Acceptable States. Loan Products. ARM Terms

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1 Program Name: Investor Qualification Product Program Highlights The borrower is qualified based upon the cash flows of the subject property only, regardless of the number of properties owned by the borrower No borrower income or employment is stated or verified Debt coverage ratio is used for qualifying purposes Minimum 640 credit score 4506T not required Debt to Income (DTI) Ratio not calculated Documentation Borrower must acknowledge the loan is a business purpose loan by signing the Borrower s Intent to Proceed with Loan and Business Purpose Loan Certification (see attachment to guidelines). All borrowers must provide the following: A complete schedule of all real estate owned, indicating financed and free and clear properties Mortgage/lien rating for each financed property Documented proof that lien-free properties are truly free and clear of all liens LOAN Minimum Loan $75,000 Amount Acceptable States Loan Products ARM Terms IL IN, FL, MI, OH, PA, CO, CA, WI LTV Limit/Maximum of 80% is Applicable in Following States FL, IL, IN, OH, PA, WI 5/1 ARM (Adjustable Rate Mortgage) 30-Year Amortization Term 10-Year Interest Only Period + 20-Year Amortization Term (Not Available in IL) 7/1 ARM (Adjustable Rate Mortgage) 30-Year Amortization Term 10-Year Interest Only Period + 20-Year Amortization Term (Not Available in IL) 30-year FRM (Fixed Rate Mortgage) 30-Year Amortization Term 10-Year Interest Only Period + 20-Year Amortization Term (Not Available in IL) Index: 1-Year LIBOR Margin: 5.99% Caps Initial Rate Reset: 2.00% Periodic Rate Reset: 2.00% Lifetime Rate Reset: 5.00% Floors Initial Rate Reset: NONE Periodic Rate Reset: NONE Lifetime Floor: ORIGINAL/INITIAL NOTE INTEREST RATE Investor Qualification Products 1

2 Lock Loan Purpose Prepayment Penalty Escrow Account ACH Draft Interested Party Contributions Subordinate Financing PROPERTY Occupancy Property Type Listed for Sale Appraisal Requirements ARM products are assumable to a qualified borrower after the fixed term. Loan must be approved prior to lock. 30 day minimum lock term required. Business Purpose ONLY Purchase Rate/Term Refinance with No Cash Out Rate/Term Refinance with Cash Out None Required for All Loans Required for All Loans Interested party contributions are limited to 3% on all LTV s Permitted, Provided That CLTV does not Exceed Applicable LTV Limits Debt Service on All Subordinate Loans is Included in DTI Calculations Terms of Subrogate Loans Conform to Fannie Mae Requirements Investor / Non-Owner [ BUSINESS PURPOSE ONLY; Signed Business Use Affidavit Required ] Eligible Appraised to be C1 - C5 Condition 1-Unit Single Family Residence 2-6-Unit Residence - Mixed use properties acceptable - Commercial space not to exceed 51% Warrantable Condominium - Non-warrantable condos subject to underwriter approval with an adjustment to rate PUD Ineligible Properties with Lot Size in Excess of 20 Acres Condotels Co-ops Leaseholds Manufactured Housing Modular Homes Commercial Properties Properties Subject to Oil and/or Gas Leases Operating Farms, Ranches, or Orchards Subject property must not be currently listed for sale. It must be taken off the market prior to the application date. Alta Mortgage Bankers will not accept appraisers on probation with any regulatory agency. No Exceptions. Loan Amount $1,000,000 1 Full Independent Appraisal Required Appraisal Risk Review (ARR) or Collateral Desktop Analysis (CDA) Investor Qualification Products 2

3 Required In Case Appraisal-ARR/CDA Variance Exceeds 10%, Second Full Independent Appraisal Required Lower of 2 Appraised Values to be Used in LTV Calculations Loan Amount > $1,000,000 2 Full Independent Appraisals Required Lower of 2 Appraised Values to be Used in LTV Calculations BORROWER First Time Home Buyer First Time Home Buyer is defined as a borrower who had no ownership interest (sole or joint) in a residential property during the three-year period preceding the date of the purchase of the security property. Citizenship/Visa Requirements First Time Home Buyer is allowed. Borrower must have a history of owning and managing commercial or residential investment real estate for a period of at least 6 months. US Citizens US Legal Permanent Residents US Persons (LLCs and Corporations organized in 50 States or DC) Non-US Citizens/Foreigners, Subject to Valid Passport Valid US Visa (If not Subject to Visa Wavier Program) 2nd Home or Investor/Non-Owner Occupancy Maximum Loan-to-Value Ratio (LTV) of 65% Required Liquid Reserves of 12 Months of PITIA Minimum Credit Score 640 [ Industry Standard "Tri-Merge" Credit Report No Older than 90 Days is Required ] Minimum Debt 1.0 x PITIA Service Coverage Credit History Fraud Prevention Engine Pull Must Be Obtained From DataVerify, CoreLogic, SAS or Similar Engine Minimum of 5 Credit Lines; Minimum 2 Active Credit Lines; At Least 1 Line with 24+ Month Rating No Derogatory Credit Event (Bankruptcy, Foreclosure, Short Sale, Deed-in- Lieu) in Past 2 Years Judgments, Tax Liens, Charge-offs, Non-Medical Collections Must Be Paid in Full Derogatory Credit Event Seasoning of 2 to 4 Years Subject to Additional 5% LTV Limit Reduction, With LTV Not to Exceed 70% Additional Liquid Reserves of 6 Months of PITIA Required -- 0x30x12 Mortgage and/or Rental Payment History Required Consumer Credit Counseling Borrowers who have experienced credit or financial management problems in the past may have elected to participate in consumer counseling sessions to learn how to correct or avoid such problems in the future. Whether borrowers have or have not completed participation in the sessions before closing on the mortgage transaction is Investor Qualification Products 3

