PURCHASE/ LIMITED CASH OUT REFINANCES STANDARD and HIGH BALANCE LOAN AMOUNTS Occupancy Maximum* LTV Maximum* CLTV Min FICO* Max Ratios Minimum Cash Investments Mortgage/ Rental History Reserves 1 Unit - Fixed 97% 1 97% 1 Subject to DU 1 Unit - ARM 90% 90% No minimum down payment by borrower OWNER OCCUPIED 2 Units - Fixed 85% 85% Subject to DU 2 Units - ARM 75% 75% No minimum down payment by borrower. 3-4 Units - Fixed 75% 75% Subject to DU 3-4 Units - ARM 65% 65% Minimum borrower contribution from borrower's own funds of 5% is. SECOND HOME 1 Unit - Fixed 90% 90% Subject to DU 1 Unit - ARM 80% 80% Minimum borrower contribution from borrower's own funds of 5% is. Purchase 1 Unit - Fixed 85% 85% Subject to DU 1 Unit- ARM 75% 75% 100% of borrowers own funds. NON-OWNER Purchase 2-4 Unit Fixed 75% 75% Subject to DU 2-4 Unit - ARM 65% 65% 100% of borrowers own funds. Limited Refinance 1-4 Units - Fixed 75% 75% Subject to DU 100% of borrowers own funds 1-4 Units - ARM 65% 65% 1 LTV/CLTV, and HCLTV Ratios Greater than 95%: Standard Loan Amounts Only; Non-Owner Occupant not allowed on Loans with LTV/CLTV/HCLTV greater than 95%. For purchase transactions, at least one borrower must be a first-time homebuyer, as indicated on the 1003 Loan Application. For limited cash-out refinance, Fannie Mae must be the owner of the existing mortgage. Max LTV/CLTV/HCLTV is 97%.. 1
PRIMARY Maximum* LTV Maximum* CLTV CASH OUT REFINANCES Min FICO* 1 Unit - Fixed 80% 80% Subject to DU 1 Unit - ARM 75% 75% 2-4 Units - Fixed 75% 75% Subject to DU 2-4 Units - ARM 65% 65% Max Ratios Minimum Cash Investments Mortgage/ Rental History Reserves Per DU/Additional reserves if borrower owns other financed properties SECOND HOME 1 Unit - Fixed 75% 75% Subject to DU 1 Unit - ARM 65% 65% NON-OWNER 1 Unit - Fixed 75% 75% Subject to DU 1 Unit - ARM 65% 65% 2-4 Units - Fixed 70% 70% Subject to DU 2-4 Units - ARM 60% 60% 6 Mos. PITI for other financed properties 6 Mos. PITI for other financed properties SECOND HOME OR INVESTMENT PROPERTIES BORROWERS WITH FIVE TO TEN FINANCED PROPERTIES MUST MEET THE FOLLOWING ELIGIBILITY REQUIREMENTS Transaction Type Number of Units Maximum LTV/CLTV/HCLTV Ratio Minimum Credit FRM: 75% Purchase/Limited Cash-out Refinance 1 Unit ARM: 65% 720 High-Balance FRM/ARM: 65% Cash-Out Refinance (only if within 6 months of purchase and all delayed financing exception FRM: 70% 1 Unit requirements are met.) ARM: 60% 720 Cash-Out Refinance (>6 months since purchase) Ineligible N/A Purchase/Limited Cash-Out Refinance Cash-Out Refinance INVESTMENT PROPERTIES 2-4 Units 2-4 Units FRM: 70% ARM: 60% FRM: 65% ARM: 60% Cash-Out Refinance (>6 months since purchase) 1-4 Units Ineligible N/A 720 720 2
CONVENTIONAL Underwriting Guidelines Underwriting Method All loans must run through Fannie Mae Desktop Underwriter (DU). Findings must be "Approve/" recommendation. Manual Underwriting is available if the loan meets Fannie Mae guides for manual Underwriting. Refer with Caution decisions will not be overturned if the loan is outside of manual guidelines. Management second review and additional price adjustment. Loan Amount Minimum Loan Amount - $50,000 Maximum Loan Amount: https://www.fanniemae.com/singlefamily/loan-limits Loan Terms Available Borrower Eligibility Transactions Ineligible Transactions- Scenarios Refer to Fannie Mae Guide B2 1.2.-03 for all ineligible transactions Cash-out Refinance Co-Borrowers 30, 25, 20 & 15 year Fixed and 5/1 and 7/1 ARMs. ARMS not allowed on High-Balance. Permanent and Non-Permanent Resident Aliens allowed with supporting documentation. Foreign Nationals not permitted. All borrowers must have valid social security number. Purchases, Non Cash-Out Refinance/Limited Cash-out Refinance (LCOR) and Cash-out Refinance The subject property was purchased by the borrower within the six months preceding the disbursement date of the new mortgage loan except if delayed financing guidelines are met. See Delayed Financing in Fannie Mae Seller Guide B2-1.2-03 Cash-Out Refinance Transactions; Investor and second home borrowers with five to ten financed properties are ineligible for cash-out refinance transactions unless all of the delayed financing exception requirements are met. (See Delayed Financing Exception in Selling Guide and B2-2-03, Multiple Financed Properties for the Same Borrower.) Loan is defined as cash out if the cash out amount exceeds the lesser of $2,000 or 2% of the loan amount. Non-Purchase money seconds are considered cash out. One borrower must have held title to subject property at least 6 months. Exception: If the property was listed for sale in the past six months, the LTV/CLTV and HCLTV ratios for a cash-out transaction is limited Maximum number of borrower s is four. Borrower must qualify on his/her own income, assets (owner occupant ratios apply). Guidelines You may access Fannie Mae Program Guidelines at their website as shown below: https://www.fanniemae.com/singlefamily/originating-underwriting Click on Originating and Underwriting; Click on Selling Guide; Click on PDF Version Selling Guide (to the Left of the screen), Underwriting Guidelines star in Part B. FNMA guidelines are also located in FAST. 3
