Freddie Mac Conforming and Super Conforming Fixed Rate

Transcription

1 This matrix is intended as an aid t help determine whether a prperty/lan qualifies fr certain Freddie Mac ffered prgrams. It is nt intended as a replacement fr Freddie Mac guidelines. Users are expected t knw and cmply with Freddie Mac s requirements. NOTE: This matrix includes verlays which may be mre restrictive than Freddie Mac s requirements. Prgram Qualificatins Eligible lans are cnfrming and super cnfrming mrtgages (using higher maximum lan limits permitted in designated high cst areas) fixed rate nly receiving LPA Accept findings Maximum Lan Amunt 2018 Cnfrming Maximum Lan Amunts Units Cntiguus States and D.C. Alaska & Hawaii 1 $453,100 $679,650 2 $580,150 $870,225 3 $701,250 $1,051,875* 4 $871,450 $1,307,175* 2018 Super Cnfrming Lan Amunts Cntiguus States and D.C. Alaska and Hawaii Units Minimum Lan Maximum Lan Minimum Lan Maximum Lan 1 $453,101 $679,650 $679,651 $1,019,475* 2 $580,151 $870,225 $870,221 $1,305,325* 3 $701,251 $1,051,875* Ineligible Ineligible 4 $871,451 $1,307,175* Ineligible Ineligible Permanent High Cst area the maximum ptential lan limits fr designated high-cst areas. Actual lan limits are established fr each cunty (r equivalent) and the lan limits fr specific high-cst areas may be lwer. The riginal balance f a Mrtgage must nt exceed the maximum lan limit fr the specific areas in which the mrtgage premises is lcated. Fr specific lan limits fr each high cst area, as released by the Federal Husing Finance Agency visit *Maximum Lan Amunt in all cases may nt exceed $1,000,000. Fr super cnfrming mrtgages, the lan amunt f the mrtgage stated in the nte is used t determine cmpliance with the maximum lan limits stated abve. Eligibility Matrix Lan Amunt & LTV Limitatins Any references t LTV ratis include LTV, TLTV, and HTLTV ratis, unless therwise nted. References t Rate/Term include Freddie Mac s n cash-ut refinance prgram The matrix may nt include all eligibility criteria applicable t the subject transactin Transactin Type Purchase & Rate/Term Refi Purchase & Rate/Term Refi Cash-Out Cnfrming and Super Cnfrming Fixed Rate Mrtgage Lans Primary Residence, Secnd Hme and Investment (see Matrix 2 fr Manufactured Hmes) Credit Occupancy Units Max LTV Max TLTV Max HTLTV Scre Primary Residence Secnd Hme Investment Primary Residence Secnd Hme Investment Ftntes 1. Cndminiums See Prperty Types fr eligibility Maximum Cash-Back 1 95% 4 95% 95% 620 Ineligible 2 85% 85% 85% 620 Ineligible % 80% 80% 620 Ineligible 1 90% 90% 90% 620 Ineligible 1 85% 85% 85% 620 Ineligible % 75% 75% 620 Ineligible 1 80% 80% 80% 620 N limit % 75% 75% 620 N limit 1 75% 75% 75% 620 N limit 1 75% 75% 75% 620 N limit % 70% 70% 620 N limit 4/24/18 Page 1 f 28

2 2. HTLTV (HELOC TLTV) = first lien balance + ttal HELOC amunt (funded plus unfunded prtin) the lesser f the appraised value r sales price (if applicable). 3. See Hme Pssible and Hme Pssible Advantage sectins fr qualificatins n these prducts. 4. See Mrtgage Insurance fr additinal cnditins Matrix 2 Cnfrming Fixed Rate Mrtgage Lans Manufactured Hmes - Primary Residence and Secnd Hme Transactin Type Purchase & Rate/Term Refi Cash-Out Occupancy Units Max LTV Max TLTV Max HTLTV Primary Residence Secnd Hme Primary Residence Credit Scre Maximum Cash-Back 1 95% 4 95% 95% 620 Ineligible 1 85% 85% 85% 620 Ineligible 1 65% Term 20 years 65% 65% 620 N Limit Ftntes 1. HTLTV (HELOC TLTV) = first lien balance + ttal HELOC amunt (funded plus unfunded prtin) the lesser f the appraised value r sales price (if applicable). 2. Cash Out term must be 20 years 3. Super cnfrming mrtgages are nt allwed fr manufactured hmes (Freddie Mac guideline) 4. See Mrtgage Insurance fr additinal cnditins Prduct Descriptin Fixed Rate 10, 15, 20, 25 and 30 years Cnfrming and super cnfrming lan amunts Fully Amrtizing Hme Pssible mrtgages (See Hme Pssible and Hme Pssible Advantage in Eligibility Requirements) Cnfrming lan amunts nly. Nt available fr Super Cnfrming mrtgages. Prduct Cdes Cnfrming Lan Amunts Super Cnfrming Lan Amunts Prd Cde Prduct Descriptin Prduct Cde Prduct Descriptin 210 Freddie Mac 10 YR Fixed 210SC Freddie Mac Super Cnfrming 10 YR Fixed 215 Freddie Mac 15 YR Fixed 215SC Freddie Mac Super Cnfrming 15 YR Fixed 220 Freddie Mac 20 YR Fixed 220SC Freddie Mac Super Cnfrming 20 YR Fixed 225 Freddie Mac 25 YR Fixed 201SC Freddie Mac Super Cnfrming 30 YR Fixed 201 Freddie Mac 30 YR Fixed Hme Pssible and Hme Pssible Advantage HP210; HPA210 Hme Pssible 10YR Fixed Hme Pssible Advantage 10YR Fixed HP215; Hme Pssible 15YR Fixed HPA215 Hme Pssible Advantage 15YR Fixed HP220; Hme Pssible 20YR Fixed HPA220 Hme Pssible Advantage 20YR Fixed HP230; Hme Pssible 30YR Fixed HPA230 Hme Pssible Advantage 30YR Fixed Eligibility Requirements Appraisal Requirements Prperty Cnditin Prperties with a Cnditin Rating f C5 r C6 are nt eligible. Appraiser must have current appraisal license Appraisal must include the fllwing. Interir and exterir phts FNMA frm 1004/FHLMC Frm 70 The subject prperty must represent the highest and best use f the prperty as imprved (r as prpsed per plans and specificatins) and the use must be a legal r legal nn-cnfrming use (cmmnly referred t as grandfathered use). Any adverse effect f nn-cnfrming use must be reflected in the pinin f value. Requirements fr prperties in established subdivisins, units in established Planned Unit Develpments (PUDs) r units in established cndminium prjects ( (f)): The appraiser shuld use cmparable sales frm within the subject subdivisin r prject. 4/24/18 Page 2 f 28

