| Loan Terms | Fixed: 30yr, 15yr. ARM: 5/6, 7/6, 10/6 ARM (margin & caps per rate sheet), and Interest-Only |
| Interest Only | | Product | Term | I/O Term | Amortization Term |
|---|
| 5/6 ARM I/O | 360 | 120 | 240 | | 5/6 ARM I/O | 480 | 120 | 360 | | 7/6 ARM I/O | 360 | 120 | 240 | | 7/6 ARM I/O | 480 | 120 | 360 | | 10/6 ARM I/O | 360 | 120 | 240 | | 10/6 ARM I/O | 480 | 120 | 360 | | 30 yr FIXED I/O | 360 | 120 | 240 | | 40 yr FIXED I/O | 480 | 120 | 360 |
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| Qualifying rate/payment | - Fixed: Qualified at note rate.
- ARM: Qualified at higher of note rate or fully indexed rate.
- Interest only: Qualified at higher of note rate or fully indexed rate. Qualifying payment is for the amortization term
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| Minimum Loan Amount | $150,000 |
| Mortgage Insurance | Not required |
| Income type | - 24- or 12-months Bank statements
- 2- or 1-year 1099, with YTD bank statements/checks
- Asset utilization (divided by 84)
- 2- or 1-year full doc
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| Maximum DTI | 50% with below exceptions - 55% allowed if: 2yr full doc, Primary residence, LTV ≤ 80%, minimum 12 mo. reserves, Residual income ≥ $3500, Not FTHB
- 43% for the borrower living rent-free or without 12-month documented housing history, asset depletion as sole source or supplemental (Borrower who sold a primary residence within the past 6 months is not considered living rent-free).
- First Time Home Buyer: 45% (please refer to the details in corresponding section)
- When non occupant co-borrower’s income is used, occupying borrower’s sole DTI is capped at 60%
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| Eligible Borrowers | - US citizens
- Permanent resident aliens (front and back copy of resident alien card required)
- Non-permanent resident aliens
- Reside & employed in the U.S. for at least 2 years
- Provide one of the following employment authorization documents:
- Valid current EAD. If EAD will expire within 6 months of loan application, obtain a letter from the employer documenting borrower’s continued employment & EAD renewal. Employer on the loan application must be the same as on the unexpired EAD. EAD documentation is acceptable up to 540 days if an automatic extension has been granted and valid through closing.
- Form I-765 Application for Employment Authorization. Must reflect approval status in the Action Block (upper right-hand corner of the form)
- Form I-797, I-797A, I-797B, or I-797C showing approval status. Petitioner to match employer name on application
- If EAD is not provided, employment authorization may be evidenced by certain Visa types. Some common Visas allowing employment include (E-3, H-1B, L, O, and P).
- Asylum: EAD referencing code C08 or Form I-94 with a stamp such as “asylum granted indefinitely”
- DACA: EAD referencing code C33 or Form I-797 conveying approval status for Case Type I765 or Form I-765 Application for Employment Authorization. Must reflect approval status in the Action Block (upper right-hand corner of the form)
- Max LTV 80%, Income documentations must be 24 months (Full doc or Alt Doc), Gift not allowed, non-occupant coborrower not allowed
- Non occupant co-borrower allowed on primary purchase transaction only. Full Doc only and non occupant co-borrower must be included on Title. For DTI requirement, please refer to the above ‘Maximum DTI’ section. Must complete and sign a Non-Occupant Co-Borrower Certification
- LLC, Partnerships, Corporations, and S Corporations. Please refer to title ownership section for additional requirements.
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| First Time Home Buyer | - Definition: An individual who is purchasing the property, will reside in the property as a principal residence, and had no ownership in a residential property during the 3 years period from the application date.
- Restrictions: Primary residence only, Max DTI 45% (Max LTV 80%, Max DTI 43%, if living rent free), Minimum 6 months reserves, must have documented 12 months’ rent history reflecting 0x30.
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| Properties | - Eligible: Single family, PUD, Condo (with Full HOA Cert), Condo Hotel, 2-4 units, and 1 unit property with ADU. Title ownership may be a fee simple or leasehold (Must meet all Fannie Mae requirements, leasehold is not eligible for condo).
