| Loan Terms | - 30, 15 years fixed, 5/6, 7/6, 10/6 SOFR ARM (Note rate may not be lower than 3% below the fully indexed rate)
- Margin: 2.75%
- Rate cap
- 5/6 ARM: 2/1/5
- 7/6, 10/6 ARM: 5/1/5
- Qualifying rate
- 5/6 ARM: Higher of note rate+2 or fully indexed rate
- 7/6 and 10/6 ARM: Higher of note rate or fully indexed rate
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| Mortgage Insurance | Not required |
| Minimum Loan Amount | Must be $1 over the agency loan limit. |
| Eligible Borrowers | - All borrowers must have social security number.
- Non occupant co-borrower is not allowed.
- US citizens
- Permanent resident (front and back copy of permanent resident card required)
- Non-permanent resident
- must be legally reside in the U.S. with an acceptable visa (E, G, H, I, L, N, O, P, R, T, TN, U, V) or EAD category C33 (DACA)
- Borrower with employment/self-employed income being used for qualification must have 2 years work history
- USCIS I-94 and/or EAD card required depends on visa category
- Expired visa/EAD requires proof of extension filed prior to expiration date, and evidence that application has been received by USCIS
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| Occupancy | - Primary residence: At least one of the borrowers must occupy. Providing housing for parents or child who is unable to work or does not have sufficient income to qualify is eligible with tax returns and/or transcripts.
- 2nd home: 1 unit only, and should not be in the same market as the borrower’s primary residence. The sales contract or appraisal must not reflect that there are timeshare agreements or any other rental agreements.
- Investment property must not be occupied by borrower.
- When the subject is investment and the borrower(s) own multiple investment properties, 2 years’ experience managing multiple investment property must be documented by tax returns or lease agreements.
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| Properties | - Eligible: Single family, PUD (only allowed on 1-unit properties), Condo (Fannie Mae warrantable for limited & full review), and 2-4 units.
- Site condos are only allowed as primary residence.
- Ineligible: Manufactured Homes, Co-op, Deed restrictions including age only, Commercial or Agricultural zoning, Mixed use, etc.
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| Appraisal Requirements | - 2 full appraisals are required for loan amounts > $2MM. LTV is based on lower of two.
- 1004D is required when report is aged more than 120 days from note date.
- Transfer appraisal is allowed
- Reduce LTV/CLTV/HCLTV by 5% if appraisal indicate declining market trend
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| Maximum Number of Financed Properties | - Primary residence: Up to 5 properties. Second home/Investment: Up to 4 properties.
- Limit includes subject property, and applies to each borrower individually and all borrowers collectively.
- Included in limitation
- Joint ownership of residential real estate
- Joint or total ownership of a property held in the name of entity, and the financing is in the name of borrower
- Obligation on mortgage for a residential property, whether or not borrower is an owner of property on title
- Joint or total ownership of a property that is held in the name of entity where borrower(s) individually or combined ownership of 25% or more, even if borrower is not personally obligated on the mortgage
- Joint or total ownership of a property that is held in the name of entity where borrower(s) individually or combined ownership of 25% or less, and the borrower is personally obligated on the mortgage
- Manufactured home and the land on which it is situated that is titled as real property
- Excluded in limitation
- Commercial, Multifamily more than 4 units, Timeshare, Vacant lot
- Manufactured home on a leasehold estate not titled as real property
- Joint or total ownership of a property held in the name of entity, and the financing is in the name of entity
- Joint or total ownership of a property that is held in the name of entity where borrower(s) individually or combined ownership of 25% or less, and the borrower is not personally obligated on the mortgage
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| Housing Payment History | Minimum 12 months verified housing payment history is required. - As of loan application date, the rental & mortgage history must current and reflect 0x30x12. “Rolling” mortgage late pays are not permitted
- In case of a recent refinance or account transfer, a combination of multiple lenders for the same property must be used to complete 12-months history requirement.
- For a recent purchase, a combination from a prior property or rental payments may be used to complete 12- months history. A gap in mortgage/rental payments history of up to 6-months is allowed by obtaining the most recent 18-months history and providing explanation the reason for the gap.
