or (C+F)) I Downpayment in FFPS $50,000 $10,000 $75,000 (H-G) Table 10: Construction Loans – Land was Gifted Lenders should use this table in cases where the land was gifted or inherited by the

VA_Guidelines.txt

60e118ce-c4b1-4329-b944-823b46bfff37

where the land was gifted or inherited by the Veteran free of encumbrance

VA_Guidelines.txt

c5100eea-c960-4e80-9c7d-259ac7ccf49f

.

VA_Guidelines.txt

badb4074-5abe-4c7a-b862-4df6d5f0b8f2

Item Description Example 1 Example 2 A Cost to Acquire Land n/a n/a B Balance Owed on Land $0 $0 C Contract to Construct + Permits $300,000 $300,000 and Reserves (if applicable) D Acquisition Cost (B+C) $300,000 $300,000 E Reasonable Value (Per NOV) $350,000 $290,000 F Land Value (if given) Not Given Not Given G Max Loan Amount $300,000 + $290,000 + (Lesser of D or E) applicable FF applicable FF

VA_Guidelines.txt

cbbd35c2-63b3-4a08-bd72-08cafbf5106e

+ (Lesser of D or E) applicable FF applicable FF H Purchase Price in FFPS (Greater $350,000 $300,000 of D or E) I Downpayment in FFPS (H-G) $50,000 $10,000 7-21 VA Lenders Handbook 26-7 Chapter 7: Loans Requiring Special Underwriting, Guaranty, and Other Considerations Topic 3: Energy Efficient Mortgages Change Date: March 11, 2019 · This chapter has been revised in its entirety

VA_Guidelines.txt

23a7798d-953b-45dd-adb4-514889df51f3

. a.

VA_Guidelines.txt

d90855d2-9a1e-4358-84ae-600514a2f041

What are EEMs? Energy Efficient Mortgages (EEMs) are loans to cover the cost of making energy efficiency improvements to a dwelling. They can be made in conjunction with a: · VA loan for the purchase of an existing dwelling, or · VA refinancing loan secured by the dwelling.

VA_Guidelines.txt

2a020dcf-01ad-4b26-8471-64659d92891d

Acceptable energy efficiency improvements include, but are not limited to: · solar heating systems, including solar systems for heating water for domestic use; · solar heating and cooling systems; · caulking and weather-stripping; · furnace efficiency modifications limited to replacement burners, boilers, or furnaces designed to reduce the firing rate or to achieve a reduction in the amount of

VA_Guidelines.txt

6d3cf83b-7d91-4894-a7de-bce589517ce7

rate or to achieve a reduction in the amount of fuel consumed as a result of increased combustion efficiency, devices for modifying flue openings which will increase the efficiency of the heating system, and electrical or mechanical furnace ignition systems which replace standing gas pilot lights; · clock thermostats; · new or additional ceiling, attic, wall and floor insulation; · water heater

VA_Guidelines.txt

46e3936a-967a-405b-83a1-06dd9d118bfb

attic, wall and floor insulation; · water heater insulation; · storm windows and/or doors, including thermal windows and/or doors; · heat pumps; and · vapor barriers

VA_Guidelines.txt

5d9f879d-af61-476b-84ac-156c3e7ca7ed

. b.

VA_Guidelines.txt

365b911a-9a03-4018-b482-488d45ae3244

Borrower Notice on the NOV Information on EEMs is provided to a Veteran who applies for a loan which requires an NOV (a loan for a home purchase or regular “cash-out” refinance). The NOV includes the following notice to the Veteran: “The buyer may wish to contact a qualified person/firm for a home energy audit to identify needed energy efficiency improvements to the property.

VA_Guidelines.txt

74a5d4a6-22b3-4a53-bb8c-8077e97e63da

In some localities, the utility company may perform this service. The mortgage amount may be increased as a result of making energy efficiency improvements such as: Solar or conventional heating/cooling systems, water heaters, insulation, weather-stripping/caulking, and storm windows/doors.

