USDA Guaranteed Rural Housing Product Profile

Transcription

1 USDA Guaranteed Rural Housing Product Profile PROGRAM CODES: 30RH Appraisals LTV/CLTV 100%* Purchase Maximum LTV/FICO Requirements Min FICO Rate and Term Refinance LTV/CLTV Min FICO %* 620 *exclusive of financed guarantee fee A full appraisal (e.g. form 1004 or equivalent, accompanied by form 1004MC) is required for all submissions If the appraisal report will be more than 120 days old, a re-inspection by the appraiser is required. The appraiser must use the Appraisal Update and/or Completion Report (Form 1004D or 442) which must include all of the following: A determination on whether or not the property value has declined. Evidence that there has been, at a minimum, an exterior inspection of the property. Notes on any market changes. If the appraiser determines that the value has declined, a new appraisal and loan must be re-underwritten using the new value. The original appraisal cannot exceed 120 days old as of the note date. Exception: An appraisal may be up to 240 days old if a recertification of value is obtained after 120 days. The appraiser must be on the FHA approved appraiser list and be an FHA Roster appraiser, although an FHA case number is not required. When prepared in accordance with HUD Handbooks and , the appraisal constitutes acceptable documentation to comply with existing dwelling inspections made in accordance with USDA Guidelines. The appraiser must state that the subject property meets requirements per HUD Handbooks and Borrower must lack sufficient resources to obtain traditional uninsured conventional financing (Borrower has less than 20% down payment). IRA Retirement and 401K accounts are not included as liquid assets for the purpose of USDA RH Borrower Eligibility purposes. Any assets greater than $5000 can be considered as a source of income. If the interest/dividend earnings are showing on the borrower s 1040 s, this income must be added to qualifying household earnings and full disclosure of all assets must be provided. Assets Borrower Eligibility Condominiums Retirement accounts limited to 60%. Gifts are acceptable from someone who is not an interested party to the transaction. The gift may come from a family member. A fully completed gift letter stating that no repayment of the gift is required must be provided. Evidence of funds must be included in the loan file. Gift funds may not be used for reserves. Assets and cash reserves are not necessarily required for the USDA program; however, all asset information listed on the 1003 and/or entered into GUS must be fully documented. The lesser of the two month average balance or the current balance will be used for verification of reserves. Deposits: Any deposits that are not consistent with the applicant's employment, or earning and savings profile must be explained and sourced, even if the deposit in question is not required for cash to close or reserves. If the funds are deemed unacceptable or cannot be fully documented, they may be able to be backed out of the account balance with an acceptable letter regarding the source of the funds signed and dated by the borrower. If the funds are backed out, they would not be considered for funds to close or reserves. This decision is based on underwriter discretion after thoroughly reviewing assets and explanation. U.S. citizens Borrowers must have a valid Social Security Number Permanent resident aliens, with proof of lawful permanent residence Non-permanent residents are allowed as long as they are a qualified alien with proof of lawful residence. Non-occupant borrowers are ineligible Borrowers may not own a dwelling in the local commuting area. An exception is not required if the borrower owns a dwelling which is not structurally sound or functionally adequate The borrower must not have sufficient assets to obtain other traditional uninsured conventional financing (LTV 80%). Must be located in an FHA, VA or Fannie Mae approved Condominium Project. Provide evidence of approval in the loan file.

