Wholesale VA Guidelines - titanml.com

Wholesale VA Guidelines

Endeavor America Loan Services August 11, 2017 of 60 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

> $424,100 loan amount

• 30-year Fixed

• 15-year Fixed

Min 620 FICO

• 30-year Fixed

• 15-year Fixed

580 - 619 FICO

AUS Refer

• 30-year Fixed

• 15-year Fixed

No FICO Min 580 FICO with No Appraisal

Principal Residence Maximum Base Loan1

Base Loan Purpose Units LTV FICO Units Conforming High Balance

Conforming Purchase, Cash-out, IRRRL 1 – 4 100% 580

1 $75,000 - $424,101 $424,101 up to VA max loan limit IRRRL No Appraisal 1 Unlimited 580

High Balance Purchase, Cash-out, IRRRL 1 – 4 100% 580 NOTE: VA’s max guarantee amount will only be based on the One-Unit (single family) limit.

IRRRL No Appraisal 1 Unlimited 580 Maximum Potential Guaranty2, 3, 4

Second Home and Investment Property Base Loan Guaranty

Conforming IRRRL 1 – 4 100% 580 ≤ $45,000 50% of Loan

High Balance IRRRL 1 – 4 100% 580 $45,001 - $56,250 $22,500

Funding Fee $56,251 - $144,000 40% of Loan with a maximum of $36,000

Type of Veteran Down Payment 1st Time Subsequent $144,001 - $424,100 25% of the Loan with a maximum of $104,250

Purchase > $424,1015 Lesser of 25% of VA county limit, OR

Regular Military

0% - <5% 2.15% 3.30% 25% of loan amount

5% to < 10% 1.50% 1.50% NOTES

≥ 10% 1.25% 1.25% 1. Maximum guaranty is 25% of VA high costs county limit.

Reservists/National Guard

0% - <5% 2.40% 3.30% 2. VA guaranty or combination of guaranty plus down payment/ subject

5% to < 10% 1.75% 1.75% equity must equal ≥ 25% of the total loan amount including funding fee.

≥ 10% 1.50% 1.50% 3. The maximum guaranty is the lesser of available entitlement or the

Cash-out Refinance maximum potential guaranty amount indicated above.

Regular Military 2.15% 3.30% 4. Minimum guaranty of 25% is required on IRRRLs.

Reservists/National Guard 2.40% 3.30% 5. CLTV is unlimited. The maximum LTV is 100% unless stated

IRRRL: Regular Military AND Reservists/Nat. Guard 0.50% 0.50% otherwise in a subtopic in the EALS Wholesale VA Guidelines.

Geographic restrictions: Texas cash-out is ineligible

6. Max cash-out on manufactured homes with LTVs greater than 90% is $500.00 (in all states except for CA, ID, OR, & WA).

7. Max cash-out on manufactured homes with LTVs greater than 100% is $500 for the states of CA, ID, OR, & WA.

8. <640 revolving debts to be paid off to qualify must also be closed. 9. EALS does not make exceptions/overrides to GSE guidelines.



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

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

Certificate of Eligibility (COE) ............................................................................................................................................................................................................. 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



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



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



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

Property Assessed Clean Energy (PACE) ................................................................................................................................................................................................ 41

Fees and Charges ................................................................................................................................................................................................................................... 42

Funding Fee ............................................................................................................................................................................................................................................ 43

Insurance ................................................................................................................................................................................................................................................ 43

Real Estate Taxes.................................................................................................................................................................................................................................... 44

Homestead Tax Exemptions................................................................................................................................................................................................................... 44

Interested Party Concessions ................................................................................................................................................................................................................. 44

Manufactured Homes ............................................................................................................................................................................................................................ 44

Restrictions ........................................................................................................................................................................................................................................ 44

General Eligibility Requirements – Title II .......................................................................................................................................................................................... 45

Additions, Modifications – Special State Requirements .................................................................................................................................................................. 45

Credit Score ........................................................................................................................................................................................................................................ 46