- Ineligible: C5/C6 or Q6, Mixed Use, Manufactured, Co-Op, Rural Property (Property over to 20-acres, appraiser indicates rural neighborhood, located on a gravel road, or 2 of 3 comps are more than 5 miles from subject), Property with PACE loan, Dome or geodesic homes, Properties with nonresidential income-producing structures on premise
- Minimum GLA: SFR 700 sqft, Condo 500 sqft, 2-4 units 400 sqft per individual unit
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| Condo | - HOA questionnaire is required, except for a detached condo.
- Project review is not required for 2-4 unit condo projects if documented with all of the followings:
- The project is not a condo hotel, houseboat, or timeshare or segmented-ownership project.
- The priority of common expense assessments applies.
- The standard insurance requirements apply.
- Special assessment information is to be provided to determine if there is a critical repair. Provide purpose, amount, term, balance, status, and cost per unit
- Condo projects identified by Fannie Mae CPM as ‘Unavailable’ is not eligible, except for Condotel.
- Project with significant deferred maintenance or have received a directive from a regulatory or inspection agency to make repairs due to unsafe conditions are not eligible.
- New projects must meet all of the following requirements:
- 50% of the total units in the project or subject’s phase must be sold/conveyed to unit owners AND at least 50% of the units must be owner occupied.
- Project or subject’s legal phase must be complete. All common elements in the project or legal phase must be 100% complete
- At least 50% of project must be sold or under legal contract.
- Project developer may be in control provided the Master Agreement allows for the homeowners to take control upon either a predetermined percentage of unit sales or within a defined time frame
- HO-6 is required even if master policy covers walls-in.
- Agency Non-Warrantable condo may be eligible as the followings:
- Commercial space up to 50% of project space
- Investor concentration up to 60%
- Single entity ownership up to 20%
- No more than 20% of the total units may be 60 days or more past due on HOA dues
- Litigations are acceptable provided the lawsuit(s) are not structural in nature which impact the subject unit and do not affect marketability of the project units and potential damages do not exceed 25% of HOA reserves or documentation from insurance carrier or attorney representing insurance carrier that the insurance carrier has agreed to defend and HOA insurance policy is sufficient to cover the litigation expense.
- Florida Condominiums (This statute applies to projects 5 stories or higher):
- A structural inspection is required if the project is over 30 years old (or 25 years old if within 3 miles of the coast). The inspection needs to address items that substantially conform to the definition of a milestone inspection as defined in Florida statute 553.899
- Inspection must confirm there are not conditions severe enough to affect the safety, soundness, structural integrity, or habitability of the improvements
- Projects with an unacceptable or no inspection are ineligible
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| Condotel (Condo Hotel) | - Please refer to the matrix - Additional Restrictions for max LTV/CLTV and max loan amount.
- Investor concentration allowed up to 100%
- Minimum loan balance to be refinanced: $150,000
- Minimum 500 sqft. Fully functioning kitchen (full-size appliances including a refrigerator and stove/oven) and bedroom are required.
- Gross rents (for all income doc types) reduced by 20% to reflect extraordinary costs (i.e., advertising, furnishings, cleaning) associated with operating short-term rental property compared to non-short-term property
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| Appraisal Requirements | - Age of report: 365 days from closing
- 1004D is required after 120 days of appraisal completion.
- If 1004D indicates the property value has declined, a new appraisal report is needed.
- 2 full appraisals are required for loan amounts > $2MM or flip transaction. LTV is based on lower of two.
- Appraisal review must be performed by New Wave Underwriter with one of the following:
- CU or LPA score 2.5 or less
- Desk review (CDA) from Clear Capital
- A field review or 2nd appraisal report
- If CDA reflects a negative value more than 10%, a field review or 2nd appraisal is required.
- Transfer appraisal is acceptable.
- FEMA declared disaster area: Full appraisal needs to be re-done if incident happened after original appraisal.
- Declining market value - 5% LTV reduction
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| Number of Financed Properties | No limit |
| AQM exposure to single borrower and/or household | All AQM aggregate shall not exceed $5MM or 10 properties. |
| Housing Payment History | - Principal Residence: 12 months housing payment history (mortgage or rental). Allow 1x30x12, must be paid current as of 45 days of the loan application date.
- Living rent free is allowed with max DTI 43% (Borrower who sold primary residence in 6 months is not considered as rent-free), however, the borrower must not be a FTHB
- VOR completed by a private-party or non-institutional landlord must be supported by alternative documentation showing the most recent 6 months history (cancelled checks, bank statements, etc.) *Payments made in cash are not eligible
- Mortgage not reported on credit report: VOM, most recent 6 months history (cancelled checks, mortgage statements including payment history, etc.), and copy of Mortgage Note (applies to both institutional/non-institutional lenders).
