c. Payment Decrease/ Increase Requirements (continued)

If the monthly payment (PITI) increases by 20 percent or more, the lender must:

·   determine that the veteran qualifies for the new payment from an underwriting standpoint; such as, determine whether the borrower can support the proposed shelter expense and other recurring monthly obligations in light of income established as stable and reliable, and

·  include a certification that the veteran qualifies for the new monthly payment which exceeds the previous payment by 20 percent or more

d. Veteran’s Statement and Lender’s Certification

For all IRRRLs, the veteran must sign a statement acknowledging the effect of the refinancing loan on the veteran’s loan payments and interest rate.

The statement must show the interest rate and monthly payments for the new loan versus that for the old loan.  The statement must also indicate how long it would take to recoup ALL closing costs (both those included in the loan and those paid outside of closing). 

If the monthly payment (PITI) increases by 20 percent or more, the lender must include a certification that the veteran qualifies for the new monthly payment which exceeds the previous payment by 20 percent or more.

EXAMPLE: 

·  Vet’s monthly payment decreases by $50.00

·  Vet pays $5,000 in closing costs (includes all costs – closing costs, funding fee, discounts, etc.)

·  recoup closing costs in 100 months - $5,000 divided by $50

NOTE:  This would not be required in those limited cases where the payment is not decreasing (reduced term of loan, etc.).

The veteran’s statement may be combined with the lender’s certification.