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1 Page 1 of 5 Lending Library / Correspondent Seller Guide / 500. Products / 508. HIP Full FHA 203(k) 508. HIP Full FHA 203(k) HIP Full FHA 203(k) Product Matrix/Guidelines The FHA 203(k) program (i.e. Full K or Consultant K) enables Borrowers to finance either the purchase or refinance of a home and include the cost of substantial repairs or improvements through a single mortgage. Unless notification has been given HIP mortgage products are delivered prior-approved. Criteria Minimum Loan Amount Maximum Loan Amount Minimum Renovation Amount Maximum Renovation Amount Description No minimum FHA County Limit ( $5,000 minimum on primary property structure No maximum as long as total (acquisition + repair or payoff + repair) is within the FHA county loan limit (varies by county and number of units: up to 4) Eligible Transaction Types Purchase Rate/Term Refinance1 Occupancy Owner Occupied Eligible Properties Attached and detached SFRs and PUDs 2 to 4 unit properties (one must be owner occupied) Condominium units in FHA approved projects Modular homes Log homes House must have been completed for at least one year and/or a Certificate of Occupancy must be provided Ineligible Properties Condotels Cooperatives Manufactured Homes Mixed Use One lot/parcel with two separate dwellings Property flips Products & Terms Max base Loan To Value (LTV) Purchase 96.5% The loan to value is based on the lesser of: The sales price2 or as-is appraised value + Borrower paid improvements minus sales concessions, or 110% of as completed appraised value

2 Page 2 of 5 Rate and Term Refinance 97.75% 1 Minimum Credit Score AUS Recommendation Maximum Debt to Income (DTI) Appraisal Contractors Pricing Note: Use of HUD Form FHA 203(k) Maximum Mortgage Worksheet is required to calculate maximum mortgage amount 660, no exceptions3 Approve/Eligible Max 45% regardless of AUS results report HIP recommends ordering through Streetlinks or Nations, but any Stonegate Mortgage-approved AMC may be used. Borrower selects one general contractor Price per published rates as found in OLIE. Max pricing according to your agreement. Fees Add $250 to Stonegate Mortgage s standard Admin Fee Supplemental origination must be included in your maximum mortgage amount and disclosed in Origination Block 1 on the GFE. Loan Product Specific Fees THESE ARE TYPICAL AND MAY VARY BY REGION. THEY ARE FINANCED AS PART OF THE TOTAL COST OF REPAIRS. Compliance inspection fees to be customary for area, but no less than $200 per inspection (per draw) HUD Consultant Fee (varies according to project scope) Drawings or blueprints Title Charges HUD Consultant Title update fees are to be typical for the area, but not less than $150 per update per draw. Required on all Full 203(k) loans (not Streamline 203(k)). Prior-Approved Lenders Stonegate Mortgage selects HUD consultant from Stonegate Mortgage acceptable consultant list. Delegated Lenders HUD consultants are selected from eligible consultant list at HUD consultant is responsible to complete Work Write-Up, oversee and manage draw process and approve project completion. HUD Consultant Fee Schedule (As determined by HUD) $400 for repairs less than $7,500 $500 for repairs - $7,501 and $15,000 $600 for repairs - $15,001 and $30,000 $700 for repairs - $30,001 and $50,000 $800 for repairs - $50,001 and $75,000 $900 for repairs - $75,001 and $100,000 $1,000 for repairs over $100,000 Contingency Reserve Minimum 10% (required on all loans) 15% is required by HUD if the utilities cannot be turned