- Notes with balloon feature with an expired maturity date exceeding 30 days require an extension to avoid being counted as delinquent
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| Age of Credit Documents | 90 days from closing |
| Credit Requirements | FICO score requirements- At least 1 borrower must have a minimum of 2 credit scores. All bureaus must not be frozen.
- Representative FICO score is the lower of 2 or middle of 3 credit scores.
- For loans with multiple borrowers, except for asset utilization, the borrower with higher monthly income is considered the primary borrower and their credit score can be used as the Representative FICO score. When both borrowers are selfemployed and jointly own the business, use the lowest score amongst the borrowers.
- For loans with multiple borrowers under asset utilization, Use lowest score amongst all borrowers. Minimum tradelines requirements
- If the primary borrower has 3 credit scores, the minimum tradeline requirement is waived.
- If the primary borrower has 2 credit scores, each borrower must meet the minimum requirements as below, unless the coborrower is the spouse of the borrower (In that case, only one spouse is required to meet the minimum requirements).
- At least 2 tradelines reporting for minimum 24 months, with activity in 12 months, or
- At least 3 tradelines reporting for minimum 12 months, with activity in 12 months, or
- All of below requirements
① At least 8 tradelines, 1 must be a mortgage or rental ② At least 1 is open and reporting for minimum 12 months ③ Borrower has at least 8 years credit history ④ There should be no serious adverse history on trade lines
- Accounts may be open or closed.
- Self-reported, Account in deferment, Authorized user, collection/charge-offs, Account included in credit events (BK/FC/SS/DIL) are not considered as acceptable tradelines.
Derogatory accounts- Any non-mortgage account on credit report must not be more than 30 days delinquent. Any delinquent account must either be brought current or paid off at closing.
- Collection and charge-off individually greater than $250, and total more than $2,000 must be paid off. Medical collections can remain open.
- Collection and charge-off may stay open if payments for open charge-offs or collections are included in the DTI. If a payment amount is not known, 5% of the balance may be used as the payment and reserves cover the balance
- All judgements, garnishments, and outstanding liens must be paid off.
- Disputes on account must be resolved, except for the ones with balance ≤ $250 can stay if payments included in DTI. The total aggregate balance in dispute unresolved can’t exceed $2,000.
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| Derogatory Credit Event | 4 years seasoning from the Note date. |
| Derogatory Credit Event 4 years seasoning from the Note date. | - Forbearance, loan modifications, or deferrals is not considered as a credit event. If these are completed or reinstated greater than 12 months from the Note date of the subject transaction and having a 0x30x12 housing history, no restrictions apply.
- If forbearance, modifications, or deferrals completed or reinstated within 12 months of the Note date of the subject transaction, borrower is not eligible for this program.
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| Employment and Income | Alternative Doc: Minimum 2-year operating history in the same business required for self-employed income doc type. Ineligible: Nonprofit Entity, Funds/Deposits in a IOLTA (Trust)
Bank Statements (24 or 12 months)- Business narrative required if nature of borrower’s business cannot be determined from the URLA
- Documentation: Most recent 24 or 12 months personal or business bank statements.
- Business account requirements:
- Borrower must be at least 25% owner verified by CPA/EA/CTEC letter, operating agreement or equivalent.
- Co-mingled account (A personal account used by a borrower for both business and personal use)
- Borrower must be the sole owner of the business verified by CPA/EA/CTEC letter, operating agreement or equivalent (borrower and spouse with combined 100% ownership eligible).
- Personal bank statement requirements:
- Borrower must be at least 20% owner verified by CPA/EA/CTEC letter, operating agreement or equivalent.
- Most recent 2 months of BUSINESS bank statements must evidence transfers to the personal account, AND activity to support on-going business operations.
- Income Calculation
- Earning trends: if the 24-month trend shows a decline in income, but the most recent 12-month earning has been stabilized, the most recent 12-month average should be used. If the trend is declining, the income is not eligible.
- Business/Co-mingled: Total deposits (less any inconsistent deposits) times expense factor, divided by 24 or 12 and multiplied with % of ownership. Inconsistent or large deposit (greater than 50% of average monthly sales) must be sourced or excluded.