4 Mortgage and/or Rental History Income Documentation not relevant since it is the borrower s credit history that is of primary importance. (FNMA B ) Disputed Accounts Disputed accounts are reviewed to determine current balance and derogatory information (a 30-day or more delinquency) within 2 years prior to the credit report date: o Zero balance and no derogatory in last 2 years no action required o Zero balance and derogatory information - remove and pull new credit report o A positive balance and no derogatory information remove and pull new credit report o A positive balance and derogatory information remove and pull new credit report A credit supplement is not allowed to document disputed accounts. Maximum 1x30x12 [ Applicable to Mortgages that Appear on Borrower's Credit Report ONLY ] Income used to qualify borrower is based upon cash flow from property. A 4506T is NOT required. If transaction is a refinance, rental agreement and rent survey (Form 1007) provided by the appraiser, will be utilized. Rents will be validated via internet research by Alta Mortgage Bankers. If transaction is a purchase, Appraisal Form 1007 will be utilized. Short term leases Purchase transactions: Use the rents provided on the comparable rent schedule from the appraiser Refinance transactions: Use the leases used throughout the year and average over the 12 month period. If there are months where the property is vacant, use zero for that month in the average. The average should be supported by the comparable rent schedule (within reason). Airbnb or similar such rentals are not acceptable. An expired lease agreement that has verbiage that states the lease agreement becomes a month-to-month lease once the initial lease/rental term expires is allowed. Debt Coverage Ratio See attached calculator Gross monthly rent less 5% vacancy factor less real estate taxes less hazard insurance less HOA dues equals net rental income Monthly PMI payment cannot exceed net rental income This program is classified as a business loan. Appendix Q and ATR requirements do not apply. Investor Qualification Products 4

5 Assets Borrower must have sufficient liquid assets available for down payment, closing costs and reserves. Funds must be sourced and seasoned for two (2) months and the most recent consecutive statements (all pages) or the most recent quarterly statements are required. Stocks, Bonds, and Mutual Funds (FNMA B ) Vested stocks, bonds, and mutual funds (including retirement accounts) may be used for down payment, closing costs, and reserves without any reduction in value: One hundred percent (100%) of the value of the asset is allowed when determining available reserves If the lender documents that the value of the asset is at least 20% more than the funds needed for the borrower s down payment and closing costs, no documentation of liquidation is required. Otherwise, documentation of the borrower s actual receipt of funds realized from the sale or liquidation must be obtained. NOTE: As a reminder, non-vested assets are not eligible for down payment, closing costs, or reserves. Like-Kind Exchanges Assets for the down payment from a like-kind exchange, also known as a 1031 exchange, are eligible if properly documented and in compliance with Internal Revenue Code Section 1031 (FNMA B ). Full Asset Documentation is required for both funds to close and reserves in accordance with Fannie Mae guidelines. Eligible Funds (Down Payment, Reserves*) Must be from borrower s own funds See Business Funds for eligibility. See Reserves for requirements and limitations. Business Funds Restricted Stock Units (RSUs) are not eligible for reserves. Business funds - Funds in the borrower s business account(s) 50% of account balance may be counted toward down payment, closing costs, and reserves so long as borrower(s) and/or non-borrowing spouse/domestic partner or family members* have a cumulative 100% ownership interest in the business (e.g., Sole Proprietor, S Corp, Corporation, LLC). A non-borrowing spouse/domestic partner or family members* who are the only other coowners of the business are acceptable and must provide a letter allowing the borrower to access the funds in the business account. *Family Members for business ownership interest purposes above are specifically defined as follows: Child, parent, or grandparent o Child is defined as a son, stepson, daughter, or stepdaughter; o A parent or grandparent includes a step-parent/grandparent or foster parent/grandparent Investor Qualification Products 5