2 Each borrower must have at least one credit score to be eligible. At least one applicant whose income or assets are used for qualification must have at least two historical trade line payment references that have existed for at least 12 months (open/closed/disputed/authorized user). Non traditional credit may be used to establish the minimum tradelines. Either three trade lines (if one includes rent/mortgage history) or 4 trade lines (if rent/mortgage history is not available) are required. GUS Accept recommendations that cannot meet these guidelines must be downgraded to Refer Installment debts: Installment debts with greater than 10 months remaining must always be included in the DTI. Installment debts with less than 10 months may be included if the payment could impact the applicants to pay the mortgage (U/W discretion). Authorized User Trade lines: A GUS underwriting recommendation of Accept with open authorized user trade lines must include evidence in the lender s permanent case file of one of the following: 1.) another applicant on the mortgage loan application owns the trade line in question, 2.) the owner of the trade line is the spouse of an applicant or 3.) 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 manually downgraded to a "refer" and the file must be manually underwritten. Closed authorized user accounts require no consideration for manual or GUS loan submissions. Credit Disputed Credit Trade lines: If disputed accounts exist, loans underwritten with the assistance of GUS that receive an underwriting recommendation of Accept will be downgraded to a manual Refer unless one of the following conditions are met on the credit report: The disputed trade line has a zero dollar balance; The disputed trade line is marked paid in full or resolved ; The disputed trade line has a balance owed of less than $500 and is more than 24 months old. Non-Purchasing Spouse (NPS): When an applicant resides or the property is located in a community property state, a credit report for the NPS must be obtained. The debts of the NPS must be included in the applicant s debt ratio, except for those specifically excluded by state law. The NPS s credit history is not a reason to deny the loan application. Verification of Rent/Mortgage History: Not required with a GUS accept. Manual underwriting requires a 12 month repayment history. Private landlords are permitted to complete the VOR. Student Loans: Include the greater of 1% of the outstanding loan balance or the verified fixed payment as reflected on the credit report in the borrower s DTI. Exception: Monthly payment amounts listed on the credit report, which are less than 1% of the outstanding balance may be used when evidence from the loan servicer is obtained indicating; The applicant is on a fixed repayment plan not subject to change under the terms of the current agreement, AND Derogatory Credit The servicer confirms the monthly payment amount that is due. Income Based Repayment (IBR) plans, graduated plans, adjustable rates, interest only, and deferred plans are examples of repayment plans that are subject to change and do not qualify for the exception listed above. Foreclosure, Pre Foreclosure, or Short Sale within 3 years If an applicant was current at the time of the sale they may be eligible after 12 months. Prior mortgage history must reflect all mortgage and installment debts were paid as agreed for the 12 months preceding the short sale/preforeclosure. Bankruptcy: Chapter 7 within 3 years. Chapter 13 allowed after one year of the payout period under the BK has elapsed. All payments must have been made as agreed, and the applicant must have written permission from the BK court to enter into the mortgage transaction. Collections: If the cumulative outstanding balance is at least $2,000, one of the following is required: Pay off all the outstanding conditions in full prior to or at closing; Document the borrower has a payment arrangement with the creditor(s) by obtaining a credit supplement or letter from the creditor(s) verifying the monthly payment and proof that the payments have been made for at least three months. This payment must be included in the borrower s DTI ratios; OR A minimum monthly payment of 5% of the outstanding balance of all collections will be assigned and included in the borrower s DTI ratios. Medical collections and charge off accounts can be excluded from this total, but must reflect on the credit report as medical. The applicant is on a fixed repayment plan not subject to change under the terms of the current agreement, AND Exclusionary List Financing Concessions Guarantee Fee Federal debts: Borrowers that are delinquent on Federal debts may be ineligible for a guaranteed loan or any delinquent Federal debt identified by CAIVRS (Credit Alert Verification Reporting System) shall cause the borrower to be ineligible until the Federal debt is paid in full or otherwise resolved. Judgments: No more than one debt payment being more than 30 days late in the last 12 months. No more than one rent or mortgage payments paid 30 days or more past due within the last 3 years No outstanding collections accounts without payment arrangements No accounts converted to collections in the past 12 months CAIVRS must be checked and cleared. Financing concessions cannot exceed 6% of the sales price. Upfront Fee for Purchases and Refinances: 2.75% Annual Fee:.50% The servicer confirms the monthly payment amount that is due. All federal judgments must be paid in full. Non-federal judgments may remain open IF payment arrangements have been made and there is evidence of three payments have been made prior to loan application. Prepayment of three months is not allowed. Upfront Fee can be financed above the appraised value.

