Hit the Books: First Time Homebuyer Programs from FNMA and FHLMC

Transcription

1 Hit the Books: First Time Homebuyer Programs from FNMA and FHLMC Two common first time homebuyer programs are MyCommunityMortgage from FNMA and Home Possible from FHLMC. This reference will help you understand the programs similarities and differences. Table A Maximum LTVs Max LTV Max LTV Primary Residence 1 Unit 2 Unit 3-4 Units 95% (97% FTHB*) Fixed & 90% ARM 95% Fixed & 90% ARM 95% Fixed Only 95% 95% 95% Vacation/2nd Home 1 Unit Investment Property 1-2 Units 3-4 Units *FNMA will allow up to 97% LTV for first time homebuyers Table B CLTVs Primary Residence Only With Community Seconds: 105% CLTV With Non-Community Seconds: 95% CLTV Additional restrictions may apply 95% CLTV

2 Table C Loan Products Loan Types Fixed-Rate Max LTV: 95% (97% FTHB) Ratios: As determined by Desktop Underwriter, 45% for manually underwritten loans with 680 credit score and 2 months PITI reserves (up to 45% for CS and CHC)* Interest-only not available Max LTV: 95% Ratios: As determined by Loan Product Advisor, 45% for manually underwritten loans Interest-only not available Fixed-Rate w/buydown Max LTV: 95% (97% FTHB) (1-2 units only) Ratios: Same as Fixed-Rate Max Buydown: 2/1 for Fixed-Rate, 7/1 and 10/1 ARMs (1-2 units only) Qualifying Rate: Note rate Balloons Max LTV: ARMs Max LTV: 90% (1-2 units only) Ratios: Same as Fixed-Rate Qualifying Rate: 5/1, 7/1 greater of the Note Rate or fully-indexed rate Annual Cap: 2% Life Cap: 5% Potential Neg-Am: Scheduled Neg-Am: Max LTV: 95% (1-4 units) Ratios: Same as Fixed-Rate Max Buydown: 2/1(1unit only) Qualifying Rate: Note Rate Max LTV: 95% (1-2 units only) Ratios: Same as Fixed-Rate Qualifying Rate: ARMs w/buydown Max LTV: 90% (7/1 and 10/1 ARMs only) * CS (Community Solutions) mortgage for teachers, police officers, firefighters, health care workers, and military personnel. CHC (Community HomeChoice) mortgage for borrower or family member with a disability Table D Refinance Requirements Rate & Term Refinances Max LTV: 95% Fixed & 90% ARM (1 Unit, Limited Cash-Out), 95% Fixed & 90% ARM (2 Unit, Limited Cash-Out), 95% Fixed Only (3-4 Unit, Limited Cash-Out) Max Cash to Borrower: Lesser of 2% of the new refinance loan amount or $2,000 2 nd Mortgages: May be included in payoff if the lien (subordinate financing) was used in whole to acquire the property. Equity Buyouts Max LTV: Cash-Out Refinances Max LTV: Max LTV: 95% (1-4 Unit, No Cash-Out) Max Cash to Borrower: 2 nd Mortgages:

3 Table E Income Requirements COURSE VIII: EXPANDING WITH NICHE PRODUCTS Standard: Any and all income from borrowers listed on mortgage must be counted - limit is based on 100% of Area Median Income* Standard: LPA will indicate income eligibility Non-Metropolitan Counties: 115% of Area Median Income Income Limits Income Limits Waived: Contact FNMA to see which areas in your territory are excluded Community HomeChoice (Borrower or family member with a disability): 115% of Area Median Income Other Income Rental Income *Visit FNMA website for Area Median Incomes Percentage Allowed: Up to 30% can come from boarder income if; (1) the boarder has lived with and paid rent to the borrower for the last 12 months (2) the border can document history of shared residence (3) the border can demonstrate payment of rent to the borrower for the last 12 months (Additional requirements may apply) 2-4 Unit Properties Only: 2 Unit: Use 75% of the lesser of the actual or projected rent from the rental unit 3-4 Unit: Use 65% of the lesser of the actual or projected rent from rental units Percentage Allowed: 2-4 Unit Properties Only: 100% can be considered stable income if it does not exceed 30% of total income Table F Co-Borrower Restrictions Co-Borrowers Non-Occupying Trailing Co-Borrowers Allowed only for Community HomeChoice (CHC) - Ratios: 33/38% Not permitted Not permitted

4 Table G Requirements for Equity, Gifts and Reserves Minimum Equity Gift/Reserves COURSE VIII: EXPANDING WITH NICHE PRODUCTS Down Payment Borrower Reserves Gifts Other Source of Funds Minimum Borrower Down Payment: 5% (can be gift),1 Unit, 5% for manual underwrite 5% (up to 2% can be gift), 2-4 Unit, 5% for manual underwrite Primary Residence: Determined by DU and must be borrowers own funds For manually underwritten loans - see Fannie Mae Selling Guide Eligibility Matrix Gifts must be from a relative as evidenced by a gift letter signed by the donor with the following information: Specific dollar amount of the gift Donor s name, address, telephone number and relationship to the borrower Evidence of receipt of funds Donor s statement that no repayment is expected Date the funds were transferred Source of the gift funds Cash on Hand: Allowed for down payment only see Fannie Mae Selling Guide for requirements Minimum Borrower Down Payment: 5% (can be gift),1 Unit 5% (up to 2% can be gift), 2-4 Unit Primary Residence: Determined by LPA For manually underwritten loans o 1 unit No reserve requirement o 2 4 units 2 months reserves Table H Guidelines for Seller Contributions Seller Contributions Maximum Seller Contributions 1-4 Unit: 3% for 90.01% LTV or greater 6% for 90% LTV or less 1-4 Unit: 3%

