Change Date

September 15, 2004, Change 4

·   This section has been changed to create subsection lettering.

·   Subsection d step 6 has been changed to update “Loan Prospector” to “Automated Underwriting.”

a. VA Underwriting Standards

VA loans involve a veteran’s benefit.  Therefore, lenders are encouraged to make VA loans to all qualified veterans who apply. 

VA’s underwriting standards are intended to provide guidelines for lenders’ underwriters as well as VA’s underwriters.  Underwriting decisions must be based on sound application of the underwriting standards, and underwriters are expected to use good judgment and flexibility in applying the guidelines set forth in the following pages.

b. Basic Requirements

By law, VA may only guarantee a loan when it is possible to determine that the veteran

·   is a satisfactory credit risk, and

·   has present and anticipated income that bare a proper relation to the contemplated terms of repayment.

VA’s underwriting standards are incorporated into VA regulations at 38 CFR 36.4337 and explained in this chapter.  This chapter addresses the verifications, procedures, and analysis involved in underwriting a VA-guaranteed loan.  It provides guidance on how to treat income, debts and obligations, credit history, and so on, and how to present and analyze these items on VA’s loan analysis form.  It does not deal with every possible circumstance that will arise; therefore, underwriters must apply reasonable judgment and flexibility in administering this important veteran’s benefit.