VA Lender Handbook M26-7 Chapter 4 — Credit Underwriting

va-m26-7-ch04

VA Pamphlet 26-7 Chapter 4 governs credit underwriting for VA loans.

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source:
  type: regulation
  id: va-m26-7-ch04
  authority: VA Lender Handbook M26-7 Chapter 4 — Credit Underwriting
  description: |
    VA Pamphlet 26-7 Chapter 4 governs credit underwriting for VA loans.
obligations:
  - id: va-m26-7-ch04-reserves-activation-income
    canonical_id: va-m26-7-ch04-reserves-activation-income
    section: VA M26-7 Ch. 4 — Reserves/National Guard Activation Income Analysis
    description: |
      [UNDERWRITER] must consider whether a borrower whose income is being
      used to qualify for a loan may experience a change in income due to
      participation in a Reserves/National Guard unit subject to
      activation. An activated Reservist/Guard member applying for a loan
      must present orders indicating their current active-duty tour is not
      to exceed 12 months.
    type: do
    audit_question: For every VA loan where the borrower's qualifying income includes Reserves/National Guard pay (or where activation is foreseeable), can [UNDERWRITER] evidence consideration of activation-driven income change and, where activated, retention of orders showing the current active-duty tour does not exceed 12 months?
    program_review: Does the program ensure the underwriter considers activation-driven income change where qualifying income includes Reserves/Guard pay, and — where activated — retains orders showing the current active-duty tour does not exceed 12 months?
    file_review: Spot-check files with Reserves/Guard income; confirm the activation-income analysis and any activation orders. The officer judges whether the income-continuance analysis adequately accounts for activation risk.
    judgment: true
    feeds: []
    workflow_phase: origination
    owner_role: underwriter
    secondary_owner_role: loan_officer
    cadence: per_loan
    consequence: ''
    tags:
      - round-b
      - regulator-direct
      - va
      - m26-7
      - ch04
      - income-analysis
      - reserves
      - promoted
    primary_source:
      tier: 1
      authority: VA Lender Handbook M26-7 Chapter 4 — Credit Underwriting
      source_class: va-handbook-m26-7
      source_url: https://benefits.va.gov/WARMS/M26_7.asp
      snapshot_id: 84a199d5bffee03b
      fetched_at: '2026-05-23T01:50:00Z'
      content_hash: sha256:ed2c25537e999a4e2d8f0edd102b19b58213237b1a9caa927fddfca170b14a9c
      paragraph_quote: Lenders must consider if a borrower, whose income is being used to qualify for a loan, may have a change in income due to participation in a Reserves/National Guard unit subject to activation.
      drafter_attestation: Copied verbatim from VA Handbook snapshot 84a199d5bffee03b (M26-7 Ch. 4 — Reserves/Guard activation income) at 2026-05-23. Source PDF retrieved via Wayback Machine.
      quote_healed: true
      effective_date: '2019-09-26'
      effective_date_source: va-change-date-preceding
    promoted_at: '2026-05-23T02:02:18+00:00'
    promoted_from: va-m26-7-ch04-roundb-v1.yaml
  - id: va-m26-7-ch04-gift-funds-verification
    canonical_id: va-m26-7-ch04-gift-funds-verification
    section: VA M26-7 Ch. 4 — Gift Funds Verification
    description: |
      [UNDERWRITER] must verify that sufficient funds to cover any gift
      used in qualifying the borrower have been transferred to the
      borrower's account, or will be documented as received by the closing
      agent at the time of closing.
    type: do
    audit_question: For every VA loan in which gift funds are used by the borrower for any portion of the transaction, can [UNDERWRITER] evidence verification that sufficient gift funds were transferred to the borrower's account, or documented as received by the closing agent at closing, with acceptable documentation (deposit evidence, donor check/electronic transfer copy, or Closing Disclosure showing receipt) retained in the loan file?
    program_review: Does the program ensure gift funds used in qualifying are verified as transferred to the borrower's account or documented as received by the closing agent at closing, with acceptable documentation retained?
    file_review: Spot-check files using gift funds; confirm transfer/receipt evidence (deposit evidence, donor check/transfer copy, or CD showing receipt) is in the file.
    judgment: false
    feeds: []
    workflow_phase: origination
    owner_role: underwriter
    secondary_owner_role: closer
    cadence: per_loan
    consequence: ''
    tags:
      - round-b
      - regulator-direct
      - va
      - m26-7
      - ch04
      - gift-funds
      - asset-verification
      - promoted
    primary_source:
      tier: 1
      authority: VA Lender Handbook M26-7 Chapter 4 — Credit Underwriting
      source_class: va-handbook-m26-7
      source_url: https://benefits.va.gov/WARMS/M26_7.asp
      snapshot_id: 84a199d5bffee03b
      fetched_at: '2026-05-23T01:50:00Z'
      content_hash: sha256:ed2c25537e999a4e2d8f0edd102b19b58213237b1a9caa927fddfca170b14a9c
      paragraph_quote: The lender must verify that sufficient funds to cover the gift have been transferred to the borrower’s account, or will be documented as received by the closing agent at the time of closing.
      drafter_attestation: Copied verbatim from VA Handbook snapshot 84a199d5bffee03b (M26-7 Ch. 4 — Gift Funds Verification) at 2026-05-23. Source PDF retrieved via Wayback Machine.
      quote_healed: true
      effective_date: '2019-02-22'
      effective_date_source: va-change-date-preceding
    promoted_at: '2026-05-23T02:02:18+00:00'
    promoted_from: va-m26-7-ch04-roundb-v1.yaml
  - id: va-m26-7-ch04-mcc-provide-to-va
    canonical_id: va-m26-7-ch04-mcc-provide-to-va
    section: VA M26-7 Ch. 4 — Mortgage Credit Certificate (MCC)
    description: |
      Where a Mortgage Credit Certificate (MCC) is in play, [UNDERWRITER]
      must provide a copy of the MCC to VA with the loan package,
      including documentation verifying any program expenses charged by
      the local government entity (as listed on the Closing Disclosure)
      and the percentage used to calculate the tax credit (and the amount
      of indebtedness, if applicable).
    type: do
    audit_question: For every VA loan in which a Mortgage Credit Certificate is used to qualify the borrower, can [UNDERWRITER] evidence that a copy of the MCC was provided to VA with the loan package, together with documentation of any program expenses (on the CD) and the certificate's tax-credit percentage and indebtedness amount?
    program_review: Does the program ensure that, where an MCC is used to qualify, a copy of the MCC is provided to VA with the loan package, including program-expense documentation (on the CD), the tax-credit percentage, and indebtedness amount?
    file_review: Spot-check MCC files; confirm the MCC copy and supporting documentation accompanied the VA loan package.
    judgment: false
    feeds: []
    workflow_phase: origination
    owner_role: underwriter
    secondary_owner_role: closer
    cadence: per_loan
    consequence: ''
    tags:
      - round-b
      - regulator-direct
      - va
      - m26-7
      - ch04
      - mcc
      - tax-credit
      - promoted
    primary_source:
      tier: 1
      authority: VA Lender Handbook M26-7 Chapter 4 — Credit Underwriting
      source_class: va-handbook-m26-7
      source_url: https://benefits.va.gov/WARMS/M26_7.asp
      snapshot_id: 84a199d5bffee03b
      fetched_at: '2026-05-23T01:50:00Z'
      content_hash: sha256:ed2c25537e999a4e2d8f0edd102b19b58213237b1a9caa927fddfca170b14a9c
      paragraph_quote: 'the borrower’s mortgage interest payment. Lenders must provide a copy of the MCC to VA with the loan package which indicates: • documentation verifying any expenses charged by the local government entity for the program which is listed on the Closing Disclosure Statement, and the percentage to be used to calculate the tax credit, and if applicable, the amount of the indebtedness.'
      drafter_attestation: Copied verbatim from VA Handbook snapshot 84a199d5bffee03b (M26-7 Ch. 4 — MCC) at 2026-05-23. Source PDF retrieved via Wayback Machine.
      quote_healed: true
      effective_date: '2019-02-22'
      effective_date_source: va-change-date-preceding
    promoted_at: '2026-05-23T02:02:18+00:00'
    promoted_from: va-m26-7-ch04-roundb-v1.yaml
_promotion_history:
  - promoted_at: '2026-05-23T02:02:18+00:00'
    candidate_path: obligations\_remediation\_round_b_drafts\va-m26-7-ch04-roundb-v1.yaml
    candidates_promoted: 3
    candidates_skipped_existing: 0

