This product may only be used when one of the following exists: A Non-occupying co-borrower is on the loan and blended ratios are being used. The occupying borrower must have the ability to at least make the housing payment on their own regardless of LP findings. Self-employed borrower with a two year history of self-employment but only tax returns are able to be validated due to timing of the tax year and startup date of the business.. All borrowers that have two years of filed returns must be qualified on the Fannie Mae program. Disputed accounts: borrowers with 1 disputed account that has not be removed or resolved. In all cases above the borrower(s) must qualify and receive and LP Accept recommendation. Agency Finance Type Occupancy Term Freddie Mac - LP Approval Purchase and Rate/Term Refinances Owner Occupied Freddie Mac - LP Approval Cash Out Refinances Owner Occupied Min Credit Score Min Credit Score 1 Unit 95/95 620 1 Unit 80/80 620 2 Unit 80/80 620 2 Unit 75/75 620 3-4 Unit 1 Unit 80/80 Second Home 85/85 Investment Property 620 3-4 Unit 75/75 620 Second Home Min Credit Score Min Credit Score 620 1 Unit 75/75 620 Investment Property Min Credit Score Min Credit Score 1 Unit - Purchase 85/85 620 1 Unit 75/75 620 2-4 Unit Purchase 75/75 620 2-4 Unit 70/70 620 1-4 Unit R/T Refi 75/75 620 Determined by LP Findings. Unpermitted structural additions under the following conditions are acceptable: The quality of the work is described in the appraisal and deemed acceptable workmanlike quality by the appraiser. The addition does not result in a change in the number of units comprising the subject property (e.g. a 1 unit converted into a 2 unit). Appraisals If the appraiser gives the unpermitted addition value, the appraiser must be able to demonstrate market acceptance by the use of comparable sales with similar additions and state the following in the appraisal: Non-Permitted additions are typical for the market area and a typical buyer would consider the "unpermitted" additional square footage to be part of the overall square footage of the property. The appraiser has no reason to believe the addition would not pass inspection for a permit. An Operating Income Statement ( form 216) will be required when the subject property is a 2-4 unit owner occupied or a 1-4 unit investment property, and rental income is being used to qualify. A Comparable Rent Schedule is required (form 1007) is required on investment properties.
Bank Statements are required. VODs are not allowed. Large Deposits A large deposit is defined as a single deposit on an account statement that exceeds 50% of the total monthly qualifying income for the loan. Any deposits less than 50% may require further investigation and documentation if deemed necessary by the underwriter, as they may be an indicator of recently opened liabilities or funds from an unacceptable source. Purchase Transactions: Large deposits made by borrowers to meet the requirements for down payment, closing cost and /or reserves for purchase transactions must be explained and documented. Funds that are not needed for down payment, closing cost and/or reserves for Loan underwriting qualification purposes must be deducted from the total assets and the reduced amount must be entered into DU. Assets Borrower Eligibility Stocks, government bonds and mutual funds are an acceptable source for the down payment, closing costs and reserves. Must verify: The borrower s ownership of the account, and U.S. citizens. Refinance Transactions: Documentation or explanation for large deposits is not required; however, large deposits may be an indication of recently opened liabilities or funds that are from an unacceptable source. The underwriter must take this into consideration and exercise proper underwriting judgment when reviewing the assets and qualifying the borrower. Stocks, Bonds and Mutual Funds Value of the account at the time of liquidation, and The borrowers receipt of the funds. When using for reserves, funds do not need to be liquidated however only enter 70% of value. Retirement Accounts 401K/IRA/SEP/Keogh accounts are an acceptable source for the down payment, closing costs and reserves. Must verify: The borrower s ownership of the account, and Value of the account at the time of liquidation, and The borrowers receipt of the funds. Document terms of withdrawal for IRA, SEP and Keogh accounts o Accounts that only allow withdraw upon termination of employment or death is not an acceptable source for down payment or reserves. When using for reserves, funds do not need to be liquidated however only enter 60% of value. Permanent resident aliens, with proof of lawful permanent residence. Nonpermanent resident alien immigrants with appropriate documentation proving right to live/work in the U.S. for a specific amount of time. If the visa is set to expire less than from the note date, the likelihood of renewal must be determined by the underwriter. Ineligible Borrowers : Foreign Nationals; Borrowers with diplomatic immunity; Borrowers with no SS#. Condominiums/PUDs Continuity of Obligation Credit Departing Residence Must follow Freddie Mac published Condominium Eligibility Guidelines. Condos located in a resort area are not eligible. All refinance transactions must meet at least one of the following continuity of obligation requirements if there is currently an outstanding lien that will be satisfied through the refinance transaction: At least one borrower is obligated on the new loan who was also a borrower obligated on the existing loan being refinanced. The borrower has been on title and residing in the property for at least 12 months and has either paid all mortgages on the subject property timely for the last 12 months or is related to the current obligor. Borrower has recently inherited or was legally awarded the property through a court supervised transfer process. All borrowers on the loan must have a minimum of one credit score. Borrowers must have at least three tradelines for credit score to be valid. In order to use rental income when converting an existing primary to an investment properties the 30% equity must be documented by an AVM or exterior-only appraisal. In addition, the Borrower must have a two years history of managing rental property and tax returns must reflect a two year history of rental income.