3 Requirements fr prperties in new subdivisins, units in new PUDs r units in recently cnverted r new cndminium prjects( (f)): The appraiser must use cmparable sales frm within the subject subdivisin r prject as well as cmparable sales in ther subdivisins r prjects t help demnstrate the marketability f new develpments r recently cnverted prjects and the market value f the prperty. The appraiser must use: One cmparable sale frm inside the subject subdivisin r prject One cmparable sale frm utside the subject subdivisin r prject, and One cmparable sale frm inside r utside the subject subdivisin r prject If there are n settled r clsed cmparable sales frm inside the subject subdivisin r prject, cntract/pending sales frm inside the subject subdivisin r prject are acceptable, as lng as three cmparable sales are actual settled r clsed sales. The cmparable sale frm inside the subject subdivisin r prject can be a sale by the builder r develper f the subject prperty. (Bulletin ) Additinal appraisal requirements fr units in detached cndminium prjects (5701.8(a)(iii)): The appraiser must use similar detached cndminium cmparable sales frm the same prject r frm similar detached cndminium prjects in the same market area. The appraiser may use detached cmparable sales that are nt lcated in a cndminium prject nly if the appraiser supprts the use f such sales in the appraisal reprt and reflects any effect that the cndminium frm f wnership has n the market value and marketability f the subject prperty. Appraisal must be btained in a manner cnsistent with the requirements f Appraiser Independence Requirements (AIRs). Nte: The Prperty Inspectin Alternative (PIA) and Frm 2070, Lan Prspectr Cnditin and Marketability Reprt, have been retired t align the Selling Guide with current Lan Prduct Advisr fferings. An appraisal is valid fr 120 days t nte date. (5601.8). Appraisal Desk Review Reprt Frm 1033 (Bulletin ) When btaining an appraisal desk review reprt fr ne-unit prperties, Frm 1033 must be used. Recnciling multiple pinins f market value ( c, Bulletin ) The requirement t use the lwer value when multiple appraisals are cnsidered t be equally accurate and well supprted has been remved. The appraisal review and recnciliatin prcess must result in the mst accurate and supprted pinin f market value. Nte: The ECOA Valuatins Rule requires cpies f appraisals and ther written valuatins be delivered t brrwer prmptly upn cmpletin, r three (3) business days befre cnsummatin, whichever is earlier. Assets All funds used t qualify the brrwer fr the mrtgage transactin, including but nt limited t dwn payment, clsing csts and reserves, must be verified and cme frm eligible surces (5501.1). Clsing csts include prepaids/escrws and csts referred t as financing csts. Fr reserves see Reserves sectin f these guidelines. Evaluated per LPA and Freddie Mac guidelines with the fllwing restrictins Stand-alne VOD (Verificatin f Depsit) is ineligible. The bank statement must shw accunt activity fr a full tw mnth perid. The dcumentatin btained thrugh the Internet must cntain the same infrmatin as wuld be fund in an riginal hard cpy f the dcument. See Freddie Mac Selling Guide sectins t Direct Accunt Verificatins and Asset Accunt Statements (5501.3(a)(i)) Dcumentatin must Identify the financial institutin Identify the accunt number, which at a minimum must include the last fur digits Identify any lans secured by the asset Cmputer-Generated Transactin Histries (5501.3(a)(i)) The transactin histry must identify the name f the institutin and the surce, and include the infrmatin required in 5501(a)(i) fr asset accunt statements, unless: It is used in cmbinatin with ther asset verificatins cntaining the missing infrmatin, and It can clearly establish that the transactin histry pertains t the same accunt Verifiable Funds Acceptable Surces f Depsit (5501.3(a)(iii)(B)) Examples f acceptable surces f depsit include: 4/24/18 Page 3 f 28

4 The brrwer s incme Funds awardee t the brrwer prvided the surce is nt an interested party t the real estate r mrtgage transactin, such as Disaster relief funds Lttery winnings Curt-awarded settlement Funds derived frm eligible asset types ((5501.3(b) and (c)) Accunt Access (5501.3(b)(ii)) All accunts held in financial institutins must be wned by the brrwer and the brrwer must have access t the funds Funds in accunts that are wned jintly by the brrwer and a nn-brrwer are cnsidered brrwer persnal funds NOTE: Custdial accunts may be used. Use cautin. Make sure brrwer has access t the mney in the accunts and is nt just the manager r paid n death beneficiary. Wedding Gifts (5501.3(c)2) Gift funds received as a wedding gift frm unrelated and/r related persns are an eligible surce f funds fr a mrtgage secured by a primary residence nly. Prvide the fllwing: A cpy f the marriage license r certificate A verificatin f the gift funds in the brrwer s depsitry accunt Evidence the gift funds are n depsit in the brrwer s depsitry accunt within 60 days f the date f the marriage license r certificate. Brrwer s Real Estate Cmmissin (5501.3(b)(ii) When the brrwer is a licensed real estate agent that is due t receive a sales cmmissin frm their purchase f the subject prperty, the Settlement/Clsing disclsure Statement must reflect the cmmissin earned by the brrwer and credited tward the mrtgage transactin. NOTE: A relative wh is a brker may nt gift his/her cmmissin t the brrwer n the subject transactin. Earnest Mney Depsits (EMD) (5501.3(b)(iii) If the EMD is needed t qualify the brrwer, then btain evidence that the EMD check cleared the brrwer s accunt. Examples may include: A cpy f the canceled check, asset accunt statement, r a written statement frm the EMD hlder verifying receipt f the funds Business Accunts Used fr Clsing (5501.3(b)(iv) A CPA letter is nt specifically required hwever the underwriter des need t determine and dcument that withdrawal f business funds will nt adversely affect the business. Dcumentatin f large depsits as described in (a)(iii) is nt required prvided that underwriter: Reviews a minimum f the mst recent tw mnths f the business accunt statements and Determines the depsits are typical fr the brrwer s business When business assets are being used fr clsing, there are sme additinal cnsideratins when analyzing the self-emplyed brrwer as nted in (f). NOTE: Business funds are nt required t be transferred t a persnal accunt prir t clsing. Surces f Funds utside the U.S. and its territries (5501.3(b)(v) Funds must be transferred int a United States r state-regulated financial institutin and verified in U.S. dllars prir t the clsing f the mrtgage transactin r Cmbined value f the assets must be at least 20% greater than the amunt frm these assets needed fr clsing. See (b) fr additinal requirements when funds frm utside the United States and its territries are used t qualify the brrwer fr the mrtgage transactin. Lender Credit (5501.6) Lender credit may be used fr the mrtgage transactin prvided it meets all f the fllwing requirements: Lender credit may nly be used as a credit twards the brrwer s clsing csts and must nt exceed the amunt f the brrwer s clsing csts Lender credit derived frm an increase in the interest rate must nt be used as a credit twards funding a temprary subsidy buy dwn plan n a n cash-ut refinance mrtgage Eligible Asset Types fr Brrwer Persnal Funds (5501.3(b)(ii) 4/24/18 Page 4 f 28

