| Max DTI | Maximum 49.99%, however, Loan with DTI > 45% must be (1) LTV ≤ 80% (2) FICO ≥ 700 (3) Minimum 6 months reserves |
| Loan Terms | 30, 25 and 20 year fixed - fully amortizing |
| Minimum Loan Amount | Must be $1 over the current conforming loan limit (High balance loan utilizing asset depletion is eligible) |
| Underwriting | DU Approve/ineligible due to loan amount or maximum cash-out on a rate/term refinance only For topics not specifically addressed in this guideline, follow Fannie Mae Single Family Selling Guide |
| Eligible Borrowers | - US Citizens
- Permanent resident aliens (front and back copy of resident alien card required)
- Non-permanent resident aliens - must be legally present in the U.S. with an unexpired visa (H1B, H2B, E1, L1 and G series visa only; G series visa must have no diplomatic immunity). Primary residence only
- Non-U.S. Citizen (including permanent resident aliens) must be employed in US for the past 24 months
- Non-occupant co-borrower: Must be a related family member of the borrower. LOX for relationship is required
All borrowers must have a valid social security number |
| First Time Home Buyer | - Max loan amount $1.5MM
- Primary and second home only
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| Properties | - Eligible : Single family, PUD, Condo and Condotels(see below for non-warrantable condo and condotels), and 2-4 units,
- Property > 10 acres : Max land value 35%, no income producing attributes, 5% LTV reduced from matrix for over 20 acres
- Property subject to gas/oil lease : Title endorsement must provide coverage against damage, No active drilling, No lease recorded after home construction date; Re-recording of lease is permitted, Must be connected to public water
- Ineligible : Condition rating C5/C6, Quality rating Q6, Leasehold, Property over 40 acres, Manufactured, Co-Op, Properties with income producing attributes, Mixed Use, Tenants-in-Common projects, Unique properties, etc
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| Additional Occupancy Requirements | - Multiple primary residence purchases within the past 12 months are not eligible
- For primary residence rate/term refinance, borrower must reside in and hold title to the property
- Second home must not be located in the same market area as borrower’s primary residence. LOE is required if property is not located in vacation/resort area
- Purchase of second home for the occupancy by other person will be considered as investment property
- An investment property is property that is owned by borrower, regardless of revenue generation
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| Non-Warrantable Condo | Only one (1) non-warrantable feature is allowed for primary and second home only. Max LTV reduced by 10% from matrix & LTV must be no greater than 70% after reduction. Additional pricing adjustments apply - Commercial space: Max 50%; must be compatible with residential use of project (i.e. restaurants, small shops, offices)
- Single entity ownership: 25% for project with more than 10 units. For less than 10 unit project, follow Fannie Mae
- Presale: New or converted projects must have at least 30% of units sold or under contract to owner occupants or second home purchasers for subject phase. Common areas/amenities must be complete for subject phase
- Budget: Reserves less than 10% but greater than 7% allowed if current reserve balance exceeds 10% of operating expenses. Less than 7% allowed if current reserve balance exceeds 20% of operating expenses. Balance sheet must be within 120 days of the Note date
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| Condotel | Primary and second home only. Max LTV reduced by 10% from matrix & LTV must be no greater than 70% after reduction.
Additional pricing adjustments apply - Must be located either in a resort area or metropolitan area, and must be associated with luxury high-end hotel brands
- Rental income may not be used for qualifying
- If Sch E has rental income reported for subject property, at least 30 days should be personal use
- No fractional ownership in the project
- Subject unit must not be subject to a mandatory rental pool. It must be borrower’s exclusive use and enjoyment
- Must have no more than 50% investor concentration
- Commercial space is limited to 50% (excluding parking space)
- Minimum 500 sqft
- Unit must have a fully functioning kitchen
- Housekeeping, front desk, card key access and daily rentals allowed
- Appraisal must include similar Condotel comps
- All other Fannie Mae condominium requirements must be met
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| Appraisal | Full appraisal is required regardless of DU findings, transfer appraisal not allowed - Subject property must be appraised within 90 days prior to the Note date
- Appraisal update (1004D) is not permitted for appraisal that are over 90 days from Note date, a new full appraisal is required. Re-use of appraisal for subsequent transaction is not allowed
- CDA (desk review) is required
- Collateral Underwriter (CU) 2.5 or less is acceptable in lieu of CDA, when LTV ≤ 80% and loan amount ≤ $1.5MM. Properties in declining market are not eligible to use the CU to meet appraisal review requirement, a CDA is required.
- If CDA returns a value that is ‘indeterminate’ or lower value than appraised value exceeding 10% tolerance, one of the following requirements must be met.
