source:
  type: guide
  id: va-m26-7-ch04-t05
  authority: VA Lenders Handbook (VA Pamphlet 26-7), Chapter 4, Topic 5 — Debts and
    Obligations
  description: VA Lenders Handbook (VA Pamphlet 26-7), Chapter 4, Topic 5 — Debts
    and Obligations.
  coverage_tier: operative
obligations:
- id: va-m26-7-ch04-t05-full
  canonical_id: va-m26-7-ch04-t05-full
  section: VA Lenders Handbook (VA Pamphlet 26-7), Chapter 4, Topic 5 — Debts and
    Obligations
  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 4, Topic 5 — Debts
      and Obligations
    source_class: va-handbook
    source_url: https://www.benefits.va.gov/warms/pam26_7.asp
    snapshot_id: 84a199d5bffee03b
    fetched_at: '2026-05-23T01:53:52Z'
    content_hash: sha256:ed2c25537e999a4e2d8f0edd102b19b58213237b1a9caa927fddfca170b14a9c
    paragraph_quote: '5. Debts and Obligations Change Date a. Verification Requirements
      for Debts and Obligations February 22, 2019 • This chapter has been revised
      in its entirety. All debts and obligations of the borrowers’ must be verified
      and rated. Obtain a credit report with all information for all credit bureaus.
      See Topic 7, subsection a of this chapter for details on the type of credit
      report required. For obligations not included on the credit report which are
      revealed on the application or through other means, the lender must obtain a
      verification of payment history showing the obligation or other written verification
      directly from the creditor, including the payment amount and outstanding balance.
      The lender must also separately verify accounts listed as “will rate by mail
      only” or “need written authorization.” When a pay stub(s) or LES indicates an
      allotment, the lender must investigate the nature of the allotment to determine
      whether the allotment is related to a debt or other obligation(s). Examples
      may include 401K obligation or repayment, child care, child support, or other.
      For obligations that have not been rated on the credit report or elsewhere,
      obtain the verification and rating directly from the creditor. Include a written
      explanation for any obligation that is not rated. Resolve all discrepancies
      prior to closing. If the credit report, deposit verification, bank statement,
      or pay stub(s) reveals any debts or obligations which were not divulged by the
      borrowers): • obtain clarification as to the status of such debts from the borrower(s),
      then • verify any remaining discrepancies with the creditor. Credit reports
      and verifications must be no more than 120 days old (180 days for new construction).
      For automatically closed loans, this means the date of the credit report or
      verification is within 120 days of the date the note is signed (180 days for
      new construction). For prior approval loans, this means the date of the credit
      report or verification is within 120 days of the date the application is received
      by VA (180 days for new construction). Continued on next page VA Pamphlet 26-7,
      Revised Chapter 4: Credit Underwriting 4-39 5. Debts and Obligations, continued
      a. Verification Requirements for Debts and Obligations, continued ECOA prohibits
      requests for, or consideration of, credit history and liability information
      of a spouse who will not be contractually obligated on the loan, except: • if
      the borrower(s) is relying on alimony, child support, or maintenance payments
      from the spouse (or former spouse), or • in community property states. If either
      of these situations is applicable, the lender must: • Obtain a credit report
      on the non-purchasing spouse in addition to the Veteran’s credit report. • Consider
      the spouse’s credit history in reaching a determination. A Veteran borrower
      with a satisfactory credit history may be considered a satisfactory risk even
      though the non-purchasing spouse’s credit may be unsatisfactory. • Include the
      monthly payment of the non-purchasing spouse’s debts on the VA Form 26-6393,
      Loan Analysis. For debts such as judgments and unpaid collection accounts, lenders
      should consider the Veteran’s capacity to address the debt(s). • Develop the
      facts surrounding any unsatisfied judgments on the spouse’s credit report, such
      as where the judgment was filed and whether the parties were married to one
      another at the time, and secure a competent legal opinion whether the judgment
      may become a lien against the property. • Exclude the monthly payment on the
      spouse’s debts from the loan analysis when a reliable source of income for the
      spouse is verified to reach such a conclusion which is voluntarily provided.
      • Document VA Form 26-6393, Loan Analysis, with an explanation of facts and
      determination when concluding credit worthiness of the Veteran or excluding
      obligations of the non-purchasing spouse. Continued on next page VA Pamphlet
      26-7, Revised Chapter 4: Credit Underwriting 4-40 5. Debts and Obligations5.
