BankSouth Mortgage Direct VA Fixed Rate and Adjustable Rate Guidelines

Transcription

1 BankSouth Mortgage Direct VA Fixed Rate and Adjustable Rate Guidelines BSM Direct guidelines have been created to provide guidance and consistency in determining credit decisions. The guides are not all inclusive of different situations that may arise on any given transaction. BSM Direct reserves the right to apply additional underwriting criteria depending on the overall risk or uniqueness of the file. Amortization: Appraisal Requirements: Assets: Product is available on 15, 20, 25, and 30 year terms. All ARMs are a 30 year term only. All appraisals are ordered through the VA portal. Documentation of assets will be based on AUS findings with the following additional requirements: All online or other activity printouts must clearly identify the borrower, the bank name and account number. Verification of full account numbers will be required if not found on full statements or printouts. Mutual funds, Stocks, and Bonds must be discounted by 30% of the available balance. Retirement accounts must be discounted by 40% of the vested balance after any outstanding loans. Deposits that are not verified from payroll, retirement, SSA, disability sources and are deemed to be excessive must be documented with a satisfactory letter of explanation and supporting documentation. Factors in determining if a deposit is deemed to be excessive may include: o The borrower s income stream. o The borrower s recent history of cash withdrawals.

2 o The borrower s typical history and spending habits. o The percentage of the deposits in relation to the borrower s overall asset portfolio. If credited at closing, all earnest money deposits must be documented with a copy of the cancelled check and the bank statement reflecting the funds drawn from the borrower s account. Any large/non-payroll deposits must be documented in accordance with VA guides. Self-employed borrowers wishing to use assets held in the business name may be subject to additional documentation requirements in order to consider the funds Credit Score and Credit Requirements: Standard BSM Direct credit policy requires all borrowers to have a minimum 640 credit score (see exception policy below) for all borrowers on transactions with a loan amount of $417,000 or smaller. Transactions with a loan amount greater than $417,000 will require a minimum 660 credit score. Borrowers with no credit scores are not eligible under any circumstance. In addition to credit score requirements, every borrower must meet the following requirements on transactions with an AUS approval: Trade Lines No longer required if AUS approved and credit score Is a true reflection of credit history. (not all trade-lines are authorized users, deferred student loans, etc ) Mortgage/Housing 1 x 30 in last 12 months Chapter 7 Bankruptcy Discharged for at least 2 years Chapter 13 Bankruptcy 1 year in repayment plan, 12 months timely payments and CCCS required with court approval to enter new mortgage Foreclosure None in last 2 years. *Authorized User and Deferred Student loan cannot be used meet trade line requirements.

3 In addition to 640 credit score, every borrower must meet the following requirements on transactions that receive a Caution/Refer: Trade Lines No longer required if AUS approved and credit score Is a true reflection of credit history. (not all trade-lines are authorized users, deferred student loans, etc..) Mortgage/Housing 0 x 30 Revolving 3 x 30 in past 12 months 5 x 30 and 2 x 60 in past months Installment 0 x 30 in past 12 months 1 x 30 and 0 x 60 in past months Chapter 7 Bankruptcy Discharged for at least 2 years Chapter 13 Bankruptcy 1 year in repayment plan, 12 months timely payments and CCCS required with court approval to enter new mortgage Foreclosure None in last 3 years. *Authorized User and Deferred Student loan cannot be used meet trade line requirement. Collections may not have to be paid as a condition of loan approval but will be considered in overall credit analysis. Judgments and Tax Liens must be paid prior to closing. Tax liens may remain unpaid with an established repayment agreement and minimum of 12 months timely payments verified. A satisfactory subordination agreement is required for any lien that is approved to remain in place after closing. Borrowers with a short sale in the past three years would not be eligible for financing. AUS Manual Downgrade Policy- In the event that credit terms or other loan information was not considered in the AUS decision, an Approve/Eligible decision must be downgraded to a refer and manually underwritten. Circumstances requiring a downgrade, if not considered in the AUS decision include but are not limited to: Delinquent federal debt, CAIVRS, and individuals on the LDP and/or GSA list. Disputed accounts, inaccuracy, or undisclosed debt. Collection accounts, tax liens, charge-off, judgments.