- Personal: Only transfers or deposits from the business account(s) are eligible deposits (less any inconsistent deposits) divided by 24 or 12 and multiplied with % of ownership. If the personal account is jointly owned, and the joint owner is not an owner of the business, deposits that are not readily identifiable as transfers from the business accounts or business deposits must be excluded unless sourced.
- Expense factor options
- Option 1: Standard 50%. Eligible for all business types.
- Option 2: If the business operates more efficiently or typically has a materially different expense factor, CPA/EA/CTEC letter specifying annual business expense ratio may be used (minimum 10%).
- Option 3: P&L prepared or reviewed/acknowledged by CPA/EA/CTEC with verified license, covering the same period used for bank statements. Total deposits (less inconsistent deposits) must be no more than 20% below the sales/revenue indicated on P&L.
- Non-Sufficient Funds (NSF): An occurrence is defined as one or more checks returned the same day.
- Overdraft protection from a depository account: Occurrences may be excluded if statements for the linked account confirm that (a) the linked account balance at the time of the transfer exceeded the amount of the overdraft transfer, (b) the linked account’s balance did not report as zero or negative at any point during the statement period of the transfer, and (c) the linked account did not itself receive overdraft protection proceeds during the statement period of the transfer.
- Overdraft protection from a line of credit: Occurrences may be excluded if statements for the linked account confirm that (a) the line’s credit limit was not exceeded during the statement period of the transfer, and (b) a payment amount which equals or exceeds the sum of all overdraft protection occurrences analyzed in the statement period is made within 30 days after the statement close date.
- If there are 1 or more occurrences in the most recent 3-month time period, up to three (3) occurrences are allowed in the most recent 12-month.
- If there are 0 occurrences in the most recent 3 months, up to 5 occurrences in the most recent 12-month time period are acceptable.
1099 (2 or 1 year)- 2- or 1-year average of 1099s (can be substituted with 1099 transcript), minus expense factor.
- Expense factor: Fixed 10%, or 3rd party prepared P&L (CPA, EA,CTEC with verified license).
- YTD earnings need to be documented when the 1099 reporting period is greater than 90-days from the note date. YTD earnings must support the ongoing receipt of income shown on the 1099 by: checks or single check stub(s) with YTD totals if available, or Bank Statement YTD (YTD earnings must be within 10% or greater than prior year earnings). Asset Utilization (as sole source or to supplement other income sources)
- Restriction: Min FICO 660, Non-occupant co-borrower not allowed. Max DTI Limits: FTHB DTI 45%, less than 12-month housing history DTI 43%
- Minimum asset requirement: Lower of $1,000,000 or 150% of the loan amount. This does not apply when used as supplement to other source of income.
- Calculation: Eligible personal asset - down payment/closing costs/reserves, then divided by 84.
- Assets considered for this doc type must be verified with the most recent 3 months account statements, quarterly statement, or VOD. Asset must be seasoned 120 days.
- All individuals listed on the asset account(s) must be on the loan, and take the title.
- Balance discounted at 70% for stocks/bonds/mutual funds, and retirement accounts. 60% will be used if borrower is not of retirement age (below 59 ½), 100% of cash surrender value of life insurance less any loans may be considered for assets
- Ineligible Assets: Gift funds, Equity in Real Estate, Privately traded or restricted/non-vested stocks, Business assets, Assets held in an irrevocable trust where borrower is not beneficiary, Asset which produces income already included in the income calculation
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| Rental Income | - Can be used as supplemental source.
- Purchase transactions
- Rental income will be determined by appraisal 1007/216 form
- Copy of the existing lease agreement when the property is currently tenant occupied, need to verify that it does not contain any provisions that could affect the first lien position of the subject property
- Refinance transactions + rental income for REO properties
- Long term rental: Lease agreement, and 2 months bank statement with proof of rental income receipt (Business bank statement used for income analysis cannot be used for proof of receipt)
- Short term rental may be used by using 12-month look back period statements or annual statement provided by the online service. 75% of verified monthly rental income (average of 12-month) can be used to offset PITIA of the rental property. Provide online listing to show property is activity marketed as a short-term rental
- Departure residence: Lease agreement, Proof of receipt of security deposit and first month’s rent. Market rent analysis (Fannie Mae form 1007 or 1025) are required.