      Debts and Obligations, continued b. Verification of Alimony and Child Support
      Obligations The payment amount of any alimony and/or child support obligation
      of the borrower must be verified. Do not request documentation of a borrower’s
      divorce unless it is necessary to verify the amount of any alimony or child
      support liability indicated by the borrower. If, however, in the routine course
      of processing the loan, the lender encounters direct evidence (such as, in the
      credit report) that a child support or alimony obligation exists, they should
      make any inquiries necessary to resolve discrepancies and obtain the appropriate
      verification. Spousal support may be treated as a reduction in income on VA
      Form 26- 6393, Loan Analysis. Child support payment is treated as a liability
      on VA Form 26-6393, Loan Analysis. c. Analysis of Debts and Obligations Significant
      debts and obligations include: • debts and obligations with a remaining term
      of 10 months or more; that is, long-term obligations, and • accounts with a
      term of less than 10 months that require payments so large as to cause a severe
      impact on the family’s resources for any period of time. Example: Monthly payments
      of $300 on an auto loan or lease with a remaining balance of $1,500, even though
      it should be paid out in 5 months, would be considered significant. The payment
      amount is so large as to cause a severe impact on the family’s resources during
      the first, most critical, months of the home loan. Determine whether debts and
      obligations which do not fit the description of “significant” should be given
      any weight in the analysis. They may have an impact on the borrower’s ability
      to provide for family living expenses. Continued on next page VA Pamphlet 26-7,
      Revised Chapter 4: Credit Underwriting 4-41 5. Debts and Obligations, continued
      c. Analysis of Debts and Obligations, continued If a married Veteran wants to
      obtain the loan in his or her name only, the Veteran may do so without regard
      to the spouse’s debts and obligations in a non-community property state. However,
      in community property states, the spouse’s debts and obligations must be considered
      even if the Veteran wishes to obtain the loan in his or her name only. See Topic
      2, subsection c of this chapter. Debts assigned to an ex-spouse by a divorce
      decree will not generally be charged against a borrower. This includes debts
      that are now delinquent. d. Borrower(s) as Co- obligor/Co- signor on a Loan
      or Obligations The borrower(s) may have a contingent liability based on co-signing
      a loan. The lender may exclude the loan payments from the monthly obligations
      factored into the net effective income calculation in the loan analysis if:
      • there is evidence that the loan payments are being made by someone else and
      the obligation is current, and • there is not a reason to believe that the borrower
      will have to participate in repayment of the loan. e. Pending Sale of Real Estate
      A borrower(s) may have a current home and the sale of the real property is needed
      to complete the transaction. The lender may disregard the payments on the outstanding
      mortgage(s) and any consumer obligations which the Veteran intends to clear
      if available information provides a reasonable basis for concluding the equity
      to be realized from the sale will be sufficient for this purpose. See Topic
      4, subsection c of this chapter for necessary documents. f. Secondary Borrowing
      If the borrower(s) plans to obtain a second mortgage simultaneously with the
      VA-guaranteed loan, include the second mortgage payment as a significant debt.
      From an underwriting standpoint, the Veteran must not be placed in a substantially
      worse position than if the entire amount borrowed had been guaranteed by VA.
      See Chapter 9 of this handbook for VA limitations on secondary borrowing. Continued
      on next page VA Pamphlet 26-7, Revised Chapter 4: Credit Underwriting 4-42 5.
      Debts and Obligations, continued f. Secondary Borrowing, continued If the borrower(s)
      provides written evidence that the student loan debt will be deferred at least
      12 months beyond the date of closing, a monthly payment does not need to be
      considered. If a student loan is in repayment, or scheduled to begin within
      12 months from the date of VA loan closing, the lender must consider the anticipated
      monthly obligation in the loan analysis and utilize the payment established
      by calculating each loan at a rate of five percent of the outstanding balance
      divided by 12 months. Example: A borrower has a $25,000 student loan balance
      and you multiple it by 5%, which equals $1,250. This amount ($1,250) is divided
      by 12 months to equal a monthly payment of $104.17. If the payment(s) reported
      on the credit report for each student loan(s) is greater than the threshold
      payment calculation above in a above, the lender must use the payment recorded
      on the credit report. If the payment(s) reported on the credit report is less
      than the threshold payment calculation above, in order to count the lower payment,
      the loan file must contain a statement from the student loan servicer that reflects
      the actual loan terms and payment information for each student loan(s). The
      statement(s) must be dated within 60 days of VA loan closing, and may be an
      electronic copy from the student loan servicer’s website or a printed statement
      provided by the student loan servicer. It is the lender’s discretion as to whether
      the credit report should be supplemented with this information. g. Loans Secured
      by Deposited Funds Certain types of loans secured against deposited funds (signature
      loans, cash value life insurance policies, 401(k) loans, or other) in which
      repayment may be obtained through extinguishing the asset, do not require repayment
      consideration for loan qualification. The assets required to secure a loan(s)
      may not be included as an asset on the VA Form 26-6393, Loan Analysis. Continued
      on next page VA Pamphlet 26-7, Revised Chapter 4: Credit Underwriting 4-43 5.
