USDA Guidelines GUSDA30

Transcription

1 USDA Guidelines GUSDA30 BSM Direct guidelines have been created to provide guidance and consistency in determining credit decisions. The guides are not all inclusive of different situations that may arise on any given transaction. BSM Direct reserves the right to apply additional underwriting criteria depending on the overall risk or uniqueness of the file. Amortization: Product is available on 30yr fixed rate term. Appraisals A full appraisal is required on all transactions. The appraisal must have been completed within six months of the date of the request for a conditional commitment. Purchase transactions for existing dwellings must meet the current requirements of HUD Handbook Asset Documentation: Two months bank statements are required on all accounts listed on the initial Large deposits must be sourced. Borrower Eligibility: U.S. Citizens and permanent resident aliens are allowed. All borrowers must have a valid social security number and minimum of 2 years residency in the United States. Permanent resident aliens must provide evidence of lawful residency in the United States Non-permanent resident aliens are not eligible for this program.

2 Credit Score and Credit Requirements: Minimum credit score is 640 for all borrowers. Additional Credit Requirements: Bankruptcy Short Sale Foreclosure Judgments & Lines Federal Debts Chapter 7-3 years elapsed since completion of discharge Chapter 13-1 yr in repayment w/12 mo timely payment and court permission to proceed None in last 3 years None in last 3 years Must be paid off Borrowers that are delinquent on Federal debts may be ineligible. Recorded outstanding judgments obtained by the United States in a federal court or any debt identified by CAIVRS shall cause the borrower to be ineligible until the Federal debt is paid in full or resolved. Evidence of payment arrangements is acceptable for IRS federal tax judgments. The following are not required to be met with a GUS accept but are required for a manual underwrite: No more than one payment being more than 30 days late in the last 12 months. No more than one rent or mortgage payment paid 30 days or more past due in the last 3 years. No outstanding collection accounts without payment arrangements. No accounts converted to collections in the last 12 months. Authorized User: A GUS recommendation of Accept with open authorized user trade-lines must include evidence in the lenders permanent casefile of the one of the following: Another applicant on the mortgage application owns the trade-line in questions. The owner of the trade-line is the spouse of an applicant. Evidence the applicant has been making payments on the account for the last 12 months If one of these conditions cannot be met, an underwriting recommendation of Accept must be downgraded to a refer and the file must be manually underwritten. Closed authorized user accounts require no consideration for manual of GUS loan submissions.

3 Disputed Credit Trade-lines: When applicants indicates a trade-line or public record in dispute, a GUS underwriting recommendation of ACCEPT may be downgraded to a REFER. A downgrade is not if any of the following are met in regards to the disputed item listed of the credit report. The trade-line has a zero dollar balance. The trade-line is marked paid in full or resolved. The trade-line has balance owed of less than $500 and is more than 24 months old. Disclosures: Completed Guarantee Fee Form must be signed by all borrowers. All borrowers must have clear CAIVR#. Income calculation form and Guaranty Fee Calculation plus any state specific forms must be included in the package. Down-Payment Requirements: A minimum cash contribution is not required by the borrower. Gifts are permitted from eligible sources (please refer to Gift documentation section). Prepaid closing costs, inspection fees and/or earnest money deposits be refunded to the borrower at closing with proper documentation to support the borrower s payment from liquid funds (i.e.: cash withdrawal from bank account, cancelled check, or debit card transaction). Employment/Income Documentation: All borrowers must be on their job a minimum of 30 days and have a paystub that reflects a minimum of 30 days earnings documented in loan file prior to loan closing. A verbal verification of employment will be conducted 48 hours prior to closing on all loans. A two year employment and income history must be verified on all borrowers: Salaried borrowers require two years W2 s and 30 day s pay stubs. Self-employed individuals require two years tax returns and a year to date profit and loss statement. Alimony and child support must have minimum 1 year history with proof of 3 years continuance. 12 months verification of receipt must be provided.

4 Part time income, overtime, bonus, and commission income must have 24 month history and will require full written VOE for verification. Disability benefits require benefits letters and 3 years continuance. A 4506-T will be ordered on all loans. Escrows: Escrow accounts are required on all USDA transactions. Escrow Holdback: Escrow Holdbacks are allowed if the following criteria are met: As-improved value must be determined. LTV cannot exceed 100%. Itemized bid from licensed contractor is required. Repairs must be itemized on 1003 and USDA Guarantee form USDA approval required. Not available for safety or livability issues. Exclusionary List: CAIVRS must be checked and cleared. Financed Closing Costs: If the value of the home being purchased is appraised higher than the purchase price, the borrower may finance any prepaid expenses and closing cost not being paid by the seller, up to a maximum of 100% of the appraised value. The borrower may NOT finance discount points. Gifts: Gifts are allowed. A fully executed gift letter confirming no repayment will be required. The gift letter must include name, address, and relationship of the donor, both borrower and donor signatures and confirm the funds were not made available from any party to the transaction. The file must also contain evidence of donor s ability to give gift prior to closing. Transfer of gift funds must be documented.