5 Depsitry accunts Depsitry accunts used t depsit and withdraw cash, such as: Checking, savings, mney market, certificated f depsit (CD), ther depsitry accunts Securities Securities that are traded n an exchange r marketplace, generally available t the public such as: Stcks, vested stck ptins, bnds, mutual funds, United States gvernment securities, ther securities Retirement accunts Independent retirement accunts and Internal Revenue Service (IRS)-qualified emplyer retirement plan accunts such as: 401K, 403b, IRAs (traditinal and Rth), SEP-IRQA, SIMPLE-IRA, KEOGH, MyRA, state retirement savings plans, ther independent and IRA-qualified emplyer retirement plan accunts Gvernment bnds (federal, state r municipal) The value used must be based n the lwer f the purchase price r current redeemable value. Prceeds frm a lan fully secured by the brrwer s assets ther than real prperty The lan must nt be prvided by an interested party t the real estate r mrtgage transactin. When the lan is secured by a financial asset used t qualify the brrwer fr the mrtgage transactin, the value f the asset must be reduced by the amunt f the lan prceeds and any assciated fees. Prceeds frm the sale r refinance f the brrwer s real prperty (including prceeds frm a 1031 exchange r a bridge lan) Fr cash-ut refinance mrtgages, the cash-ut prceeds frm the subject refinance transactin is nt an eligible surce f funds fr reserves. Prceeds frm the sale f the brrwer s assets ther than real prperty r exchange-traded securities The purchaser f the brrwer s asset must nt be an interested party t the real estate r mrtgage transactin. Brrwer s real estate cmmissin Brrwer s real estate cmmissin is an eligible surce f funds fr dwn payment and/r clsing csts when the brrwer is a licensed real estate agent that is due t receive a sales cmmissin frm their purchase f the subject prperty. Funds frm a trust The brrwer must be the beneficiary and have access t the funds as f the date f the lan clsing. The brrwer s prtin f undistributed trust funds may be used as reserves nly. Individual Develpment Accunt (IDA) Agency matching funds nt subject t recapture Any matching funds may be cnsidered brrwer persnal funds A maximum f a 4 t 1 match by an Agency s funds is permitted The brrwer must satisfy any vesting requirements f the matching IDA prgram Cmmunity Savings System accunts Brrwer cntributins Funds n depsit in a Cmmunity Savings System that are depsited by the brrwer. A nn-prfit cmmunity rganizatin must administer the savings prgram. Pled funds Pled funds are funds n depsit prvided by the brrwer and ther member(s) f a grup f related persns wh: Have resided tgether fr at least ne year, and Will cntinue residing tgether in the new residence, and Are pling their funds t buy a hme Funds prvided by related persns wh d nt reside with the brrwer are subject t the requirements f Sectin (c) fr gift funds. Brrwer s revlving credit card (charges/cash advances) r unsecured line f credit Brrwer s revlving credit card (charges/cash advances) r unsecured line f credit used t pay fees assciated with the mrtgage applicatin prcess (e.g., riginatin fees, cmmitment fees, lck-in fees, appraisal, credit reprt and fld certificatins) are subject t the fllwing requirements: The maximum amunt charged r advanced may nt exceed the greater f 2% f the mrtgage amunt r $1,500 AND The brrwer must have sufficient verified funds t pay these fees (in additin t the funds needed t qualify fr the mrtgage transactin; hwever, the brrwer is nt required t pay ff these charges at clsing; r The amunt charged r advanced must be included in the brrwer s ttal utstanding debt and the repayment f such amunt must be included when determining the brrwer s mnthly debt payment-t-incme rati (5401.2) Cash value f a life insurance plicy (nt the face value) The brrwer must be the wner f the plicy and nt the beneficiary Rent credits The prtin f rental payments paid by the brrwer credited twards the dwn payment and/r clsing csts under a dcumented rental/purchase agreement. The credit must nt exceed the difference between the market rent and actual rent paid. The rental/purchase agreement must have an riginal term f at least 12 mnths and the rent must be based n a minimum f 12 mnths rental payments. Trade equity: Net prceeds f the trade-in f the brrwer s previusly wned residence 4/24/18 Page 5 f 28

6 The brrwer s equity in the previusly-wned residence id determined by subtracting any utstanding liens n the previusly-wned residence, plus any transfer csts, frm the lesser f the appraised value f the previusly-wned residence r tis trade-in price as shwn I the trade-in cntract. When assets that are invested in stcks, bnds, mutual funds, U.S. gvernment securities, retirement accunts r ther securities are needed fr clsing, evidence f liquidatin is required unless the cmbined value f the assets is at least 20% greater than the amunt frm these assets needed fr clsing. Large Depsits (5501.3(a)(i)) Except as stated belw, the underwriter is nt required t dcument the surces f unverified depsits fr purchase r refinance transactins. Hwever, when qualifying the brrwer, the underwriter must cnsider any liabilities resulting frm all brrwed funds. Fr purchase transactins: The underwriter must dcument the surce f funds fr any single depsit exceeding 50% f the ttal mnthly qualifying incme fr the mrtgage, therwise referred t as a large depsit, if the depsit is needed t qualify the brrwer fr the mrtgage transactin. When a single depsit cnsists f bth verified and unverified prtins, the underwriter may use just the unverified amunt when determining whether the depsit is a large depsit as described abve. When a large depsit is nt verified and is nt needed t qualify the brrwer fr the mrtgage transactin, the underwriter must reduce the funds used fr qualifying purpses by the amunt f the unverified depsit. Fr Lan Prduct Advisr Mrtgages, the underwriter must enter the reduced amunt f the asset int Lan Prduct Advisr. When the surce f funds can be clearly identified frm the depsit infrmatin n the accunt statement (e.g., direct payrll depsits) r ther dcumented incme r asset surce in the mrtgage file (e.g., tax refund amunts appearing n the tax returns in the file), the underwriter is nt required t btain additinal dcumentatin. Brrwer Investment Primary residence (5501.3(b)) 1-4 units, n minimum cntributin required Greater than 80% LTV n lnger requires 5% cntributin frm brrwer s wn funds when a gift r gift f equity frm a related persn is used. Part r all f dwn payment may be gifted. Secnd hme lans (5501.3(b)) Greater than 80% LTV requires a 5% investment frm brrwer s wn funds, excluding gifts. Investment prperty lans require entire dwn payment frm brrwer s wn funds, gift ineligible. Interested Party Cntributins (5501.5) IPCs: Basis fr the limit is LTV/TLTV rati as fllws: Primary Residence and Secnd Hmes (Cnfrming lan amunts) 3% fr LTV/TLTV > 90% 6% fr LTV/TLTV > 75% 90% 9% fr LTV/TLTV 75% Primary Residence and Secnd Hme (Super cnfrming lan amunts) Investment Prperties (bth cnfrming and super cnfrming lan amunts) 2% at all LTV/TLTVs Abatements Nte: Funds prvided by an interested party t pay r reimburse in whle r in part a certain number f mnthly payments (i.e., abatements) f principal, interest, taxes, insurance and/r ther assessments n the brrwer s behalf in excess f Prepaid/Escrws assciated with the mrtgage clsing are nt eligible. (5501.5) The payment f n mre than 12 mnths f hmewners assciatin dues by an interested party is nt cnsidered an abatement but is cnsidered an interested party cntributin, subject t the abve limitatins. The funds fr the payment f the hmewners assciatin dues must be cllected at clsing and transferred directly t the hmewners assciatin, as dcumented n the Settlement/Clsing Disclsure Statement Gifts Primary Residence and Secnd Hmes Eligible prvided the required Brrwer investment is met (i.e.., secnd hme, LTV > 80%) Gift letter signed by the dnr must be retained in the lan file Investment Prperties Gift ineligible Gift r Gift f Equity frm a Related Persn (5501.3(c)) A gift letter signed by the dnr is required. Infrmatin prvided in the gift letter must: State the dnr s name and that the funds are given by a related persn Include the dnr s mailing address and a telephne number State the amunt f the gift funds r gift f equity 4/24/18 Page 6 f 28