4 Failure to meet specific conditions of AUS approval. Bank statements that indicate multiple NSF charges. Loans manually downgraded must meet credit requirements on caution/refer grid above. Credit Score Exception-Transactions with credit scores between are eligible if they meet the following criteria: Loan must receive automated approval. Maximum Debt to Income ratio is 41% No late mortgage, rent, or installment payment in last 12 months. No more than 1 x30 on revolving debt in last 12 months. No Bankruptcy, Foreclosure, or Short Sale in last 5 years. No collections, liens, charge-offs, or judgments in last 12 months. All open balances on such accounts must be paid. Cash out refinances not allowed. Loan amount cannot exceed $417,000 Documentation: On Approve/Eligible transactions, AUS findings will determine asset and income documentation. Pay-stubs covering a 30 day consecutive period will be required on all transactions. Manually down-graded loans or loans receiving a refer or caution will require last 2 years tax returns, 2 years W 2s, 2 months bank statements along with paystubs covering a 30 day period. Down Payment and Closing Costs: VA loans do not require a down payment unless there is insufficient entitlement or the loan size exceeds the VA loan limits. Allowable Closing Costs Veteran may pay any of the following reasonable closing costs and fee: 1% origination fee Reasonable discount points if they are used to buy down the interest rate VA appraisal fee VA compliance inspector fee if required by the NOV (Notice of Value) Recording Fees

5 Taxes and stamps Credit report fees Pre-paid items Insurance (hazard and flood when required) Flood Cert. Well and Septic inspection fees Survey, if required by lender or veteran, except on condominiums Title Insurance, title examination, title endorsement, title policy, title search Environment protection lien endorsement VA funding fee MERS Fee Non-allowable borrower paid closing costs The veteran may NOT pay any of the fees listed below, but the seller or lender may pay the non-allowable fees. However, if no origination fee is charged, the Veteran may pay non allowable costs up to 1% of the purchase price. The Veteran may also pay a combination of non-allowable fees and an origination fee as long as it does not exceed 1% of the purchase price: Attorney fees other than title commitments Lender appraisals or appraisal review Lender s inspections not required on the appraisal/nov Loan closing or settlement fees Doc prep, underwriting, loan application, admin, or processing fees Assignment fees Photographs Interest rate locks fees Notary fees Escrow fees Commitment fees Fees charged by third parties regardless of affiliation with lender Tax service fees The veteran may never pay any of the following fees or charges, regardless of whether an origination fee was paid: Termite inspection on a purchase Attorney fee VA inspection fees for builders

6 Any portion of the seller s lien or short sale fee Any cost of repairs Eligible Borrowers: Veterans and active duty personnel. Joint loans with a Veteran and their spouse are allowed; however, the Veteran must be the primary borrower regardless of income. Joint loans made to two veterans not married must be sent to VA for prior approval. Eligible for Government Financing: A clear CAIVR number will be required for all borrowers on all transactions. Employment/Income: Standard Documentation: All borrowers must be on their job a minimum of 30 days and have a paystub that reflects a minimum of 30 days earnings documented in loan file prior to loan closing. Income documentation will be determined by AUS system on Approve/Eligible transactions. Manually downgraded and refer/caution transactions will require 2yrs tax returns and 2yrs W 2s along with paystubs covering a 30 day period. A verbal verification of employment will be conducted 48 hours prior to closing on all loans. A 4506T will be executed for the most recent two years on all borrowers. Current Employment less than 12 months: Current employment less than 12 months is usually not considered stable and reliable. The following must be evaluated: Employer s written statement of the probability of continued employment.