VA_Guidelines.txt

21690ef7-1797-4dd0-8161-ee448ca5cb41

Other energy related improvements may also be considered.” Continued on next page 7-22 VA Lenders Handbook 26-7 Chapter 7: Loans Requiring Special Underwriting, Guaranty, and Other Considerations Topic 3: Energy Efficient Mortgages, continued b.

VA_Guidelines.txt

7f8f56f3-e102-4f0e-8c15-675d4600b580

Borrower Notice on the NOV, continued The mortgage may be increased by: · Up to $3,000 based solely on the documented costs, · Up to $6,000 provided the increase in monthly mortgage payment does not exceed the likely reduction in monthly utility costs, or · VA does not permit EEMs more than $6,000 (38 U. S. C. §3710(d)). c.

VA_Guidelines.txt

102878d1-4473-4fd4-a8bd-37cd53758d9d

S. C. §3710(d)). c. Underwriting Considerations Energy efficiency improvements up to $3,000: The resulting increase in loan payments will normally be offset by a reduction in utility costs.

VA_Guidelines.txt

f3628564-5955-46cd-84af-c6ec4ec68aa8

Energy efficiency improvements more than $3,000, up to $6,000: The lender must make a determination that the increase in monthly mortgage payments does not exceed the likely reduction in monthly utility costs, and must rely on locally available information provided by utility companies, municipalities, state agencies or other reliable sources, and document the determination.

VA_Guidelines.txt

e967c636-6b3f-4b25-8492-85e798876337

Energy efficiency improvements in conjunction with an Interest Rate Reduction Refinancing Loan (IRRRL). If the monthly payment (Principal, Interest, Taxes, and Insurance (PITI)) for the new loan exceeds the PITI of the loan being refinanced by 20 percent or more, the lender must certify to having determined that the Veteran qualified for the higher payment. d.

VA_Guidelines.txt

19aaef20-bce2-40a6-9707-a2729a17cab8

Documentation Required with Closed Loan Package Energy efficiency improvements up to $3,000: Evidence of the cost of improvements such as a copy of the bid(s) or contract itemizing the improvements and their cost.

VA_Guidelines.txt

24466c6c-8edc-4c1c-8974-ffe78057dc65

Improvements more than $3,000, up to $6,000: Evidence of the cost of improvements such as a copy of the bid(s) or contract itemizing the improvements and their cost, and the lender’s determination that the increase in monthly mortgage payments does not exceed the likely reduction in monthly utility costs.

VA_Guidelines.txt

9a534f4d-125e-4523-b0f0-f44d2c9340e0

IRRRL with significant increase in payments: If the cost of the improvements cause the new loan payment (PITI) to be 20 percent or higher than the old payment (on the loan being refinanced), then include the lender’s certification that it has determined that the Veteran qualified for the higher payment.

VA_Guidelines.txt

bdcedb62-4d23-4889-a73d-4e486bad095f

Continued on next page 7-23 VA Lenders Handbook 26-7 Chapter 7: Loans Requiring Special Underwriting, Guaranty, and Other Considerations Topic 3: Energy Efficient Mortgages, continued b.

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628aa966-237e-4c3c-af73-a7cee18d51e1

Borrower Notice on the NOV, continued The mortgage may be increased by: · Up to $3,000 based solely on the documented costs, · Up to $6,000 provided the increase in monthly mortgage payment does not exceed the likely reduction in monthly utility costs, or · VA does not permit EEMs more than $6,000 (38 U. S. C. §3710(d)). c.

VA_Guidelines.txt

9179767b-6974-43d4-acc2-0f6d9410ce22

S. C. §3710(d)). c. Underwriting Considerations Energy efficiency improvements up to $3,000: The resulting increase in loan payments will normally be offset by a reduction in utility costs.