Purchase Transactions - The following additional requirements apply for LTV Ratios greater than 95% (LTV/CLTV 97%); LTV Ratios Greater than 95%- Purchase & Limited Cash-Out Refinance Transactions 30 Year Fixed Rate Only For purchases at least 1 borrower must be a first-time homebuyer as defined by Fannie Mae One-Unit principal residence, condos, PUDs only. No Co-op Gifts are allowed Maximum CLTV 105% if the subordinate lien is an eligible Community Seconds loan Purchase Only 35% MI Coverage is (Reduced MI is not permitted) Use Radian only Subordinate Financing is not allowed Non-occupant co-borrowers are not permitted High-balance are not permitted Adjustable rates are not permitted Manufactured housing is not permitted For Limited Cash Out Refinance Transaction In addition to the above requirements, the existing loan being refinanced must be owned (or securitized) by Fannie Mae. Documentation may come from: a) The current servicer (if the lender is not the servicer). b) Fannie Mae's Loan Lookup too - https://knowyouroptions.com/loanlookup Mortgage Insurance coverage is for loans with LTV ratios greater than 80%. Mortgage Insurance types: borrower paid monthly mortgage insurance and lender single paid and monthly paid mortgage insurance. Mortgage Insurance (MI) Transaction Type 80.01-85.00% 85.01-90.00% 90.01-95.00% 95.01-97.00% Fixed-rate term 20 years 6% 12% 25% 35% Fixed-rate, term > 20 years 12% 25% 30% 35% Multiple Financed Properties Non-Arm's Length Transactions - Identity of Interest Properties in the state of Texas Property Listed for Sale Property is borrower's primary residence - No limitations on number of properties financed. Property is a second home or an investment property, the borrower may own or obligated on up to ten (10) financed properties (including his or her principal residence). These limitations apply to the total number of properties financed, not to the number of mortgages on the property. DU cannot determine number of financed properties the borrower owns or is obligated on, but will issue messages on second and investment property transactions reminding that the eligibility requirements must be manually applied to investment and second homes. Transactions where: The Builder is acting as Realtor/Broker permitted on primary residence only Realtor/Broker is selling their own property permitted on primary residence only Loan originator is acting in another real-estate role not permitted. Loan Originator cannot have another real estate related position on any loan, regardless of the loan program Refer to FNMA Texas 50(a) (6) Cash-Out Matrix Properties listed for sale within the past 180 days are eligible for rate/term or cash out refinance, however cash out refinances are limited to 70% LTV. Properties listed for sale must have been taken off the market at least one day prior to the date of the application Qualifying Rate Qualify at Note Rate. 5/1 ARM qualifies at the greater of the start rate + 2% or the fully indexed rate (index margin); 7/1 ARM qualifies at the note rate 4
CREDIT Non-Traditional Alt Credit Car Lease Payments 30-Day Charge Accounts Contingent Liability (Co-Signed Loans) DU Loans: Co-borrowers without credit scores Derogatory credit Disputed Trades Not permitted The lease payment must be included in the DTI regardless of the remaining number of payments. Borrower must have sufficient funds to cover the unpaid balance of all unpaid 30-day charge accounts (e.g., American Express). DU will include the balance in the cash to close and total funds verified. The borrower and the individual making the payments must both be liable for the debt repayment. To exclude the payment from the DTI ratio, 12 months canceled checks or bank statements are as evidence of timely payment by the other co-obligator on the note/loan. The person making the payments must be a co-obligator on the loan. Allowed for 1-unit principal residence only. Purchase or limited cash out refinance. Income for qualifying borrower cannot come from self-employment. Not allowed for High-Balance. Borrower with non-traditional credit and a credit score must contribute more than 50% of the