7 Establish that the gift funds r gift f equity are a gift that des nt have t be repaid Gift funds: If the verificatins prvided in the mrtgage file d nt shw evidence that the gift funds have been depsited in the brrwer s accunt, the brrwer must prvide evidence f the transfer f funds frm the dnr t the brrwer. Gift f equity: A gift f equity must be reflected n the Settlement/Clsing Disclsure Statement. Assumptins Brrwer Eligibility C-brrwers Credit Nte: The mrtgaged premises des NOT need t be identified in the gift letter. Ineligible Eligible US Citizen Permanent resident alien Nn-permanent resident alien (maximum 80% LTV/CLTV/HCLTV n 1-unit primary residence and secnd hmes nly; ther restrictins apply) Inter Vivs Revcable Trust (5103.5) Nte: A Pwer f Attrney is nt allwed n prperties held in a trust Ineligible Freign Natinals Eligible LPA Accept required Ratis determined by LPA Nn-ccupying brrwer eligible per LPA (5103.1) Required funds (including the dwn payment, clsing csts, and reserves) may cme frm the ccupant brrwer and/r the nn-ccupying brrwer. Mandatry review f MI Sectin is required Fr Accept Mrtgages, Lan Prduct Advisr has determined that a brrwer s credit reputatin is acceptable LPA Accept is required Regardless f receiving an LPA Accept the Underwriter must determine that each brrwer individually and all brrwers cllectively have an acceptable credit reputatin. Husing (Mrtgage/Rental) Payment Histry (PITIA) is inclusive f all liens regardless f psitin, as well as all ccupancy types. Mrtgage histry evaluated by AUS Credit scres must be btained n mre than 120 days prir t the Nte Date. Generally all brrwers must have usable Credit Scre(s). (See Brrwers withut usable Credit Scres belw) Adverse r Dergatry Credit Fr Accept Mrtgages, the significance f the dergatry infrmatin has already been cnsidered by Lan Prduct Advisr and the Brrwer s credit reputatin has been deemed acceptable. Verificatin f Payment Histry Fr Accept Mrtgages where all Brrwers have a usable Credit Scre, direct verificatin f debts that are nt listed n the credit reprts (including Mrtgage debt and rent) is nt required. Brrwers withut usable Credit Scres Exceptin fr Primary Residence (5201.1(c)): One brrwer n every lan must have a useable credit scre as determined by Lan Prduct Advisr The transactin is a purchase r n cash-ut refinance Mrtgage The Mrtgage is secured by a 1-unit prperty and all Brrwers ccupy the prperty as their Primary Residence Brrwers with a usable Credit Scre cntribute mre than 50% f the ttal mnthly incme Brrwers withut a usable Credit Scre are nt self-emplyed Fr all Brrwers withut usable Credit Scres, any debt that is nt reprted t the credit repsitries must be verified t have a satisfactry payment histry and the payment must be included in the mnthly debt payment-t-incme rati. Lans > 80% LTV with ne r n scre brrwers are subject t Mrtgage Insurers requirements fr eligibility. Ineligible Manual Underwriting 4/24/18 Page 7 f 28

8 Dcumentatin Dcument as determined by LPA Findings with Risk Grade f Accept (streamlined accept and standard dcumentatin), Freddie Mac Selling Guide and LSM guidelines LSM will accept digitally signed dcuments per Freddie Mac guidelines. A cpy f the divrce decree is required when the lan file indicates incme r liability due t divrce. Escrw Waivers Prperty tax and insurance escrws may be waived fr LTV 80%. Individual state laws may supersede this requirement. Financing Types Purchase Mrtgages Refinance Mrtgages Manufactured Hme Restrictin Nte: A mrtgage with prceeds that are used t pay the utstanding balance under a land cntract r cntract fr deed is ineligible (Freddie Mac ) Cnstructin Cnversin Mrtgages (4602) Transactins where the mrtgage prceeds are used t replace interim cnstructin financing must meet requirements f Chapter K33. Fr n cash-ut refinance cnstructin Cnversin Mrtgages secured by Manufactured Hmes, at least ne brrwer must have been n the title t the land fr 12 mnths r mre prir t the effective date f permanent financing Fr cash-ut refinance Cnstructin Cnversin Mrtgages, at least ne brrwer must have been n the title t the land fr six mnths r mre prir t the effective date f permanent financing. General Requirements fr all refinance mrtgages (4301.2) At least ne brrwer n the refinance mrtgage was a brrwer n the mrtgage being refinanced; r At least ne brrwer n the refinance mrtgage held title t and resided in the mrtgaged premises as a primary residence fr the mst recent 12 mnth perid and the mrtgage file cntains dcumentatin that the brrwer, either: Has been making timely mrtgage payments, including the payments fr any secndary financing, fr the mst recent 12-mnth perid; r Is a related persn t a brrwer n the mrtgage being refinanced; r At least ne brrwer n the refinance mrtgage inherited r was legally awarded the mrtgaged premises (fr example, in the case f divrce, separatin r disslutin f a dmestic partnership). Requirements fr Rate/Term ( n cash-ut ) refinance mrtgages (4301.4) Prceeds may be used nly t: Pay ff the first mrtgage, regardless f its age. Pay ff any junir liens secured by the mrtgaged premises, that were used in their entirety t acquire the subject prperty Pay related clsing csts, financing csts and prepaids/escrws and Disburse cash ut t the brrwer (r any ther payee) nt t exceed 2% f the new refinance mrtgage r $2,000, whichever is less Pay ff the utstanding balance f a land cntract r cntract fr deed if the cntract was executed greater than 12 mnths prir t refinance applicatin (ther requirements apply). If there are excess prceeds: The mrtgage amunt must be reduced: r The excess must be applied as a principal curtailment t the new refinance mrtgage at clsing and must be clearly reflected n the Settlement/Clsing Disclsure Statement. Under n circumstances may cash disbursed t the brrwer (r any ther payee) exceed the maximum permitted fr n cash-ut refinance mrtgages. Settlement/Clsing Disclsure Statement(s) required frm any transactin within past 6 mnths. If previus transactin was a cash-ut r if it cmbined a first and nn-purchase mney subrdinate int a new first, lan t be cded cash ut. If new transactin cmbines a first and nn-purchase mney subrdinate int a new first lan, it is cnsidered cash ut. Owner ccupied prperties lcated in Texas with new r existing Texas Sectin 50 (a)(6) lans are eligible. If the first r secnd Texas Sectin 50(a)(6) lan is being paid ff, regardless f whether the brrwer is getting any cash back, the lan is restricted t the Texas Hme Equity Sectin 50(a)(6) If the first mrtgage is nt a Texas Sectin 50(a)(6) lan and the secnd mrtgage is a Texas Sectin 50(a)(6), the secnd lien may be subrdinated and is cnsidered a rate and term refinance. The secnd lien must be subrdinate t the first mrtgage and a subrdinatin agreement must be executed. Brrwer cannt receive any cash back frm first mrtgage transactin. If a Texas Sectin 50(a)(6) secnd lien is being paid ff, the lan is restricted t the Texas Hme Equity Sectin 50(a)(6). 4/24/18 Page 8 f 28