Verbatim regulatory text (3)

Verbatim provisions from VA Lender Handbook M26-7 Chapter 4 — Credit Underwriting — each quote is a verified substring of the regulator-published source snapshot, not retyped. Quoted for reference; this is not legal advice. The operational layer (P&P updates, prompts) lives in the regulation update kits.

VA M26-7 Ch. 4 — Reserves/National Guard Activation Income Analysis

Effective 2019-09-26 · VA Change Date for this topic

Lenders must consider if a borrower, whose income is being used to qualify for a loan, may have a change in income due to participation in a Reserves/National Guard unit subject to activation.

Source: VA Lender Handbook M26-7 Chapter 4 — Credit Underwriting · source URL · snapshot 84a199d5bffee03b

VA M26-7 Ch. 4 — Gift Funds Verification

Effective 2019-02-22 · VA Change Date for this topic

The lender must verify that sufficient funds to cover the gift have been transferred to the borrower’s account, or will be documented as received by the closing agent at the time of closing.

Source: VA Lender Handbook M26-7 Chapter 4 — Credit Underwriting · source URL · snapshot 84a199d5bffee03b

VA M26-7 Ch. 4 — Mortgage Credit Certificate (MCC)

Effective 2019-02-22 · VA Change Date for this topic

the borrower’s mortgage interest payment. Lenders must provide a copy of the MCC to VA with the loan package which indicates: • documentation verifying any expenses charged by the local government entity for the program which is listed on the Closing Disclosure Statement, and the percentage to be used to calculate the tax credit, and if applicable, the amount of the indebtedness.

Source: VA Lender Handbook M26-7 Chapter 4 — Credit Underwriting · source URL · snapshot 84a199d5bffee03b

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Operationalizing VA Lender Handbook M26-7 Chapter 4 — Credit Underwriting

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Source of record: https://claudeforcompliance.com/regs/va-m26-7-ch04/ · register va-m26-7-ch04 · Claude for Compliance. Free to read and download; see regulatory updates and methodology.