FULL DOC PURPOSE/OCCUPANCY/UNITS LTV CLTV Minimum FICO PURCHASE Owner Occupied (O/O) 1 unit (see MI section below) 95% 95% 700 1 unit (see MI section below) 97% 97% 720 2 units (see MI section below) 95% 95% 720 2 4 units 75% 75% 680 Second Home (2nd) 1 unit (see MI section below) 90% 90% 720 Non Owner Occupied (NOO) 1 unit 80% 80% 720 2 4 units 75% 75% 720 RATE/TERM REFINANCE Owner Occupied (O/O) 1 unit (see MI section below) 95% 95% 700 1 unit (see MI section below) 97% 97% 720 2 units (see MI section below) 95% 95% 720 2 4 units 75% 75% 680 Second Home (2nd) 1 unit (see MI section below) 90% 90% 720 Non Owner Occupied (NOO) 1 4 units 75% 75% 720 CASH OUT REFINANCE Owner Occupied (O/O) 2 4 units 75% 75% 680 Second Home (2nd) 1 unit 75% 75% 680 W Conv Conf Page 1 Revised 12/14/2011
Non Owner Occupied (NOO) 1 unit 75% 75% 720 2 4 units 70% 70% 720 General Guidelines LOAN TERMS Full Doc 10, 15, 20, 30, 40 year Fixed Full Doc 3/1, 5/1, 7/1 ARM (30 or 40 year term) Interest Only not permitted INDEX (ARM ONLY) LIBOR (London Interbank Offered Rate) for twelve month US dollar denominated deposits, as published in the Wall Street Journal MARGIN (ARM ONLY) 2.25% ANNUAL ADJUST CAP 2.00% (ARM ONLY) Rate is equal to the note margin plus index rounded to the nearest 0.125% (Subject to Life Cap) LIFE CAP (ARM ONLY) 3/1 ARM 6.00% 5/1 ARM 5.00% 7/1 ARM 5.00% CONVERSION OPTION All ARMs are non convertible (ARM ONLY) TEMPORARY BUYDOWNS Not permitted QUALIFYING RATE Fixed Qualify at Note rate ARM 3/1 and 5/1 LIBOR ARM Qualify using the greater of the fully indexed, fully amortizing rate or Note rate 7/1 LIBOR ARM Qualify at Note rate ASSUMPTIONS Not permitted PREPAYMENT PENALTY None BORROWER ELIGIBILITY Permanent Resident Aliens Verify Alien Registration Card for past 2 years Non Permanent Resident Aliens Must be a legal resident of the U.S. as evidenced by SSN Borrower must be employed in the U.S. Valid work authorization unexpired Visa for past 2 years Tax Identification Number (TIN) is not acceptable Foreign Nationals Not permitted NON OCCUPANT Not permitted CO BORROWERS LOAN AMOUNTS Minimum $40,000 Maximums: (FNMA Limit) 1 unit $417,000 2 units $533,850 3 units $645,300 4 units $801,950 PROPERTY TYPES Eligible Property Types 1 4 units PUDs Fannie Mae Condos Must be on FNMA approved list and Warrantable project Florida Condos Second Homes not permitted Investment properties not permitted Primary Residence only Eligible Project Warranty New and Newly converted Attached Condominium projects Must have PERS Final Project Approval issued by Fannie Mae posted on www.efanniemae.com Established Condominium projects Must have Lender Full Review Ineligible Project Warranty Limited Review/Streamline Review, CPM Expedited, FHA Approved Project Modular Pre Cut/Panelized Housing W Conv Conf Page 2 Revised 12/14/2011
Manufactured Homes. Please refer to section regarding Manufactured Homes for further clarification. Ineligible Property Types Co ops Rural Properties Mixed Use Properties (income producing properties, farming, ranches, etc) Construction to Permanent Loans Condotel Non warrantable condos Deed restricted properties MANUFACTURED HOMES Maximum LTV is 80% Minimum FICO is 700, No Mortgage Lates or derogs in the past 24 months 4 months PITI reserves required Maximum DTI ratio is 41% Max housing increase of 50% 1978 or Newer Double wide or larger No Flood Zones 3 closed comps within 90 days of date of underwriting Max distance of comps not to exceed 5 7 miles Max 2 acres no rural properties allowed All comps must be manufactured homes and must be similar in size, age, and style No Dirt Roads or Driveways No Non Occupant Co Borrowers No Hauled water or Cisterns Property may not have any income generated on site (i.e. Mixed Use Farm, Workshops, boarding, etc) Cash out refi s Maximum LTV is 65%, it is only allowed on 15 years, and 2 full appraisals are required 2 nd Appraisal will be required upon underwriter discretion No Gift ALTA 7 policy required Foundation Engineer Cert required MANUAL PRICING required UNDERWRITING METHOD DO (version 8.2) LP Manual Underwrites not allowed AGE OF CREDIT DOCUMENTS Credit documents cannot be older than 