5 Guarantee Fee: A one-time guarantee fee of 2% is required on purchase and refinances transactions. The guarantee fee may be financed. Please Note: When financing the guaranty fee, the actual amount financed will result in a percentage higher than 2% due to the required calculation method. Refer to the chart below for proper calculation. The Guarantee Fee may be calculated in two ways depending on whether the fee will be financed. Transaction Type Purchase & Rate/Term Guarantee Fee Not Financed Multiple the loan amounts by 2% and round to the nearest cent. Example: $100,000 x.02=$2,000 Guaranteed Fee Financed The fee is calculated as follows: 1. Divide the base loan amount by.98 and round to the nearest cent. 2. Multiply that number by.02 (2.0%) and round to the nearest cent. Example: $100,000/.98=$102, $102, x.02=$ Effective with loans receiving a conditional commitment from RD on or before October 1, 2012 both purchase and refinances will require an annual fee equal to.40%. The annual fee is calculated over a 12 month average of the subject s principal balance. A guarantee fee calculator can be found online at

6 Hazard Insurance: Hazard policy deductibles are not to exceed 1% Homebuyer Education: Homebuyer education is not typically required for a USDA loan. However, it may be required by a local USDA office in some circumstances. Income Limits: The borrower s adjusted household cannot exceed 115% of the area median income. An income calculator is available on the Rural Development website at From the home page click Single Family Housing under Income Eligibility tab. Income for all non-applicant household members (age 18 and up) must be documented in the same manner as those obligated on the note. For purposes of household income calculation, farm, or self-employed business losses are not deducted from the overall income total. They are to be considered as zero income for income eligibility purposes. Liquid assets in excess of $5,000 remaining after closing must be considered income producing with a monthly income amount considered in the Household Income Eligibility Calculation. If an interest rate or annual interest figure is not reflected on the statement, the current standard passbook savings rate will be applied. For example, if a borrower had $5,000 in assets after closing, the follow calculation could be used: $5,000 X 1% (.01) = $50 in annual income Maximum Loan Amount/LTV: 100% of the appraised value is allowed up to the current maximum FNMA/FHMLC loan limit (currently $417,000) and may include closing costs. The maximum LTV may exceed 100% of the appraised value only by the amount of the Guarantee fee being financed in the loan amount; thus, maximum LTV is 102%.

7 Multiple Property Ownership: Borrowers cannot own another dwelling in the local commuting area. An exception can be granted if the borrower owns a dwelling which is not structurally sound or functionally adequate. All members of the household are included when determining real property ownership (i.e. property belonging the non-borrowing spouse will be included and considered). Joint ownership in real property awarded to another party through divorce settlement is not considered ownership of adequate dwelling and will not automatically disqualify a borrower. Non-Occupant Co-Borrower: Not allowed. Occupancy: Primary residence only. Borrowers must occupy the subject property within 60 days of closing and intent to occupy for a minimum of 12 months. Property Eligibility: In order for a property to be eligible for USDA loan, the property must be located in a rural designated area as defined by USDA. Eligible areas can be located on the USDA Rural Development web site at:

8 Property Type: Eligible Properties: Single Family Attached/Detached. PUDS Modular Homes. Condominiums that meet FNMA, FHLMC, or FHA guidelines. Ineligible Properties: Manufactured Homes. Second Homes. Investment or income producing properties. Leaseholds. Working Farms. Log Homes. Geodesic Domes. 2-4 Units Properties with more than 30% land value. Mixed Use Properties. Property Flipping: A property is considered to be a flip if title has been transferred in the last 90 days. The following documentation is required on a property flip. Documentation of seller s acquisition cost. Property Requirements And Inspections: Existing Dwelling Properties: House must comply with HUD handbook minimum property standards. Pest Inspection. Septic Inspection. Well Inspection. New Construction: Certificate of Occupancy- footing, framing, and final inspections. Termite treatment records. 1 year builder warranty. Thermal certification.

9 New Construction without a Certificate of Occupancy: Plan Certification Form Termite treatment records. 2/10 Builder warranty. Thermal certification. Qualifying Ratios: Maximum ratios are 29/41. A higher ration will be allowed with a GUS approval; however, the debt ration cannot exceed 50% regardless of GUS approval.

10 Refinances: Rate/Term refinances are allowed on loans already secured by a USDA Mortgage. Loan secured but any other type of financing are not eligible. Description Cash-Out Term Interest Rate Guarantee Fee Household Income Loan Amount Not allowed 30 years Requirement Must be minimum 1% lower than the interest rate of the existing loan The fee amount is 2.00% of the total principal obligation of the new loan. The fee may be financed into the new loan amount. The LTV of the new loan may exceed 100% only if the excess amount represents a financed guarantee fee of no more than 2.00% Total household income cannot exceed the moderate level for the area as established by RD. Streamlined: Maximum loan amount cannot exceed the current principal balance of the loan being refinanced, plus the guarantee fee. Occupancy Qualifying Ratios 29/41% Borrowers Real Estate Commission: Real estate commission is limited to total of 8%. Non Streamlined: Maximum loan amount cannot exceed 100% of the current market value as determined by a full appraisal. The base loan amount may include the principal balance and accrued interest, reasonable and customary closing costs, lender fees and funds necessary to establish new escrow account. The guarantee fee may be financed above the fair market value not to exceed 102% The subject property must still be the borrower s principal residence. All borrowers originally obligated on the note must remain on the new note. If a borrower wishes to be removed, the remaining borrower must demonstrate their own repayment ability.

11 Re-negotiated Sales Contracts: BSM will not accept re-negotiated sales contracts that increase the sales price after the original appraisal has been completed if: The appraised value is higher than the contracted sales provided to the appraiser, AND The new purchase agreement and/or addendum used to modify the sales price is dated after the appraisal is received, AND The only change to the purchase agreement is an increase to sale price. If the purchase agreement is re-negotiated following the completion of the appraisal, the loan to value will be based on the lower of the original purchase price or the appraised value, UNLESS: Re-negotiation of only seller paid closing costs and/or pre-paid items when seller paid closing costs/pre-paid items are common and customary for the market and supported by the comparable, OR An amended sales contract for new construction is obtained due to improvements that have been made that impact the tangible value of the property. In the event of such changes, an updated appraisal must be obtained to verify the value of the modifications/changes. Reserves: Not required. Seller Contribution: Temporary Buy-Downs: Seller contributions up to 6% are allowed. Not allowed