- Rental verification must be documented by copies of cancelled checks, bank statements, direct payment records, or VOR. If the landlord is related to the borrower, cancelled checks must be provided. Verifications performed by a party other than a professional management company are not permitted. If the landlord is a management company, they must be listed in the local telephone directory and the file must contain a copy of the list. If the listing is not available, 12 months cancelled checks must be provided.
- Borrower with no mortgage/rental history is eligible for primary residence purchase only.
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| Age of Credit Documents | No older than 120 days from closing. Paystubs must be dated within 30 days prior to application date. Assets must be dated within 45 days from application date, except for quarterly statements. |
| Credit Requirements | - Frozen/locked credit are not acceptable.
- Minimum tradeline requirements
- Borrower individually or all borrowers jointly must have minimum 4 tradelines, one of which is open and has at least 24 months history. The other 3 must be rated for at least 12 months whether it’s open or closed.
- Authorized user account can be included in minimum tradeline, only if another borrower on the loan is the owner of the account; or borrower providing 12 months evidence that he/she has been the actual and sole payor.
- Accounts included in derogatory credit event; non-traditional credit are not counted.
- All judgments, liens, charge-off and past due accounts must be satisfied prior to or at closing.
- Disputed tradelines or public records adverse to the credit profile require LOE from borrower including evidence to support the dispute.
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| Derogatory Credit Event | - All derogatory credit requires borrower’s LOE details the circumstance, and the reason should not be financial mismanagement (borrower’s disregard for the payment of obligation when due).
- Bankruptcy
- Documentation: Copies of bankruptcy petition, schedule of debts, discharge or dismissal order and the document issued by the court showing the bankruptcy estate is closed, and evidence to indicate that all debts not satisfied by BK have been paid or are being paid.
- Seasoning: Chapter 7 & 11 - 4 years seasoning from discharged or dismissed to the loan application date. Chapter 12 & 13: 4 years from repayment plan was dismissed or 2 years from discharge date to the loan application date. *Note: The shorter waiting period based on the discharge date recognizes that borrowers have already met a portion of the waiting period within the time needed for the successful completion of a Chapter 12 or 13 plan and subsequent discharge. A borrower who was unable to complete the Chapter 12 or 13 plan and received a dismissal is held to a 4-year waiting period.
- Multiple bankruptcy: For more than 1 BK in the past 7 years, 5 years seasoning is required
- Deed-in-lieu/Short Sale/Pre-Foreclosure Sale/Charge off of a mortgage: 4 years seasoning required from completion to the loan application date.
- Credit reports indicates the followings requires LOE, and the acceptance of credit is Underwriter’s own decision.
- Several accounts with recent late payments
- Multiple 60- or 90-day late payments
- More than two 30-day or 60-day late housing payment in the last 24-months
- Multiple late payments extending over a period of time
- Public record information reveals several occurrences of judgment, tax liens, and/or collection
- Foreclosure: 7 years seasoning required from application date.
- Loan modification
- At least 6 months have passed since the restructure or modification was completed
- Mortgage history must meet the mortgage history requirements
- Forbearance
- At least 6 months have passed since the Forbearance or Repayment Plan was completed
- Borrower must have made the payments as agreed per the loan forbearance or repayment plan
- Mortgage history must meet the mortgage history requirements
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| Debts | - Installment account which does not extend beyond 10-months are excluded.
- Pre-paid leases may be excluded, if the borrower fully paid the terms of their lease at the lease signing, provided the borrower’s assets are reviewed and no undisclosed obligations are reflected.
- Revolving debts: Amount on credit report must be included. If no payment is on the credit report, either actual payment on the account statement; or the greater of 5% of balance or $10 must be used.
- Open 30-day account: Must be included unless borrower has sufficient funds for the balance.
- Authorized user account: Must be included unless 12-months cancelled checks/bank statements are provided proving the owner of the account is making the payments.
- Overdraft protection account attached to a checking account is considered a revolving line of credit, if there is a balance.