qualifying income. Qualifying credit score must be inputted into LOS as zero. Follow DU findings as to any debt that should be paid All judgments, garnishments, and liens must be paid off at or before closing. Documentation of the satisfaction must be provided. For forgiveness of debt, modifications, bankruptcies, foreclosures, and short sales, follow standard Fannie Mae waiting periods/guidelines. DU will issue the disputed tradeline message if it contains derogatory payment information (a 30-day or more delinquency) reported within two years prior to the credit report date. The message will list the disputed tradeline with a reported derogatory payment within the last two years. The disputed tradeline is accurate, then a new credit report is removing the disputed information and resubmit the report through DU. If DU does not issue a message specific to the trade line with a dispute, it is not to be addressed. If the trade line DOES belong to the borrower and the reported payment history is accurate, the disputed trade line(s) must be considered in the credit risk assessment. To ensure the disputed trade line is considered, a new credit report must be obtained with the trade line(s) no longer reported as disputed and resubmit the loan case file to AUS. Note: If the credit reporting confirms that the disputed information is incorrect or incomplete and underwriting of the application needs to be completed before the credit files can be corrected, the credit score cannot be used. Therefore, a Rapid rescore must be obtained removing the disputed tradeline. SIGNIFICANT DEROGATORY CREDIT EVENTS Bankruptcy, Chapter 7 or 11 See Chart Page 6 Bankruptcy, Chapter 13 4 Years from discharge date or dismissal date. A two-year waiting period for extenuating circumstances is permitted if it can be documented and is from the discharge or dismal date of the Two (2) years from discharge date or four (4) years from the dismissal date. There are no exceptions. Multiple Bankruptcy Filings Five (5) years waiting period is. Note: Two or more borrowers with individual bankruptcies are not cumulative, and do not constitute multiple bankruptcies. A seven-year waiting period is, and is measured from the completion date of the foreclosure action as reported on the credit report or other foreclosure documents provided by the borrower. Foreclosure --Exceptions for Extenuating Circumstances - A three-year waiting period is permitted if extenuating circumstances can be documented, and is measured from the completion date of the foreclosure action --Additional requirements apply between three and seven years, which include: Maximum LTV, CLTV, or HCLTV ratios of the lesser of 90% or the maximum LTV, CLTV, or HCLTV ratios for the transaction per the Eligibility Matrix. The purchase of a principal residence is permitted. Limited cash-out refinances are permitted for all occupancy types pursuant to the eligibility requirements in effect at that time. Note: The purchase of second homes or investment properties and cash-out refinances (any occupancy type) are not permitted until a seven-year waiting period has elapsed. 5
The following table summarizes the waiting period requirements for all significant derogatory credit events. Summary Waiting Period Requirements for Derogatory Events LOANS MUST RECEIVE A RECOMMENDATION FROM DU THAT IS ACCEPTABLE. NO MANUAL UNDERWRITES Derogatory Event Waiting Period Requirements Bankruptcy Chapter 7 or 11 4 years 2 years Bankruptcy Chapter 13 Multiple Bankruptcy Filings - 2 years from discharge date - 4 years from dismissal date 5 years if more than one filing within the past 7 years Waiting Period with Extenuating Circumstances - 2 years from discharge date - 2 years from dismissal date 3 years from the most recent discharge or dismissal date 3 years Additional requirements after 3 years up to 7 years: Foreclosure1 7 years - 90% maximum LTV ratios2 - Purchase, principal residence - Limited cash-out refinance, all occupancy types Deed-in-Lieu of Foreclosure, Preforeclosure Sale, or Charge-Off of Mortgage Account 4 years 2 years 1 When both a bankruptcy and foreclosure are disclosed on the loan application, or when both appear on the credit report, bankruptcy waiting period may apply if appropriate documentation is obtained to verify that the mortgage loan in question was discharged in the bankruptcy. Otherwise, the greater of the applicable bankruptcy or foreclosure waiting period must be applied. 