3 Income, Annual To be eligible for a Rural Development guaranteed loan, the Borrowers adjustable household income cannot exceed the maximum allowable income limit set forth by Rural Development. The link below will allow you to determine what that amount is for the specific property address you are working with. Child Care Deductions: Dependent Deductions: Private/relative-provided child care must include canceled checks as evidence of payment. Preschool tuition (prior to kindergarten) is eligible for deduction. Child support and private tuition paid for kindergarten through child up to 1 of age are ineligible. Anticipated care for unborn child/child not currently in attendance is ineligible. Adjustments to reduce annual income include $480 for each minor child, full time student or a disabled member of the family. $400 may be deducted from annual income for each family member over 6 of age. Income, Repayment Income, Repayment Full-Time Student Income: Full-time student's income is included as a household member if: Only the first $480 of their earnings is counted. Written Verification of Employment is required for all employed borrowers. Newly Employed: Re-entering the Workforce: Full documentation is required when a borrower employed by a family member or employed by a family-held business. The business accountant must verify that the borrower is not self-employed by indicating his or her percentage of interest in the business. The accountant must be a disinterested third party. Follow income documentation as required by GUS. Additional documentation may be required if the underwriter deems it necessary to support the decision to use the income. Two years' tax returns will be required. Profit and loss with balance sheet required if 90 days past the last tax filing date. This is for trending purposes only and will not be used for determining the income. Tax Returns: 4506-T: Transcript General Requirements: Student lives or proposed to live in the dwelling at any time during the upcoming 12 months, or Property is listed as the student s permanent address. A borrower who has less than a two-year employment history may have their income considered on a case by case basis as qualifying income if the borrower was either attending college or in a training program immediately prior to their current employment. Supporting documentation must be provided. For a borrower who is re-entering the work force after a six month or greater gap and has less than a current two year employment history, the borrower s income may be allowed as qualifying income if the file contains documentation to support that the borrower has been at their current employer for a minimum of six months and evidence of previous employment history to cover two years. Employment by a Relative: All of the following income documentation is required: Tax Exempt Income: Most recent paystub documenting 30 days of income. W-2 s covering the most recent. Complete signed individual federal tax returns for the most recent. If the borrower is newly hired, previous employment in the same or related field must be verified. Tax Exempt Income may be grossed up 25% for repayment calculations (not grossed up for annual income calculation). Self-Employment: Rental Income: Rental income must be included in the annual income calculation, however, it may only be used to qualify the borrowers from a DTI ratio perspective when the borrowers have owned the property for at least and can document receipt of rental income with of tax returns. When tax returns are needed, follow documentation as required by GUS. When the most recent tax filing date has past and the borrowers filed an extension the following is required: Two years most recent returns that have been filed and signed. A copy of the filed extension request. Must be signed, dated and executed by: A tax transcript reflecting No record of return filed for the most recent tax period. Evidence that any taxes owned have been paid. All applicants whose income is used to qualify; AND All adult household members, even if they are not on the loan. Validated transcripts from the IRS must be received prior to requesting the conditional commitment. Income Documentation Required per GUS Findings or an Underwriter YTD paystub YTD paystub and most recent year W-2 YTD paystub and most recent W-2 s Personal 1040 s for most recent year Personal 1040 s for most recent Personal 1040 s and business returns for most recent Number of Years Validated IRS 4506T Transcripts Required

4 Loan Purpose LTV Determination Manual Underwriting Maximum Loan Amount Minimum Loan Amount - Unpaid fees, such as late fees due the servicer are not eligible to be included in the new loan amount - Borrowers may be reimbursed at closing for any fees paid in advance (for example, appraisal and credit report fee). A nominal amount of "cash-out" to the borrowers may occasionally result due to final escrow and interest calculations. This amount, if any, must be applied to a principal reduction of the new loan. - At least one original borrower must remain on the new loan. - Interest Rate must be at least 1% lower than current interest rate. Cash Out is not allowed Maximum loan amount is constrained by the limitations applied when considering the maximum annual income at the program's maximum DTI. $60,000 Mortgage Products, Eligible Interest only not allowed Multiple Properties Purchase -Closing costs may be financed when there is equity above the contract price. Rate & Term Refinance - The maximum loan amount cannot exceed the balance of the existing Rural Development loan being refinanced plus: o Accrued interest o Financed guarantee fee o Reasonable and customary closing costs o Fund to establish a new tax and insurance escrow amount Purchase transactions and Refinance Transactions are based on the appraised value. Allowed when GUS findings are either Approve/Eligible with a manual downgrade or refer/eligible. Maximum DTI 29/41 or 32/44 allowed with Debt Ratio Waiver approved by USDA. Debt Ratio Waivers: All applicants must have a 680 or great credit score, and at least one compensating factor below documented: Fixed Rate 30 year term only Temporary buydowns are not allowed Rural Energy Loans are not allowed PITI equal