TCF Credit and Income Guidelines

Transcription

1 Clarifications/ Changes to Policy: NO CHANGES TO THE GUIDELINES TCF Credit and Income Guidelines Updated March 1 st, 2019 Second-lien HELOC for Primary Residences and Second Homes. No investment properties Eligible properties: single family, condominium and Owner Occupied 2-unit properties. First mortgage product can be FHA, VA or Conventional; fixed or amortized ARM. No Interest Only first mortgage products. TCF does not lend in the following States: AL, AK, HI, TX, OK, LA, MS, W VA No reserves required for subject property or any other property owned. No restrictions on Gifts - Full gift allowed with no borrower contribution needed. No seasoning for cash out. No delayed financing restriction No title seasoning or continuity of obligation. No active trade lines or installment debt required- TCF requires a total (Borrower and Co- Borrower credit, combined) of 3 trade lines, open or closed, one seasoned 3 years. No restriction on isolated late payments - with good explanation and overall credit profile. No seasoning to use current market value as long as our Desk Review supports value No restriction on Non Permitted Improvements our Desk Review must support value. No restriction on Work VISAs - with the right documentation. Unexpired EAD cards OK. No seasoning for return to work after employment gap if compensation is full time base pay No 4506 or tax returns needed for W-2 earners. No requirement for 2- year tax returns w/du or LP findings for 1- year tax returns. Non ARMS length transactions allowed. Gift of equity allowed. Property off the market one day OK.

2 Credit Guidelines Credit Scores: The Primary Wage Earner (Borrower with most income) must meet TCF Minimum Mid Scores. FICO Score 680 Combined Liens $1,250,000 85% CLTV. FICO Score 700 Combined liens $1,250,000 to 89.99% CLTV FICO score 730 Combined liens over $1,250,000 to $2M 89.99% No minimum score for the lower wage earner. If you excluded a lower wage earner on your first mortgage due to score, you can add that Borrower/their income to the HELOC as long as they are on title for the first. TCF doesn t have a policy regarding late payments. We focus on the higher wage earner mid credit score. 5 year seasoning for a SHORT SALE, FORECLOSURE or any Real Estate transaction settled for less than owed. Submit to TCF the month after the 5- year anniversary or submit the day after the 5- year mark with a settlement statement or property profile showing exact settlement date BK Policy: No Bankruptcy FILING in the past 7 years. We use the filing date on the Credit Report. If borrower filed, but BK didn t go through, there s a 7 year waiting period. Trade Lines: A total of 3 trade lines (Per FILE--all Borrowers credit combined) with one trade line seasoned 3 years. Accounts can be open or closed. No Installment Debt or VOR required. No trade line activity rule. Authorized user accounts do not qualify as a Trade Line. OK to Pay-Off debts to qualify. Pay off debts with the HELOC, at closing. Revolving accounts can remain open. Installment debt excluded with 6 or less months remaining. You can pay down installment debt with the HELOC. Student Loans: If in deferment, no payment listed on the credit report, use 1% of the balance for each loan or estimated payment from student loan lender s calculator. Payment from an Income Repayment Plan - OK. TCF does not include 401K loans in DTI. 401K Statement no longer required, however, 403B Loans will require a statement to show the vested balance outweighs the loan. Departing Residence converting to rental Provide a 12- month lease and proof a security check has been deposited. TCF will apply 75% of gross rent to offset PITI. No departing property equity requirement. No prior landlord experience required. Lease and Security check can be provided as a final (PTD) condition. Positive rental income will be used as qualifying income. Housing Debt when departing is under contract. Loan on the departing residence may be omitted from the debt analysis with a fully executed purchase agreement/contract for the sale of the property, provided the transfer of possession date is not more than 60 days after the loan closing Co-signed mortgage debt: Borrower must execute Quit Claim if listed on Title and provide proof someone has been making the payments for a minimum of 6 months. Will not eliminate co-signed debt if any late payments in the past 24 months. Newly rented properties-not on returns: If a property is not being reported on the tax returns, current lease agreement with proof of one month rents received A filed Marriage Separation Agreement or Divorce Decree must be provided to document debt that has been assigned to an ex-spouse.

