c. Maximum Loan Amount and Down Payment Required (continued)

New construction or existing homes not previously occupied:

The initial loan amount may not exceed the lesser of the purchase price or 97.50% of the initial reasonable value of the property.

-   A down payment will be required to cover the difference between the reasonable value and the initial loan amount.

The principal amount of the loan thereafter (including the amount of all interest deferred and added to principal, but not including any amount attributable to the funding fee or energy efficiency improvements) may not be scheduled to exceed the projected value of the property at any time.

Calculate the projected value of the property by increasing the reasonable value of the property from the time the loan is made at a rate not in excess of 2.5% per year, but never to exceed 115% of the initial reasonable value.

Downpayment:

·   The amount required depends upon whether the dwelling is new or existing.  (See above.)

·   The veteran may choose to pay a higher down payment to offset the negative amortization.

·   The downpayment must be paid in cash from the veteran’s own resources.

Impact of interest rate increase on loans in process:

Any increase in the interest rate requires recalculation of the maximum loan amount, down payment, and payment schedule.

Funding fee and energy efficiency improvements:

The initial loan amount may be increased by the amount of the VA funding fee, if financed in the loan, and the cost of any energy efficiency improvements.

 d. Amortization

Loan payments increase each year at a rate of 7.5% per year for the first five years.  At the beginning of the sixth year, the payments become level for the remaining term.

This amortization plan is similar (except for the “minimum cash investment” requirement) to HUD’s GPM Plan III under Section 245 of the National Housing Act.