VA_Guidelines.txt

14b5cb71-7b6d-4633-8fe7-1607cb8e0ddc

Energy efficiency improvements more than $3,000, up to $6,000: The lender must make a determination that the increase in monthly mortgage payments does not exceed the likely reduction in monthly utility costs, and must rely on locally available information provided by utility companies, municipalities, state agencies or other reliable sources, and document the determination.

VA_Guidelines.txt

6cadccf5-c557-446f-a07d-3e02170ecb0b

Energy efficiency improvements in conjunction with an Interest Rate Reduction Refinancing Loan (IRRRL). If the monthly payment (Principal, Interest, Taxes, and Insurance (PITI)) for the new loan exceeds the PITI of the loan being refinanced by 20 percent or more, the lender must certify to having determined that the Veteran qualified for the higher payment. d.

VA_Guidelines.txt

e2ae1b41-b077-4d50-97d6-b152b4f91f5b

Documentation Required with Closed Loan Package Energy efficiency improvements up to $3,000: Evidence of the cost of improvements such as a copy of the bid(s) or contract itemizing the improvements and their cost.

VA_Guidelines.txt

186eda20-d1d5-4881-9ed9-a0d5bfb7fedb

Improvements more than $3,000, up to $6,000: Evidence of the cost of improvements such as a copy of the bid(s) or contract itemizing the improvements and their cost, and the lender’s determination that the increase in monthly mortgage payments does not exceed the likely reduction in monthly utility costs.

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1f77e7dd-90bf-43c9-be1d-c066d66b386c

IRRRL with significant increase in payments: If the cost of the improvements cause the new loan payment (PITI) to be 20 percent or higher than the old payment (on the loan being refinanced), then include the lender’s certification that it has determined that the Veteran qualified for the higher payment.

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b9237023-aae8-4aad-bb91-8a185dc8e7fd

Continued on next page 7-23 VA Lenders Handbook 26-7 Chapter 7: Loans Requiring Special Underwriting, Guaranty, and Other Considerations Topic 3: Energy Efficient Mortgages, continued e. How to Calculate Guaranty and Entitlement Use? Guaranty is calculated on an EEM as described in the following table.

VA_Guidelines.txt

d1700222-e13f-4fcd-a3f8-635362c5c72e

Table 8: How to Calculate Guaranty and Entitlement Use for EEM Step Action 1 Calculate guaranty on the loan without the portion attributable to the energy efficiency improvements. 2 Calculate guaranty on the energy efficiency improvements portion by applying the same percentage used in Step 1. 3 Add the results of Steps 1 and 2 to arrive at guaranty on the entire loan.

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6972aa09-4280-4ffb-aaf6-9f0139e6a191

However, the Veteran’s entitlement will only be charged the amount arrived at in Step 1; it is based upon the loan amount before adding the cost of the energy efficiency improvements. Example 1: If a Veteran has full entitlement and applies for a loan of $80,000, plus $6,000 in energy efficiency improvements, VA will guarantee 40 percent of the full loan amount of $86,000.

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79d37ded-7bfa-4d89-9e3a-6023e6e3263d

Thus, the dollar amount of the guaranty will be $34,400, even though the charge to the Veteran’s entitlement is only $32,000.

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5384aa81-a770-4e4c-a04c-28db08428155

Example 2: If a Veteran with full entitlement applies for a $144,000 loan to purchase a home, and adds $6,000 in energy efficiency improvements, the 25 percent guaranty on the loan will only require the use of $36,000 entitlement, but the dollar amount of guaranty will be $37,500. f.

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5d946eb9-e234-4ba7-b89c-d536b1acb7f5

How to Calculate the Funding Fee Calculate the funding fee based on the full loan amount including the cost of the energy efficiency improvements. Continued on next page 7-24 VA Lenders Handbook 26-7 Chapter 7: Loans Requiring Special Underwriting, Guaranty, and Other Considerations Topic 3: Energy Efficient Mortgages, continued g.

