source:
  type: guide
  id: va-m26-7-ch03-t01
  authority: VA Lenders Handbook (VA Pamphlet 26-7), Chapter 3, Topic 1 — Basic Elements
    of a VA-Guaranteed Loan
  description: VA Lenders Handbook (VA Pamphlet 26-7), Chapter 3, Topic 1 — Basic
    Elements of a VA-Guaranteed Loan.
  coverage_tier: operative
obligations:
- id: va-m26-7-ch03-t01-full
  canonical_id: va-m26-7-ch03-t01-full
  section: VA Lenders Handbook (VA Pamphlet 26-7), Chapter 3, Topic 1 — Basic Elements
    of a VA-Guaranteed Loan
  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 3, Topic 1 — Basic
      Elements of a VA-Guaranteed Loan
    source_class: va-handbook
    source_url: https://www.benefits.va.gov/warms/pam26_7.asp
    snapshot_id: 73e5d344e2743889
    fetched_at: '2026-05-23T01:53:52Z'
    content_hash: sha256:b452379ce6dbdb528896ce1d9ac9ca8a9cf03b5fab6fa9af7766dc2dc17c2bbe
    paragraph_quote: '1. Basic Elements of a VA-Guaranteed Loan Change Date November
      8, 2012, Change 21 • This section has been updated to remove a hyperlink and
      make minor grammatical edits. a. General rules The following table provides
      general rules and information critical to understanding a VA loan guaranty.
      Exceptions and detailed explanations have been omitted. Instead, a reference
      to the section in this handbook that addresses each subject is provided. Subject
      Explanation Section Maximum Loan Amount VA has no specified dollar amount(s)
      for the “maximum loan.” The maximum loan amount depends upon: • the reasonable
      value of the property indicated on the Notice of Value (NOV), and • the lenders
      needs in terms of secondary market requirements. 3 of this chapter Downpayment
      No downpayment is required by VA unless the purchase price exceeds the reasonable
      value of the property, or the loan is a Graduated Payment Mortgage (GPM). The
      lender may require a downpayment if necessary to meet secondary market requirements.
      3 of this chapter Amount of Guaranty Guaranty is the amount VA may pay a lender
      in the event of loss due to foreclosure. 4 of this chapter Occupancy The veteran
      must certify that he or she intends to personally occupy the property as his
      or her home. 5 of this chapter Continued on next page VA Pamphlet 26-7, Revised
      Chapter 3: The VA Loan and Guaranty 3-3 1. Basic Elements of a VA-Guaranteed
      Loan, Continued a. General rules (continued) Subject Explanation Section Interest
      Rate and Points Interest rate and points are negotiated between the lender and
      veteran. • The veteran and seller may negotiate for the seller to pay all or
      some of the points. • Points must be reasonable. • Points may not be financed
      in the loan except with Interest Rate Reduction Refinancing Loans (IRRRLs).
      6 and 7 of this chapter Purpose of Guaranty To encourage lenders to make VA
      loans by protecting lenders/loan holders against loss, up to the amount of guaranty,
      in the event of foreclosure. 11 of this chapter Underwriting Flexible standards.
      The veteran must have: • satisfactory credit, and • satisfactory repayment ability
      − stable income − residual income (net effective income minus monthly shelter
      expense) in accordance with regional tables, and − acceptable ratio of total
      monthly debt payments to gross monthly income (A ratio in excess of 41% requires
      closer scrutiny and compensating factors.). chapter 4 IRRRLs (Streamline Refinancing
      Loans) Used to refinance an existing VA loan at a lower interest rate. • No
      appraisal or underwriting is required. • Closing costs may be financed in the
      loan. • Any reasonable discount points can be charged, but only two discount
      points can be financed in the loan. • No cash to the borrower. Note: A fixed
      rate loan to refinance a VA Adjustable Rate Mortgage (ARM) may be at a higher
      interest rate. 1 and 2 of chapter 6 Continued on next page VA Pamphlet 26-7,
      Revised Chapter 3: The VA Loan and Guaranty 3-4 1. Basic Elements of a VA-Guaranteed
      Loan, Continued a. General rules (continued) Subject Explanation Section Funding
      Fee The veteran must pay a funding fee to help defray costs of the VA Home Loan
      program. • Find the percentage appropriate to the veteran’s particular circumstances
      on the funding fee table. • Apply this percentage to the loan amount to arrive
      at the funding fee. • The funding fee may always be financed in the loan. 8
      of Chapter 8 Closing costs Those payable by the veteran are limited by regulation
      to a specific list of items plus a one percent flat charge by the lender. •
      Any other party, including the seller, can pay any costs on behalf of the veteran.
      • Closing costs cannot be financed in the loan except on certain refinancing
      loans. (See chapter 8.) 2, 4, and 7 of chapter 8 Security Instruments The lender
      may use any note or mortgage forms they wish as long as they contain certain
      VA-required clauses. 1 of chapter 9 VA Pamphlet 26-7, Revised Chapter 3: The
      VA Loan and Guaranty 3-5'
  judgment: false
