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Topic 6. Purchase of Property with Encumbrances
July 30, 2019
This chapter has been revised in its entirety.
a. Policy
Pursuant to 38 U.S.C. § 3703(d)(3)(A), a VA-guaranteed loan must be secured by a first lien on the realty. Lenders are responsible for properly securing the first-lien position of a VA- guaranteed loan. Any existing liens on the property must be paid off or subordinated to the VA loan.
b. Eligibility
A loan to purchase property subject to unpaid delinquent taxes, special assessments, prior mortgage indebtedness, or other obligations secured by effective liens that the Veteran agrees to pay or which constitute encumbrances on the property is not eligible for guaranty, if the loan amount, plus these unpaid obligations, exceeds VA’s reasonable value of the property.