- A Clear Capital BPO and Clear Capital Value Reconciliation of Three Reports(original appraisal, desk review and BPO). The Value Reconciliation is used
- A filed review or 2nd full appraisal report. Lower of the two will be used. If 2nd appraisal is obtained, CDA is not required
- 2 appraisals are required for loan amount > $1.5MM on refinance transaction only. LTV will be based on lower of two. If both are done as ‘subject to’, only one 1004D is acceptable from appraiser who gave lower value
- HPML: Second appraisal is needed when definition of ‘flip’ on HPML appraisal guideline is met (Lender paid)
- If property was acquired less than 90 days from purchase agreement & purchase price exceeds the seller’s acquisition price by more than 10% then a 2nd appraisal is required. Bank owned properties are not exempt.
- If property was acquired between 91-180 days from purchase agreement & purchase price exceeds the seller’s acquisition price by more than 20% then a 2nd appraisal is required. Bank owned properties are not exempt.
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| Maximum Number of Financed Properties | Follow Fannie Mae. Please check reserve requirements in Asset and Reserves section |
| Age of credit documents | Follow Fannie Mae |
| Credit Requirements | Follow DU requirements, except below: - All borrowers must have minimum 2 credit scores
- All 3 bureaus must not be frozen
- All disputed tradelines must be included in DTI
- Derogatory accounts must be considered in analyzing the borrower’s willingness to repay, however, if a disputed account has a zero balance and no late payments, it can be disregarded
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| Mortgage Payment History | If the borrower(s) has a mortgage in the most recent 24 months, a mortgage rating must be obtained (Credit report or VOM) - Applicable to all borrowers on the loan
- No more than 1x30x12 or 2x30x24, mortgage late must not be within the most recent 3 months of application. LOE from borrower is required for any late payments
- All mortgages must be ‘current’ as of the Note date
- If a mortgage holder is a party to the transaction or relative of the borrower, cancelled checks or bank statements to verify satisfactory history is required
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| Derogatory credit event | - BK/SS/FC/DIL/NOD: 4 years since completion/discharge/dismissal date
- Forbearance resulting in subsequent loan modification: 4 years since exit from forbearance
- Mortgage settled for less, negotiated or short payoffs: 4 years since settlement date
- Multiple derogatory credit event not allowed
- Tax liens, judgments, charge-offs, and past-due accounts must be satisfied or brought current prior to or at closing
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| Forbearance | Determining Eligibility for New Loan - Any loans that are shown to be in active or previous forbearance but where the borrower continued to make regularly scheduled payments is eligible
- All payments must have been made within the month due
- The forbearance plan must be terminated at or prior to closing and the loan file must contain documentation that the forbearance is no longer active (i.e. removal letter from servicer, etc.)
- Any loans (including but not limited to the subject mortgage) where a mortgage reflects reduced or missed payments under a forbearance and borrower has accepted a payment deferral, initiated a repayment plan or has reinstated the mortgage to return to a current status must meet the requirements below:
- Purchase & Rate/Term Refinance:
- Three (3) consecutive months of required payments since completed forbearance plan
- All payments must have been made within the month due
- Cash-out Refinance:
- Twelve (12) consecutive months of required payments since completed forbearance plan
- All payments must have been made within the month due
- Payment Deferral: The refinance of a loan that has a payment deferral and where the amount of the deferred payments is included in the new loan is eligible as a rate/term transaction. Funds applied to pay off the prior loan, including the deferred portion, are not considered cash out
- Repayment Plan: The full amount of the repayment plan monthly payment must be considered in meeting the required consecutive payment requirements (Purchase/Rate Term or Cash-out) detailed above
- A mortgage subject to forbearance must utilize the mortgage payment history in accordance with the forbearance plan in determining late housing payments
- Loan file must contain a letter of explanation from the borrower detailing the reason for forbearance and that the hardship no longer exists
- Forbearance resulting in subsequent loan modification is considered a significant derogatory credit event and subject to a four (4) year waiting period
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| Employment and Income | Follow Fannie Mae/DU findings plus below requirements
Wage/Salary
- Must have 2 year employment history
- Declining income : Most recent 12 months or the most conservative income calculation should be used if declining period is shorter than 12 months. Income must be stabilized and not subject to further decline. The employer or borrower should provide a written justification
- W-2 transcripts are required