HUD Red Tags ..................................................................................................................................................................................................................................... 46

HUD Data Plate .................................................................................................................................................................................................................................. 47

Ineligible properties ........................................................................................................................................................................................................................... 47

Insurance ............................................................................................................................................................................................................................................ 47



Modular Homes ................................................................................................................................................................................................................................. 47

New Construction .............................................................................................................................................................................................................................. 48

Title Binder ......................................................................................................................................................................................................................................... 49

Well and Septic .................................................................................................................................................................................................................................. 49

Maximum Term ...................................................................................................................................................................................................................................... 49

Occupancy .............................................................................................................................................................................................................................................. 49

Power of Attorney .................................................................................................................................................................................................................................. 50

Qualifying ............................................................................................................................................................................................................................................... 50

Reserves ................................................................................................................................................................................................................................................. 51

Interest Rate Reduction Refinance (IRRRL) ............................................................................................................................................................................................ 51

Non-Credit Qualifying ............................................................................................................................................................................................................................ 51

General Guidelines ............................................................................................................................................................................................................................. 51

Borrower Eligibility ............................................................................................................................................................................................................................. 51

Credit Score ........................................................................................................................................................................................................................................ 52

Funding Fee ........................................................................................................................................................................................................................................ 52

Guaranty ............................................................................................................................................................................................................................................ 53

Loan Limit ........................................................................................................................................................................................................................................... 53

Matrix (LTV, Score, Units) .................................................................................................................................................................................................................. 53

Mortgage Verification ........................................................................................................................................................................................................................ 53

Net Tangible Benefit .......................................................................................................................................................................................................................... 54

Occupancy .......................................................................................................................................................................................................................................... 54

Online Status Inquiry (in lieu of COE) ................................................................................................................................................................................................ 54

Recently Listed Property .................................................................................................................................................................................................................... 54

Subordinate Financing ....................................................................................................................................................................................................................... 54



Social Security Validation ................................................................................................................................................................................................................... 54

Rate Decrease and Maximum Term................................................................................................................................................................................................... 55

Loan Documentation.......................................................................................................................................................................................................................... 55

Credit Qualifying .................................................................................................................................................................................................................................... 56

Income/Assets .................................................................................................................................................................................................................................... 56

IRRRL with NO Appraisal ........................................................................................................................................................................................................................ 56

Residual Income Requirement ............................................................................................................................................................................................................... 57

Secondary Financing .............................................................................................................................................................................................................................. 58

Underwriting .......................................................................................................................................................................................................................................... 59

Automated Underwriting (AUS) ......................................................................................................................................................................................................... 59

Manual Downgrades .......................................................................................................................................................................................................................... 59

Manual Underwriting ......................................................................................................................................................................................................................... 60

Compensating Factors ....................................................................................................................................................................................................................... 60


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 Guidelines

Ability to Repay

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.

Age of Documents 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 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.

http://benefits.va.gov/HOMELOANS/resources_circulars.asp


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

All bathrooms

Main living area

Examples of physical deterioration, if present

Examples of recent updates such as restoration, remodeling and renovation, if present

• 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.



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.)

http://www.benefits.va.gov/homeloans/documents/circulars/26_14_8.pdf

http://www.benefits.va.gov/warms/pam26_7.asp

http://www.benefits.va.gov/Homeloans/resources_circulars.asp



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

http://www.va.gov/vaforms/form_detail.asp?FormNo=26-1859

http://portal.hud.gov/hudportal/documents/huddoc?id=92541.pdf




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]







Construction Inspections and Warranty

IF Property is appraised as: Requirements

Proposed/Under Construction without 10-Year Insured Protection Plan and 1-year Builder Warranty

▪ 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.

Proposed/Under Construction with 10-Year Insured Protection Plan and 1-year Builder Warranty

▪ Both 1-year builder warranty and 10-year HUD accepted insured protection plan 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.