30 days at submission date. Credit documents include credit report, employment, income and asset documentation Appraisal and Preliminary report are good for 90 days CREDIT AND TRADELINES CREDIT: All borrowers must have minimum 2 FICO scores on the credit report. All borrowers must have sufficient credit experience regardless of DO findings Non traditional credit not allowed TRADELINES: DO Approve/Eligible: The Underwriter must compare information from the credit report for the loan with the data used by DO to evaluate the loan to ensure the DO recommendation was based on complete and accurate credit information DO Approval is based on Authorized User Account Trade Line(s): Must have minimum 3 open tradelines rates for 12 months, regardless of DO BANKRUPTCY Chapter 7 4 years from discharge or dismissal date Chapter 13 2 years from the discharge date or 4 years from the dismissal date Multiple BK Filings with 7 years 5 years from most recent discharge or dismissal date FORECLOSURE 5 years from completion date Additional requirements that apply after 5 years up to 7 years following completion date: The purchase of a second home or investment property is not permitted Rate/term refinances are permitted for all occupancy types pursuant to the eligibility requirements in effect at that time Cash out refinances are not permitted for any occupancy type DEED IN LIEU OF 4 years from completion date (date deed in lieu executed) FORECLOSURE Additional requirements may apply after 4 years up to 7 years following completion date INCOME All income must include written fully executed VOE Paystubs: provide most recent consecutive 30 day period with YTD earnings Tip/Bonus/Commission Income: W Conv Conf Page 3 Revised 12/14/2011
Tip income may be used if the borrower has received it for the last 2 years and the employer indicated that the tip income will in all probability continue Both tax returns and Written VOE are required for underwriter to determine the amount of tip income that may be considered in qualifying the borrower. Must be broken on VOE for 2 years 4506 T: Require signed 4506 T Form from all borrowers at both application and closing MAX DTI RATIO Max of 45% as per DO/LP findings Up to 50% on exception basis only MORTGAGE INSURANCE Expanded Approval (EA) Level loans are ineligible (MI SECTION) A (minus) Level loans are ineligible Maximum Financing Concessions are limited to 3% Waiver of income validated by AUS eligible as Full Documentation Lowest Mid FICO Score is 720 Maximum DTI ratio is 41% Appraisal Requirements: May not be more than 120 days old at the time of submission for Mortgage Insurance. Recertification of value is not permitted. All appraisals must conform to FHFA s HVCC and be compliant with USPAP Appraisal requires an interior and exterior inspection. Report form must be appropriate to the property type or transaction per FNMA/FHLMC requirements Maximum risk exposure to one borrower is the lesser of: $300,000 aggregate insured risk exposure OR Two (2) insured properties, only one of which may be a primary residence Grant Funds from state/municipal/housing authorities and non profits are acceptable, provided the borrower(s) has the minimum equity/down payment, no lien for grant is created against subject property, and repayment of grant is not required; documentation of grant terms is required Cash out and streamline refinances are ineligible Interest only loans are ineligible Multi unit properties are ineligible Gift Funds: Borrowers who have satisfied the minimum borrower equity requirement from their own funds can use gift funds from immediate family members to increase down payment, pay part of the closing costs, or supplement reserves Gift documentation meeting FNMA/FHLMC requirements must be obtained Reserves: Two (2) months Reserves required Sourced/Seasoned minimum of Sixty (60) days In the case of a conversion of principal residence, Six (6) months reserves for both the subject property and current property are required. Reduced reserves of no less than Two (2) months for both properties may be considered if there is documented equity of at least 30% in the current property. Unsecured loan funds