- Student loans
- May be excluded if there is 10 or fewer payments remain
- If credit report does not reflect a payment or the correct payment, use 1% of outstanding balance or actual payment on the student loan documentation.
- Timeshare is treated as installment account.
- Payoff of debt to qualify is permitted on installment account ONLY, and the source of funds used must be verified. Account paid off after application date is considered ‘payoff’ not ‘omit’, the same requirements above apply. Proof of paid receipts or cancelled checks must be provided.
- Debts paid by business may be excluded if:
- 12-months cancelled checks drawn against the business account; and
- The account in question does not have a history of delinquency; and
- Two year’s tax returns evidencing that business expenses associated with the debt support that the debt has been paid by the business must be obtained; and
- The underwriter’s cash flow analysis of the business took into consideration the payment of the obligation (included interest expenses, and taxes and insurance, if applicable, that one would reasonably expect to see based on the loan balance and age of the loan).
- Debts paid by other party for at least 12-months may be excluded, only if such debt is a contingent liability for the borrower (borrower is co-signor). If primary obligor is the borrower, debt should be included.
- Mortgage debt must be included, even if other party is making payment (except for departure property – see below departure property section)
- HELOC: Qualifying payment should be calculated using the fully amortizing principal and interest payment based on Prime + Margin (or 2% if margin is unavailable) + 2%, for the remaining term after the Interest Only period on the maximum line amount.
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| Departure Property | - When current residence is being converted to an Investment property, rental income may be used if borrower’s equity is 25% or more, and borrower has 2-year history of investment property management experience.
- Equity must be documented by either exterior only appraisal (form 2055) or Original sales price, minus current unpaid principal balance.
- Investment property management experience must be documented with 2 years tax return*
- 12-months PITIA reserve for departure property is required (If rent income is not used, 6-months is required)
- *IF borrower does not have 2-year history of management experience, rent income may still be used when FICO > 760
- When current residence is being converted to a Second Home
- Payments must be included in DTI.
- 6 months of PITIA reserves are required for the departure property.
- When current residence is pending sale or up for sale, but sale will not be closed prior to the subject closing:
- If payments are included in DTI, 2 months reserves is required on departure property.
- Payments may be excluded from DTI, if there is an accepted contract, and 6 months PITIA reserves on departure property is documented. If there is no contract, payments may still be excluded with 24-months PITIA reserves on departure property.
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| Age of Tax Returns | *April 15 and October 15 applies unless IRS publishes other date for applicable year Note: For business tax returns, if the borrower’s business follows a fiscal year (a year ending on the last day of any month except December), the dates in the chart above may be adjusted to determine what year(s) of business tax returns are required in relation to the application date/disbursement date of the new mortgage loan. | *Application date | Note date | Documentation Required |
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| October 15 (current year minus 1), to April 14, current year | October 15 (current year minus 1), to April 14, current year | The most recent year’s tax return is required. The use of a Tax Extension is not permitted | | April 15, current year | May 30 | The most recent year’s tax return, OR all of the following: | | All Applications | May 31 - October 31 | - IRS Form 4868 filed to IRS
- Tax transcripts confirming “No transcripts available’ for the applicable year; and
- Returns for the previous 2 years
| | All Applications | November 1 to April 14 (current year plus 1) | The most recent year’s tax return is required. The use of a Tax Extension is not permitted |
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| Employment and Income | Employment history and Stability- 2-year employment history is required.
- Newly employed: Borrower with less than 2 most recent years history may be eligible as long as borrower was attending school, in a training program related to the new position, or in the military immediately prior to their current employment.
- Any employment gaps over 30 days must be explained in writing. In case the gap is over 6-months, the following requirements must be met:
- Income may be used if borrower is employed in current job for 6 months or longer; and
- Borrower has documented 2 years work history prior to an absence from employment (W-2 or paystubs); and
- Acceptable situations include individuals who took several years off to raise children, etc.
- If documentation includes that the income will end within the next 3 years, the income should not be used.
Wage earner- Most recent paystubs covering 30 days with YTD, 2 years W-2. If borrower has not received their W-2 before January 31, year-end paystub may be used in lieu of last year’s W-2.