Existing Construction with major alterations, improvements, or repairs

▪ VA or LAPP underwriter will determine on case-by-case basis, based on the nature 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-year-old)

▪ No warranty is required.





▪ Changes to Exhibits: change is limited to substitution of mechanical equipment of equal value.

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.


http://www.benefits.va.gov/HOMELOANS/appraiser_cv_local_req.asp


Assets ▪ 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



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). Cash-on-hand is not acceptable.

▪ Document the gift transfer NOTE: Gifts of Equity are not allowed and are not recognized by VA.

Retirement Account ▪ 60% of the vested balance can be considered as cash reserves ▪ If using retirement funds for reserves, document the terms of withdraw

Sale of Home ▪ 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.

Assumability ▪ A VA mortgage is assumable by qualified Borrower(s) during the life of the loan.


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 Dates Minimum Service Requirement

World War II 09/16/1940 – 07/25/1947 90 days

Post-World War II 07/26/1947 – 06/26/1950 181 days

Korean 06/27/1950 – 01/31/1955 90 days

Post-Korean 02/01/1955 – 08/04/1964 181 days

Vietnam 08/05/1964 – 05/07/1975 90 days

Post-Vietnam 05/08/1975 – 09/07/1980 181 days

09/08/1980 – 08/01/1990 2 years: Enlisted after 09/07/1980 and Officer after 10/16/1981

Persian Gulf 09/08/1980 – present 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

Other Eligible Borrowers Minimum Service Requirement

Active duty member ▪ 90 days minimum wartime service when called up under U.S.C. Title 10 ▪ 181 days minimum peacetime service of continuous active duty.

Active Reserve or National Guard ▪ 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

Other Eligible Borrowers Minimum Service Requirement

Unmarried surviving spouse ▪ 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.

POW/MIA Spouse ▪ Veteran must have been POW or MIA for 90 days.


Borrower Eligibility (continued)

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.

CAIVRS ▪ 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

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 (loans closed on/before 10/02/2015) or Closing Disclosure (loans closed 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


http://vip.vba.va.gov/


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.


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 Documentation of debt restructure is required o Acceptable 12 months payment history of debts included in the consumer’s debt restructure. o 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.

o 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.



Foreclosures o Two (2) years minimum seasoning (from application date) is required for prior foreclosure and deed-in-lieu 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 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.

Modified / Restructured Loans

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)



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.

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.



Short Sales o There is no waiting period when the borrower has a short sale appearing on their credit report o All loans must be documented according to the AUD findings, or manual underwriting guidelines

Community Property States

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.


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 Re-Inspections

▪ Appraisal inspected on/before a declared disaster incident period end date:

• A re-inspection/exterior only appraisal on either form 1004D or form 2075 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.


Disaster Re-Inspections (continued)

▪ 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)

Escrow Holdbacks 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


Escrow Holdbacks (Continued)

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)

Eligible Properties 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.

http://www.vba.va.gov/pubs/forms/VBA-26-1849-ARE.pdf

http://www.vba.va.gov/pubs/forms/VBA-26-1839-ARE.pdf

https://vip.vba.va.gov/portal/VBAH/VBAHome/condopudsearch


Ineligible Properties

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 ▪ Homes with a manufactured home accessory unit (unless used for storage use only) ▪ 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%*

*Not applicable to homes located in the states of California, Idaho, Oregon, or Washington.

Eligible Transactions

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 take-

out) - 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.


Ineligible Products or Transactions

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

Employment/ Income Verification

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.


Employment/ Income Verification (continued)

Active Duty Military (continued)

o 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.

o 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.

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. o 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.

Flight Pay, Overseas Pay, Combat Pay

o Other taxable allowances include: flight or hazard pay, pro-pay, overseas pay, and combat pay. o 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 Special Separation Benefit (SSB) is a one-time lump sum that is taxable in the year of receipt. o SSB is considered as a cash reserve (not effective income).

Voluntary Separation (VSI)

o VSI is paid annually and is taxable in the year of receipt. o VSI may be used as qualifying income. o Payment period is calculated by multiplying the service member’s years of service times two.