9 The title plicy will reference the Texas Sectin 50(a)(6). Prperties listed fr sale within the last six mnths are eligible as fllws: Prperty has been taken ff the market n r prir t the applicatin date. Brrwer prvides written cnfirmatin f the intent t ccupy if a primary residence Requirements fr cash-ut refinance mrtgages (4301.5) A mrtgage placed n a prperty previusly wned free and clear by the brrwer is always cnsidered a cash-ut mrtgage. At least ne brrwer must have been n the title t the prperty fr at least six mnths prir t the Nte Date except as specified belw. If nne f the brrwers have been n the title t the subject prperty fr at least six mnths prir t the Nte Date f the cash-ut refinance mrtgage, the fllwing requirements must be met: At least ne brrwer n the refinance mrtgage inherited r was legally awarded the subject prperty (fr example, in the case f divrce, separatin r disslutin f a dmestic partnership) OR, all f the fllwing: The Settlement/Clsing Disclsure Statement frm the purchase transactin must reflect that n financing secured by the subject prperty was used t purchase the subject prperty. If the mrtgage has an applicatin received date prir t Octber 3, 2015, the Settlement/Clsing Disclsure Statement must be an executed versin. A recrded trustee s deed r equivalent dcumentatin may be used when a Settlement/Clsing Disclsure Statement was nt used fr the purchase transactin. The preliminary title reprt fr the refinance transactin must reflect the brrwer as the wner f the subject prperty and must reflect that there are n liens n the prperty The surce f funds used t purchase the subject prperty must be fully dcumented If funds were brrwed t purchase the subject prperty, thse funds must be repaid and reflected n the Settlement/Clsing Disclsure Statement fr the refinance transactin The amunt f the cash-ut refinance mrtgage must nt exceed the sum f the riginal purchase price and related clsing csts, financing csts and prepaids/escrws as dcumented by the Settlement/Clsing Disclsure Statement fr the purchase transactin, less any gift funds used t purchase the subject prperty. A recrded trustee s deed r equivalent dcumentatin may be used when a Settlement/Clsing Disclsure Statement was nt used fr the purchase transactin. There must have been n affiliatin r relatinship between the buyer and seller f the purchase transactin The cash-ut mrtgage must meet all ther Freddie Mac requirements. Transactins in which a prtin f the cash-ut prceeds f the refinance is used t pay ff the utstanding balance n an installment land cntract, regardless f the date the installment land cntract was executed are ineligible (4404.1). Payff f land cntract may nly be dne as purchase r rate/term transactin. (Manufactured Hmes nt allwed n mrtgages used t pay ff land cntracts.) Owner ccupied prperties lcated in Texas with new r existing Texas Sectin 50 (a)(6) lans are eligible. If the first r secnd Texas Sectin 50(a)(6) lan is being paid ff, regardless f whether the brrwer is getting any cash back, the lan is restricted t the Texas Hme Equity Sectin 50(a)(6). Lst Nte Affidavits are nt an acceptable substitute fr any f the required dcuments. If riginal dcumentatin cannt be prvided per abve, then a CEMA is nt allwed. Gegraphic Lcatins/Restrictins, as applicable Eligible states are as fllws: AZ, CA, CO, DC, FL, GA, IL, IN, KY, LA, MD, MA, MT, MI, MN, NV, NM, NJ, NC, OH, OR, PA, SC, TX, UT, VA, WA and WI Nte: Texas Cash-ut 50(a)(6) lans are eligible. 4/24/18 Page 9 f 28