- Overtime, Bonus, Commission and tips must have 2 years history of receipt. Earnings must be stable or increasing; borrower’s explanation must be obtained if decreases in the last year or fluctuation is large. Written confirmation (or WVOE) is required to confirm continuance.
- 2 years 1040 is required for employees of a school district, employees in a family-owned business, and/or employees of interested party in transaction. If a person signs WVOE has the same last name as borrower, their relationship must be documented.
- Future Income
- Purchase transaction, owner occupied or 2nd home, a minimum 2 year work/student history, start date of employment must be within 90 days of the Note date, not employed by family or interested party to the transaction
- Examples: teachers whose contracts begins with the new school year, physicians beginning residency, employee relocating for new job
- Offer letter or contract for future employment:
- Clearly identifies the employer and borrower, is signed by employer, and is accepted and signed by the borrower
- Clearly identifies the terms of employment, including position, type, and rate of pay, and borrower’s start date
- Is non-contingent. Note: If conditions of employment exist, all conditions of employment must be satisfied by written documentation prior to closing
- 3 months reserves to cover all monthly liabilities (subject PITIA and all monthly liabilities) in addition to the funds/reserves required for the transaction.
- Auto allowance/Expense account reimbursement
- Must have 1 year history of receipt, and must likely to continue for the next 3 years
- If borrower reposts automobile expenses on Form 2106 or personal tax returns, Schedule C: if the amount of allowance > monthly expenses, difference is added to the monthly income. If the amount of allowance $lt; monthly expense, difference is added to liability.
- If borrower does not report allowance on Form 2106 or tax returns, Schedule C: the full amount of allowance is added to borrower’s income and full amount of monthly expense is added to liability.
- Military benefits
- Flight pay, hazardous duty pay, rations, clothing allowance, housing allowance may be used as income if documented in LES (Education benefits are not considered as qualifying income)
- In lieu of verbal VOE, LES dated within 120 days calendar days prior to the note or verification through online Defense Manpower Date Center is acceptable
- Minister/Clergy income
- 2 years personal tax return is required.
- Unreimbursed business expenses must be deducted from qualifying income if tax return reflects ‘other income’ such as housing allowance > 25% of the borrower’s annual employment income.
- If other income is used for qualifying, documentation must be provided to show income has been received for the most recent 12months and likely to continue for the next 3 years
- Verbal VOE must be performed no more than 10 business days prior to the loan closing.
Self employed- An individual receiving income from any of the following source must be qualified as self-employed
- Borrower who has 25% or more ownership in business
- Borrower relies on investments for income (e.g., interests, dividends, capital gains, or real estates)
- Borrower receives income from the subject property seller or broker
- 2 years individual and business tax returns are required for all self-employed borrowers.
- 2 years self-employment history is required. Less than 2 years may be considered if borrower has a recent 2 years history of successful employment in the same occupation/related field, and they have been self-employed for at least 1 full tax year.
- For sole proprietor (Schedule C), when there is evidence of a large increase in net profits from the prior year, audited P&L and CPA letter explaining the cause of the increase must be provided.
- For partnership, S-Corporation and C-Corporation, in addition to 2 years tax return, the followings are required:
- Unaudited Year-to-date profit and loss (P&L) statement and balance sheet must be provided, if application date is more than 90 days after the end of business’ fiscal or calendar year end.
- P&L and balance sheet can be prepared either by business’s tax preparer or borrower provided evidence that the documents have been viewed by business’s tax preparer.
- Access to the business income/liquidity must be verified for Partnership (1065) & S-Corporation (1120S).
- Business income may not be used unless borrower is 100% owner for C-Corporation (1120).
- If business income is used to qualify, verification of existence of the business must be provided within 30 calendar days prior to the loan closing. Verification should be completed by one of the following:
- Documentation prepared/issued by a 3rd party (e.g., CPA, regulatory agency, or applicable licensing bureau); or
- Phone listing and address on internet or directory assistance (411.com, Manta.com not permitted).