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52ffb04e-7fc8-4d70-89a1-43a3b8c56f0f

Improvements Not Completed Before Closing If the energy efficiency improvements are not completed before closing, the lender may establish an escrow and close the loan. · A formal escrow is not required. · Only the amount needed to complete the improvements must be withheld.

VA_Guidelines.txt

cc42e9c0-144d-461c-8d70-737bc8666990

Check the appropriate block in item 23, VA Form 26-1820, Report and Certification of Loan Disbursement. · No additional documentation concerning the escrowed/earmarked funds must be submitted when reporting the closed loan. Generally, the improvements should be completed within 6 months from the date of loan closing.

VA_Guidelines.txt

1243e7f5-c0cc-41c5-b8f8-52cf30d19164

Provide written notification to VA when improvements are completed and the escrow funds are disbursed. Escrow requirements concerning completion of improvements are listed in Chapter 9 of this handbook. · Assure the funds are properly applied to the costs of improvements.

VA_Guidelines.txt

b19f609d-b272-43b1-9533-31b69e48ff79

If, after a reasonable time, the lender determines that the improvements will not be completed: · Apply the balance of the escrowed/earmarked funds to reduce the principal balance on the loan, and · Provide written notification to VA that this has been done. h. Reimbursement to the Veteran out of IRRRL Proceeds The Veteran generally may not obtain cash proceeds from an IRRRL.

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f4723912-5956-4d07-87bc-a742ba0f0ebb

There is one exception.

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4e6355d5-30ea-40e5-92bd-f6ca924bb4ad

Up to $6,000 of IRRRL loan proceeds may be used to reimburse the Veteran for the cost of energy efficiency improvements completed within the 90 days immediately preceding the date of the loan

VA_Guidelines.txt

9b719292-3c0b-4073-945f-8af75705c5be

. 7-25 VA Lenders Handbook 26-7 Chapter 7: Loans Requiring Special Underwriting, Guaranty, and Other Considerations Topic 4: Loans for Alteration and Repairs Change Date: March 11, 2019 · This chapter has been revised in its entirety. a.

VA_Guidelines.txt

2c4d89c6-41f1-48bc-8fbd-872a5a034f60

Description VA may guarantee a loan for alteration and repair: · Of a residence already owned by the Veteran and occupied as a home, or · Made in conjunction with a purchase loan on the property. The alterations and repairs must be those ordinarily found on similar property of comparable value in the community. b.

VA_Guidelines.txt

f7dcaf64-3af5-4ed2-945b-51c22f554fd1

Value Considerations The cost of alterations and repairs to structures may be included in a loan for the purchase or regular “Cash-Out” refinance of improved property to the extent that their value supports the loan amount

VA_Guidelines.txt

c9570303-6eae-486b-bbba-5e12eab5b20b

. 7-26 VA Lenders Handbook 26-7 Chapter 7: Loans Requiring Special Underwriting, Guaranty, and Other Considerations Topic 5: What is a Supplemental Loan Change Date: March 11, 2019 · This chapter has been revised in its entirety. a.

VA_Guidelines.txt

b7195ce7-9ff2-4f12-b4a5-2bf6eb4ab7f6

What is a Supplemental Loan? A supplemental loan is a loan for the alteration, improvement, or repair of a residential property. The residential property must secure an existing VA- guaranteed loan, and be owned and occupied by the Veteran, or the Veteran will reoccupy upon completion of major alterations, repairs, or improvements.

VA_Guidelines.txt

1ace71a4-d5c7-44c8-a5bf-dc4d6a5e9092

The alterations, improvements, or repairs must: · Be for the purpose of substantially protecting or improving the basic livability, or utility of the property, and · Be restricted primarily to the maintenance, replacement, improvement or acquisition of real property, including fixtures. Installation of features such as barbecue pits, swimming pools, etc., does not meet this requirement.