Derogatory Credit Derogatory Event Bankruptcy Chapter 7 or 11 Bankruptcy Chapter 13 Deed-in-Lieu of Foreclosure and Pre-foreclosure Sale Foreclosure Modified/Restructured Mortgage Payment Multiple Bankruptcy Filings Waiting Period Requirements 4 years from discharge date 4 years from dismissal date 4 years 90% maximum LTV/CLTV ratios; limited to purchase of primary residence or rate/term refinance (all occupancies). 7 years LTV/CLTV ratios per the Eligibility Matrix 7 years Can not be on our subject property. Modified/restructured loans on non-subject properties do not have a specified waiting period. Acceptance will be based on LP findings and the payment history on the property in question. No late mortgage payments in the preceding 12 months. 5 years Newly Employed: A borrower who has less than a two-year employment history: that borrower s income may be 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. Re-entering the Workforce: 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 a previous employment history to cover a two years. Employment by a Relative: 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. All of the following income documentation is required: 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. In order to use rental income on the subject investment property, the borrower's federal tax returns must reflect a two year history of rental income Employment/Income Verification Whenever rental income from the subject is to be used in qualifying, the Borrower must have rent loss insurance on the Investment Property for at least six months of gross monthly rent. In order to use rental income when converting an existing primary to an investment property the 30% equity must be documented by an exterior-only appraisal. In addition, the tax returns must reflect a two year history of rental income Self Employment: Follow income documentation as required by LP. Additional documentation may be required if the underwriter deems it necessary to support the decision to use the income. Profit and loss with balance sheet required if note date is more than 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: When tax returns are needed, follow documentation as required by LP. When the most recent tax filing date has past and the borrowers filed an extension the following is required: 4506-T: Two years most recent returns that have been filed and signed. A copy of the filed extension request. A tax transcript reflecting No record of return filed for the most recent tax period. Evidence that any taxes owed have been paid. Signed and dated at application and closing, is required for all borrowers whose income is being used to qualify. Transcript General Requirements: Income Documentation Required per LP 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
Maximum financing concessions for primary residences and second homes are as follows: 9% of value with LTV/CLTV ratios less than or equal to 75% Financing Concessions 6% of value with LTV/CLTV ratios greater than 75% up to and including 90% 3% of value with LTV/CLTV ratios greater than 90% The maximum financing concession for investment properties is 2% of value regardless of the LTV ratio. For the purposes of determining financing concessions, "value" is the lesser of the sales price or appraised value. Gift funds are acceptable on primary residences and second homes only (no N/O/O) with the following requirements: Donor must be a family member, a fiancé, fiancée or domestic partner; Gifts Gift letter is obtained indicating the amount of the gift, date gift will be given, donor's name and address, relationship to borrower, and that no repayment is expected; Borrower must make 5% minimum down payment from their own funds when the LTV is greater than 80%. Purchase The funds are verified in either the borrower or donor's account; Document transfer of funds from donor to borrower. Limited Cash-Out/Rate & Term Refinance. Cash Out Proceeds can be used to Pay off a first mortgage as long as ther is at least 120 days seasoning when the mortgage being refinanced was from a purchase money transaction, measured from note date of purchase to note date of refinance. Proceeds can be used to pay off any junior liens used solely and in their entirety to purchase the subject property. Pay related Closing Costs and Prepaid items. Disburse cash out to the Borrower in an amount not to exceed 2% of the new Mortgage or $2,000, whichever is less. 6 months seasoning required; measured from settlement date to initial application date, unless delayed financing guidelines are met. Loan Purpose Delayed Financing Delayed financing provision is acceptable if all of the following requirements are met: The LTV/CLTV/HCLTV must be based on the lesser of the original sales price or the current appraised value. The new loan amount must not be more than the actual documented amount of the borrower's initial investment in purchasing the property plus the financing of closing costs, prepaid items and points. The purchase transaction was an arms-length transaction. The purchase transaction is documented by the HUD-1 Settlement Statement, which confirms that no mortgage financing was used to obtain the subject property. The source of funds for the purchase transaction must be documented. The preliminary title search or report must not reflect any existing liens on the subject property. The source of funds to acquire the subject property must be documented. Any loans used as a source for the purchase transaction will be required to be repaid and reflected on the new HUD-1. All other cash-out refinance eligibility requirements and cash-out pricing apply. All refinance transactions must meet Continuity of Obligation requirements.