are not an acceptable source of down payment File will be subject to MI Underwriting Approval States: FL No Second Homes allowed NV (Clark County) No Attached Condominiums, cooperatives, PUDs, Non warrantable condos FL (Miami Dade & Broward Counties) No Attached Condominiums, cooperatives, PUDs, Non warrantable condos INVESTOR APPROVAL 2 nd home transactions Venta Wholesale Underwriter discretion (NON DELEGATED) All NOO transactions 97% LTV transactions DTI 45% Property flips less than 180 days May apply as discretion by the underwriter ASSETS Determining the value of the asset when used for reserves: Stocks, Bonds and Mutual Funds: 70% of the value may be used as reserves Retirement Accounts: 60% of the vested value may be used reduced from 70% (terms of withdrawal must be documented) Bank Statements or Computer generated VODs must be provided (Covering 60 days and must include all pages) (Large deposits to be explained) Written VODs are not permitted Business Funds: Allowed on Full Doc only W Conv Conf Page 4 Revised 12/14/2011
Must be Owner Occupied Business type must be under Sole Proprietorship (Corporation/LLC on a case by case basis with 100% ownership only) Used for Down Payment and/or Closing Costs Only (Business funds cannot be used for meeting reserve requirements) Provide CPA Letter explaining use of business funds does not negatively affect the business RESERVES O/O Per DO/LP findings (if ratio is 45%, 2 months PITI will be required) 2 nd Home 2 months PITI plus an additional 2 months reserves on every other financed 2 nd home & NOO NOO 6 months PITI plus an additional 2 months reserves on every other financed 2 nd home & NOO GIFT FUNDS Allowed on O/O or 2 nd home purchase transactions Gift donor must be blood or legal relative, domestic partner, or fiancé Gift letter must contain the amount of the gift, donor s name, address, phone number and their relationship to the borrower Donor should state that the repayment is not expected Donor ability and transfer to be documented If LTV 80%, the entire down payment can come from a gift FIRST TIME HOME BUYER Document rent via cancelled checks Document minimum of 3 months PITI reserves (sourced/seasoned 90 days) from own funds Maximum Payment shock of 25% from current rent 2 nd home or NOO financing not permitted SELLER CONTRIBUTION O/O and 2 nd home 3% for CLTV 90.01% 6% for CLTV between 75.01 90% 9% for CLTV 75% NOO is limited to Maximum of 2% regardless of LTV/CLTV MAXIMUM NUMBER OF If Subject property is O/O, maximum of 10 financed properties FINANCED PROPERTIES If Subject property is 2 nd home, maximum of 4 financed properties If Subject Property is NOO, maximum of 4 financed properties This includes joint or total ownership CONDOMINIUM PROJECT VFG reserves the right to limit its exposure to 20% in any 1 condominium project (or 1 unit maximum in 2 4 unit condominium projects) Occupancy Rate: At least 51% Delinquencies: No More than 15% of total units Condominium must be on FNMA Approved Condo listing PROPERTY FLIPS Prior approval required for less than 180 days Considered a Property Flip when ownership changes more than 1 time within 6 months Subject to price adjustment; Investor specific PROPERTY LISTED FOR SALE Properties that were 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% maximum LTV Properties listed for sale must have been taken off the market on or before the loan application date SEASONING Cash out refinances 6 months Title Seasoning REQUIREMENTS FOR REFINANCE If the property was purchased by the borrower within the 6 months preceding the application for new financing, the borrower is ineligible for a cash out refinance If refinance is under 12 months, the lower of the value or sales price will be used. If refinance is over 12 months, the current value will be used. Rate/Term refinances 6 months Title Seasoning If the First Mortgage being paid off with this transaction was used to pay off any subordinate financing that was not used to acquire the property, and that mortgage has not been seasoned for at least 6 months prior to the date of the loan application, the loan is ineligible for Rate/Term refinance APPRAISAL If purchase price