- Purchasing 2-4-unit primary residence & using other unit rental income
- The monthly qualifying rental income must be added to the borrower’s total monthly income (The income is not netted against the PITIA of the property)
- The full amount of the mortgage payment (PITIA) must be included in the borrower’s total monthly obligations when calculating the DTI ratio
Full Doc: 4506-C is required for all income types.
Wage (2 or 1 year)- Most recent paystubs covering 30 days with YTD, 2- or 1-year W-2. Offer letter may be required if new job just started
- Overtime, Bonus, and/or Commission income requires 2 years history of receipt with WVOE (Year-end paystub will not satisfy). Income received less than 2 years but more than 1 year may be used if borrower has minimum 2 years history of receipt in the same line of work. Paystubs and W-2s are still required
- Tip income requires at least 2 years history of receipt, with 2 years 1040 and 2-years W-2. Current paystub must have tip income and YTD
- When employed by family, 2 years W-2 and 2 years 1040 must be documented. CPA for that family business must provide letter to prove borrower has no ownership, as well as borrower’s LOE for potential ownership.
- Foreign income must be documented with 2 years 1040 reporting foreign income in lieu of W-2.
Other Income- Retirement/Pension (Must continue minimum 3 years from mortgage Note date, borrower must have unrestricted access to the accounts without penalty)
- Pension/Social Security: Award letter or two prior years 1099-R and one month proof of current receipt
- 401K/Keogh/IRA: Account statement reflecting available balance for withdrawals, one year 1099-R form, one month proof of current receipt, minimum history of withdrawal for 12 months
- Housing/parsonage allowance: WVOE with 2-years history of receipt, 2 years 1040 with Sch SE.
- Trust income: Trust agreement with borrower as a beneficiary, Trust asset statement to evidence 3 years continuance.
- RSU: Follow Freddie Mac guidelines, except documentation is 2 years regardless of performance or time based.
- Any other income not listed in this guide follows Fannie Mae guidelines.
Self-employed (2 or 1 year) :- 2- or 1-year W-2, most recent 2 or 1 year signed/dated tax return for both individual and business, and most recent paystub covering 30 days periods when officer compensation is paid.
- An YTD P&L, no older than 60 days from the Note Date, most recent 3 months business bank statements (Audited P&L cannot waive business bank statements). Bank statement deposits must support P&L and prior years’ tax return in terms of sales/revenue.
- If tax return for last year is not filed yet, 12 months P&L as of Dec 31 (or end of fiscal year) is required.
Rental Income- Rental history must be documented with Sch E.
- Lease agreements are required for all properties where rental income is used. Expired lease that has converted to month to month requires bank statements for lessor of [2 months] or [the time period after lease expiration].
- 75% of gross rental income will be used, if property was purchased during or after the most recent tax return year.
- Commercial rental income from Sch E must be documented with a rent roll. Zoning and primary use must be commercial.
- Departing residence rental can be used up to offset of PITIA. Comparable rent schedule (FNMA form 1007), lease agreement, and evidence of security deposit receipt/first month’s rent must be documented.
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| Residual Income | - Calculation: Gross Monthly Income minus Total Monthly Debts.
- Minimum residual income does not apply to investment property.
- Minimum residual income: $2,500 + $250 for each dependent. A dependent is any person other than the borrower or spouse in the household.
- Full doc with DTI > 50%, minimum is $3,500.
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| Debts | - Revolving debt with no payment on credit report will be calculated at 5% of balance or $10 whichever is greater.
- Installment loan less than 10 months remaining can be excluded. Payoff or paydown to less than 10 months are allowed, however, must be occurred prior to the Note date.
- Timeshare obligations will be treated as a consumer installment loan.
- 30 days open account that has a monthly payment that is identical to the account balance, payment may be excluded if borrower has funds to cover (In addition to closing funds and reserves).
- Debts paid by others (contingent liability) which borrower is primary obligor must be included (i.e., borrower financed auto for their business and business pays the loan. If the loan is in borrower’s name, debt must be included).
- Business debt in borrower’s name may be excluded with any of the following supporting document:
- Most recent 6 months of cancelled checks drawn from the business account.
- Tax returns reflecting the business expense deduction (applicable to full doc).
- Business bank statement after closing cost and reserves deducted, is greater than or equal to the balance of the debt.
- Pending sale property’s PITI may be excluded if executed sales contract is present, and all financing contingencies have been cleared.