6 Spouse or domestic partner (domestic partner must live with borrower) Legally adopted son or daughter, including a child who is placed with the borrower by an authorized agency for legal adoption Foster child Brother, stepbrother, sister, stepsister Aunt or uncle Son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-inlaw, or sister-in-law of the borrower. Cousins are not allowed. Required Liquid Reserves Gifts Non-Arm s Length Transactions Business funds that are in a personal account prior to application may be used for down payment, closing costs, and reserves without restriction. Large deposits must be sourced to determine there is not an undisclosed loan. Loan Amount $1,000,0003 Months of PITIA Loan Amount $1,000,001 to $2,000,0006 Months of PITIA Loan Amount > $2,000,00012 Months of PITIA Subject to If DTI > 43%: Not Applicable If Other Mortgage Loans Outstanding: Additional 3 Months of Combined PITIA on Other Mortgages If Derogatory Credit Event Seasoning 4 Years: Additional 6 Months of PITIA If at Least One Borrower is a Foreigner: 12 Months of PITIA Cash Out Amounts from Subject Loan May Be Used to Satisfy Reserve Requirements Liquid Reserves Must Be Seasoned for a Minimum of 3 Months Must Conform to All Fannie Mae Gift Requirements; Gifts of Equity Require a 5% LTV Limit Reduction Non-arm s length transactions are purchase transactions in which there is a relationship or business affiliation between the seller and the buyer of the property. Non-arm s length transactions are allowed for the purchase of existing property. For the purchase of newly constructed properties, if the borrower has a relationship or business affiliation (any ownership interest, or employment) with the builder, developer, or seller of the property, only primary residence is allowed. Mortgage loans on newly constructed homes secured by a second home or investment property where there is a non-arm s length relationship are prohibited. (FNMA ) When tenant is buying from landlord/seller, a Verification of Rent (VOR) from a third party management company is acceptable. If there is no third party management company, provide the most recent 12 months cancelled rent checks or 12 months bank statements (or whatever shorter time period the borrower has been renting) See Gifts. Investor Qualification Products 6

7 1, 2, 3, 4, 5 MAXIMUM LTV MATRIX (Given Credit Score & Loan Balance) OCCUPANCY: Investor/Non-Owner (1-4 Unit and Condo) PURPOSE: Purchase or Rate/Term Refinance Loan Amount Up To Credit Score $750,000 $1,000,000 $1,500,000 $2,000,000 $2,500, % 80% 80% 75% NA % 80% 80% 70% NA % 80% 75% 65% NA % 75% 70% 60% NA % 70% 65% NA NA 1 LTV Limit of 80% is Applicable in Following States: FL, IL, IN, OH, PA, WI 2 LTV Limit of 65% is Applicable If at Least One Borrower is a Foreigner 3 Additional 5% LTV Reduction (with Maximum Loan Amount of $2,000,000) for All Cash-Out Refinance Loans 4 Additional 5% LTV Reduction (with Applicable LTV Limit of 70%) if Derogatory Credit Event Seasoning 4 Years 5 Additional 5% LTV Reduction (Applicable to All Limits Shown in Matrix Above) for Gifts of Equity 1, 2, 3, 4 REQUIRED LIQUID RESERVES MATRIX Loan Amount $1,000,000 3 Months $1,000,001 - $2,000,000 6 Months > $2,000, Months Foreign Borrowers 12 Months Derogatory Credit Event 4 Years Additional 6 Months DTI > 43% NA Other Mortgages Outstanding Additional 3 Months 3 1 Cash Out Amounts May Be Used as Reserves 2 Reserves Must Be Seasoned for 3 Months 3 Additional 3 Months of PITIA of Other Outstanding Mortgages (Applicable to Mortgages that Appear on Borrower's Credit Report ONLY) 4 Borrowers' Liquid Reserves and Borrowers' Reserves are Defined as Assets That Meet Fannie Mae's Requirements Investor Qualification Products 7

8 EXHIBIT A Borrower s Intent to Proceed with Loan and Business Purpose Loan Certification Date: Loan #: Borrower Name: Mailing Address: Loan Program: Property Address: This document is intended to express your request to proceed with the above referenced loan. If you wish to proceed, please return a signed and dated copy of this document to [ENTER NAME AND ADDRESS OF LOAN OFFICE OR DEPARTMENT]. By signing and returning this document I am confirming I wish to continue with the loan, that the loan is for business purposes and not household purposes, and that the loan proceeds are intended to be used (and will in fact be used) for business purposes only, not for my personal use. I also represent that I do not occupy the property as my primary residence or as a vacation home. I intend to lease or rent the property to a third person. I understand that because the loan will be made exclusively for business purposes, laws applicable to consumer purpose loans, including but not limited to the following, are not applicable to this loan: Truth in Lending Act (15 U.S.C et seq.), Real Estate Settlement Procedures Act (12 U.S.C et seq.), Gramm-Leach Bliley Act (15 U.S.C ), Secure and Fair Enforcement Mortgage Licensing Act (12 U.S.C et seq.), and Homeowners Protection Act (12 U.S.C et seq.). By signing below I confirm I have read and understand this document and I intend to continue with the loan, and affirm that the Property is to be a non-owner-occupied investment property. Borrower Name Date Borrower Name Date Borrower Name Date Borrower Name Date Borrower Name Date Borrower Name Date Investor Qualification Products 8