2 References to LTV ratios include LTV, CLTV, and HCLTV ratios. The maximum LTV ratios permitted are the lesser of the LTV ratios in this table or the maximum LTV ratios for the transaction per eligibility matrix. Extenuating Circumstances Prior Restructure Reflected in credit history Student Loans Examples of documentation that can be used to support extenuating circumstances include documentation that confirm the event such as a copy of a divorce decree (i.e., significant loss of income due to divorce), medical reports or bills, notice of job layoff, job severance papers, death of major wage earner, etc., and documentation that illustrate factors that contributed to the borrower s inability to resolve the problems that resulted from the event such as a copy of insurance papers or claim settlements, property listing agreements, lease agreements, tax returns (covering the periods prior to, during and after a loss of employment). Etc. Borrower must also provide a letter of explanation detailing the extenuating circumstance. At least two (2) years of acceptable traditional credit since completion date. All efforts should be made to obtain payment of deferred student loans. If unable to obtain, 1% of balances will be used as payment in determining DTI 6
COLLATERAL Appraisal Ineligible Properties Condominiums - Established Condominiums (Ineligible Projects) Condominiums (Limited Review - Attached) Condominiums (Limited Review - Detached) Condominiums that require Fannie Mae to approve the project (PERS) Full Appraisal Required interior & exterior inspection. 1004 for SFR, 1025 for 2-4 Units. 1007 Single Family Comparable Rent Schedule for rental 1-unit investment properties. Transferred appraisals require AIR Certification and TIL from previous lender. Manufactured Housing; Leasehold Properties Property Flip when Non-Arm s Length Transaction Vacant Land or Land Development properties Properties not accessible by roads that meet local standards Agricultural properties, such as farms or ranches Ineligible condo projects; non warrantable Condominiums Co-op properties or hotels; Timeshares Boarding houses Bed and breakfast properties Properties that are not suitable for year-round occupancy regardless of location 1) At least 90% of the total units in the project have been conveyed to the unit purchasers; 2) The project is 100% complete, including all units and common elements; 3) The project is not subject to additional phasing or annexation; and 4) Control of the HOA has been turned over to the unit owners. 5) Attached units in Established Condo Projects in the state are Florida are limited to the following LTV Ratios: ----Principal Residence (PERS Approved or CPM Review - 97% LTV. Limited Review max LTV of 75%. ----Second home - (PERS Approved or CPM Review - 90%. Limited Review max LTV of 70%. ----Investor - (PERS Approved or CPM Review - 85%. Limited Review - Not Ineligible Projects: Refer to Selling Guide - B4-2.1-02 Limited Review: Must be located in either an attached unit in an established condo project, including 2-4 unit condo projects, or a detached unit in a new or established condo project (including those projects with a mixture of attached and detached units). The unit must secure a mortgage that is originated on a spot loan basis. The mortgage must meet the LTV/CLTV/HCLTV ratios for the occupancy type. Investment property or manufacture homes not allowed. Project is not an ineligible project. New attached condo projects are not allowed. LTV/CLTV/HCLTV - Primary Residence / less than or equal to 80%; Second Home less than or equal to 75%; Investment Properties are not eligible. If the project is a detached unit, the unit securing the mortgage must be 100% complete. Attached new and newly converted condos in the state of Florida are not allowed under limited review. The Limited review must have been completed within 180 days prior to the note date. The mortgage is secured by a single detached unit in a condo project. Not a manufactured home. Not an ineligible project. Primary residence, second home or investment property, subject to DU Approve/. Appraiser must comment on, and reflected in the appraisal report, any effect that buyer resistance to the condo form of ownership has on the market value of the individual unit. If project is new, the appraiser used as a comparable sale at least one detached condo unit, which may be located either in a competing project or in the subject project, if the condo unit is offered by a builder other than the one that built the subject unit. Property covered by type of property and flood insurance coverage for single-family detached dwellings, if the condo unit consists of the entire structure as well as the site and air space; or the project's master property and flood insurance policies, if the condo unit consists only of the air space for the unit and the