Change Date

September 15, 2004, Change 4

This section has been changed to create subsection lettering.

a. Requirement

All VA loans must be amortized if the maturity date is beyond five years from the date of the loan.  Loans with terms less than five years are considered term loans and need not be amortized.

Generally, VA loans must be amortized as follows:

·   Payments must be approximately equal

·   principal must be reduced at least once annually, and

·   the final installment must not exceed two times the average of the preceding installments.

Exceptions to these requirements are made in the case of

·   Graduated Payment Mortgages (GPMs) - See section 6 of chapter 7

·   Growing Equity Mortgages (GEMs) - See section 7 of chapter 7

·   Alternative amortization plans prior approved by VA, and

·   Construction loans.

b. Alternative Amortization Plans

Certain amortization plans which do not meet the requirements described above may be used if approved in advance by VA.  A lender may submit an amortization plan to VA for prior approval if the plan

·   is generally recognized; that is, is used extensively by established lending institutions, but

·   does not meet the requirements of approximately equal periodic payments and a reduction in principal not less often than annually (Other than graduated payment mortgages and growing equity mortgages).