      Debts and Obligations, continued g. Loans Secured by Deposited Funds, continued
      Use the current balance times 60 percent minus the loan balance to equal the
      usable amount to consider as an asset. A statement would only be necessary to
      verify the amount used as an asset. h. Open 30-Day Charge Accounts An open 30-day
      charge account is defined as an account in which the borrower(s) must pay off
      the outstanding balance on the account every month. For open 30-day charge accounts,
      determine if the borrower(s) pays the balance in full each month, and has verified
      funds to cover the account balance in addition to any funds required for closing
      costs. • If there are sufficient funds, the payment does not need to be included
      in Section D of the VA Form 26-6393, Loan Analysis, but the obligation should
      continue to be listed. • If there are not sufficient funds, a minimum payment
      of 5 percent of the balance should be considered included in Section D of the
      VA Form 26-6393, Loan Analysis. VA Pamphlet 26-7, Revised Chapter 4: Credit
      Underwriting 4-44 6. Debts Owed to the Federal Government Change Date February
      22, 2019 • This chapter has been revised in its entirety. a. Title Search Requirements
      b. VA Form 26- 8937, Verification of VA Benefits The lender is responsible for
      obtaining the necessary title search to ensure there are no encumbrances that
      would preclude the borrower from obtaining a loan. The lender is responsible
      for obtaining the necessary title search to ensure there are no encumbrances
      that would preclude the borrower from obtaining a loan. Generally, VA Form 26-8937,
      Verification of VA Benefits, is not needed unless the COE or new IRRRL case
      number indicates to submit the form to VA before closing. However, ask the Veteran
      and any Veteran co-obligors (including spouse if a Veteran) if he or she: •
      will be discharging within the next 6 months from the military and has completed
      a PEB or MEB and will be filing for VA disability while still on active duty,
      • has recently filed for VA disability and compensation, or VA pension, and
      VA has not yet made a determination, • would be entitled to receive VA disability
      benefits, but in receipt of retirement pay, • has received VA disability benefits
      in the past, or • is an unmarried surviving spouse of a Veteran (has applied
      and/or in receipt of DIC who died on active duty or as a result of a service-connected
      disability. If the Veteran falls under one of the above categories, follow the
      procedures discussed in Topic 2, subsection m of this chapter. When VA returns
      the form to the lender and the form indicates that the borrower has any of the
      following: • an outstanding indebtedness of VA overpaid education, compensation,
      or pension benefits, • an education or direct home loan in default, • an outstanding
      indebtedness resulting from payment of a claim on a prior VA home loan, or •
      a repayment plan for any of these debts that is current, Continued on next page
      VA Pamphlet 26-7, Revised Chapter 4: Credit Underwriting 4-45 6. Debts Owed
      to the Federal Government, continued b. VA Form 26- 8937, Verification of VA
      Benefits, continued Then one of the following must accompany the loan package:
      • evidence of payment in full of the debt, or • evidence of a current payment
      plan acceptable to VA and evidence that the Veteran executed a promissory note
      for the entire debt balance. VA may find a repayment plan acceptable if: • the
      Veteran has been satisfactorily making payments on a repayment plan in effect
      prior to the lender’s inquiry, • the Veteran’s overall credit history and anticipated
      financial capacity after the proposed loan is made indicate a reasonable likelihood
      that the repayment plan will be honored and the outstanding amount of indebtedness
      is not so large that it would prevent payment in full, within a reasonable period
      (approximately 1 year), or • the case involves unusually meritorious circumstances.
      Examples Consideration would be given to a Veteran with an outstanding/excellent
      credit history and adequate income whose debt balance is too large to be reasonably
      paid out in less than 18 months to 2 years. VA will offer special consideration
      to a Veteran’s claim that he or she was not previously aware of an overpayment
      of benefits. Continued on next page VA Pamphlet 26-7, Revised Chapter 4: Credit
      Underwriting 4-46 6. Debts Owed to the Federal Government, continued c. What
      is the Credit Alert Verification Reporting System (CAIVRS)? CAIVRS is a Department
      of Housing and Urban Development (HUD) maintained computer information system
      which enables participating lenders to learn when a borrower has previously
      defaulted on a federally-assisted loan. More information can be found at: http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/caivrs
      The database includes default information from the Department of Agriculture,
      Department of Education, Department of Justice, HUD, Small Business Administration,
      Federal Deposit Insurance Corporation, and VA. The VA default information included
      in the database relates to: • overpayments on education cases, • overpayments
      on disability benefits income, and • claims paid due to home loan foreclosures
      which resulted in a debt of the government (Generally type 2 VA loans). CAIVRS
      Procedures A CAIVRS inquiry must be performed for all borrowers and co-borrowers
      (Veteran or non-Veteran) on all VA loans, including IRRRLs. The one exception
      to this policy is that CAIVRS is not required for non-purchasing spouses in
      community property states. VA assigns a 10-digit VA lender identification number
      (ID) to each new lender, then automatically forwards the ID number to HUD with
      a request to grant the lender CAIVRS access. The lender can begin accessing
      CAIVRS usually between 7 to 10 business days after receiving its VA ID number
      assignment. To register for CAIVRS access for first time users, please use the
      following link: https://entp.hud.gov/idapp/html/f57register.cfm. Please direct
      questions concerning problems encountered with accessing CAIVRS to caivrs_admin@hud.gov.