- Deferred student loan - 1% of balance or fully amortizing payments using loan payment documents will be used.
- HELOC with no payments on credit report will be calculated at 5% of balance.
- For alimony obligation, payment amount either can be reduced from the income or added to a debt for DTI ratio.
- Any new debts found on credit refresh will be included in DTI.
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| Assets and Reserves | Documentation: Most recent 1-month bank statements or VOD- Must be liquid asset.
- All large deposit must be sourced, otherwise needs to be deducted from eligible asset balance.
- Stocks, bonds, mutual funds, cash value of life insurance are used at 100% value for closing funds and reserves.
- Retirement asset is used at 70% of the vested balance for closing funds and reserves.
- Assets held in a Trust require the following:
- Obtain written documentation (e.g. bank statements) of the value of the trust account from either the trust manager or the trustee, and
- Document the conditions under which the borrower has access to the funds
- Gift funds allowed when minimum down payment requirement is met (please refer to corresponding ‘Purchase’ section). No minimum down payment is required if owner occupied, income doc type is 12 or 24-month bank statements or full doc, with maximum LTV 80%. Borrower must meet both reserve and residual income requirements.
- Gift of equity is allowed for primary residence only (please refer Purchase - Non-Arm’s Length transaction).
- Business funds can be used, limited to the borrower’s ownership % in the business.
- Assets held in foreign accounts must be translated to English and verified in USD equivalency at the current exchange rate via http://www.xe.com.
- Crypto currency (Bitcoin and Ethereum only)
- Must be liquidated and deposited into an established US bank account for closing funds.
- Can be used at 60% of current valuation (within 30-days of the Note date) for reserves. Statement must include name of financial institution, account holder name, account number, statement date, time period covered and available balance in USD.
- Ineligible asset: Down Payment assistance programs, unsecured loans, any assets used as income, non-vested or restricted stock, cash-on-hand, sweat equity, 529 Saving Plan
Reserves (PITIA for property x months) - Maximum 12 months- LTV ≤ 85%: 6 months
- LTV > 85%: 12 months
- Loan amount > $1.5MM: 9 months
- Loan amount > $2.5MM: 12 months
- For ARM loan, calculation is based upon initial PITIA, not the qualifying payment.
- For I/O loan, calculation is based upon interest only payments.
- No reserves for R/T refinance where transaction results in a reduction to payments of 10% or greater. For I/O loan, the reduction is based on the amortizing payment used for loan qualification. DTI >50% not eligible.
- Cash-out proceeds is eligible to satisfy reserve requirement
- Gift funds, 1031 exchange proceeds cannot be used
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| Title Ownership | - Eligible: Individual, Joint Tenants, Tenants in Common, Inter-vivos revocable trust
- Ineligible: Land trusts, Blind trusts, IRAs, Non-for-profit entity
- Title must be in the borrower’s name (owner-occupied property) at the time of application for refinance transactions
- To vest a loan in an Entity, the following requirements apply
- Restricted to investment property only.
- Purpose and activities are limited to ownership and management of real property.
- Entity must be domiciled in a US State.
- Any business structure is limited to a maximum of 4 owners or members.
- Multi-level entity structures allowed subject to entity documentation requirements met for all entities. (Permitted up to 2 layers)
- Personal guaranties must be provided by members representing at least 50% ownership of the entity. A personal guaranty form is required.
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| Business Vesting documentation | Depends on the type of entity, below documents from entity are required.- LLC (Limited Liability Company)
- Entity Articles of Organization or Partnership
- Certificate of Good Standing or equivalent (Foreign LLC Certificate of Good Standing if entity is not formed in the subject property state)
- Certificate of Authorization for the person executing all documents on behalf of the Entity. The authorization may be determined in an Operating Agreement or other corporate documents. If not, a Borrowing Certificate is required. (LLC Borrowing Certificate -Single Member, or LLC Borrowing Certificate - Multiple Member)
- Corporate documents that contain a list of owners, title, and ownership percentage (e.g. organization structure)
- Tax Identification Number (EIN). Single member LLC may use EIN or the guarantor SSN
- Corporation
- Filed Certificate/Articles of Incorporation (and all amendments)
- By-Laws (and all amendments)
- Certificate of Good Standing (issued by Secretary of State (SOS) where the Corporation is incorporated)
- Tax Identification Number (EIN)
- Borrowing Resolution/Corporate Resolution granting authority of signer to enter loan obligation
- Receipt of current year franchise tax payment or clear search, or evidence the state does not require a franchise tax payment
- Partnership
- Filed Partnership Certificate (if a general partnership, filing with the SOS may not be required)
- Partnership Agreement (and all amendments)
- Certificate of Good Standing (issued by the SOS where partnership is registered)
- Tax Identification Number (EIN)
- Limited partner consents (where required by partnership agreement)
Documents signing requirements are as below:- Authorized signer for the entity must sign all disclosures (e.g. initial disclosures, TRID), Any state or federally required settlement statement, Note and Deed of Trust including all riders in the name of entity.