7 Applicant s training and/or education related to the duties of the current position. This generally applies to skilled positions such as nurses, medical technicians, lawyers, paralegals, computer systems analysts, etc. Active-Duty Military Income: Copy of Leave and Earnings statement required. ETS (Expiration of Term of Service) date must be at least 12 months after loan closing. If ETS date is within 12 months of closing date, one of the following is required: Documentation that active duty service personnel has re-enlisted or extended period of active duty beyond 12 months after closing. A written statement from active-duty service personnel that he or she intends to re-enlist or commanding officer stating active-duty service personnel is eligible to re-enlist and commanding officer has no reason believe re-enlistment will not be granted. Evidence of a valid offer of local civilian employment following release from active duty. If the ETS field on the Leave and Earnings reflects 9999, evidence of 12 months remaining enlistment must be obtained from the veteran s commanding officer. Leave and earnings statements for officers will not have a date in the ETS field. The ETS field will be blank or contain XXXX. No documentation of remaining length of service is required. Entitlement: The Veteran s available entitlement is the amount of the loan VA will guarantee. Secondary Market investors require at least a 25% guaranty. If the amount of the Veteran s entitlement does not equal 25% of the loan amount for guaranty, a combination of the remaining entitlement plus existing equity (refinance transaction) or down payment (purchase) may be used to meet the requirement. All veterans receive $36,000 basic entitlement which provides 100% financing on loan amounts < $144,000. The Certificate of Eligibility is required to

8 document the Veteran still has the full entitlement. If the Veteran has a previous outstanding VA loan, the basic entitlement may be less than $36,000. Additional or Bonus entitlement is allowed on loan transactions greater than $144,000. The additional entitlement is calculated using the following formula. Loan Amount X.25 -$36,000= bonus entitlement. The bonus entitlement can be added to the remaining basic entitlement (example on 417,000 loan amount: $417,000 x.25 minus $36,000 = 68,250 (bonus entitlement) plus remaining basic entitlement of $36,000 = $104,250 which would cover the 25% guaranty). Bonus entitlement may be used on loan amounts greater than $144,000 even when there is no basic entitlement remaining; however, bonus entitlement cannot be used on loan amounts less than $144,000 in any situation. Escrows: Funding Fee: Required on all transactions. A funding fee is charged on VA loans unless the Veteran is verified to be exempt from the fee. The exemption should be documented on the Certificate of Eligibility or with a VA Form The following are exempt from the funding fee: Veterans receiving VA disability compensation of 10%+ Surviving spouse receiving survivor s benefits with a Code 06 Military retirees that have been rated as disabled by VA and opted to receive military disability pay in lieu of VA compensation The funding fee or a portion thereof may be financed as long as the total loan amount does not exceed the maximum loan limit.

9 Purchase Type of Veteran Down Payment First-Time Use% Subsequent Use% None to 5% 2.15% 3.30% Regular Military 5% to <10% 1.50% 1.50% >10% 1.25% 1.25% None to 5% 2.40% 3.30% Reserves/National 5% to <10% 1.75% 1.75% Guard >10% 1.50% 1.50% Cash-Out Refinances Type of Veteran First-Time Use% Subsequent Use% Regular Military 2.15% 3.30% Reserves/National Guard 2.40% 3.30% Hazard Insurance: Hazard policy deductibles are not to exceed 1%. IRRRL Refinance: IRRRL refinance guidelines will be addressed in a separate program description. Any reference to refinance guides in this description is referring to Cash-out refinances. Maximum Loan Amount and LTV: Primary Residence Transaction Property Type Loan Amount Max LTV Purchase 1-4 Unit, Condo VA county limit or $729, * whichever is less.* Cash-Out Refinance 1 Unit and Condo VA county limit or $729,750 whichever is less.* 90