Rental Income- Follow Fannie Mae except for the followings:
- 2 year’s tax return is required and Income is averaged by 12 to 24 (number of months based on 2 years tax return – e.g., 2 full years tax return reports rental income, then use 24) if income is reported on Schedule E. Income may not be averaged if trend is declining.
- When property is reported on business tax return Form 8825, income is calculated using 12-months (or number of months reported on tax return). Positive income should not be included as rental income, but may be added as self-employed income, subject to ‘self-employed income’ requirement below.
- Current lease agreement is required for subject investment property purchase transaction if currently rented.
Other Income- K-1 income with $lt; 25% ownership
- 2 years most recent tax returns with Schedule E and K-1
- If K-1 reflects a stable history of distribution, no additional documentation is required. If not, borrower’s access to business income must be documented by partnership agreement, corporate resolution and 2-months business bank statement evidencing business has adequate asset to support the withdrawal of earnings
- Must verify the business remains open and in existence
- Vested restricted stock
- 2 most recent year-end paystubs
- Account statements showing history of restricted stock grants, as well as future grants available to continue generating income
- Restricted stock used to qualify must be fully vested
- Determine that the income is likely to continue based on an established earning trend. (Income should be averaged if trend is stable or increasing. If the trend is declining and there is no evidence borrower will not continue to receive the income at current level, the current amount must be used)
- Auto allowance/Expense account reimbursement
- If IRS form 2106 or Schedule C was used to report auto expenses, the amount of allowance that exceeds expense is added to income. If borrower does not report allowance on tax return, the full amount should be added to income
- Most recent paystub cover past 30 days, and 2 years W-2 or tax return (with form 2106 or Schedule C)
- Alimony/Separate maintenance
- History of 12-months receipt by bank statements, or cancelled checks; and
- 3 years continuance specified by the court order or attorney’s letter
- Child support
- History of 12-months regular receipt by bank statements, cancelled checks, or court records; and
- 3 years continuance specified by the court order or attorney’s letter
- Proof of children’s age
- Retirement/pension
- Copy of most recent 1 year 1099 or statement from organization providing income
- If retirement is paid as a monthly distribution from 401(K), IRA or other retirement account, income must continue for the next 3 years. Multiple accounts may be combined. If the assets are in the form of investments (stocks, bonds or mutual funds), 70% of value must be used for continuance
- Newly setup or large increase in distribution will be reviewed case by case
- Annuity
- Most recent annuity statement with amount, frequency and 3 years continuance
- Social security
- Most recent SSA award letter
- If borrower is drawing benefits from another person’s account/work record, proof of current receipt is also required. In case award letter has a defined expiration date due to recipient’s age, evidence 3 years continuance must be documented
- Disability
- Disability policy or benefits statement, and 2-months proof of receipt
- If benefits have expiration date, the remaining term must continue at least 3 years (The requirement for reevaluation is not considered an expiration date)
- Capital gain
- 2 years tax return with Schedule D and 1099s. However, if earnings over 2 years are not consistent, 3 years average will be necessary
- Proof of ownership of sufficient asset to support 3 years continuance
- Interest & Dividends
- 2 years tax return with Schedule B and 2-months account statement showing sufficient assets for 3 years continuance
- Note receivable
- A copy of note confirming the amount, frequency, and 3 years continuance
- Most recent 2 year’s tax return with Schedule B, or 12-months proof of receipts
- Non-taxable income
- Underwriter must develop an ‘adjusted gross income’ for the borrower by using the previous year’s tax rate. 25% may only be used if borrower was not required to file a tax return or no tax liability on tax return
- For type of income that is not listed in this guideline, please reach out to Underwriter or Scenario Desk for acceptability and documentation requirements.
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| Assets and Reserves | Eligible asset and verifications- Asset verification
- Most recent 2-months bank statement, dated no more than 45 days old from application date AND no more than 120 days old from closing date. VOD is acceptable
- Quarterly statements must be dated within 90 days from application date.
- Internet downloads are acceptable if it clearly identifies borrower as account holder/name of the institution and URL. Copies must include at least last 4 digits of account number, time period covered, all deposits and withdrawals transactions, and ending balance.
- Large deposit (50% of total qualifying income) must be explained and documented.
