Purchase, Rate and term refinance, Cash-out refinance. Finance Type. Owner-occupied primary residences only F15, F20, F25, F30, F15HB.

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1 Finance Type Occupancy Product Codes Purchase, Rate and term refinance, Cash-out refinance Owner-occupied primary residences only F15, F20, F25, F30, F15HB. F30HB FHA Fixed Rate Type of Loan Maximum Mortgage Maximum LTV/CLTV Minimum Credit Score Reserves Max DTI Maximum Number of Units Purchase Refer to Maximum Loan Amounts Section 96.5%/96.5% 640 Determined by AUS Rate and Term Refinance Refer to Refinance Section under topic of "Maximum Insurable Mortgage" 97.75%/97.75% 640 Determined by AUS Cash-Out Refinance N/A 85%/85% 640 Determined by AUS FHA High Balance Type of Loan Maximum Mortgage Maximum LTV/CLTV Minimum Credit Score Reserves Max DTI Maximum Number of Units Purchase Rate and Term Refinance Refer to Maximum Loan Amounts Section Refer to Refinance Section under topic of "Maximum Insurable 5/1 ARM 30 YR 15 YR 96.50% % AUS Loans follow DU/LP guidelines AUS Loans follow DU/LP guidelines Revised: April 8, 2016 Page 1

2 Mortgage" Cash-Out Refinance N/A 85% AUS Loans follow DU/LP guidelines Age of Documents Appraisal: 120 days from the note date sets: 120 days from the note date Credit report: 120 days from the note date Income: 120 days from the note date Underwriting Method DU Eligible - Yes - Approve/Eligible LP Eligible - Yes - Accept Manual Underwriting Eligible - Yes Refer/Eligible Borrower Eligibility Eligible: U. S. Citizens Permanent resident aliens Non-permanent resident aliens Inter vivos revocable trusts Non-occupant co-borrowers Ineligible: Partnerships Corporations Non-Revocable Inter Vivos Trust Foreign Nationals Revised: April 8, 2016 Page 2

3 Compensating Factors Housing Expense Payments Down Payment Accumulated Savings Previous Credit History No discretionary debt Compensation or Income Not Reflected in Effective Income Minimal Housing Expense Increase Substantial Cash Reserves Substantial Non-Taxable Income Potential for Increased Earnings Primary Wage -Earner Relocation Residual Income Please see guidelines for full details of compensating factors Condominiums Credit Must be FHA Eligible: Minimum FICO score of 640 All borrowers must have at least one credit score. FICOs below under 640 are eligible. Please see sections 603, 604 and 605 for FHA low score programs. Revised: April 8, 2016 Page 3

4 Chapter 7 Bankruptcy A minimum of two years must have elapsed since the date of discharge of the bankruptcy Credit report documenting date of discharge or copy of the discharge papers Must have re-established acceptable credit or chosen not to incur new credit obligations Reaffirmation of Debt Refinances When a borrower(s) choose to refinance a mortgage debt was previously associated with a Chapter 7 bankruptcy, they are required to provide documentary evidence that the mortgage debt was reaffirmed. Derogatory Credit Chapter 13 Bankruptcy A minimum of 12 months of the payout period has elapsed under the bankruptcy and the payout performance has been satisfactory with all required payments made on time. Borrowers must receive written permission from the counseling agency to enter into the mortgage transaction. If the bankruptcy has been discharged the waiting period is: Two years from the discharge date for a TOTAL Scorecard Accept/Approve Recommendation For less than two years, the loan must be downgraded to a Refer and evaluated by a Direct Endorsement (DE) underwriter. Pre-Foreclosure, Short Sale, Foreclosure or Deed-in-Lieu A minimum of three years must have elapsed since the date of foreclosure completion Evidence of completion of the foreclosure must be in the loan file. The credit report verifying foreclosure completion is not acceptable. Restructures/Loan Modifications Modified loans may not have had principal forgiveness or curtailment, but have had a recapitalization of interest in arrears. This represents a change to the original loans terms. Down Payment sistance Down Payment sistance programs are permitted with approved government entity second lien. CLTV may exceed 96.5% Revised: April 8, 2016 Page 4