- Manual/handwritten VOE is not allowed. Overtime, bonus, commission income must be documented YTD paystub, 2 years W-2 and year end paystub; or through Fannie Mae approved 3rd party verification (i.e. The Work Number)
- Non US Citizen must be employed in the U.S for the past 24 months
Trust income- May be used if guaranteed and regular payments will continue for at least 3 years
- Regular receipt of trust income for the most recent 12 month must be documented
- Trust agreement must show total amount designated to borrower, terms of payment, duration of trust and irrevocability
Restricted Stock and Stock Options - Must be entered into DU as bonus income
- Borrower must be currently employed by RSU/Stock option issuing company
- Must have received for 2 years, identified on paystubs, W-2s or tax returns as income
- Vesting schedule must indicate the income will continue for a minimum 2 years at a similar level. Continuance is based on lower of current stock price or 52-week average for the most recent 12 months at the time of application
- Calculation : 2 years average of prior income received
Offer letter or Employment contract - Paystub must be provided prior to funding
Asset Depletion (Max LTV/CLTV/HCLTV 80%. Primary 1-2 units and Second home only)- Calculation: Net eligible assets divided by 240
- Minimum requirements: $1,000,000 of Net eligible asset
- Net eligible asset: Total personal asset – (final funds for closing + reserves + any portion of asset pledged as collateral for a loan + Gift and/or borrowed funds)
- Most recent 2-month statement must be documented. For accounts other than retirement, any deposit exceeding 10% of borrower’s total eligible asset needs to be sourced
- Borrower(s) must be a sole owner of account, and has access to withdraw funds in its entirety without any penalty or an additional early distribution tax. In case retirement account is used, it must be an account recognized by IRS (i.e. 401K, IRA)
- Eligible assets must be held in US account
- Most recent 2 years tax returns are required
- Income may not be combined with employment related income to qualify. However, If one borrower uses employment income, and another borrower utilizes asset depletion, as long as eligible asset for depletion is not jointly held with first borrower, asset depletion can be used as qualifying income
Self-employment income- Minimum FICO 720
- Follow Fannie Mae/DU Findings, however, if DU recommendation is for 1 year tax return, filing extension for current year is not allowed. After each year’s original due date, the most recent year’s tax return must be documented. If most recent year is extended, regardless of DU recommendation, 2 years tax return is required
- Aggregate secondary business losses reporting on 1040 (even though ownership is less than 25%) which is greater than 5% of borrower total qualifying income must be deducted from qualifying income. Additional documentation is not required
- Verification of business existence must be verified no more than 20 business days prior to the Note date JUMBO PLUS Version 3/02/2023
- YTD P&L (audited or unaudited) is required up to and including the most recent month preceding the loan application date and must not be more than 90 days aged prior to the Note date
- If the borrower filed an extension for the current tax year, YTD P&L must be provided to cover the full year
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| Debts | Follow Fannie Mae except below - Pay down of installment debt for loan qualification is not allowed
- If the most recent tax return or tax extension indicate tax owed to IRS or State Tax Authority, evidence of sufficient liquid asset equal to the payment amount must be documented
- Tax installment plan is allowed on most recent tax year only. Prior to most recent years due must be paid in full (i.e. borrower files 2021 tax return or extension in April 2021, an installment plan is allowed for taxes due for 2021 only). Satisfactory pay history based on terms must be provided
- Alimony payments may be deducted from income rather than included as a liability for divorces prior to 1/1/2019 only
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| Assets and Reserves | Follow Fannie Mae except below
- Must be liquid asset held in US account
- Large deposit inconsistent with monthly income or deposits must be verified if using for down payment, reserves or closing cost
- Fannie Mae approved 3rd party vendor generated verification reports are allowed
- A written VOD is not allowed. System generated automated VOD may be used if provided by a verifiable institutional bank
- Gift funds
- Can be used once borrower has contributed 5% of purchase price from their own funds
- Not allowed if LTV > 80%
- Eligible donor : Spouse, child, parent, sibling, grandparent, domestic partner, fiancé or fiancée. Gift from donor that are also interested party to the transaction is not allowed unless it is gift of equity
- Business Funds
- Borrower must have ownership of 51% or greater, only borrower’s % of ownership should be applied to the balance. An access letter from other owner(s) to the business funds is required
- Business bank statement must not reflect any NSFs or overdrafts
- Cash flow analysis required using most recent 3 months business bank statement to determine no negative impact to the business. Statements must be no older than the latest 3 months represented on the YTD P&L.