to or less than current housing for the proceeding 12 months, 3 months reserves after closing based on average balance, All employed applicants have been with the current employer for a minimum of 12 months. There are no exceptions to the defined ratio and credit score requirements. Discount points may only be financed for Rural Development-defined low-income applicants. Retaining a home: Current homeowners are eligible for a Rural Housing Guarantee loan if all the following are met: Applicants are not financially responsible for another Rural Housing loan at the time of loan closing; Only one home may be retained; Must occupy subject property as primary residence; Applicants do not have the resources/credit to obtain home via conventional financing. Borrower(s) must be qualified with payments on both homes. Rental income from retained home cannot be used to offset mortgage payments. Current home no longer meets applicants' needs: Severe Overcrowding, defined as more than 1.5 household members per room. Must document overcrowding has existed for more than 90 days and will persist for at least 9 months after closing. Significant status change in the borrower (disability/limited mobility of permanent household member). Must document substantial retrofitting of current dwelling would be required (ramps, wider door frames/hallways, etc.). Must verify change in household member's status and existing property deficiencies, as well as suitability of the new property. Occupancy Property Owner Occupied Residences only MUST BE IN DESIGNATED RURAL HOUSING ELIGIBLE AREAS. The link below will allow you to determine if a certain property address fits the defined rural areas Outbuildings: Site: 1 UNIT ONLY PUD, Detached or Attached: Condos - must be FHA of FNMA approved see Condo Section for details. Barns and small outbuildings that are typical for the area and are used for storage and/or personal use are acceptable. The presence of significant outbuildings such as silos, large barns, large riding arenas, or facilities for farm-type animals, may indicate that the property is agriculture in nature, and therefore would be unacceptable. No income producing land or large tracts of land ready to plant (Gardens are not considered income producing). Small home-based operations such as childcare, product sales are allowed. Prohibition on in-ground pools has been removed. Deductions of contributory value of outbuildings and pools is no longer required. Leased land is not allowed. Site Value: The 30% site value guideline has been removed. Site size must be typical for the area, and cannot include income producing land or buildings used for income purposes.

5 Property Street Access/Maintenance: Shared driveways must have a recorded easement. Private streets must have a recorded easement or be maintained by an HOA. Maintenance: If HOA in charge, must meet Fannie, Freddie, HUD or VA Criteria. Properties located in flood zones: Existing properties in flood zones are now allowed if FEMA flood insurance is available and must cover the lesser of: The outstanding principal loan balance, or Maximum coverage allowed under NFIP. Unless a higher amount is required by state or federal law, maximum deductible should not exceed the greater of $1,000 or 1% of the face amount of the policy. New Construction: Must meet Rural Housing inspection and Builder Warranty requirements; evidence must be included in the file. Property flipping transaction is assessed using the seller's date of acquisition as the date of settlement on the seller's purchase of that Property Flipping Policy property and the execution of a sales contract to another party restriction on resales occurring 90 days or less after acquisition. (Properties resold within 90 days of purchase) Non arms-length transactions are prohibited. Ratios Recently Listed Properties Reserves Must contain a representative FICO of at least 680 Housing ratio (PITIA) of 29% - A higher housing ratio is acceptable with a GUS Accept or Rural Housing Approval. Payment Shock: PITIA > 29%: Payment shock of 100% or higher is considered a risk layer and no additional risk layering should be allowed without strong compensating factors. Underwriters must justify the transaction on the 1008 which will be reviewed by the local Rural Development office for approval. DTI of 41% A higher DTI is acceptable with a GUS Accept or Rural Housing Approval. Rate/Term Transaction - the listing must have expired or been withdrawn prior to the application date. Gift funds not allowed for reserves. RD Conditional Commitment for Single Family Housing Loan Guarantee Rural Housing Documentation Secondary Financing Utilities UW Method Must include completed, signed, and dated Lender Certification pages. The lender s signature on the Lender Certification certifies to Rural Development the loan was closed in accordance with all applicable conditions listed and no adverse changes have occurred since the commitment was issued. Loans may not have an outstanding contingent Conditional Commitment. All documentation used to satisfy the Conditional Commitment must be included in the file. Allowed in accordance to Rural Development requirements. For Purchase Transactions, Rural Housing requires the following inspections: Private Well/Water Supply: The local health authority or a state certified laboratory must perform a water quality analysis. The water quality must meet state/local standards. Cisterns are not an acceptable water source. Private Septic System: The septic system must be free of observable evidence of failure. An FHA roster appraiser, government health authority, licensed septic professional, or qualified home inspector may perform the septic system evaluation. An FHA roster appraiser or qualified home inspector may require an additional inspection due to their observations. Existing dwellings appraised by a HUD roster appraiser, who has indicated the dwelling meets the required HUD handbooks does not require further septic certification. GUS Feedback Cert with Accept Risk Class recommendation. Manual verification of all program requirements Concurrence of Approval from the USDA prior to doc draw and funding See Manual Underwriting section for more information on manually underwritten loans.