3 Real Estate owned by a business will not be included in DTI calculations if Borrower owns less than 25% of the business. If Borrower owns 25% or more of the business, TCF will use rental income to offset or wash the PITI on the property. Please provide Mortgage Statements and documentation for the tax and insurance obligations for each property owned by the business. We can use the Schedule E to document real estate taxes and property insurance. Positive cash flow will be used as qualifying income. Non-Real Estate Accounts Paid by other persons: Non-real estate accounts paid by another individual who is contractually obligated on the debt, may be omitted from the debt analysis if the following criteria are met: There is proof of 12 months of payments by the individual There is no delinquency in the last 12 months. Non-Real Estate Accounts Paid by a Business: Non-real estate accounts, i.e, car loans & credit cards, paid by a business entity may be omitted from the debt analysis if all of the following criteria are met: There is proof of 12 months of payments by the business There is no delinquency in the last 12 months Income Guidelines TCF policy requires a two- period history 2018/YTD for all forms of varying pay. Non-occupant Co-Borrowers: Non-occupant co-borrowers are allowed. Only one applicant must intend to occupy the property as his or her primary (or secondary) residence. All applicants will be credit qualified and must be on the title. TCF s policy for calculating varying income, including: commission, shift differentials, overtime, part-time work, varying hours will be to average actual months worked in 2017, with the current employer + YTD. TCF will not include income from a prior employer unless there was no income from the current employer in If current year income is declining by more than 20%, TCF uses lower income. Bonus Income: TCF needs a WVOE, Letter from Employer and/or borrower so we know frequency of bonus payout. TCF will average bonus income received in , using that frequency. If Bonuses are paid quarterly and Borrower has received two bonus pays YTD, we will average over 6 months. If Borrower has not received a bonus pay-out YTD, TCF can average bonus income received over 24 months. Please include a WVOE indicating future bonus income is likely. If bonus is received based on performance, will average 2018/ YTD. Self -employed borrowers: TCF will accept an accountant prepared P/L for 2018 until April 15 th to average 2017/2018 OR to use 2018 if you have findings asking for 1 year of tax returns. NOTE: If paying themselves a W-2, TCF will average 2018 W-2 + YTD paystub. TCF may calculate more income for Borrowers with varying pay. TCF calculates varying income by averaging two periods YTD. We can average pay for income received YTD as long as the current monthly average hasn t declined by >20%. If decline exceed 20%, we can look to request an exception to average if there is a good explanation.

4 Using Offer Letter or Employment Contract to calculate income for varying pay. If Borrower has varying base pay (hourly pay) TCF will calculate the income using the hourly rate and guaranteed hours. Borrowers that work a 9, 10 or 11-month work year. TCF will annualize that income. Allowances, including Housing, Auto, Military. TCF will use current income documented by current paystubs. We will no longer average this income over two periods. Borrower on leave If Borrower will return to work before first TCF Payment is due (the 23 rd of month following funding) TCF can use final prior to leave paystub to calculate full-time base income. If Borrower will not return prior to first TCF Payment, TCF will qualify using income received prior to temporary leave and any income received to date, including leave pay. Applicant must provide written confirmation of intent to return to work and employer must provide documentation evidencing date of return to work. Self-Employed Borrowers 2- year self-employment history required. Document with tax returns. No transcripts required if signed returns are provided. One year Tax returns: TCF will follow LP or DU findings for one- year tax returns. If the S/E Borrower pays themselves wages, TCF will average wages over YTD. In some cases, the YTD self-employed wages earned are not indicative of the applicant s normal annual earnings. An example would be borrowers that pay themselves a lump sum at the end of the year and/or borrowers that receive inconsistent income throughout the year. If this is determined to be the case, a tax return, W-2, or year-end paystub from the two most recent calendar years may be used to verify self-employed wages. Two years Returns required for seasonal and temp workers- borrowers that work for a temp agency, need a 2 year work history documented Declining Income Policy: If income is declining by more than 20%, TCF uses lower income. Teacher Income: TCF will require a VOE stating how many months they work if unable to determine based on the paystub. If they are paid less than 12 months, we are going to use a run rate to calculate their income. Run rate: current YTD figures + all of the previous year then averaged out. If the current year is less than last year by more than a 20% difference, we have to use the lessor of the two, otherwise, they are averaged. 1. K-1 Income TCF Will use the following: Ordinary business income may be used if the borrower is 25% owner or more, and the company does not show a loss. If the borrower is married, spouse is the other owner, and together their ownership is 25%+, we can still use ordinary business income. If the borrower is less than 25% owner we can use the following: 1. Distributions 2. Ordinary Dividends 3. Depreciation only if they are 100% owner