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

▪ 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



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 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.

Non-Taxable Income ▪ 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.



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

▪ 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.

Reserve/National Guard ▪ 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.



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.


AUS Income Documentation

Documentation AUS Approve/Accept AUS Refer

Alimony/Child Support ▪ 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.

▪ 12 months receipt for manual approval.

Gap in Employment ▪ 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

▪ An explanation is required for each employment gap >30 days.

Current 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

▪ Same as Approve/Accept


AUS Income Documentation (continued)


Previous Employment ▪ 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 self-employed or commissioned

▪ Obtain a written VOE or any of the following to verify past two (2) year period:

• W-2s or W-2 transcripts

• Tax transcripts

De-Minimis Self-Employment

“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.

▪ Same as Approve/Accept


AUS Income Documentation (continued)


Self-Employed: Personal Tax Returns

Most recent two (2) years signed personal tax returns with all applicable schedules and referenced statements

Same as Approve/Accept

Self-Employed: Commissioned Borrower

▪ 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

Same as Approve/Accept

Self-Employed: Profit & Loss Statements and Balance Sheets

Not required Obtain YTD P&L and Balance Sheet if >7 months have elapsed since the last business year tax ending date.

Self-Employed: Business Returns

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.


Entitlement ▪ 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 (continued)

• 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:

1. World War II 2. Korean War 3. Post-Korean War 4. Vietnam War 5. Entitlement Restored 6. Un-Remarried Surviving Spouse

7. Spouse of POW/MIA 8. Post-World War II 9. Post-Vietnam War 10. Persian Gulf War 11. Selected Reserves


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 Maximum Potential Guaranty* Special Requirements

Up to $45,000 50% of the loan amount Minimum guaranty of 25% on IRRRLs

$45,001 to $56,250 $22,500 Minimum guaranty of 25% on IRRRLs

$56,251 to $144,000 40% of the loan amount with a maximum of $36,000 Minimum guaranty of 25% on IRRRLs

$144,001 to $424,100 25% of the loan amount with a maximum of $104,250 Minimum guaranty of 25% on IRRRLs

>$424,101 The lesser of 25% of the VA county loan limit, or 25% of the loan amount

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 Escrow waivers are not allowed under any circumstances



Property Assessed Clean Energy (PACE)

Property Assessed Clean Energy (PACE) VA supports the overall goal of clean energy, energy efficiency, and resilience. PACE programs may provide an alternative means of financing clean energy improvements to residential properties using financing provided by private enterprises in conjunction with state and local governments. Generally, the repayment of the PACE obligation is collected and secured in the same manner as special assessments are collected by the local government, rather than paid directly by the borrower to the party providing the PACE financing. In the event of the sale of a property with outstanding PACE financing, the obligation may continue with the property, and the new homeowner will be responsible for the payments on the outstanding PACE amount. The terms and conditions of the PACE obligations may vary by state, local government, and PACE program. Properties that are or will remain encumbered with a PACE obligation may be eligible for VA financing provided that the lender satisfies the following requirements:

• Under the laws of the state where the property is located, the PACE obligation must be collected and secured by the creditor in the same manner as a special assessment against the property.

• The property may be subject to the full PACE obligation; however, the property shall not be subject to an enforceable lien superior to the VA loan for the full outstanding PACE obligation at any time.

• The property may be subject to an enforceable lien that is superior to the VA loan for delinquent regularly scheduled PACE special assessments. (If VA acquires ownership of a property that is subject to a PACE obligation, or if VA is assigned a VA loan that is secured by such a property, nothing in this policy should be construed as a waiver or release of VA’s federal property rights or legal claims related to such property rights).

• There are no terms or conditions that limit the transfer of the property to a new homeowner. Legal restrictions on conveyance arising from a PACE obligation that could require the consent of a third party before the owner can convey the real property are prohibited, unless such provisions may be terminated at the option of, and with no cost to, the owner.

