AG-AMERICA HOBBY FARM AND RURAL RESIDENTIAL LENDING GUIDE

Transcription

1 AG-AMERICA HOBBY FARM AND RURAL RESIDENTIAL LENDING GUIDE

2 Table f Cntents BORROWER ELIGIBILITY... 1 Age f Dcuments... 1 General Overview and Summary... 1 CREDIT ELIGIBILITY... 2 Underwriting, Ratis and Dcumentatin... 2 LTV / CLTV... 2 HOBBY FARMER AGRICULTURAL (Ag) INCOME... 3 Incme Dcumentatin... 3 UNDERWRITING GUIDE FOR SELF-EMPLOYED APPLICANTS... 3 Example... 3 Calculatin... 3 ASSETS... 4 Asset Verificatin... 4 PROPERTY ELIGIBILITY... 4 Appraisal... 4 Ineligible Prperties... 5 Prperty Classified as Hbby (see Brrwer Eligibility Guides)... 5 Prperty Classified as Rural Resident (see Brrwer Eligibility Guides)... 5 i

3 BORROWER ELIGIBILITY Age f Dcuments TYPE OF DOCUMENT LENGTH OF VALIDITY TO NOTE DATE Appraisal 120 days Bank Statements 60 days Credit Reprt 60 days O&E 14 days Pay Stubs * 60 days Payff Statement 30 days Prperty Inspectins septic, well, hme 90 days inspectin, etc. Self-Emplyment 30 days Verificatin Survey 180 Title and Clsing 90 days Prtectin Letter VOD 60 days VOE 30 days VOR/VOM 30 days * Brrwers wh are nt paid n a 12-mnth schedule (e.g., teachers paid n a 10-mnth year) and the lan is clsing during the mnths when the brrwer will nt have a paystub dated within 90 days f clsing, prvide last paystub received and cpy f cntract verifying start date f emplyment fr the cming year Nte: Altered r blacked ut dcuments are nt allwed When cnsecutive credit dcuments are in the lan file, the mst recent dcument is used t determine whether it meets the age requirement Fr example, when tw cnsecutive mnthly bank statements are used t verify a depsitry asset, the date f the mst recent statement must be n mre than 90 days ld n the date the nte is signed General Overview and Summary The Rural Hme Mrtgage (RHM) Prgram ffers lng-term financing pprtunities fr residential real estate lans t Rural Residents and, Hbby Farmers, wh are U.S. citizens r permanent resident aliens. An individual must be at least 18 years f age r have a guardianship cntract, giving authrizatin t a cntemplated transactin. Applicatins invlving a permanent resident alien will require dcumentatin frm INS (Immigratin and Naturalizatin Service) that authrizes the applicant t wn real estate in the United States. Applicatins invlving entities such as Trust, Partnerships, Crpratins, Limited Liability Cmpanies, and Estates are cnsidered ineligible brrwers fr the RHM prgram. The majrity f brrwers fall within the Hbby Farmer r Rural Resident categry in the Rural Hme Mrtgage Prgram. Hbby Farmer is defined as ne whse primary business r vcatin is essentially ther than farming. A Hbby Farmer has primary emplyment ff-farm and supplements their primary incme with agricultural incme. A Hbby Farmer lives n r in reasnable prximity t an acreage, exercises direct cntrl f the agricultural incme thrugh active management r participatin, and the prperty has the reasnable capability f generating annual grss agricultural incme f at least $500 n a sustained basis. T access the ptential fr agricultural incme, please refer t the sectin f the Guide fr Hbby Farmer Agricultural Incme Dcumentatin. Cash ut refinance (Hbby Farm) Beynd the amunt f the cash ut prtin which may be used t pay ff hme equity, persnal vehicle r revlving debs, the amunt f actual cash t the brrwer will be limited t the lesser f $100,000 r 25% f the lan amunt. The cash ut must PAGE 1 f 6 AG-AMERICA HOBBY FARM AND RURAL RESIDENTIAL REV: 30MAR15