      If the borrower(s) is found to have a delinquent federal debt through CAIVRS,
      the validity and delinquency status of the debt should be verified by contacting
      the creditor agency using the contact phone number and case number reflected
      on the borrower’s CAIVRS report. Continued on next page VA Pamphlet 26-7, Revised
      Chapter 4: Credit Underwriting 4-47 6. Debts Owed to the Federal Government,
      continued c. What is the Credit Alert Verification Reporting System (CAIVRS)?,
      continued The creditor agency that is owed the debt can verify that the debt
      has been resolved. Documentation should be included in the loan file and an
      explanation must be provided on VA Form 26-6393, Loan Analysis. It is not necessary
      for CAIVRS to update the number if documentation is included in the loan file.
      Once screening is complete, enter the CAIVRS confirmation code on VA Form 26-6393,
      Loan Analysis, in the space to the right of the “no” block in item 46 for purchase
      and refinances. For IRRRLs, enter the code on VA Form 26-8923, IRRRL Worksheet,
      in the Notes section. d. Borrower with Presently Delinquent Federal Debts When
      CAIVRS or another source indicates that the borrower has a delinquent Federal
      debt, the following steps must be taken: • Suspend processing of the loan application
      to determine the reason for the non “A” number. • Give full consideration to
      the CAIVRS information, and any subsequent clarifying information or documentation
      provided, in applying VA credit standards. Any non “A” number received does
      not automatically disqualify a Veteran from using their home loan benefit; however,
      the lender must document and justify the approval. See Topic 7, subsection b
      of this chapter for documentation and explanation requirements. • If a previous
      VA loan is involved that resulted in a debt to the government (due to foreclosures,
      short sale, deed in lieu, or other), the borrower may contact the VA Debt Management
      Center at 1-800-827- 0648 or at dmc.ops@va.gov to make arrangements to repay
      the debt. Generally, only type 2 VA loans (fifth digit of the VA loan number)
      result in a debt to VA and are reported. The Veteran’s entitlement cannot be
      restored until the debt to VA is paid in full. Continued on next page VA Pamphlet
      26-7, Revised Chapter 4: Credit Underwriting 4-48 6. Debts Owed to the Federal
      Government, continued d. Borrower with Presently Delinquent Federal Debts, continued
      If the fifth digit of the previous loan number is a type 6 VA loan, there is
      generally a loss to the government and the loss is not reported to CAVIRS. A
      loss to VA does not need to be repaid; however, the Veteran’s previously used
      entitlement to guaranty the previous VA loan is not restored until the loss
      is paid in full. Each agency has their timeliness requirements before removing
      a non “A” CAVIRS finding. This does not preclude the Veteran or borrower from
      receiving a VA loan if credit standards are met for VA loans. See Topic 4.07b
      (13 and 14) of this Chapter for guidelines after a bankruptcy or foreclosure.
      Example: A borrower suffered a loss on a FHA loan home loan 2 years ago. While
      HUD has not removed the CAIVRS finding as the 3-year waiting period has not
      passed for FHA, the lender is eligible to continue processing a VA loan without
      an “A” CAIVRS finding due to the borrower(s) meeting VA credit guidelines for
      foreclosures and documented in the loan file. CAIVRS information is only for
      the lender’s and borrower’s use in processing the loan application. Only those
      persons having responsibility for screening borrowers and/or co-borrowers may
      use CAIVRS. Any other use is unauthorized. e. Treatment of Federal Debts A borrower(s)
      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 arrangement have been made between
      the borrower and the Federal agency. Example: A borrower has delinquent taxes
      and payments have not been made for several years. The establishment of a payment
      plan after the CAVIRS finding has been addressed may not be sufficient to show
      a satisfactory payment arrangement to repay the obligation. A borrower(s) cannot
      be considered a satisfactory credit risk if he or she has a judgment lien against
      his or her property for a debt owed to the Government until the judgment is
      paid or otherwise satisfied. VA Pamphlet 26-7, Revised Chapter 4: Credit Underwriting
      4-49'
  judgment: false