10 *Secondary Market (Ginnie Mae) investors require VA guaranty must be at least 25% of gross loan amount including the funding fee. Multiple Properties Ownership: Borrowers may own up to 4 total properties including the subject. This condition applies to all properties even if owned free and clear. Borrowers owning a home secured by a VA mortgage may purchase another principal residence without disposing the present property. However, there must be sufficient remaining entitlement to meet the 25% guaranty requirement. The borrower must qualify with outstanding debt. Non-Occupant Co-Borrower: Non occupant co-borrowers are not allowed. Occupancy: Primary residence only. Borrowers must occupy property within 60 days of closing. Principal Residence Conversion: If the borrower is converting a current principal residence to investment property, the following conditions will apply: Both the current and proposed monthly housing expenses must be used for qualifying. Rental income may not be used to offset mortgage payment. Evidence of cash reserves totaling 3 months PITI for both properties must be provided. Exceptions to the above guidelines may be considered on a case by case basis if it is determined by the underwriter that the use of rental income meets VA guidelines and the following conditions can be met: The file must contain an executed one year lease and the evidence of the receipt/deposit of the first month rent/and or security deposit paid to the homeowner. Verification of the stability of the local rental market confirming that there is no indication that the property will be difficult to rent.

11 Evidence of cash reserves for the subject property totaling 3 months PITI. Rental income (75% of gross rent from lease) is only used to offset the mortgage payment. Additional positive rental income many not are used as effective income. Property Flipping: The seller must have owned the property for at least 30 days and be the current owner of record. The sales contract and loan application cannot be dated prior to the 31 st day. If the value has increased more than 20% from the previous sales price, documentation will be required to substantiate the increase. Property Requirements: The following documents and/or inspections will be required as determined by the appraisal and age of the property. New/Never occupied (less than year): VA Builders Warranty (VA Form ) or Builder s 10yr Warranty Certificate of Occupancy Wood infestation report/soil Treatment Guarantee (HUD,NPCA, or NPMA 99A & B) Local Health Authority Approval of individual water supply and/or sewage disposal system (if applicable) Certification of VA Builder approval. Veteran Certification as to Property Inspections (based on 1 year or 10 year warranty) Existing (Previously occupied or New over 1 year old evidenced by CO) Well Test and/or Septic Inspection by local authority or acceptable third party as required by appraiser or sales contract. Appraisal certification if public water/sewer is available. Connection must be made if available.

12 Wood infestation report/termite letter required on all transactions including refinances. Property Type: Eligible properties include single family attached and detached, 2 to 4 units on purchase transactions, and VA approved condos. Ineligible properties include manufactured homes, condo-hotels, leaseholds, log homes, mixed use, unique properties and working farms. Qualifying Ratios: Maximum DTI IS 55% regardless of AUS findings. For manually underwritten loans including those downgraded by the underwriter, the maximum qualifying ratio is 41%. The ratio may only be exceeded if there are verifiable compensating factors and the verified residual income is at least 120% of the required amount. Non-taxable income may be grossed up for debt ratio qualifying purposes only. The gross-up percentage that may be used is based on the Veteran s tax bracket. Generally, 115% may be used with no further documentation. Income cannot be grossed up in order to meet the required residual amount. Real Estate Commission: Real estate commission is limited to a total of 8%. Refinances: With the exception of IRRRL transactions, all other VA refinances are considered cash-out refinances regardless of any cash received by the Veteran at closing. VA to VA cash out refinances must reflect true cash out to borrower and must have acknowledgement from Veteran he is aware of the higher funding fee assessed on cash out transactions compared to VA IRRRL. There is no seasoning requirement on VA Cash-out refinances; the LTV is based on the current appraised value.