- Loan application must be completed/signed by all individual member of the entity. Section labelled ‘Title will be held in what Name(s) should be completed with only the entity name.
- Personal guaranty form must be signed at loan closing and dated the same date as the Note, by all members.
- Spousal Consent to Pledge is required for community property states (AK, AZ, CA, ID, LA, NM, TX, WA, WI).
Example - Signature Requirements
[Authorized Signatory] may be replaced by a different title as specified in the Member Consent (e.g., Managing Member, Member, etc.).
Sample 1:
Borrower: JJ Investors, LLC by James Johnson, Single Member of LLC
Note, Security Instrument, and all Riders:
Signature Block
JJ INVESTORS, LLC a [ ] limited liability company
James Johnson
By: James Johnson
Title: [Authorized Signatory]
Sample 2:
Borrower: JJ Investors, LLC, by James Johnson and Jane Nelson, two Members of LLC;
Both Members are Authorized Signatories of LLC.
Note, Security Instrument, and all Riders:
Signature Block
JJ INVESTORS, LLC a [ ] limited liability company
James Johnson,
By: James Johnson
Title: [Authorized Signatory]
and
JJ INVESTORS, LLC a [ ] limited liability company
Jane Nelson
By: Jane Nelson
Title: [Authorized Signatory] |
| Solar Panels | - Follow Fannie Mae B2-3-04
- All solar panel loans and leases with PACE/HERO financing must be paid off. If loan proceeds are used to pay off the PACE loan, transaction will be considered cash out
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| Impound | - Impound is required, unless all of below is met.
1) Non HPML 2) LTV ≤ 80% 3) FICO ≥ 720 4) Minimum 12 months reserves - Flood insurance premium not allowed to be waived
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| Power of Attorney | POA must contain expiration date. Other requirements follow Agency guideline |
| Purchase | - Minimum 5% borrower contribution is required for primary. 10% for 2nd Home and investment.
- Assignment of contract or finder’s fee reflected on the purchase contract may not be included in the sales price or associated with LTV/CLTV calculation.
- Non arm’s length transaction is allowed with below restrictions:
- Max LTV/CLTV 80%
- Transaction must not be ‘For Sale by Owner’.
- Purchase between family member is acceptable for all income types
- Seller’s 12 months mortgage history is required to confirm it is not a foreclosure bailout.
- Gift of equity is allowed for primary home
- Commission earned by buyer/borrower when representing themselves cannot be used for down payment, closing costs, or reserves.
- Renter purchasing from landlord must be documented with 12 months of cancelled checks to prove timely payments. VOR is not acceptable.
- Flip transaction requires 2 appraisals.
- Seller acquired property within 90 days from borrower’s purchase agreement date, and borrower’s purchase price is greater than seller’s acquisition price by more than 10% (or 90-180 days with by more than 20%).
- If renovated or rebuilt, document to validate actual cost to construct or renovate must be provided.
- 2nd appraisal must be provided to the borrower if loan is HPML.
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| Interested Party Contribution (IPC) | - Can only be used for closing costs and prepaid expenses, not down payment or reserves.
- Maximum 6% if LTV ≤ 80%, Maximum 4% if LTV > 80% for primary residence. Maximum 3% for 2nd home & Investment.
- Exceeding IPC after above use is considered as sales concessions, will be deducted from sale price to determine LTV.
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| Rate & Term | - Max Cash-back to borrower is 2% of loan amount or $5,000 whichever is less.
- If property was acquired less than or equal to 6 months from the application date, LTV/CLTV is based upon the lessor of appraised value or previous purchase price (+any documented improvements), The purchase settlement statement and any invoices for material/labor are required.