- Business funds may be used as below
- If borrower is not 100% owner, access letter from other business owners is required
- 2 years tax return must be obtained/used
- Underwriter must perform written analysis and approve the use of business funds
- Large deposits that are not in line with business review/income stream should be explained and verified
- Can be used for reserves only if borrower is 100% owner
- Gift
- May be used for down payment and closing cost, after minimum borrower contribution has been met.
- Must not be used for reserves.
- Funds received prior to closing must be documented via either both donor and borrower’s bank statement; or cancelled check; or donor’s withdrawal slip and borrower’s deposit slip
- Funds received at closing must be documented with donor’s bank statement AND either copy of cashier’s check; or wire transfer confirmation
- Gift of equity, Wedding gift is not allowed
- Retirement account
- Account must allow withdrawals regardless of current employment status
- Any outstanding loans must be subtracted prior to determining vested balance
- If used for closing, proof of liquidation is required
- If used for reserves, terms of withdrawal is required to prove tax penalty and only the net value must be used
- Stocks and other securities
- Net value should be calculated using 70% of current market rate
- Stock options or non-vested restricted stock options are not eligible for reserves
- Pledged stocks or bonds used as loan security; or to offset a margin account are not considered liquid assets
- Life insurance
- Value is calculated using 100% of cash/surrender value
- If used for closing, proof of liquidation is required
- Annuities
- If the annuity is being used as income, it cannot be used for asset
- Net value should be calculated using 70%, however, if it can be verified the borrower is not subject to penalties/surrender charges/taxes, 100% can be used
- If used for closing, proof of liquidation is required
- Trust account may be used with copy of trust agreement
- Identify the trustee’s name, address, telephone number, and the borrower as beneficiary. The trustee must be an independent third party that would typically handle trust accounts
- Verify that the borrower has access to all or a specific amount of the funds.
- Verify that the funds are available for disbursement to the borrower.
- Proof that funds have been received is required if assets from the trust are being used for closing
- 1031 exchange
- May be used for down payment
- Copies of all closing documents, including exchange agreement, settlement statement, title transfer, and purchase agreement of the relinquished property must be obtained
- Both purchase agreement on relinquished property and replacement properties must contain the language to identify 1031 exchange
- Crypto currency must be verified and liquidated to be used as asset
- Foreign assets
- All assets must be verified prior to the transfer, funds must be sourced, and translated into English
- Funds coming from the Peoples Republic of China (including but not limited to Hong Kong & Taiwan) are ineligible to be used in a mortgage transaction. This applies to the assets required for the transaction, including gift funds as well as the qualifying income
- For type of assets that is not listed in this guideline, please reach out to Underwriter or Scenario Desk for acceptability and documentation requirements.
Down Payment sources- When the borrower is required to make a down payment, the source of assets must be seasoned for at least sixty (60) days before the date of the loan application.
- EMD must be documented by cancelled check AND bank statement (or VOD) showing the check has cleared. However, if borrower has sufficient verified assets to cover EMD, the above verification is not required.
- Down Payment assistance is not allowed.
- For minimum borrower contribution, please see below ‘Purchase’ section.
Reserves- Reserves should be calculated based on the qualifying rate
- Subject property: Refer to the matrix.
- Additional property: 2-months PITIA on each additional residential property with a lien.
- Departing residence: See above ‘Departure property’ section.
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| Purchase | - Borrower’s minimum contribution for down payment
- Primary residence LTV > 70%: 10% of sales price
- Primary residence LTV ≤ 70%: 5% of sales price
- Second home & Investment: All of down payments. Gift funds are not permitted.
- Proof of funds were actually paid (cancelled check or escrow receipt) must be documented.
- Non-arm’s length transactions are not allowed.
- Credits to buyer due to pro-rated real estate tax or HOA assessment cannot be considered when determining borrower’s funds to close requirement.
- In case there is existing lease agreement, it must be documented for review of tenant rights provisions. Lease must not have any provisions that allows tenant’s right to supersede first mortgage lien.
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| Interested Party Contribution (IPC) | - IPC can only be used for closing costs and prepaid expenses, not down payment.