4 be fr an eligible purpse such as, imprvements t their primary hme/prperty. Examples f ineligible purpses include investments, secnd hmes r prviding funding fr nn-agricultural business purpses. Rural Resident is defined as an individual wh is nt a legitimate FT Farmer r Hbby Farmer. The Rural Resident has prperty with less than five acres, des nt have agriculture incme nr des the subject prperty have the realistic capability f generating sustained agricultural incme. Rural Resident lans will be underwritten in cmpliance with Qualified Mrtgage / Ability-t-Repay regulatins. On a purchase transactin, the LTV is based upn the lwer f the sales price r appraised value. A Rural Resident can nly finance the purchase, imprvement r refinance f mrtgage debts related t the primary hme. Cash ut refinance (Rural Resident) - The cash ut must be fr an eligible purpse such as, imprvements t their primary hme / prperty. The amunt f actual cash t the brrwer will be limited t the lesser f $100,000 r 25% f the lan amunt. Examples f ineligible purpses include investments, secnd hmes r prviding funding fr nnagricultural business purpses. A Rural Resident may live in a rural area r in a rural cmmunity with a ppulatin f 2,500 r less. Ag-America utilizes tw websites t cnfirm ppulatin: and CREDIT ELIGIBILITY Underwriting, Ratis and Dcumentatin 39% Debt-t-incme (DTI) rati (up t 43% n a case-by-case basis with cmpensating factrs). See Underwriting Guide fr Self-Emplyed Applicants, t determine ratis fr self-emplyed brrwers. Credit Bureau Scre 700 (average f mid scres) Credit scres are calculated by taking the middle scre f the three merged credit scres fr each brrwer (r lwer f the tw scres if nly tw are available). All brrwers will require a middle scre f at least 700. Credit histries with significant dergatry issues may verride the credit bureau scre requirement. RURAL RESIDENT HOBBY FARMER $100,000 minimum lan amunt $100,000 minimum lan amunt Maximum hme value $269,807 Maximum lan amunt $2 millin N Prir Bankruptcies, N Prir Mrtgage Delinquencies, N Prir Credit Cunseling, N Prir Freclsures/Deed in lieu, N Shrt Sales r Outstanding Cllectins LTV / CLTV LTV: Stated as maximums, adjustments may be made based n the characteristics f the prperty (i.e. significant tillable acreages, equine facilities, unique characteristics, etc.) CLTV: Calculated by dividing the principal balance and any additinal subrdinate debt int the lesser f the purchase price r the appraised value. 30 and 15 year prducts available Lan Amunt LTV CLTV Lans $100,000 - $600,000 80% 95% Lans $600,001-$750,000 75% 90% Lans $750,001-$1 millin 70% 80% Lans $1,000,001 -$1.5 millin 65% 75% Lans $1,500,001 - $2 millin 60% 70% Secnd mrtgages are allwed prviding the lan is frm an institutinal r gvernment lender. PAGE 2 f 6 AG-AMERICA HOBBY FARM AND RURAL RESIDENTIAL REV: 30MAR15

5 Seller carry back financing and cntracts fr deed are nt allwed. The payments used t calculate secnd mrtgages are based n fully amrtized payments calculated n the principal balance, a market-interest rate and term f n mre than 15 years. Credit dcumentatin; Credit Reprt (3 bureau merged) Credit and Inquiry explanatins Supprting credit infrmatin, if applicable Rental references Direct credit references Utility histries, etc. Divrce Decree, if applicable with all supprting schedules (curt recrded cpy) Legible signed and cmpleted 4506T frm HOBBY FARMER AGRICULTURAL (Ag) INCOME Incme Dcumentatin All Brrwers Include the mst recent 2 years f signed and dated persnal tax returns with all applicable schedules and; Verificatin f Emplyment (VOE); W-2 s; Recent wage statements/paystubs, dated within 30 days f applicatin. A Hbby Farmer will reflect histric ag-incme n the Schedule F ($500 minimum). The Rural Resident brrwer s tax returns will nt reflect any farm related incme. Self-Emplyed Brrwers Include a signed and dated Balance Sheet fr the business (assets and liabilities). The balance sheet needs t include payment terms fr the business related debts, including rates, terms and payment amunts. If the brrwers have a 25% r mre interest in a partnership r crpratin, the mst recent 2 years f signed and dated tax returns with all applicable schedules, fr thse entities will be required. Hbby Farmer brrwer may be required t develp a signed and dated Business Plan utlining hw the subject prperty can r is realistically capable f generating $500 (minimum) annual agincme. Land rental agreements, CRP (Cnservatin Reserve Prgram administered by the Farm Service Agency (FSA)) cntracts, equine barding cntracts, and pasture rent agreements are adequate ways t dcument ag-incme. Signed and dated Year-t-date Prfit and Lss statement up t mst recent quarter ending, t ensure cntinued prfitability. Nte: There is n minimum r maximum number f acres that autmatically eliminate a brrwer frm the Hbby Farmer eligibility. Evidence f Ag r Timber Incme UNDERWRITING GUIDE FOR SELF-EMPLOYED APPLICANTS Example The applicant is self-emplyed as an electrician. The spuse wrks as a nurse making $50,000/year. The balance sheet fr the business shws tw debts related t the business. One debt is fr a van ($25,000 lan amunt with a $600/m payment). The ther debt is fr a building used as the business headquarters ($150,000 lan with a $1,500/m payment). They have applied fr a $200,000 lan t purchase a primary residence. The PITI payment will be $1,600/m; they als have a car lan payment f $500/m and ther cnsumer debt payments f $250/m. Calculatin $50,000 wage incme (spuse) PAGE 3 f 6 AG-AMERICA HOBBY FARM AND RURAL RESIDENTIAL REV: 30MAR15