5 Table I Requirements for Manufactured and Attached Housing Manufactured Housing LTV Limits Max LTV: Max LTV: 95% (Additional restrictions apply) Attached Housing Condominiums LTV Limits Criteria: Must be on FNMA s approved condo development list Condo, PUDs, Attached Non-Condo: Max LTV 95% (97% FTHB) Co-op: Max LTV 95% (97% FTHB) (Must meet FNMA requirements) Criteria: Condo, PUDs, Attached Non-Condo: Co-op: Table J Requirements for Mortgage Insurance and Extended Terms Mortgage Insurance Coverage Mortgage Insurance Coverage Required - see your company MI rates Extended Terms 40-Year Term

6 Table K Credit Guidelines Desktop Underwriter Approval: Eligibility and approval is determined by DU. At least one borrower must have a traditional credit history. Approve/Eligible findings are eligible for delivery to FNMA. Loan Product Advisor Approval: Eligibility and approval is determined by LPA. At least one borrower must have traditional credit history. Accept findings are eligible for delivery to FHLMC. Credit Guidelines Manual underwriting: Minimum credit score 1 Unit with max 36% DTI, 700 with max 45% DTI 2-4 Unit with max 36% DTI or 720 with max 45 DTI and 2 months PITI reserves There are expanded guidelines for borrowers with non-traditional credit, low credit scores due to lack of credit history and/or insufficient credit, and those with extenuating circumstances. See requirements for expanded manual underwriting guidelines in the FNMA Selling Guide for more information. Manual underwriting: Minimum credit score 660 for all files with invalid, ineligible, or incomplete assessment Table L Requirements for Homebuyer Education Homebuyer Education Minimum Requirements All Units: For purchase transactions where all borrowers are first time buyers, or if all borrowers are relying solely on non-traditional credit to qualify, or if the LTV is above 95%, at least one borrower must complete pre-purchase homebuyer education and counseling. All Units: For purchase transactions where all borrowers are first time buyers, at least one borrower must complete pre-purchase homebuyer education and counseling.

7 Table M Comparison of Home Possible and Home Possible Advantage SM Home Possible Home Possible Advantage SM Eligible Property and Loan Types 1-4 unit primary residence Manufactured home Fixed-Rate and ARM 1 unit primary residence Manufactured homes are not allowed Fixed-Rate only LTV Limits 95% 97% LTV 105% TLTV with FHLMC approved second mortgage Ratios As determined by Loan Product Advisor, 45% for manually underwritten loans As determined by Loan Product Advisor, 43% for manually underwritten loans Summary Conventional Financing through FNMA and FHLMC: Maximum financing is an excellent option for first time homebuyers who have limited cash assets, high credit quality, job stability, sufficient earnings and are looking for a primary residence. When it comes to conventional financing, two of the more common first-time homebuyer loans are MyCommunityMortgage by FNMA and Home Possible by FHLMC. General loan program requirements are as follows: o Purchase transactions or rate/term refinances only o Primary residence only o Borrower may use gift funds for down payment o Income limitations for borrowers to qualify o Borrower may not own or have joint ownership in any other property It is important to note neither MyCommunityMortgage nor Home Possible requires a borrower to be a first-time homebuyer in order to qualify for financing up to 95% LTV. However, FNMA will allow a borrower to finance up to 97% if at least one of the borrowers is a first-time homebuyer. As discussed in previous lessons, FNMA considers a first-time homebuyer someone who has not owned a home in the last 3 years. Down Payment Assistance Programs o The most common restrictions are maximum allowable income (typically based on or at a percentage above median income) and purchase price. It is important to check with the down payment assistance provider to see if borrowers must attend any kind of homebuyer education to qualify.

8 HUD Homes and $100 Down Program: HUD s Federal Housing Administration has helped millions of people realize the dream of homeownership by making the home buying process easier and more affordable. One of the more unique programs HUD offers is the $100 Down Program. If someone defaults on an FHA mortgage, HUD will foreclose on the property and pay off any losses to the bank holding the note. In an effort to recoup their costs they will put the home up for sale with an attractive price and flexible loan terms. USDA Rural Development Loans: The United States Department of Agriculture offers special loans and grants to low and moderate income rural Americans. These programs make home financing available to homebuyers who want to buy and/or improve homes in specified rural communities. USDA partners with approved lenders to offer 100% financing to individuals and families for the purchase of safe and sanitary homes. o Overview of general program guidelines: Home must be in USDA approved and designated rural area 100% financing no down payment required Borrower must meet income limits per USDA guidelines A USDA Guarantee Fee (similar to the UFMIP for FHA) is financed into the loan Annual fee for all loans, based on remaining principal balance paid monthly Flexible credit guidelines and non-traditional credit may be accepted Streamlined underwriting for borrowers with credit scores 620 and above DTI ratios of 29/41 can be exceeded with compensating factors Non-occupant co-borrowers are not permitted Not limited to first time homebuyers Eligible repairs may be financed into the loan restrictions may apply Eligible property types are new construction, modular homes, PUD s, manufactured homes, and eligible condo s Closing costs can be added to the loan with higher appraised value Closing costs can be paid by the home seller, up to 6% You can verify property eligibility by visiting services/single-family-housingguaranteed-loan-program

9 Notes COURSE VIII: EXPANDING WITH NICHE PRODUCTS