VA_Guidelines.txt

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No more than 30 percent of the loan proceeds may be used for the maintenance, replacement, improvement, repair, or acquisition of non- fixtures or quasi-fixtures such as refrigeration, cooking, washing, and heating equipment. The equipment must be related to or supplement the principal alteration for which the loan is proposed. b.

VA_Guidelines.txt

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Required Lien and Maximum Loan Term It is the lender’s responsibility to obtain an effective lien of the required dignity (lien position).

VA_Guidelines.txt

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Possible methods to secure a supplemental loan are: · Through an open-end provision of the instrument securing the existing loan, · Through an amendment of the existing loan security instrument, · By taking a new lien to cover both the existing and the supplemental loans, or · By taking a separate lien immediately junior to the existing lien.

VA_Guidelines.txt

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The maximum loan term is: · 30 years if amortized, or · 5 years if not amortized. Continued on next page 7-27 7-27 VA Lenders Handbook 26-7 Chapter 7: Loans Requiring Special Underwriting, Guaranty, and Other Considerations Topic 5: What is a Supplemental Loan, continued c.

VA_Guidelines.txt

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Other Requirements The existing loan must be current with respect to taxes, insurance, and amortized payments, and must not otherwise be in default unless a primary purpose of the supplemental loan is to improve the ability of the borrower to maintain the loan obligation. The making of a supplemental loan can never result in any increase in the rate of interest on the existing loan.

VA_Guidelines.txt

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A supplemental loan to be written at a higher rate of interest than that payable on the existing loan must be evidenced by a separate note from the existing loan. d.

VA_Guidelines.txt

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Prior Approval or Automatic Loan Closing A supplemental loan will require the prior approval of VA if the: · loan is to be made by a lender that does not have authority to close loans on an automatic basis or · loan is to be made by a lender that does not have authority to close loans on an automatic basis; or · an obligor liable on the currently outstanding obligation will be released from

VA_Guidelines.txt

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outstanding obligation will be released from personal liability by operation of law or otherwise

VA_Guidelines.txt

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. e.

VA_Guidelines.txt

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Procedures Submit a statement describing the alterations, improvements, or repairs made or to be made with the prior approval application (or loan closing package, if closed automatically). In addition, report the amount outstanding on the existing loan as of the date of closing of the supplemental loan in the loan closing package.

VA_Guidelines.txt

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If the cost of the repairs, alterations, or improvements exceeds $3,500: an NOV and compliance inspections are required. If the cost of the repairs, alterations, or improvements does not exceed $3,500: an NOV and compliance inspections are not required. Instead, a statement of reasonable value may be submitted. The statement must be completed and signed by a VA-designated appraiser.

VA_Guidelines.txt

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A VA-designated appraiser is an individual nominated by the lender (who may be an officer, trustee, or employee of the lender or its agent) who has been approved by the local VA office. The statement must specify the: · work done or to be done, · purchase price or cost of the work and material, and · purchase price or cost does not exceed the reasonable value.

VA_Guidelines.txt

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Continued on next page 7-28 VA Lenders Handbook 26-7 Chapter 7: Loans Requiring Special Underwriting, Guaranty, and Other Considerations Topic 5: What is a Supplemental Loan, continued e.

VA_Guidelines.txt

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Procedures, continued In lieu of VA compliance inspections, the lender must submit a certification as follows: “The undersigned lender certifies to the Department of Veterans Affairs that the property as repaired, altered, or improved has been inspected by a qualified individual designated by the undersigned, and based on the inspection report, the undersigned has determined that the repairs,

VA_Guidelines.txt

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the undersigned has determined that the repairs, alterations, or improvements financed with the proceeds of the loan described in the attached VA Form 26-1820, appear to have been completed in substantial conformance with related contracts

VA_Guidelines.txt

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.” f.

VA_Guidelines.txt

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Guaranty and Entitlement If the supplemental loan will not be consolidated with a related outstanding guaranteed loan the: · Veteran must have sufficient entitlement for the new loan, and · VA will issue a new LGC solely for supplemental loans. If the supplemental loan will be consolidated with a related outstanding guaranteed loan, VA will issue a new modified guaranty certificate.