6 Plus$35,000(tw-year average net business incme Plus$12,500Interest Plus$15,000Depreciatin Plus$0.00N ther add-backs =$112,500Incme befre subtracting business related payments Less$25,200Annual Business related payments ($600 + $1500 = $2100 X 12) =$87,300Available incme fr cnsumer purpses $7,275Mnthly cnsumer incme ($87,300 / 12) $1,600PITI (husing t incme rati = 21.99%) $750Cnsumer related debt payments =$2,350Ttal debt (debt t incme rati = 32.30%) ASSETS Asset Verificatin Verificatin f Depsit (VOD) Tw mnths f statements recent and cnsecutive fr; Bank/credit unin, 401k, mutual fund and stck Other assets; Gift letter, fully executed frm an acceptable dnr (relative, dmestic partner, fiancée, fiancé, church, municipality r nnprfit rganizatin). Dcument brrwer received the gift funds prir t r at clsing via; Cpy f dnr s gift check and brrwer s depsit receipt Cpy f dnr s withdrawal slip and brrwer s depsit receipt Cpy f dnr s certified, cashier s r ther fficial check t the clsing agent, r HUD-1 Settlement Statement shwing the wire credit fr funds received at clsing and the wire instructins Earnest Mney check Purchase Agreement (Sale f present residence); Final HUD-1 with Net Sheet, if applicable PROPERTY ELIGIBILITY Appraisal Appraisal (FNMA 1004 preferred with tillable acres nted alng with a plat bk map) and include descriptin f incme/expenses t real estate Must cntain descriptin f the prperty and applicable frces f value The appraisal may be rdered thrugh Ag-America s AMC site Hmes financed thrugh the Hbby Farm / Rural Hme Mrtgage Prgram are required t be in gd cnditin with n deferred maintenance r incmplete cnstructin shwn n the appraisal. Owner ccupied primary residence Hmes with either deferred maintenance r incmplete cnstructin culd be financed as an end lan, and nce the wrk is cmpleted and verified by the appraiser, including final inspectin and phts. PAGE 4 f 6 AG-AMERICA HOBBY FARM AND RURAL RESIDENTIAL REV: 30MAR15

7 Sme agriculture facilities are permitted, but active/cncentrated livestck facilities r extensive business facilities are nt eligible. Prperties shuld be Hbby Farm in nature and nt a full-time business peratin. Prperties must have direct access t state r cunty maintained streets r rads. Easements may require additinal dcumentatin. The appraiser shuld give value t the hme and all acreage that will be used as security. Fr example, the appraiser shuld nt value the hme and ten acres with an addendum fr the remaining excess acreage. Sme flexibility is allwed with regard t distance f cmparable sales and adjustments fr varying acreages. Nn-cntiguus parcels are permissible n prperties. The parcels shuld be within a reasnable prximity t each ther. Cntact Ag-America if there is a situatin invlving nn-cntiguus parcels. Fld Zne Determinatin is required. Water and Waste Treatment the prperty is required t have adequate in-service utilities, including well and septic. Waste treatment must meet state and lcal standards. Lg hmes may be allwed if there are sufficient satisfactry cmparable sales within the subject s market area Ineligible Prperties Full Time farming peratin Prperty expsed t a high cncentratin f livestck Manufactured Hme (mdular/wd framed allwed if n permanent basement) Mbile Hme Secnd Hme Unique Hme (Shed, dme, berm and cabin) Twnhuse, Duplexes r Planned Unit Develpment Investment Prperties Prperty Classified as Hbby (see Brrwer Eligibility Guides) Includes prperties ranging frm five t 160 acres. Prperties ver 160 acres will be reviewed n a case-by-case basis. When a prperty exceeds 160 acres, Ag-America may be required t decline the lan due t eligibility fr parcels when a significant prtin f the prperty is used fr agricultural purpses. The prperty may therwise qualify fr the Ag-America Cmmercial Farm and Ranch lan prgram. Prperties must have the realistic capability f generating $500 r mre f agricultural related incme n a sustained basis. The agricultural incme must be realistic, in relatin t the characteristics f the prperty (see Hbby Farmer Incme Dcumentatin Guides). The hme value shuld cmprise f at least 30 percent f the verall prperty value. The mderate price limitatin ($269,807) des nt apply t a brrwer classified as a Hbby Farmer. Prperty Classified as Rural Resident (see Brrwer Eligibility Guides) Includes prperties less than five acres and the prperty with n ability t generate agriculture incme. Lcated in a rural area r in a cmmunity with a ppulatin f 2,500 r less (verify using r The hme-nly value is required t be less than $269,807 (mderate price limitatin). The hme value is calculated by: ttal appraised value less the value f land, less the utbuildings (including detached garages). PAGE 5 f 6 AG-AMERICA HOBBY FARM AND RURAL RESIDENTIAL REV: 30MAR15

8 PAGE 6 f 6 AG-AMERICA HOBBY FARM AND RURAL RESIDENTIAL REV: 30MAR15