- Maximum 6% for primary residence & Second Home
- Maximum 2% for investment property
- Exceeding IPC after above use is considered as sales concessions, will be deducted from sale price to determine LTV/CLTV/HCLTV
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| Rate & Term | - Cash-back to borrower is limited to 1% of new loan amount or $5,000 whichever is less.
- Not eligible if prior loan was cash-out and completed within 30 days from application date.
- Property that is currently listed for sale is not eligible. Property that was listed for sale within 180 days from application date is eligible for rate/term refinance only on a primary residence and second home (except when property was purchased within 180 days). Documentation evidencing cancellation of listing, and borrower’s LOE detailing the reason for cancelling are required.
- Purchase money subordinate lien can be included in a new loan amount, ONLY if it was made within 12-months.
- Payoff of subordinate lien that has been open for more than 1 year and there has not been a draw greater than or equal to $2,000 within the past 12-months is considered as rate/term refinance.
- Buyout from spouse, domestic partner or affianced interest is allowed. Borrower must not receive any cash back.
- If buyout is from spouse, divorce settlement paper must be documented
- If buyout is from domestic partner, fiancée, or fiancé, both parties must sign a written agreement with stated buyout dollar amount. Both parties must have jointly owned the property for at least 12-months from application date, and occupied the property as their primary residence (evidenced by driver’s license, bank statement, credit card bill, utility bill, etc.)
- Property inherited within the past 12-months cannot be held in probate, and the owner must have clear title. Documentation evidencing the inheritance, percentage of ownership by heirs must be provided. 5% LTV/CLTV reduction applies to the matrix. • Principal reduction is only allowed when lender credit exceeds closing cost, up to $2,500 or 2% of loan amount whichever is less. • Removing any borrower from original loan is NOT allowed unless a borrower on the new loan has been divorced for 6-months or more, provided verification that a borrower on the new loan has been making timely payment for the past 6-months.
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| Cash-Out | - Max cash-in-hand: Refer to the matrix.
- At least one borrower must have held title for a minimum 6-months. Inherited or legally awarded properties are exempt from this seasoning. The time property held in an LLC is counted towards the seasoning, if borrower owns majority of LLC.
- Property inherited within the past 6-months cannot be held in probate, and the owner must have clear title. Documentation evidencing the inheritance, percentage of ownership by heirs must be provided.
- Property purchased with no financing or short-term financing requires 12-months seasoning (includes delayed financing).
- Property that is currently listed for sale or had been listed for sale within the past 180 days is not eligible.
- For Texas, a new refinance transaction that includes the payoff of an equity line of credit, the payoff of any loan that is a Texas Section 50(a)(6) loan, or provides any cash to the borrower at closing makes the new loan subject to Texas Section 50(a)(6) requirements and is not eligible.
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| Continuity of Obligation | - When an existing mortgage on the subject property will be satisfied as a result of a refinance transaction (rate/term and cash out), one of the following requirements must be met:
- At least one Borrower on the refinance mortgage was a Borrower on the mortgage being refinanced; or
- At least one Borrower on the refinance mortgage inherited or was legally awarded the mortgaged premises (e.g., in the case of divorce, separation, or dissolution of a domestic partnership); or
- At least one borrower on the refinance mortgage held title to and resided in the mortgaged premises as a primary residence for the most recent 12-month period and the mortgage file contains documentation evidencing that the borrower has been making timely mortgage payment, including the payments for any secondary financing, for the most recent 12-month period; or
- The property was previously owned by an inter vivos revocable trust and the borrower is the primary beneficiary of the trust
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| Subordinate Financing | - New subordinate financing is not allowed.
- Existing subordinate lien may be re-subordinated to the new refinance transaction.
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| Escrows & Title | - No impound required except when property is in flood zone
- Vesting under trust is permitted.
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| Power of Attorney | - Eligible except for cash-out refinance.
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| Compliance | - All loans must be General QM with Safe Harbor.
- HPML is not permitted.
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| MSA List | Reduce max LTV/CLTV/HCLTV by 5% if subject is in one of the MSA counties. |
