Explore the major rules lenders review, then open the controlling VA Lender’s Handbook chapter for the full policy, exceptions, definitions, and updates.
These summaries are educational, not an approval decision or a substitute for the handbook. Individual lenders may apply additional credit standards and product requirements. Always confirm the current rule for the specific borrower, property, and transaction.
GUIDELINE TOPICS
Start with the question you need answered.
CHAPTER 3
Loan purposes, entitlement and loan structure
VA financing can support eligible purchases, construction, improvements, IRRRLs, and cash-out refinances. The guaranty protects the lender; it is not cash paid to the borrower and does not replace qualification.
VA generally does not set a maximum loan dollar amount.
Property value, entitlement, lender qualification, and secondary-market requirements still matter.
No down payment is required by VA in many purchases, but important exceptions apply.
For most VA loans, the eligible Veteran certifies an intent to personally occupy the property as a home. Occupancy within 60 days is generally considered reasonable, with documented exceptions.
Vacation-home or investment-only use does not satisfy the normal rule.
Spouse or dependent-child occupancy may satisfy the rule in specified circumstances.
An IRRRL generally uses a prior-occupancy certification instead.
VA instructs lenders to evaluate overall repayment patterns and satisfactory credit risk. The VA does not establish one universal minimum credit-score requirement.
A lender may establish its own minimum score or credit standards.
Housing-payment history is an important indicator.
Borrowers without established traditional credit may be evaluated using verified alternative credit.
The lender documents stable, reliable income and evaluates debts, housing expense, taxes, deductions, and other obligations. Temporary income generally cannot be treated the same as income expected to continue.
All debts and obligations must be verified and evaluated.
Documents must meet applicable age and verification standards.
Automated underwriting provides a risk classification; the lender still makes the decision.
VA underwriting considers both debt-to-income ratio and the income remaining after major monthly obligations. A ratio above 41% is not automatically a denial, but it requires closer review and appropriate compensating factors.
Residual-income requirements vary by region, loan amount, and family size.
Residual income is a separate test from debt-to-income ratio.
The complete credit and income profile determines the result.
The two programs serve different purposes. An IRRRL refinances an existing VA-backed loan and must provide the required benefit. A VA Cash-Out refinance uses full underwriting and may replace a VA or non-VA mortgage.
An IRRRL is not designed to provide equity cash to the borrower.
Cash-out transactions generally require current primary-residence occupancy.
Costs, seasoning, recoupment, value, and benefit requirements can apply.
A one-time VA funding fee may apply unless the borrower qualifies for an exemption. The handbook also identifies allowable borrower charges and rules for seller-paid costs and concessions.
The funding fee can generally be financed, increasing the loan balance.
No monthly private mortgage insurance is generally required.
Cash to close can still include prepaid items and allowable third-party charges.
The VA appraisal supports an opinion of reasonable value and reports observable conditions tied to VA minimum property requirements. It is not a substitute for a home inspection.
A VA-assigned appraiser completes the appraisal.
The lender’s Staff Appraisal Reviewer or VA reviews the report and issues the Notice of Value.
Any required repairs or conditions shown on the NOV must be resolved as required for guaranty.
VA Loan Guaranty Circulars can announce temporary policies, implementation dates, rescissions, and changes that may not yet be reflected in every handbook page.