• The existence of a PACE obligation on a property is readily apparent to the mortgagee’s appraiser, borrowers, and other parties to a VA loan transaction; information on PACE obligation must be available for review in the public records where the property is located.

• At the time of purchase, the sales contract must indicate whether the PACE obligation will remain with the property or be satisfied by the seller at, or prior to closing. Where the PACE obligation will remain, all terms and conditions of the PACE obligation must be fully disclosed to the borrower and be made part of the sales contract between the seller and the borrower.

• Where improvements have been made to the property through a PACE program and the PACE obligation will remain outstanding, the appraiser must analyze and report the impact on the value of the property – whether positive or negative – of the improvements and any additional obligations.

• The lender is responsible for the escrow of funds to ensure timely payment of the PACE obligation.


Fees and Charges VA allows 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 1% Flat Fee (Unallowable Fees/Charges) • 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

• 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


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 %

Purchase

Regular Military

0% to < 5% 2.15% 3.30%

5% to < 10% 1.50% 1.50%

> 10% 1.25% 1.25%

Reservist / National Guard

0% to < 5% 2.40% 3.30%

5% to < 10% 1.75% 1.75%

> 10% 1.50% 1.50%

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 0.50% 0.50%

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 for all loans with appraisals. For VA IRRRLs, Endeavor America will accept the borrower’s current coverage amount as being adequate to cover the replacement cost of the subject property.



Real Estate Taxes

Purchase Refinance

CA Properties Use the higher of the actual amount on the Title Report or 1.25% of the sales price.

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.

All Other States Use the amount on the Title Report unless the tax information sheet completed by the Title company shows a higher amount.

Use the amount on the Title Report or tax certification.

Homestead Tax Exemptions

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.

Interested Party Concessions

▪ 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.

Manufactured Homes

Endeavor America will lend on manufactured homes on purchase, rate & term, cash-out, and IRRRL transactions that comply with applicable requirements below.

Restrictions ▪ Maximum loan amount is the lesser of the county limit or $424,100. ▪ Maximum land value ratio cannot exceed 30% for single-wide and 50% for double and triple-

wide units.*

*Not applicable to homes located in the states of California, Idaho, Oregon, or Washington.

▪ Cash-out refinances with LTVs greater than 90% are limited to <$500 maximum cash back to the borrower in all states except CA, ID, OR, and WA for the following purposes: debt consolidation, rate and term reduction, home improvement, and spousal buy-out.

▪ Cash-out refinances with LTVs greater than 100% are limited to <$500 maximum cash back to the borrower in the states of CA, ID, OR, and WA for the following purposes: debt consolidation, rate and term reduction, home improvement, and spousal buy-out.


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 – Special State Requirements (continued)

Additions or structural modifications may put the home at risk if the changes were not performed in accordance with the HUD code.

▪ Appraiser must describe any additions/modifications made to the MH since its initial site placement.

• 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.

http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/ramh/mhs/faq

http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/ramh/mhs/faq

http://portal.hud.gov/hudportal/HUD?src=/hudprograms/mhcss

http://portal.hud.gov/hudportal/HUD?src=/hudprograms/mhcss

http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/rmra/mhs/factsheet

http://www.benefits.va.gov/warms/pam26_7.asp

http://portal.hud.gov/hudportal/HUD?src=/program_offices/administration/hudclips/guidebooks/4930.3G



Additions, Modifications – Special State Requirements (continued)

▪ 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.

Credit Score Endeavor America requires a minimum qualifying FICO score of:

▪ 580 score for double-wide and triple-wide ▪ 620 score for single-wide

HUD Red Tags ▪ 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:

• 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

http://www.ibts.org/

http://www.benefits.va.gov/homeloans/documents/circulars/26_14_24.pdf



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.

• 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.

Ineligible properties 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

▪ Homes with an accessory manufactured home (unless used for storage use only)

Insurance Dwelling coverage is determined by the insurer.