improvements and site are considered to be common areas or limited common areas. The Limited review must have been completed within 180 days prior to the note date. The following projects must be submitted to Fannie Mae for project approval (branch and/or broker must submit the project to Fannie Mae for approval): New and newly converted condo projects consisting of attached units located in Florida; New and newly converted non-gut rehabilitation condo projects. PERS approval must be valid (unexpired) as of the note date. Maximum LTV limits for Attached units in new and newly converted condo projects in Florida are: 1) Principal Residence 97% LTV with / Decision 2) Second Home 90% LTV 3) Investment 85% LTV 7
HIGH-BALANCE Collateral A One-Unit Residential Field Review is if the loan amount is greater than $625,500 and the LTV/CLTV/HCLTV ratio is greater than 80%; or the property is valued at $1,000,000 or more and the LTV/CLTV/HCLTV ratio is greater than 75%. INCOME/ASSETS Amended Tax Returns Original filed returns and the amended return are. Tax returns must have been amended prior to the application date and execution of the purchase contract. CANNOT BE AMENDED TO QUALIFY. Assets / Reserves Bonus, Overtime, and Commission Income Business Assets Current Primary Pending Sale (not closing prior) Current Primary converted to Second Home Employed by Family Member Per DU -A minimum history of two-years of employment income is ; -Borrowers relying on overtime or bonus income for qualifying purposes must have a history of no less than 12 months; -A minimum history of 2 years of commission income is recommended however 12-24 months may be considered with positive factors to reasonably offset the shorter income history When using business assets as funds for the down payment, closing costs, and/or financial reserves, the underwriter must perform a cash flow analysis to confirm the withdrawal of these funds will not have a negative impact on the business. When using business funds for assets, second signature by Underwriting Manager is. 6 Months Business Account statements are. Payment for both properties must be used to qualify the borrower with 6 months PITI in reserves after closing for both properties. Payment for both properties must be used to qualify the borrower with 6 months PITI in reserves after closing for both properties. Two (2) years tax returns, W-2 s, one month s current paystubs with 30 days of earnings, Written VOE, and evidence does not own more than 25% interest in the company Gifts Follow FNMA Guidance: 1 Unit Primary Residences (including DU Version 9.3 High Balance): no minimum borrower contribution is 2-4 Units, 2nd Homes, & DU Version 9.2 High Balance: LTV's >80% require the borrower have a minimum 5% of their own funds in the transaction Gifts are not permitted on Investment Properties Donor must be immediate family member, fiancé or domestic partner. The donor may not be affiliated with any other interested party to the transaction. A gift can be provided by: a relative, defined as the borrower's spouse, child, or other dependent, or by any other individual who is related t the borrower by blood, marriage, adoption, or legal guardianship or a fiancé, fiancée, or domestic partner. Gift Equity Large Deposits Multiple Properties to the Same Borrower A gift of equity is acceptable for principal residence. Not eligible for non-owner or new construction properties. The donor must provide a gift letter and the gift property must not be a distress sale. Large Deposits are defined as a single deposit that exceeds 50% of the total monthly income for the loan. Note: If the deposits exceed 100% of borrower s total income, the underwriter may require an LOE and source of the funds. If bank statements reflect automatic deposits of all income and additional deposits are reflected outside of borrower s monthly income, the underwriter may request an LOE and source of substantial deposits outside of borrower s total income. No limitation on the number of properties owned if the property is the borrower s principal residence. Second Home and investment property is limited to one to four financed properties. Investor and second home borrowers with five to ten financed properties For Internal Use Only - Not for consumer distribution. This document is not an advertisement as defined in 12 CFR 1026.2. All products are subject to credit and property approval. Guidelines are subject to change at any time and without prior notice. Residential Bancorp, Inc. 5686 Dressler Rd NW, One Bancorp Building, North Canton, OH 44720, NMLS # 210853, California BRO CRMLA # 4131217, CFL#603J643, Equal Housing Lender. 8