- Retirement accounts
- Refer to Fannie Mae selling guide for liquidation of funds requirements
- In case where borrower is not at retirement age and funds are being used for down payment or closing costs, evidence of liquidation is required
- For reserves, vested value (after reduction of any outstanding loans) will be discounted at 70% when borrower’s age 59 ½, or at 60% if < 59 ½
- Foreign asset must be held in a US account prior to closing
- EMD that is refunded to borrower at closing still needs verification
Reserves| Occupancy | Loan amount, FICO, LTV | # of Months |
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| Primary | ≤ $1MM and FICO ≥ 700 and LTV ≤ 80% | 3 | | ≤ $1MM and FICO < 700 | 6 | | ≤ $1MM and LTV > 80% | 6 | | $1MM < Loan amount ≤ $1.5MM | 6 | | $1.5MM < Loan amount ≤ $2MM | 9 | | ≤ $1MM | 6 | Second Home | | $1MM < Loan amount ≤ $1.5MM | 12 | | $1.5MM < Loan amount ≤ $2MM | 15 | | Investment | ≤ $1MM | 6 | | $1MM < Loan amount ≤ $1.5MM | 12 | | First Time Homebuyer | ≤ $1MM | 6 | | $1MM < Loan amount ≤ $1.5MM | 9 | | DTI > 45% | Minimum 6 months required | | Additional 1-4 Unit Financed REO | Additional 6 months required based on PITIA of the additional REO |
*Gift, Business Funds, Proceeds from sale of non-real estate assets, proceeds from 1031 exchange, HELOC/Cash-out from other property, borrowed funds (including secured) are not allowed for reserves |
| Purchase | Transaction must be arm’s length, except sales between family member; LO is related to borrower; Seller acting as their own real estate agent/borrower or relative of borrower acting as their own real estate agent; or borrower is purchasing from current landlord (Investment property must be arm’s length) |
| Interested Party Contribution (IPC) | Maximum 6% for primary residence & Second Home
Maximum 2% for investment property
Exceeding above limit is considered as sales concessions, will be deducted from sale price and appraisal value to determine LTV. Sales concession must be addressed in the sales contract |
| Rate & Term | Follow Fannie Mae except below - Cash-back to borrower must not exceed 1% of the loan amount
- For properties owned less than twelve (12) months of Note date, the LTV will be based upon the lesser of the original sales price (plus any improvements made and documented) or the current appraised value
- Payoff of a non-purchase second lien seasoned a minimum of 12 months from date of application is allowed. The second lien must not evidence draws exceeding $2,000 within the past 12 months. Withdrawal activity must be documented with a transaction history of the line of credit
- Buy-out of co-owner’s interest for primary residence is allowed, when both borrower and co-owner jointly owned and occupied the property for at least 1 year from application date(must be evidenced by driver’s license, bank statement, credit card bill or utility bills). 1 year joint occupancy/ownership is waived for inherited property. Buy-out agreement must be documented
- Delayed financing: Follow Fannie Mae requirements. Loan is treated as R/T refinance except Texas home equity 50(a)(6)
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| Cash-out | Follow Fannie Mae except below - No maximum cash-out limit
- For properties owned less than twelve (12) months of Note date, the LTV will be based upon the lesser of the original sales price (plus any improvements made and documented) or the current appraised value
- Cash-out proceeds may not be used to satisfy judgments, liens, charge-offs and past-due
- Texas home equity 50(a)(6) is not eligible
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| Continuity of Obligation | At least one borrower on existing mortgage must also be a borrower on a new refinance. If not, one of the below must be met - The borrower has been on title for at least 12 months and
- Has been making mortgage payments for the most recent 12 months; or
- Is related to the borrower on the mortgage being refinanced
- The borrower was added on title for 24 months or more as of closing date
- The borrower has recently been legally awarded, the property (divorce, separation, or dissolution of a domestic partnership)
- The borrower on the new refinance transaction has been added to title through a transfer from a trust, LLC or partnership. The following requirements apply:
- Borrower must have been a beneficiary/creator (trust) or 25% or more owner of the LLC or partnership prior to the transfer
- The transferring entity and/or borrower has had a consecutive ownership (on title) for at least the most recent six (6) months prior to the disbursement of the new loan
- Transfer of ownership from a corporation to an individual does not meet the continuity of obligation requirement
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| Title Ownership | Individual, Joint Tenants, Tenants in Common |
| Inter Vivos Revocable Trust | Not allowed on 3-4 unit primary residence |
| Escrows & Title | - Tax and insurance must be impound for LTV on or greater than 80% (CA 90%)
- Any existing tax or liens must be removed or paid in full through escrow
- Solar recorded property must meet Fannie Mae requirements
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| Power of Attorney | Follow agency guideline |
| Subordinate Financing | - Allowed up to maximum CLTV per matrix
- If subject property HELOC is not included in CLTV/HCLTV calculation due to $0 balance, evidence of close letter is required. If account to be remained without closing, full credit limit amount must be included in CLTV
- Down Payment and closing cost assistance program is not allowed
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| Compliance | All loans must be General QM with Safe Harbor |
| HPML | Higher Priced Mortgage Loans (HPML) are allowed if the following requirements are met: - Loan must have an escrow account for a minimum of 5 years
- CFR §1002.14(a)(1) allowing the consumer to waive the requirement that the appraisal copy be provided three (3) business days before consummation, does not apply to Higher Priced Mortgage Loans subject to §1026.35(c). A Consumer of a Higher Priced Mortgage Loan subject to §1026.35(c) may not waive the timing requirement to receive a copy of the appraisal under §1026.35(c)(6)(i)
- HPML appraisal guideline must be followed
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