5 4. Dividends 5. Guaranteed Payments 6. Items Affecting Shareholder Basis TCF does not deduct 2106 expenses from income. Tax Returns not needed for W-2 employees. No Transcripts required. TCF will gross up Child Support, Foster Care and Social Security income by 25%. Prior year s tax returns needed to determine what percentage of Social Security income is taxable. TCF will use positive cash flow from a rental property as income. Subtract net rental income (either 75% of a monthly rent, 12-month lease or a Schedule E with standard add-backs) from the rental property PITI/HOA. Positive cash flow is added to income. Negative cash flow is included with recurring and installment debt. If a rental or second home has an I/O first mortgage, TCF converts to a PITI payment. Job History and Employment Gap: One- year Job history required for W-2 employees. Can include education. Work history does not have to be continuous. Signed and dated LOE needed for gap greater than 30 days. Non-Resident Aliens TCF requires Borrowers live and work in the US. We do not require a 2- year history in the US. TCF allows all type of Work VISAs with the right documentation. Provide machine readable Immigrant VISA; copy of unexpired foreign passport and I-94 or I-797A form. TCF requires 1 trade line seasoned 3 years. If Borrower does not have US credit seasoned 3 years, OK to use Non US Credit. IRA Depletion :70% of account balance with 30 year s continuance Borrower must be of retirement age and have access with no penalty. Distribution from Retirement Account: Borrower must be of retirement age Borrower can establish a monthly distribution or increase an existing distribution. If setting up a new distribution or increasing an exiting distribution, TCF requires a written document from the financial institution. TCF does not require the funds having been received. 70% of the account(s) must support the distribution for a minimum of 36 months. Borrower must be of retirement age to use retirement funds. Assets statements must also be provided Asset Depletion - To use assets as income - 70% of savings or brokerage account divided by 360. Borrower must be able to withdraw assets with no penalty. Example: Asset owned by individual Liquid asset (made up of stocks & mutual funds) $540,000 x 70% = $378,000 Divide by 360 months (term of loan) =$1,050 per month

6 Offer Letter or Employment Contract for Salary (closing before new position commences) Start Date must be within 45 days of loan closing. Income and type of employment must be commensurate with previous position. Income from RSU: Restricted stock units can be used as income provided the earnings are: Reflected on the applicant s paystub Verified as recurring Accompanied by an employer-generated vesting schedule showing past and future vesting of shares A filed Marriage Separation Agreement or Divorce Decree must be provided to document Alimony or Child Support income plus proof of 3 months received (bank statements, cancelled checks). 3 year s continuance required. Property Guidelines Properties not allowed: 3+ units; Leasehold, Co-Ops; Investment properties; Vacant Land; Manufactured Homes; Mobile Homes; Deed Restricted. Properties allowed: SFR, 2- unit, town house, Condo s, Condotels, Log, Dome, earth, and berm homes Review dept must approve TCF does not accept PIWs The subject property needs to meet the requirements on our appraisal checklist form, to determine eligibly to order a desktop appraisal. If any items are checked yes, a full appraisal is required. If a desk-top appraisal is eligible, it will be ordered through TCF only. A deposit of $175 is held, and will not be collected if the transaction closes, but will be collected should the transaction be cancelled by the borrower once ordered. If the value of a desk-top comes in low and the borrower wishes to order a full appraisal, it will need to be ordered through TCF s AMC at the borrowers cost. A full appraisal may be ordered through the brokers AMC or TCF s AMC. TCF will order a drive-by appraisal - cost of $175 is included in our $295 cost, and will be collected if the transaction is cancelled after the appraisal has been completed Single family one and 2-unit properties only. 2-unit properties must be Primary Residences. TCF will accept a transferred appraisal. We require a transfer letter from the Lender and an AIR Letter. TCF does not lend on properties rated C-5. Properties needing significant work not a good fit.

7 Once TCF orders the Appraisal Desk Review we will not accept a rebuttal (higher value). Condominium Projects: TCF no longer has a minimum % of owner occupied units in a Project. Maximum 10 acres in all states. No seasoning to use current market value, including flips, if our Desk Review supports value. No restriction on unpermitted improvements if our Desk Review supports value. No non-warrantable condo allowed Asset Guidelines TCF has no reserve requirements. No documentation required for source of down payment. Gifts allowed even a full gift with no Borrower Contribution. No Bank or Asset statements required.