10 Per Bulletin , Cmmencing n the effective date fr the TRID Rule established by the CFPB, lenders must use the revised Fannie/Freddie Frm 3185 Texas Hme Equity Affidavit and Agreement which shws a versin date f 12/07 (rev. 06/15). Additinal restrictins as fllws: Prperties lcated in Illinis in cunties f Ck, Kane, Peria r Will requires cpies f the fllwing t be clsely reviewed: (1) A cpy f the Certificate f Cmpliance with the cunseling requirements r the Certificate f Exemptin, if the lender r transactin is exempt and (2) A cpy f Title Cmmitment free frm any exceptins related t the anti-predatry lending database requirements. State specific regulatry requirements supersede all underwriting guidelines set frth by LSM. Nte: The fllwing states have specific anti-predatry lending laws. Mrtgages designated as high-cst, high-risk r similar mrtgages are nt eligible: CO, GA, IL, IN, KY, OK High-Cst Mrtgage Lans Higher-Priced Mrtgage Lans LSM des nt riginate r purchase high-cst mrtgage lans (12 CFR ) Higher-Priced Mrtgage Lan (HPML) - Definitin A first-lien mrtgage secured by a Primary Residence that has an annual percentage rate (APR) f 1.5% r mre abve the average prime ffer rate (APOR) fr a cmparable transactin as f the rate lck date. Higher-Priced Mrtgage Lans eligible fr sale t Freddie Mac must be ne f the fllwing mrtgage prducts: A fixed rate mrtgage Hme Pssible Refer t Freddie Mac Selling Guide Chapter 4501 fr cmplete guidelines. Hme Pssible Offering Identifier Cde = 241 Must enter int Lan Prduct Advisr (LPA) Hme Pssible mrtgages have the fllwing characteristics: First lien mrtgage Maximum term 30 years (except manufactured hmes) MFH fllw standard Freddie Mac guidelines (5703.3d) (see belw) Purchase r n cash-ut refinance 1-4 unit primary residence Super Cnfrming mrtgages are nt allwed. Manufactured Hmes MFH lans fllw standard Freddie Mac guidelines (5703.3d) Where the requirements f Chapter 5703 and these guidelines cnflict: Minimum cntributin frm brrwer persnal funds n purchase transactins and the eligible surces f funds fr dwn payment, clsing csts, financing csts, prepaids/escrws, and reserves may be thse permitted fr Hme Pssible Mrtgages. Mrtgage insurance cverage levels must be thse used fr mrtgages secured by a manufactured hme Incme Limits The incme used t qualify the brrwer, cnverted t an annual basis, must nt exceed 100% f the area median incme (AMI) r the percentages (incme multipliers) in the designated high-cst areas listed belw. There is n incme limit if the mrtgaged premises is lcated in an Underserved Area. State Cunty Incme Multiplier Califrnia All Cunties 140% Hawaii All Cunties 170% Massachusetts Essex Cunty 135% Middlesex Cunty 135% Nrflk Cunty 135% Plymuth Cunty 135% Sufflk Cunty 135% New Hampshire Rckingham Cunty 135% Straffrd Cunty 135% New Jersey Bergen Cunty 165% Essex Cunty 165% 4/24/18 Page 10 f 28

11 Hudsn Cunty 165% Hunterdn Cunty 165% Middlesex Cunty 165% Mnmuth Cunty 165% Mrris Cunty 165% Ocean Cunty 165% Passaic Cunty 165% Smerset Cunty 165% Sussex Cunty 165% Unin Cunty 165% New Yrk Brnx Cunty 165% Duchess Cunty 165% Kings Cunty 165% Nassau Cunty 165% New Yrk Cunty 165% Orange Cunty 165% Putnam Cunty 165% Queens Cunty 165% Richmnd Cunty 165% Rckland Cunty 165% Sufflk Cunty 165% Ulster Cunty 165% Westchester Cunty 165% Oregn Clackamas Cunty 120% Clumbia Cunty 120% Multnmah Cunty 120% Washingtn Cunty 120% Yamhill Cunty 120% Pennsylvania Pike Cunty 165% Washingtn Clark Cunty 120% King Cunty 120% Pierce Cunty 120% Skamania Cunty 120% Snhmish Cunty 120% Fr Lan Prduct Advisr (LPA) mrtgages, LPA will determine the incme eligibility f the mrtgage. Ownership f ther residential prperty The brrwer must nt have an wnership interest in any ther residential prperty as f the Nte Date, except as stated belw: If the brrwer des nt ccupy the ther prperty and the underwriter dcuments: The brrwer inherited their wnership interest in the prperty and shares wnership with anther party, r The brrwer wns the prperty with anther party and the debt assciated with the prperty was assigned t the ther party by a curt rder (e.g., a divrce decree), r The brrwer is a csigner/guarantr n the related mrtgage debt and smene ther than the brrwer has made payments n the debt assciated with the prperty fr the mst recent 12 mnths, as dcumented with cpies f canceled checks r a statement frm the lender. Rental Incme Rental incme frm a 1-unit primary residence may be cnsidered as stable mnthly incme prvided it meets Freddie Mac guidelines r the fllwing: Cnnectin with brrwer The persn prviding the rental incme and the brrwer: Have resided tgether fr at least ne year Will cntinue residing tgether in the new residence, and The persn prviding the rental incme prvides apprpriate dcumentatin t evidence residency with the brrwer (e.g., cpy f a driver s license, bill, bank statement, etc., that shws the address f that persn t be the same as the brrwer s address) Rental payment Rental incme frm the persn residing in the mrtgaged premises: Has been paid t the brrwer fr the past 12 mnths n a regular basis Can be verified by the brrwer with evidence shwing receipt f regular payments f rental incme t the brrwer fr the past 12 mnths (i.e., cpies f canceled checks) Des nt exceed 30% f ttal incme used t qualify fr the mrtgage The mrtgage file must cntain a written statement frm the brrwer affirming: 4/24/18 Page 11 f 28

12 The surce f the rental incme The fact that the persn prviding the rental incme has resided with the brrwer fr the past year and intends t cntinue residing with the brrwer in the new residence fr the freseeable future Rental incme frm a 2-4 unit primary residence must meet Freddie Mac guidelines (5306.1). Debt t Incme (DTI) Ratis DTI ratis are determined by Lan Prduct Advisr (LPA) Calculatin f qualifying incme The underwriter must attempt t verify all incme reprted n the URLA (Frm 1003/1065) in accrdance with Freddie Mac guidelines (sectins 5302 thrugh 5307). Any discrepancies, including underreprted incme, must be crrected befre submitting the mrtgage t LPA. All incme reprted n the URLA that has been verified and that meets the criteria fr stable mnthly incme per Freddie Mac guidelines (tpic 5300) must be used t qualify the brrwer and must be submitted t LPA. Credit The brrwer s credit reputatin is acceptable if the mrtgage is submitted t Lan Prduct Advisr and receives a Risk Class f Accept. Affrdable Secnds see LTV/TLTV/HTLTV Ratis fr Hme Pssible Mrtgages Prperty Type Maximum LTV Maximum TLTV Maximum HTLTV 1-4 unit 95% 95% 95% Manufactured Hme 95% 95% 95% Brrwer Cntributin Minimum Cntributin frm Brrwer Persnal Funds* Prperty Type Hme Pssible with LTV/TLTV/HTLTV ratis 80% Hme Pssible with LTV/TLTV/HTLTV ratis > 80% 95% 1-unit Nne Nne 2-4 unit Nne 3% Manufactured Hme Nne Nne * Stated as a percentage f value Reserves Prperty Hme Pssible 1-unit Nne required 2-4 unit Tw mnths Underwriter must verify all reserves required by LPA. The abve required reserves are included in the amunt f reserves that LPA will require. Surces f Funds The fllwing surces f funds are permitted and must meet Freddie Mac requirements ( (c)(i, ii, iii)). Use Minimum Brrwer cntributin Dwn payment fr purchase transactin (the difference between the purchase price and the First Lien amunt) Additinal Equity if needed fr a n cash-ut refinance transactin Clsing Csts, Financing Csts, Prepaids/Escrws Reserves Permitted Surces f Funds Brrwer Persnal Funds Brrwer Persnal Funds Other Brrwer Funds Brrwer Persnal Funds Other Brrwer Funds Brrwer Persnal Funds Other Brrwer Funds Flexible surces f funds Brrwer Persnal Funds Other Brrwer Funds 4/24/18 Page 12 f 28