3 Page 3 of 5 at the time of the appraisal inspection The UW has the option to increase it to a maximum of 20% Typical cost of Appraisal Seller Contributions Mortgage Insurance Premium Escrowed payments (Verified by HUD Consultant) Current AMC rate Follow FHA guidelines Follow FHA guidelines If qualified, Borrower may elect to roll in up to 6 months PITI. Include on line B-4 on Max Mortgage Worksheet. Eligible Improvements The following are examples of eligible repairs. Eligible repairs will be determined by the HUD Consultant and the detail included in the WWU (Work Write Up) Repair/Replacement of roofs, gutters and downspouts Repair/Replacement/upgrade of existing HVAC systems Repair/Replacement/upgrade of plumbing and electrical systems Repair/Replacement of flooring Painting, both exterior and interior Weatherization, including storm windows and doors, insulation, weather stripping, etc. Purchase and installation of appliances, including freestanding ranges, refrigerators, washers/dryers, dishwashers and microwave ovens Accessibility improvements for persons with disabilities Lead-based paint stabilization or abatement of lead-based paint hazards Repair/replace/add exterior decks, patios, porches Basement finishing and remodeling, Basement waterproofing Window and door replacements and exterior wall residing Septic system and/or well repair or replacement Swimming pool repair4 Major rehabilitation or major remodeling, such as the relocation of a load-bearing wall; New construction (including room additions); Repair of structural damage Repairs requiring detailed drawings or architectural exhibits; Landscaping or similar site amenity improvements Detached garage Ineligible Items Required Improvements Items deemed to be luxury items such as home spa, theater rooms, swimming pools, tennis or basketball courts etc. Must correct any HUD Minimum Property Requirements/Standards, or health and safety issues as noted by HUD Consultant or Appraiser.

4 Page 4 of 5 Payment of Contractors (Draws) Maximum of five draws (4 draws with a 10% holdback for the first draws and a final draw). Stonegate Mortgage issues two-party draw checks made payable to the borrower and contractor, delivered via certified mail to the borrower. Per HUD guidelines, draws must be submitted to Stonegate Mortgage directly from the HUD consultant with the appropriate fully executed forms. Final draw will be made after HIP Draw Department receives: HUD Consultants approval (Final Draw Request) Contractor's Release of Lien Mortgagor's Letter of Completion Title update All funds remaining in the escrow account at the completion of the project will be disbursed according to the 203k Borrower s Acknowledgement. (Stonegate Mortgage recommends a principal reduction.) Draw requests should be faxed to or ed to [email protected]. Energy Efficient Mortgage (EEM) 5 Under the FHA EEM Program, a Borrower can finance into the mortgage 100% of the cost of eligible energy efficient improvements subject to certain dollar limitations (refer to D for more information, or confer with HIP Consultant) $100 Down HUD REO FHA 203(k) may be combined with the $100 Down HUD REO program. See src=/program_offices/housing/sfh/talk/salesincentives for details. FHA 203(h) FHA 203(k) can be combined with FHA 203(h) which is a 100% base LTV FHA loan. To be eligible for this program, Borrowers must have lost a home in a federally declared disaster area within 12 months of application. See src=/program_offices/housing/sfh/ins/203h-dft for details. Good Neighbor Next Door Bond programs Self-Help FHA 203(k) may be combined with this program designed to benefit education, health and safety workers by allowing a 50% discount off of the list price. See for details. Local bond programs may NOT be combined with the FHA 203(k) program. Not allowed. The borrower must have an arm s-length transaction with the contractor.

5 Page 5 of 5 Materials Draws Not allowed. 1 Typically Borrower will need at least 5% equity going in and at completion to roll in closing costs. 2 Use the Sales Price as the as-is value on any purchase transaction, EXCEPT for a HUD REO. On HUD REO's, the value on the original HUD appraisal is the as-is value. 3 No alternative credit allowed. 4 $1,500 limit on the amount of the repair cost. 5 In order to qualify for EEM, Borrower must pay for and obtain HERS report to determine eligibility. HIP Full FHA 203(k) Contacts If you have questions about these guidelines, please contact your Stonegate Mortgage Account Executive or your Stonegate Mortgage Sales Director (CFI Channel). HIP Contacts William Brown Director Home Improvement Program Kyle Wagner HIP Operations Manager Contact Info [email protected] [email protected] HIP efax: Questions prior to loan origination for HIP and REHAB: Questions prior to loan origination for CREDIT: Communication about pending HIP loan submissions: Post-closing and draw questions: [email protected] [email protected] [email protected] [email protected] HIP Full FHA 203(k) Exhibits Correspondent HIP Q & A Correspondent HIP Best Practices