5 Gifts or grants from non- profit organizations or municipalities are eligible. Eligible Property Types Single Family Detached Single Family Attached 2 4 Unit Detached/Attached PUDs Low-rise and High-rise Condominiums (must be FHA eligible) Rural Properties (in accordance with agency Guidelines, loans must be residential in nature) Financing Concessions HUD REO Transactions Financing concessions cannot exceed 6% of the sales price. Maximum Mortgage Amount: The maximum mortgage amount is calculated using the lesser of the "as-is" value of the new appraisal or sales price when determining the maximum financing, excluding for HUD REO properties with down payment sales incentives. Calculation for Insurable HUD REO with Repair Escrows - Use the lesser of the "as-is" value of the new appraisal, or sales price Closing costs and pre-paids may not be added in the mortgage amount May include cost of repairs up to 110% of the loan amount up to a maximum $5000 (plus a 10% contingency amount) If sales incentives are present, they must be included in the REO sales contract (HUD-9548) Revised: April 8, 2016 Page 5

6 The maximum loan-to-value (LTV) factor for identity-of-interest transactions on principal residences is restricted to 85%. Financing above the 85% maximum for identity-of-interest transactions is permitted under certain circumstances, as described below: - Family Member Purchase - Builder s Employee Purchase - Corporate Transfer - Tenant Purchase: A current tenant, including a family member tenant, purchases the property where he/she has rented for at least six months immediately predating the sales contract. Note: A lease or other written evidence to verify occupancy is required. The maximum mortgage calculation is not affected by a sales transaction between a tenant and a landlord with no identity-of-interest relationship. Identity of Interest Transaction Supreme will include HUD s definition of Family members for Identity-of-Interest transactions. Child, Parent, or Grandparent Spouse, 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 Uncle Aunt Note: A child is defined as a son, stepson, daughter, or stepdaughter. A parent or grandparent includes a stepparent/grandparent or foster parent/grandparent Revised: April 8, 2016 Page 6

7 Ineligible Property Types Manufactured homes (built on a permanent chassis and attached to permanent foundations) Mobile Homes Cooperatives Condotels Hotel Condominiums Timeshares Geodesic Domes Working Farms and Ranches Unimproved Land and property currently in litigation Loan Purpose Purchase Limited Cash-Out/Rate & Term Refinance - Proceeds can be used to Pay off a first mortgage regardless of age - Proceeds can be used to pay off any junior liens related to the purchase of the subject property, or that are seasoned at least 12 months - Pay related Closing Costs and Prepaid items - Disburse cash out to the Borrower in an amount not to exceed $500 Cash Out - LTV is based on Purchase Price if property owned less than 12 months - Borrower must be 0x30x12 on the subject mortgage history - Texas properties are ineligible Occupancy Property Flipping Policy Owner-occupied primary residences only Non-Occupying Co-Borrowers allowed subject to FHA requirements. Property flips are measured from the acquisition date to the buyers executed sales contract date. Properties resold 90 days or fewer following the date of acquisition by the seller are not eligible for FHA financing unless the seller is an acceptable entity. See guidelines for full details. Properties resold between 91 and 180 days after acquisition require a second appraisal by a different appraiser if the resale price is 100% or more over the price paid by the seller when the property was acquired. Revised: April 8, 2016 Page 7

8 DTI determined Qualifying Ratios DTI Manual Underwrite Maximum 37/47% with ONE of the following Compensating Factors 3 months reserves for 1-2 unit, 6 months reserves, 3-4 units New total mortgage payment is not more than $100 or 5% ( whichever is less) of higher than previous housing payment. And 0 X 30 in most recent 12 months Residual Income Maximum 40/40% Borrower has established open credit for at least 6 months but carries no balances for previous 6 months Maximum 40/50% with TWO of the following Compensating Factors 3 months reserves for 1-2 unit, 6 months reserves, 3-4 units New total mortgage payment is not more than $100 or 5% (whichever is less) of higher than previous housing payment. And 0 X 30 in most recent 12 months Verified significant additional income that is not considered effective income Meets HUD's Residual Income requirements Recently Listed Properties State Restrictions No Cash-Out Transaction - Allowed when the property is listed for sale. The property and the borrower must be eligible and qualified for the refinance. Cash-Out Transaction - the listing must have expired or been withdrawn prior to the application date. Texas 50 (a) (6) Refinance Mortgages are prohibited 2-4 Unit properties in Illinois. Please refer to the Underwriting Guidelines for specific program details, State specific requirements and other overlays/requirements. Revised: April 8, 2016 Page 8