13 Eligible Assets, as described in (b) Brrwer Persnal Funds When used with Hme Pssible mrtgages, brrwer persnal funds include: Brrwer persnal funds as described in (b) Cash n hand, if the fllwing requirements are met: The underwriter reasnably cncludes, and can supprt, that the brrwer is a cash-basis individual and that the cash n hand is nt brrwed and culd be saved by the brrwer The mrtgage file cntains the fllwing dcuments supprting the lender s cnclusin: A cmpleted Exhibit 23, Mnthly Budget and Residual Analysis Frm, r anther dcument cntaining the same infrmatin, cnfirming that the ttal mnthly residual incme available fr savings is a psitive number Cpies f six mnths cash receipts (e.g., rent r utility receipts) r ther alternative dcumentatin (e.g., direct verificatins r wire transfers) meeting the requirements f sectin (b) t verify that recurring bligatins, including the payment f revlving and installment debt, are custmarily paid in cash A credit reprt, btained at the time f lan applicatin, meeting the requirements f sectin The credit reprt must nt shw mre than three tradelines. Cpies f three mnths statements fr any pen revlving accunt that reveal cash advances are nt the surce f brrwer funds. Any cash advances must be explained and dcumented (e.g., a cash advance used in an emergency situatin). The mrtgage file must have n indicatin that the brrwer typically uses checking, savings r similar accunts Evidence that funds fr the dwn payment, clsing csts, financing csts, prepaids/escrws and reserves are depsited in a financial institutin r are held in an institutinal escrw accunt prir t clsing Other Brrwer Funds When used with Hme Pssible mrtgages, ther brrwer funds include: Other brrwer funds as described in sectin (c) Fr purchase transactins, prceeds frm an unsecured lan meeting the requirements f sectin frm the fllwing surces: An Agency A related persn, r A Cmmunity Savings System (funds in excess f the brrwer cntributin t the Cmmunity Savings System) Prceeds frm an Affrdable Secnd r ther secndary financing that meets the requirements in Chapter Any secndary financing subrdinated t a Hme Pssible Advantage Mrtgage must be an Affrdable Secnd. Flexible surces f funds When used with Hme Pssible mrtgages, flexible surces f funds include: Financing cncessins as described in sectin (b) meeting the applicable requirements f sectin Lender credit derived frm increase in interest rate Nte: Sweat equity is nt allwed (LSM verlay) Mrtgage Insurance (4707.1) Transactin Type Mrtgage Insurance Cverage* LTV Rati > 80% & 85% > 85% & 90% > 90% & 95% Hme Pssible, fixed rate, 20 years Hme Pssible fixed rate, > 20 years; and all Manufactured Hmes** *Custm Mrtgage Insurance cverage is nt allwed (LSM verlay) 4/24/18 Page 13 f 28 > 95% & 97% (applies t Hme Pssible Advantage nly) Standard 6% 12% 25% 25% Standard 12% 25% 25% 25%

14 **Manufactured Hmes are limited t maximum 95% LTV/CLTV/HCLTV Hmewnership Educatin When all the brrwers are First Time Hmebuyers* fr purchase transactin Hme Pssible mrtgages, at least ne qualifying brrwer must participate in a hmewnership educatin prgram befre the Nte Date. *First Time Hmebuyer: A first time hmebuyer is an individual wh meets all f the fllwing requirements: Is purchasing the mrtgaged premises Will reside in the mrtgaged premises as a primary residence Had n wnership interest (sle r jint) in a residential prperty during the three-year perid preceding the date f the purchase f the mrtgaged premises In additin, a displaced hmemaker r a single parent may als be cnsidered a first time hmebuyer if the individual had n wnership interest in a residential prperty during the preceding three-year perid ther than an wnership interest in the marital residence with a spuse. If a displaced hmemaker r a single parent slely wned the marital residence, r slely r jintly wned a secnd hme r investment prperty, the individual may nt be cnsidered a first time hmebuyer. If a Living Trust is purchasing the mrtgaged premises, then fr purpses f this definitin, an underwritten settlr f that Living Trust will be deemed t be purchasing the mrtgaged premises. Hmewnership educatin must nt be prvided by: An interested party t the transactin, The riginating lender The Seller (Freddie Seller/Servicer) Hmewnership educatin prgrams may use different frmats and require different lengths f time t cmplete. The fllwing are acceptable: Prgrams develped by HUD-apprved cunseling agencies, Husing Finance Agencies (HFAs) r Cmmunity Develpment Financial Institutins (CDFIs) Hmewnership educatin prgrams develped by mrtgage insurance cmpanies r ther prviders prgrams that meet the standards f the Natinal Industry Standards fr Hmewnership Educatin and Cunseling ( As an alternative t the prgrams listed abve, Freddie Mac s free financial literacy curriculum, CreditSmart, meets the hmewnership educatin requirements, prvided: The brrwer cmpletes the nline Credit Smart Steps t Hmewnership tutrial, which includes Mdule 1 (Yur Credit and Why It is Imprtant), Mdule 2 (Managing Yur Mney), Mdule 7 (Thinking Like a Lender), Mdule 11 (Becming a Hmewner), and Mdule 12 (Preserving Hmewnership: Prtecting Yur Investment) The financial literacy curriculum is nt prvided by an interested party tt eh transactin, the riginating lender r the Seller (Freddie Seller/Servicer) A cpy f Exhibit 20, Hmewnership Educatin Certificatin, r anther dcument (such as the CreditSmart Steps t Hmewnership certificate f cmpletin) cntaining cmparable infrmatin must be retained in the mrtgage file. Landlrd Educatin (2-4 unit primary residences) Purchase Transactins At least ne qualifying brrwer must participate in a landlrd educatin prgram befre the Nte Date. Landlrd educatin must nt be prvided by an interested party t the transactin, the riginating lender r the Seller (Freddie Seller/Servicer). A cpy f a certificate evidencing successful cmpletin f the landlrd educatin prgram must be retained in the mrtgage file. Refinance Transactins Landlrd educatin is nt required but is recmmended fr brrwers wh have nt previusly attended a prgram. Pst-purchase and Early Delinquency Cunseling The Seller, as Servicer, must prvide (at n cst t the brrwer) Early Delinquency Cunseling t all brrwers wh experience prblems meeting their mrtgage bligatins, in accrdance with Sectins (c) and (c). Hme Pssible LSM verlays The fllwing are nt allwed fr Hme Pssible r Hme Pssible Advantage prgrams: ARMs Temprary buydwns Manual underwriting Nn-traditinal credit, including nn-traditinal credit required t supprt an LPA decisin 4/24/18 Page 14 f 28