VA_Guidelines.txt

80294604-1d3f-4241-8b84-c8725043029a

Continued on next page 7-29 VA Lenders Handbook 26-7 Chapter 7: Loans Requiring Special Underwriting, Guaranty, and Other Considerations Topic 5: What is a Supplemental Loan, continued e.

VA_Guidelines.txt

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Procedures, continued In lieu of VA compliance inspections, the lender must submit a certification as follows: “The undersigned lender certifies to the Department of Veterans Affairs that the property as repaired, altered, or improved has been inspected by a qualified individual designated by the undersigned, and based on the inspection report, the undersigned has determined that the repairs,

VA_Guidelines.txt

437f22f2-82ff-4df4-90a0-369dfca0f114

the undersigned has determined that the repairs, alterations, or improvements financed with the proceeds of the loan described in the attached VA Form 26-1820, appear to have been completed in substantial conformance with related contracts

VA_Guidelines.txt

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.” f.

VA_Guidelines.txt

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Guaranty and Entitlement If the supplemental loan will not be consolidated with a related outstanding guaranteed loan the: · Veteran must have sufficient entitlement for the new loan, and · VA will issue a new LGC solely for supplemental loans. If the supplemental loan will be consolidated with a related outstanding guaranteed loan, VA will issue a new modified guaranty certificate.

VA_Guidelines.txt

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Continued on next page 7-29 VA Lenders Handbook 26-7 Chapter 7: Loans Requiring Special Underwriting, Guaranty, and Other Considerations Topic 5: What is a Supplemental Loan, continued g. Procedure If the Veteran has no available entitlement, VA can still guarantee the supplemental loan provided the lender is the holder of the Veteran’s existing loan and the loans are to be consolidated.

VA_Guidelines.txt

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The amount of the modified guaranty will be the maximum guaranty effective on the existing loan at the time the supplemental loan is closed. To calculate the percentage of guaranty applicable to the combined indebtedness take the result of Step 1, and divide by the result of Step 3.

VA_Guidelines.txt

3684cb70-e7d2-42ea-961a-5139360f8de7

Follow the steps in the table below to calculate the percentage of guaranty applicable to the combined indebtedness.

VA_Guidelines.txt

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Table 9: Supplemental Loan Procedure Step Action 1 Take the balance of the existing loan at the time of closing of the supplemental loan and multiply by the percentage of guaranty for the existing loan, as shown on the guaranty certificate

VA_Guidelines.txt

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. 2 Calculate the amount of guaranty that would be issued on the supplemental loan as an independent loan (do not exceed the amount of entitlement available to the Veteran). 3 Take the balance of the existing loan and add the amount of the supplemental loan. 4 Take the result of Step 1 above and add the result of Step 2 above. 5 Divide by the result of Step 3 above

VA_Guidelines.txt

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. 5 Divide by the result of Step 3 above. 7-30 VA Lenders Handbook 26-7 Chapter 7: Loans Requiring Special Underwriting, Guaranty, and Other Considerations Topic 6: Adjustable-Rate Mortgages Change Date: March 11, 2019 · This chapter has been revised in its entirety. a.

VA_Guidelines.txt

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General Information Concerning ARMs An ARM loan offers adjustable interest rates based on negotiated initial fixed interest rates coupled with periodic adjustments to the interest rate over time. Hybrid ARMs have longer initial fixed rates of 3, 5, 7, or 10 years, while a “traditional” ARM allows for an annual adjustment after 1 year. b.

VA_Guidelines.txt

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Interest Rate Adjustments Traditional ARMs: Interest rate adjustments occur on an annual basis. The annual interest rate adjustments are limited to a maximum increase or decrease of one percentage point. Additionally, interest rate increases are limited to a maximum of five percentage points over the life of the loan.

VA_Guidelines.txt