Rendering a Final Decision
If a Veteran's spouse is not on the application and is receiving child support payments, could these funds be considered to offset the children in the residual?
Yes, as long as the motivation for payment (court order) and consistent receipt of the funds are documented.
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Are compensating factors considered for loans with ratios over 41%?
The VA home loan is a residual driven program. The VA considers the ratio as a secondary evaluator. The underwriter should consider the following:
- If the residual is in excess of the guideline by more than 20%, a loan with a high ratio but good credit and job stability could be approved.
- If the loan does not have residual + 20%, the underwriter must review all compensating factors and the decision should be documented in the remarks section of the loan analysis form.
- For loans with ratios over 41% and the residual does not exceed the guideline by 20%, the underwriter's supervisor must sign the Loan Analysis Form concurring with the underwriter's determination. The reasoning for loan approval must be listed in the remarks section of the Loan Analysis Form.
Specifics on ratios, second signatures and compensating factors may be found in Chapter 4 of the
VA Lender's Handbook.
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Can non-taxable income be grossed up?
Pension, Compensation, or Other Net Income in Section E must list the actual income, not a grossed up figure. There should be two ratios listed on the Loan Analysis Form if you choose to gross up; the first in the ratio box in Section E, showing the actual ratio, and the second in the Remarks Section listing the ratio based on the grossed up income figure.
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