13 In certain situations, Veterans may be eligible for refinancing when there is a short pay-off. Borrowers must be current on the mortgage and meet the following requirements: 0 x 30 on mortgage in last 12 months Demonstrate there is insufficient equity in the home based on current appraised value OR verify a reduction in income that affects the borrower s capacity to repay the existing debt against the property The existing servicer may not execute a subordinate or unsecured lien for the difference between existing balance and short payoff Copy of written agreement between Veteran and lender approving the principal reduction Properties currently listed are not eligible for refinancing. If the listing was withdrawn or expired 1 day prior to application, the property is eligible for refinancing. Cash out refinances on recently listed properties will be limited to 70% of the lesser of the last list price or current value unless a minimum of 6 months has passed from the withdrawal or expiration date. A copy of the withdrawn/expired listing will be required. Re-Negotiated Sales Contracts: BSM will not accept re-negotiated sales contracts that increase the sales price after the original appraisal has been completed if: The appraised value is higher than the contracted sales provided to the appraiser, AND The new purchase agreement and/or addendum used to modify the sales price is dated after the appraisal is received, AND The only change to the purchase agreement is an increase to sale price. If the purchase agreement is re-negotiated following the completion of the appraisal, the loan to value will be based on the lower of the original purchase price or the appraised value, UNLESS: Re-negotiation of only seller paid closing costs and/or pre-paids when seller paid closing costs/pre-paids are common and customary for the market and supported by the comparable, OR An amended sales contract for new construction is obtained due to improvements that have been made that impact the tangible value of

14 the property. In the event of such changes, an updated appraisal must be obtained to verify the value of the modifications Reserves: Not required on loans amounts less or equal to $417,000. Loan amounts over $417,000 require 6 months reserves. Residual Income Requirements: Residual Income is the remaining monthly income after all monthly debts are paid. Non-taxable income may not be grossed up to meet this requirement. Monthly maintenance and utility fees must be deducted as monthly debt for the residual income calculation. The cost of these items is calculated at $.14/square foot of the subject property. All members of the household must be considered when determining family size. This includes the veteran s spouse (if not a borrower) and any individuals that depend on the veteran for support (fiancé, children, other adults without income sources, etc.). The residual income varies by region and by loan amount. The residual income may be reduced by 5% for active duty veterans. Table of Residual Incomes by Region for Loan Amounts of $79,999 and below Family Size Northeast Midwest South West 1 $390 $382 $382 $425 2 $654 $641 $641 $713 3 $788 $772 $772 $859 4 $888 $868 $868 $967 5 $921 $902 $902 $1004 Over 5 Add $75 for each additional member up to a family of seven Table of Residual Incomes by Region for Loan Amounts of $80,000 and above Family Size Northeast Midwest South West 1 $450 $441 $441 $491

15 2 $755 $738 $738 $823 3 $909 $889 $889 $990 4 $1,025 $1,003 $1,003 $1,117 5 $1,062 $1,039 $1,039 $1,158 Over 5 Add $80 for each additional member up to a family of seven Northeast Midwest South West Key to Geographic Regions Used in Preceding Table Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Vermont Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, Wisconsin Alabama, Arkansas, Delaware, DC, Florida, Georgia, Kentucky, Louisiana, Maryland, Mississippi, North Carolina, Oklahoma, South Carolina, Tennessee, Texas, Virginia, West Virginia Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington, Wyoming Seller Concessions: Termite Letter: Title Commitments: Seller may pay for all closing costs and bona fide discount points. Additionally, the seller may contribute up to 4% concessions. Concessions include items such as the Funding fee and pre-paid escrows. Required on all Cash-Out Transactions Full commitment with 24 month chain of title will be required. Seller name on the contract must match owner of record, as of the date of the buyer s offer. Any discrepancy may require additional documentation. Properties held in corporation names, LLC s, and Relocation companies will require documentation to show authorized signor for contract and closing. Underwriting: All loans must be scored through automated underwriting system (DU). Loans receiving Refer/Caution will be manually underwritten to BSM guides. Please refer to VA handbook for any issues not addressed in this description at the VA Web site, 17 BankSouth Mortgage VA Guidelines