source:
  type: guide
  id: va-m26-7-ch09-t05
  authority: VA Lenders Handbook (VA Pamphlet 26-7), Chapter 9, Topic 5 — Secondary
    Borrowing
  description: VA Lenders Handbook (VA Pamphlet 26-7), Chapter 9, Topic 5 — Secondary
    Borrowing.
  coverage_tier: operative
obligations:
- id: va-m26-7-ch09-t05-full
  canonical_id: va-m26-7-ch09-t05-full
  section: VA Lenders Handbook (VA Pamphlet 26-7), Chapter 9, Topic 5 — Secondary
    Borrowing
  type: do
  tags:
  - regulator-direct
  - va
  - va-handbook
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: VA Lenders Handbook (VA Pamphlet 26-7), Chapter 9, Topic 5 — Secondary
      Borrowing
    source_class: va-handbook
    source_url: https://www.benefits.va.gov/warms/pam26_7.asp
    snapshot_id: 23782f6842a5daf5
    fetched_at: '2026-05-23T01:53:53Z'
    content_hash: sha256:b7c7fcb001b1097e51e4479c70f74c0d981cc1a7a38109e8cd455e205071d9e8
    paragraph_quote: '5. Secondary Borrowing Change Date July 30, 2019 • This chapter
      has been revised in its entirety. a. What is Secondary Borrowing For purposes
      of this topic, secondary borrowing refers to the Veteran obtaining a second
      mortgage simultaneously with a VA-guaranteed first mortgage, both secured by
      the same property. This does not include HAPs (see Topic 9, Item 13 of this
      chapter). b. Policy Secondary borrowing is acceptable as long as: • the Veteran
      is not placed in a substantially worse position than if the entire amount borrowed
      had been guaranteed by VA, • the loan (in conjunction with the first mortgage)
      may not exceed the NOV, and • the requirements detailed below are met. c. Requirements
      The second mortgage must meet the following requirements: Factor Requirement
      Documentation The lender must submit documentation disclosing the source, amount,
      and repayment terms of the second mortgage and agreement to such terms by the
      Veteran and any co-borrowers. Lien Position The second mortgage must be subordinated
      to the VA-guaranteed loan, that is, the second mortgage must be in a junior
      lien position relative to the VA loan. Allowable Purposes Proceeds of the second
      mortgage may be used for a variety of purposes, including, but not limited to:
      • closing costs, or • a downpayment to meet secondary market requirement of
      the lender. But may not be used to cover any portion of a downpayment required
      by VA to cover the excess of the purchase price over VA’s reasonable value.
      Continued on next page VA Pamphlet 26-7, Revised Chapter 9: Legal Instruments,
      Liens, Escrows, and Related Issues 9-10 5. Secondary Borrowing, continued c.
      Requirements, continued Factor Requirement Cash back There can be no cash back
      to the Veteran from the VA first mortgage or a second mortgage obtained simultaneously,
      except any cash the Veteran paid in the transaction. Underwriting The Veteran
      must qualify for the second mortgage which is underwritten as an additional
      recurring monthly obligation. Interest Rate The rate on the second mortgage
      may exceed the rate on the VA-guaranteed first; however, it may not exceed industry
      standards for second mortgages. Assumability The second mortgage should not
      restrict the Veteran’s ability to sell the property any more than the VA first
      mortgage. That is, it should be assumable by creditworthy purchaser(s). Grace
      Period There should be a reasonable grace period before. A late charge comes
      due, or commencement of foreclosure proceedings in the event of default. d.
      Unusual Terms Second mortgages bearing unusual terms, interest rates, etc.,
      are sometimes offered by parties such as: • federal, state, or local government
      agencies, • non-profit organizations, • private individual, • builders, or •
      sellers. e. VA Standards Consult a VA RLC with jurisdiction over the state where
      the property is located if it is unclear whether the terms of the second mortgage
      meet VA standards or if there may be a reasonable basis for VA to make an exception
      to the standards detailed in this topic. VA Pamphlet 26-7, Revised Chapter 9:
      Legal Instruments, Liens, Escrows, and Related Issues 9-11'
  judgment: false