Modular Homes ▪ 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.



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.

http://portal.hud.gov/hudportal/documents/huddoc?id=DOC_36315.pdf

http://portal.hud.gov/hudportal/documents/huddoc?id=DOC_36316.pdf

http://portal.hud.gov/hudportal/documents/huddoc?id=npma99a.pdf

http://portal.hud.gov/hudportal/documents/huddoc?id=npma99b.pdf

https://www.fema.gov/floodplain-management/special-flood-hazard-area

http://www.fema.gov/pdf/floodplain/nfip_sg_appendix_f.pdf



Title Binder ▪ 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.

Well and Septic 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.

Maximum Term 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.

Occupancy 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.


Power of Attorney 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.

Qualifying 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).



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:

• Excellent credit history • Military benefits • High residual income • Minimal consumer debt

• Conservative use of consumer credit

• Low DTI ratio • Long term employment • Significant liquid assets

• Tax benefits of homeownership • Satisfactory homeownership experience

• Little or no increase in shelter expense

• Existence of equity in refinancing loans

• Tax credits for childcare expenses

• Sizeable down payment

Reserves ▪ 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 (IRRRL)

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).

Non-Credit Qualifying

General 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.

Borrower Eligibility Generally, borrowers obligated on the original VA loan must be the same on the new loan and the veteran must still own the property.



IRRRL (continued)

Borrower Eligibility (continued)

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

Credit Score 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 and 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:

• 580 conforming and high balance primary 1 unit

Funding Fee ▪ Funding Fee of 0.50% is required on all IRRRLs unless the veteran has a qualifying exemption.


IRRRL (continued)

Guaranty ▪ 25% minimum guaranty is required for all IRRRLs regardless of the dollar amount of the guaranty being transferred from the prior loan.

Loan Limit The maximum total loan amount may include:

▪ The existing VA payoff

▪ VA Funding Fee

▪ Allowable fees and charges

▪ Up to two (2) discount points

Matrix (LTV, Score, Units)

Conforming Loans

Occupancy Units LTV Credit Score

Principal Residence 1-4 Unlimited 580

Second Home and Investment

1-4 Unlimited 580

High Balance Loans

Principal Residence 1-4 Unlimited 580

Second Home and Investment

1-2 Unlimited 600

Mortgage Verification ▪ Evidence the existing VA loan was current at the time of application and is current at closing.

▪ Must have six months of consecutive payments on the existing loan documented prior to funding.


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:

• 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.

Recently Listed Property Properties listed for sale are permitted if the listing was cancelled at least one day prior to the loan application date.

Subordinate Financing ▪ 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.

Social Security Validation Verification of the borrower’s social security number is required.

http://vip.vba.va.gov/


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 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








IRRRL 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

Credit Qualifying 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

• Compensating factors required for DIT > 41% up to 50%

▪ No asset verification required

IRRRL with NO Appraisal

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. ▪ With exception to the appraisal requirement, the loan must comply with ALL other guidelines noted above in the Non-Credit

Qualifying section.


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.

Minimum Residual Income by Region

Loan Amounts < $80,000

Family Size Northeast Midwest South West

1 $390 $382 $382 $425

2 $654 $641 $641 $713

3 $788 $772 $722 $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

Minimum Residual Income by Region

Loan Amounts > $80,000

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 $80 for each additional member up to a family of seven

Geographic Regions for Residual Income

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 Rick, South Carolina, Tennessee, Texas, Virginia, West Virginia

West 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 non-qualifying 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.


Secondary Financing

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.


Underwriting 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.



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.

• Excellent credit history • Little or no increase in shelter expense

• Conservative use of consumer credit • Military benefits

• Minimal consumer debt • Satisfactory homeownership experience

• Long-term employment • Tax benefits of homeownership

• Significant liquid assets • Tax credits for child care

• Large down payment or existence of equity in refinancing loans

• High residual income

• Low debt-to-income ratio


Wholesale VA Guidelines - titanml.com

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