Minimum Loan Amount Maximum Loan Amount Mortgage Insurance $60,000.00 1 unit = $417,000; 2 units = $533,850; 3 units = $645,300, 4 units = $801,950. Standard Coverage Required. Financed MI, Split MI and Borrower-Paid Single Premium MI are not allowed. Non-Occupant Co-Borrower must be immediate family member. Non Occupant Co-Borrower Max 90% LTV. Ratios should not exceed 35/43 for occupying borrower. Occupying borrower must be able to make monthly housing payment based on their own income/funds. Primary Residence - 1-4 units Occupancy Second Homes - 1-unit only Investment Properties - 1-4 units 1-4 Units. PUD - Detached or Attached. Condos - Warrantable Only - see Condo Section for details. Acreage: Lot size in excess of 10 acres must be carefully reviewed by the underwriter with the following being evaluated: Maximum LTV 80%. Property; Eligible Types Must be typical for the area, comps must support this. Must be residential in nature with no more than 20% of land value being used for income producing. Properties Resold within 180 days of Purchase Land to value ratio should not exceed 35%. Highest and best use must be residential. Minimal outbuildings: such as small barns or stables that are of relatively insignificant value in relation to the total appraised value of the subject property are acceptable providing they are typical of other residential properties in the subject s area. Significant outbuildings: The presence of outbuildings such as silos, large barns, storage areas, or facilities for farm-type animals, may indicate that the property is agriculture in nature, and therefore would be unacceptable. Arm's length transactions allowed only. Field Reviews are required when sales price has increased by more than 20%. No history of multiple flips within the preceding 12 months. Ratios The lesser of 50% or LP Findings Primary Residence - Freddie Mac requires the following reserves when the existing primary is pending sale or is converting to an investment property: If the equity on the current residence is 30% or more, 2 months on the subject and 2 months on current principal residence. If the equity on the current residence is less than 30%, 6 months on the subject and 6 months on current principal residence. Reserves Second Homes - Reserves equal to two monthly payments of principal, interest, taxes and insurance (PITI) for the Mortgaged Premises, reserves equal to two monthly payments of PITI for each other financed second home and 1 - to 4-unit Investment Property in which the Borrower has an ownership interest or on which the Borrower is obligated. N/O/O - Reserves equal to six monthly payments of principal, interest, taxes and insurance (PITI) for the Mortgaged Premises that could be used to supplement payments during vacancies and make regular and emergency repairs to the subject property as necessary, and reserves equal to two monthly payments of PITI for each other financed second home and 1- to 4-unit Investment Property in which the Borrower has an ownership interest or on which the Borrower is obligated. All reserves entered into LP must be verified Primary Residence 2-4 units require at least 6 months PITI. Underwriting Method Loan Processor with an accept - recommendation is required. Inspection only required if: The appraiser or purchase agreement calls for one or indicates a potential issue. Cisterns: Not Allowed. Wells: Purity test is only required if: Utilities There is any indication that the water might not be safe or is contaminated, or If the purchase agreement required ones. Spring fed wells are not acceptable. Tests must address: Nitrate, Arsenic, E Coli and coliform levels. Road Maintenance agreement is required for all private roads