15 Custm MI Cnstructin cnversin r renvatin mrtgages Sweat equity RHA leveraged secnds Unsecured lans frm riginating lender used as a surce f funds Hme Pssible Resurces Hme Pssible Freddie Mac Web Page: Hme Pssible Fact Sheet: Hme Pssible At-A-Glance : Hme Pssible Incme & Prperty Eligibility tl: Hme Pssible Exhibit 23: Mnthly Budget and Residual Analysis Frm (see AllRegs) Hme Pssible Exhibit 20: Hmewnership Educatin Certificatin (see AllRegs) Freddie Mac CreditSmart webpage: Hme Pssible Advantage ( %) Refer t Freddie Mac Selling Guide Chapter 4501 fr cmplete guidelines. Hme Pssible Advantage Offering Identifier Cde = 250 Must enter int Lan Prduct Advisr (LPA) Hme Pssible Advantage mrtgages are Hme Pssible mrtgages with additinal flexibility f higher lan-tvalue (LTV) and ttal LTV (TLTV) rati limits. A Hme Pssible Advantage mrtgage must be secured by a 1-unit primary residence that is nt a manufactured hme. LTV/TLTV/HTLTV Ratis fr Hme Pssible Advantage Mrtgages Prperty Type Maximum LTV Maximum TLTV Maximum HTLTV 1 unit 97% 105% N/A* Manufactured Hme Nt allwed Nt allwed Nt allwed * Secndary financing subrdinated t a Hme Pssible Advantage Mrtgage must be an Affrdable Secnd. The Affrdable Secnd financing cannt be a Hme Equity Line f Credit (HELOC). Brrwer Cntributin Minimum Cntributin frm Brrwer Persnal Funds Prperty Type Hme Pssible Advantage 1-unit Nne Reserves Incme Prperty 1-unit Hme Pssible Nne required Incme Stability and Histry Fr each incme surce used t qualify the brrwer, the underwriter must determine that bth the surce and the amunt f the incme are stable. Base Nn-fluctuating Emplyment Earnings - Incme types with pre-determined fixed payment amunts that ccur with regular frequency and/r defined and dcumentable terms lend supprt t incme stability and the analysis f histrical receipt is typically nt necessary Fluctuating Emplyment Earnings - Incme types that fluctuate typically must be viewed frm the perspective f histrical earnings. Fluctuating earnings are nt cnsidered base r salaried earnings In mst instances, a tw-year histry f receiving incme is required. Nte: Fluctuating hurly earnings d nt include additinal emplyed incme (e.g., bnus, vertime, tips) Cntinuance f Incme Fr all incme used t qualify the brrwer, the underwriter must determine whether the incme is reasnable expected t cntinue. Cntinuance f incme is categrized as fllws: 4/24/18 Page 15 f 28

16 Incme and earnings types typically withut dcumentable cntinuance (likely t cntinue) Base nn-fluctuating emplyment earnings, fluctuating hurly emplyment earnings, cmmissin incme, bnus incme, vertime incme, tip incme, autmbile allwance, military entitlements, military reserve r Natinal Guard, unemplyment (assciated with seasnal emplyment), self-emplyment Incme, ryalty payments (tw-year histry), fstercare incme, husing r parsnage allwance, rental incme, tax-exempt incme Incme types with dcumentable cntinuance Mrtgage differential, ntes receivable, ryalty payments (ne-year histry), trust incme (fixed payment), alimny, child supprt and/r separate maintenance, Hmewnership Vucher Prgram (HOV), dividend and interest, capital gains, trust incme (fluctuating payments), retirement accunt distributins as incme. Incme types that may r may nt have dcumentable cntinuance, depending upn the surce and terms f the specific incme type Retirement incme, survivr and dependent benefits, lng-term disability incme, scial security supplemental Security Incme SSI), public assistance incme. Evaluated per LPA and Freddie Mac guidelines with the fllwing restrictins: Stand-alne VOE (Verificatin f Emplyment) is ineligible. VOE must be accmpanied by pay stub r pay stub and W-2 At minimum a YTD paystub and W-2 is required Self-Emplyed Brrwer (5304.1(a)) A Brrwer wh has an wnership interest f 25% r mre in a business is cnsidered t be self-emplyed A brrwer meeting this definitin must be identified in LPA whenever the self-emplyment incme and /r lss is used t determine the brrwer s stable mnthly incme fr qualifying. (5304.1(b) Self-Emplyment Histry (5304.1(c)) A tw-year histry f current self-emplyment is required in mst cases Fr self-emplyment less than tw years: Incme may still be cnsidered stable per underwriter s analysis justifying this determinatin Dcument the brrwer has a tw-year histry f receipt f incme at the same r greater level in the same r similar ccupatin Cnsider and evaluate the brrwer s experience in the business Cnsider and evaluate the acceptance f the cmpany's prducts in the marketplace Analysis f YTD financial statements and 3 mnths bank statements may prvide supprt Minimum histry f receipt f incme Brrwer s federal incme tax returns must reflect at least ne year f self-emplyment incme Gegraphical relcatin If the brrwer is relcating t a different gegraphic area, prir t cnsidering incme, the underwriter must: Cnsider and evaluate the acceptance f the cmpany s service r prducts in the marketplace (e.g., market studies, industry research) Prvide a written analysis justifying the brrwer s incme will cntinue at the same level in the new lcatin Business and Incme Analysis (5304.1(d)) Business review and analysis Business must shw sufficient liquidity and be financially capable f prducing stable mnthly incme fr the brrwer Use f business incme reprted n the brrwer s federal individual incme tax returns Sle Prprietrships use Schedule C Partnerships and S Crpratins use brrwer s prprtinate share f incme (e.g., rdinary incme, guaranteed payments) carried frm Frm 1065 r 1120S, thrugh the Schedule K-1 and nt the brrwer s federal individual incme tax returns. Cash distributins may nt be used as qualifying incme, but may be used t establish business liquidity and access t business funds. S Crpratins and crpratins use incme reprted n brrwer s W-2 frm the business. Crprate tax returns and Frm 1125-E, if applicable, must cnfirm brrwer s W-2 incme. Use f business incme nt reprted n the brrwer s federal individual incme tax returns Incme reprted n business returns but nt n persnal returns may be cnsidered stable, prvided the underwriter s analysis cnfirms that based n the financial strength f the business the use f these funds as persnal incme wuld nt have a detrimental effect n the business. Access t business incme Dcumentatin is nt required t verify access t business incme fr: 4/24/18 Page 16 f 28