Program History

The VA program was created with the signing of the GI Bill by President Franklin D. Roosevelt on June 22, 1944. This law provided veterans with federally guaranteed home loans with no down payment.

This benefit was intended to stimulate jobs in the housing industry, as well as providing assistance for veterans and their families. The maximum loan amount at the time was $2,000, 50% of that guaranteed by the government.

VA Loans — Veteran’s Best Friend

  • No down payment required up to county limits:
  • No monthly Mortgage Insurance – helps to qualify for larger loan
  • Seller contributions allowed up to 4% of value…above and beyond payment of standard closing costs
  • Fees that can be paid by the veteran are limited
  • 100% gift funds allowed
  • No minimum reserve requirements (conforming limits)
  • Make sense underwriting
  • Veteran can use entitlement multiple times
  • Fixed rate assumable loan (as approved by VA/servicer)
  • Assistance/counseling to veterans in default due to temporary financial difficulty
  • Vets qualify for home loan benefits after 2 years of service (less if served prior to 1980), or 90 days active duty during the Persian Gulf era; Reservists and National Guard eligible after 6 years (or 90 days active duty in Gulf)
  • Unmarried surviving spouse of a veteran who died while in service or from a service connected disability may use benefits

To Recap…

  • No Monthly Mortgage Insurance
  • 100% LTV Purchase or Refinance

VA Financing is on the rise, but still under-utilized.

  • Only an estimated 5% of U.S. Veterans and qualified military
    personnel have used their home loan benefits.

What does this mean to you? Home financing made simple!

VA Funding Fee

  • Although there is no monthly mortgage insurance on a VA loan, the veteran does have a onetime Funding Fee. On loans below county limit, this can be financed into the loan over and above the appraised value/sales price, or can be paid in cash (or a combination of both).
  • The Funding Fee may be waived in the following instances (as evidenced on the “Certificate of Eligibility”):
    • Veterans receiving VA compensation for service-connected disabilities
    • Vets who would be entitled to receive compensation if not receiving military retirement pay
    • Loans for surviving spouses of vets who died in service or from service-connected disabilities
  • Funding Fee is calculated as a percentage of the loan amount. For example, on a $400,000 loan with a 2.15% VAFF = $8,600. Total loan amount = $408,600

TIP: Ask the Vet to put down 5% to reduce the Funding Fee!

Down Payments & Loan Amounts

Loan Programs: 30, 25 & 20 Yr. Fixed (PERL – conforming); High Bal, 15 Yr. & 5/1

The VA will guarantee 25% of the loan up to the county limit. Because of this, there is no down payment at or below the county limit:

Above county limits, the borrower is required to make a minimal down payment in the amount of 25% of the difference between the sales price and county limit (see example below).


$458,850 – VA Loan Limit for Chesapeake County
$550,000 – Sales Price
$550,000 Sales Price – $458,850 County Limit = $91,150 difference
$91,150 difference x 25% required down = $22,787 down payment
$550,000 Sales Price – $22,787 down = $527,213 max VA loan (a 95.8% LTV in this case!)

Hint: If the borrower has 5% to put down, the Funding Fee will be reduced to 1.5%!

The Advantage – Selling the Seller

Overcome the seller’s objections about dealing with a VA buyer! With PERL Residential Lending, the seller does not need to pay all the “non-allowable” fees!

  • VA allows the non-allowable fees to be paid by the borrower up to 1% if an origination fee is not charged.
  • These fees include lender fees (processing, underwriting etc.), escrow fee, termite inspection (depending on state), notary fee, messenger fee and any other non-allowable fee.
  • It generally costs the borrower less than the one percent so all parties benefit.



NOTE: The LTV/CLTV is exclusive of Financed VA Guaranty Funding Fees (Except for IRRRL)
1Minimum credit score for manufactured housing is 620

Underwriting — IRRRLs

A VA Interest Rate Reduction Refinance Loan (IRRRL) is a refi of an existing VA loan only. Rate and P&I must both be reduced, unless the existing loan is an ARM or the term is decreasing.