or Appraisal is less than $100,000 two appraisals are required REQUIREMENTS ON NON OWNER OCCUPIED TRANSACTIONS CURRENT PRINCIPAL RESIDENCE IS PENDING Both the current and the proposed mortgage payments must be used to qualify the borrower for the new transaction SALE AND WILL NOT BE In addition, the following reserve requirements must be met: CLOSED PRIOR TO NEW < 30% equity in existing primary residence 6 months PITI reserves for both properties TRANSACTION 30% equity in existing primary residence (as evidenced by an appraisal report) 2 months PITI reserves for both properties Exception: The current primary residence s PITI is not required to be used in qualifying the borrower providing that the minimum reserves stated above are met and the following additional documentation is provided: W Conv Conf Page 5 Revised 12/14/2011
CONVERSION TO 2 ND HOME CONVERSION TO INVESTMENT PROPERTY A fully executed sales contract for the current residence, and Confirmation that any financing contingencies have been cleared Both the current and the proposed PITI must be used to qualify and; Require 6 months PITI reserves (sourced/seasoned 90 days) for both properties Lender may consider 2 months for both properties if there is documented 30% equity in existing property (via Appraisal) The rental income must be documented with: A copy of the fully executed lease agreement; and The receipt of a security deposit from the tenant and deposit into the borrowers account; and Copy of the tenant s ID If the 30% equity in the property cannot be documented: Rental income may not be used to offset the mortgage payment Both the current and the proposed mortgage must be used to qualify; and 6 months PITI for both properties is required RENTAL INCOME USED FOR QUALIFYING ON NON OWNER OCCUPIED TRANSACTIONS CONTINUITY OF OBLIGATION Up to 75% of the rental income to be used to offset the mortgage in qualifying, documented 30% equity in the existing property (derived from an appraisal) 2 months PITI for both properties Subject to price adjustment; Investor specific For refinance transactions where there is an outstanding lien against the property, acceptable continuity of obligation must be met by meeting any of the following: There is at least one borrower obligated on the new loan who was also a borrower on the existing loan being refinanced The borrower has been on title for the last 12 months, and has either paid the mortgage for the last 12 months or can demonstrate a relationship (relative, domestic partner, etc.) with the current obligor NOTE: Transfer of ownership from a corporation to an individual does not meet the acceptable continuity definition If the borrower is currently on title but is unable to demonstrate an acceptable continuity of obligation or there is not currently an outstanding lien on the subject property, the loan must be underwritten and priced as a Cash Out refinance and is subject to the following restrictions: No outstanding lien: If the property was purchased within the 6 to 12 months prior to the application date for the new financing, the LTV ratios will be based on the lesser of the original sales price/acquisition cost (documented by HUD 1) or the current appraised value If the property was purchased more than 12 months prior to the application date for new financing, the current appraised value may be used to calculate the LTV ratios Outstanding liens with no continuity of obligation: If the borrower has been on title for at least 6 months but continuity of obligation does not exist, the maximum LTV ratios will be limited to 50% based on the current appraised value If no existing loan on the property, the new refinance must be treated as a cash out refinance APPRAISAL FORMS Form 1004 SFRs and PUDs Form 1073 Condominiums Form 1025 and Form 216 (Operating Income Survey) 2 4 Unit properties Form 1007 and Form 216 (Operating Income Survey) required for 1 Unit Investment properties Form 1004MC (Market Condition Addendum) is required on all appraisals Form 1004D (Appraisal Update and/or Completion Report) ELIGIBLE STATES NV CA OR WA UT AZ FL AL TX (Purchase transactions only) CO W Conv Conf Page 6 Revised 12/14/2011