- Payoff of a non-purchase second lien seasoned a minimum of 12 months from date of application. The second lien must not evidence draws exceeding $2,000 within the past 12 months and withdrawal activity must be documented with a transaction history of the line of credit.
- Buy out a co-owner pursuant to an agreement.
- Minimum 12 months seasoning is required if previous refinance was cash-out (previous note date to loan application date). Closing Disclosure for prior transaction is required. Loans do not meet this requirement will be considered as cash-out.
- Payoff of delinquent real estate taxes (60 days or more past due) is considered cash-out.
- Transaction must be treated as cash-out when the subject property is encumbered by one of the following: Blanket/CrossCollateralized loan or loan that allows for Paid in Kind interest
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| Cash-Out | - Max cash-in-hand: Unlimited
- A letter explaining the use of loan proceeds and borrower’s indicating their intent to retain the property is required
- Payoff delinquent real estate taxes (60 days+) is considered cash-out
- If cash-out is for personal, family, household use, loan must meet all applicable federal & state requirements of a consumer loan transaction even if the borrower is a company or the loan was initially intended for business purpose. Including but not limited to the requirements of the TILA (5 U.S.C. 1601 et seq) , RESPA (12 U.S.C 2601 et seq) , GLBA (15 U.S.C. 6802-6809), SAFE (12 U.S.C 5601 et seq), and HOPA (12 U.S.C 4901 et seq).
- Loan not eligible for cash-out
- Primary/Second Home properties listed for sale in the past 6 months
- Investment properties listed for sale in the past 6 months, unless a 3 year prepay penalty is applied. Listing must be cancelled prior to the note date. Value will be based on the lesser of the lowest list price or appraisal value.
- Has been a prior cash-out transaction within the past 6 months (measured from recording date to the app date)
- Payoff of a Land Contract / Contract for Deed / Texas 50(a)6
- Non occupant co-borrower not allowed
- Cash-out seasoning is defined as the length of time subject has been owned by the borrower. Measured by the property acquisition date to the date of the new note.
- 6 months Title seasoning is required for a transaction to be eligible for cash-out
- For properties owned 12 months or longer, the LTV/CLTV is based upon the appraisal value
- If the subject property was purchased within 6-12 months prior to application date, The LTV will be based on the lesser of the sales price (+any documented improvements) or the current appraised value
- Cash-out seasoning of 6 months or less is allowed with the following restriction: Delayed financing, borrower acquired the property through an inheritance, or was legally award the property through divorce, separation, or dissolution of domestic partnership
- Delayed Financing: Property was purchased by a borrower for cash within 180 days of the loan application
- Original purchase transaction was an arm-length transaction
- Source of funds for the purchase transaction are documented
- Max LTV/CLTV ratio is based upon the lower of the current appraised value or the property’s purchase price (+ any documented improvements)
- Proceeds may satisfy reserves
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| Subordinate Financing | - Allowed up to maximum CLTV as per matrix.
- CLTV is calculated at the max available line amount unless it is past draw period.
- Must be institutional.
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| Prepayment Penalty | - Applies to Investment property only.
- 6 months of interest on the amount of the prepayment that exceed 20% of the original principal balance. The charge applies to loans that pay off due to sale or refinance, or curtailment that exceed 20% of the original principal balance in a given 12- month time period.
- Period: Borrower(s) can choose from 0 to 5-years
- Penalties not allowed in certain states, as below
- AK, KS, MI, MN, NM, OH, and RI
- IL and NJ when vested to individuals
- PA when loan amount is less than $312,159
- Only declining structures allowed in MS
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| Fraud Check | New Wave Lending may request for additional document for ‘red flags’ or ‘high alerts’ on the fraud report. |
| State restriction: CT, IL, NJ, NY | - CBSA Specific List restriction below. Click here for full zip code list.
- State/CBSA Overlay
| CBSA Name | CBSA Code | CBSA Name | CBSA Code |
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| Phoenix-Mesa-Chandler, AZ | 38060 | 0 Boulder, CO | 14500 | | Sacramento-Roseville-Folsom, CA | 94207 | Breckenridge, CO | 14720 | | San Francisco-Oakland-Hayward, CA | 41860 | Austin-Round Rock, TX | 12420 | | San Jose-Sunnyvale-Santa Clara, CA | 41940 | Sevierville, TN | 42940 | | Santa Cruz-Watsonville, CA | 42100 | | |
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