The new loan amount may include:

  • Unpaid principal balance
  • Prepaid expenses
  • VA Funding Fee of .50%
  • Allowable closing costs
  • Max. 2 discount points

Perl IRRRL Guidelines

  • Max 135% LTV w/ 620 credit; Max 100% LTV w/ 600 credit (based on total loan amount
  • AVM from DataVerify determines LTV; if AVM not adequate, order conventional appraisal
  • NEVER order a VA appraisal on a streamline!
  • DTI is not calculated – no AUS
  • The P&I on the IRRRL must be less than the loan being refinanced (unless going from fixed to ARM or reducing term)
  • 0x30x12 on all mortgages
  • Max $500 incidental cash back

Underwriting Basics – Credit


  • Chapter 7 – generally 2+ years is acceptable; possibly 1-2 years with extenuating circumstances
  • Chapter 13 – all payments satisfied OK; possibly OK after 12 months of satisfactory payments with court approval
  • VA Jumbos – no BK within past 7 years


  • Follow same rules as Chapter 7 BK (VA Jumbos – no history of foreclosure within past 7 years)
  • Ensure that borrower’s entitlement has been restored (or determine if there’s bonus entitlement)
  • Develop complete information on the facts and circumstances of the foreclosure

Other Adverse Credit Items:

  • Collections – Aggregate balance of $1,000 or greater must be paid (excluding medical)
  • Judgments – Must be paid in full at or prior to closing

Underwriting Basics – Property

Conversion of primary Residence to Rental

  • If the veteran is converting a current principal residence to an investment property:
    • Evidences of cash reserves totaling 3 months PITI for each rental property must be provided.
    • The borrower may qualify using 75% of the gross rental income to offset the mortgage payment.
  • Borrower may use entitlement multiple times – Veteran must occupy the property as his/her primary residence
    when purchased.
  • Income from existing rental properties claimed on the borrower’s Schedule E may be used. With 2 years, positive
    net rents may be used as income. Less than 2 years, can be used to offset mortgage.
  • Unlike FHA, the VA has no “flip” rule or restrictions. Sales price appreciation simply must make sense.

Underwriting Basics – Liabilities

Need a boost? VA Underwriting makes sense!

VA Recommended Compensating Factors include (but are not limited to):

  • Excellent Credit History
  • Conservative use of consumer credit
  • Minimal consumer debt
  • Long-term employment
  • Significant liquid assets
  • Sizeable down payment (purchases)
  • Significant equity (refi’s)
  • Little or no payment shock
  • High residual income (more info on next slide)
  • Low DTI
  • Tax benefits for home ownership

Compensating factors can be used to justify expanded DTI or payment shock, but CANNOT be
used to offset unsatisfactory credit.

Underwriting — Residual Income

Residual income is the amount of net income remaining to cover family living expenses (food, health care, clothing, etc.). All household members are included in family size, with the exception of: a) a non-borrowing spouse who has a stable, reliable income sufficient to support expenses, or b) a child for whom sufficient foster care or child support payments are received regularly.

Appraisals & Collateral

  • Appraisals are ordered through the Veteran’s Information Portal and assigned by the VA.
  • The subject property must meet VA Minimum Property Requirements prior to loan funding. This will affect properties being sold “as is.” Repairs noted on the appraisal must inspect the repairs and issue a clear inspection report prior to funding.
  • All VA Purchases requires a clear termite report, excluding condos on the 2nd story or higher.
  • Any required repair items or deficiencies will be noted on the appraisal report.

Most VA appraisals do not require repair work!

What Else Do I Need To Know?

  • Borrowers must occupy the property. No Investment or 2nd Home purchases allowed (IRRRL OK).
  • VA borrowers may own other property, as long as the subject property will be owner occupied.
  • Non-occupant co-borrowers are not permitted to help qualify.
  • Non-traditional credit is allowed on a case by case basis.
  • Condos must be on the VA approved condo list. There are no “spot approvals.”
  • Termite report and clearance is required (except IRRRL’s) on existing properties in areas where the probability of infestation has been defined as “very heavy” or “moderate to heavy” by the IRC. Check with VA Regional Loan Center for final determination.
  • Clear CAIVRS is required for all borrowers.
  • VA is often confused as a “First Time Homebuyer” program, but this is not the case.
  • This program is open to all Veterans, active duty military, qualified reservists/National Guard, and un-remarried surviving spouses of service-connected death.


Summary of VA Advantages

  • No down payment required. See County List for limits.
  • Maximum seller contributions 4%+
  • 100% gift funds allowed
  • No minimum reserve requirements
  • Make sense underwriting
  • Citizenship is not required
  • Veteran can use entitlement many times
  • Not limited to First Time Homebuyers
  • Fixed rate assumable loan
  • Reservists/National Guard qualify for VA benefits
  • Manufactured homes OK
  • Quick closings
  • Underwritten at PERL


Experienced Realtors and Veterans trust and choose PERL!

  • Purchase and Refinance specialists in VA, FHA and Conventional loans.
  • We understand the demands and pressures of a Realtor driven purchase market.
  • We know the importance of closing on time to the buyer, seller, and Realtor.
  • Experienced, quality Mortgage Loan Originators who provide individual service.
  • Dedicated Government Lending department and senior management team with decades of experience.