Quick Reference Program Summary. The following is an outline of the underwriting and closing requirements of New Hampshire Housing.

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1 Quick Reference Program Summary The following is an outline of the underwriting and closing requirements of New Hampshire Housing. Specific Program Rules are attached to this reference. A reservation cannot be entered until the application and the Purchase and Sales Agreement have been signed. l. Interest Rate The interest rate for loans made under the Single Family Mortgage Program will be established daily. Rate changes will be published on our website at 2. Term: 30 years 3. Reservations: Interest rates will be locked in at time of reservation. If the borrower changes to another program, after the initial reservation is confirmed with a New Hampshire number, the program rate will be the rate on the date of the original reservation. 4. Payments: Mortgage payments are due on the first of each month. 5. Penalties: There are no prepayment penalties. 1

2 6. Funding and Loan Submission: Loans which are submitted with full documentation required for Authority purchase within 15 calendar days of the loan closing, as specified under the current Mortgage Loan Purchase Agreement (MLPA), will be funded at the premium fee. This fee is intended to provide participating lenders with increased resources to assist you and your origination staff in marketing New Hampshire Housing programs and serving eligible homebuyers. Loans that are submitted for purchase subsequent to the 15-day delivery deadline (or which are otherwise submitted in a form which does not meet Authority requirements) will be purchased subject to a reduced fee. This recognizes that late delivery of closed loans creates financial and administrative burdens for New Hampshire Housing. Please note that the Authority reserves the right to refuse to purchase any loan submitted more than 60 days after the closing date. New Hampshire Housing encourages lenders to review processing and transmittal policies to minimize the number of loans that will be subject to reduced fees. We will provide you with formal reports on your institution s success in meeting the delivery requirements outlined in the MLPA. Calendar Days from Loan Closing* To Receipt by NHHFA of Loan Ready for Purchase** Loan Acquisition Fee (as % of Loan Amount) (1.00)*** * The Authority s determination of Calendar Days from Loan Closing is based on 15 actual days after closing. ( i.e. If a loan closes the first day of the month, the loan must be in the Authority s hands by the 16 th of the month.) ** A loan ready for purchase means a loan delivered in the format specified in the Authority s rules and including all documents as detailed in the Stacking List. *** The Authority in its sole discretion may elect to purchase a loan delivered more than 60 days after closing but reserves the right to charge the lender a penalty of up to 1% of the mortgage amount. All mortgage loans submitted must the endorsement on the back of the Note in accordance with Section 5(D) of the MLPA as follows: Payable without recourse to the order of the New Hampshire Housing Finance Authority, except as provided in the Mortgage Loan Purchase Agreement between the endorser of this note and said Authority 2

3 7. Submission of Loans: The original lender s loan file with all loan documents prepared in an order consistent with the New Hampshire Housing Stacking List should be submitted. This should include only the documentation required on that list. 8. Non-Assumable: New Hampshire Housing mortgage loans are non-assumable. 9. Income: Gross household income is determined by including all sources of income. BE CAREFUL the insurer you choose may not use all sources of income. Borrower(s) must qualify both for Income Eligibility and Income Qualification requirements. 10. Assets: Liquid assets include cash, savings accounts, stocks, bonds, gift funds, and trust funds. Does not include pension funds, i.e., IRA's. There is no asset limitation. 11. Ratios: Our guidelines are 33.0% housing ratio, 50% total debt ratio. Buy downs must be qualified with MI, FHA, RD, or VA guidelines. Without insurance they must qualify using 28%/ 36%, or as approved by New Hampshire Housing. Minimum allowable housing ratio is 20%, unless posted differently by the Authority. 12. RD, FHA and VA loans are acceptable to New Hampshire Housing. Borrower(s) must qualify under both program rules. Be careful when combining to use the stricter of the two requirements. 13. Maximum loan-to-value: 1-4 Units 97.0% Subject to Insurer Condos 97.0% Subject to Insurer Manufactured Housing 97.0% Subject to Insurer FHA Determined by FHA VA 100.0% (if using grant must put in 1%) RD 100.0% Must contribute at least 1% Plus Guarantee Fee (We base loan off the lower of the appraisal amount or purchase price.) MI, RD, and FHA insurance premiums may be financed with the mortgage loan. If the VA funding fee is financed, the fee need not be added to the total acquisition cost of the dwelling. APPROVAL BY GOVERNMENT AGENCIES OR PRIVATE MORTGAGE INSURANCE DOES NOT GUARANTEE APPROVAL AND PURCHASE BY NEW HAMPSHIRE HOUSING. 3

4 14. Escrow Requirements: Real Estate taxes, Homeowners Insurance, Private Mortgage Insurance, Flood Insurance and FHA MIP, if applicable. 15. Type of Ownership: Fee Simple - first lien on property. 16. Occupancy: All loans must be owner occupied at all times. Borrowers must intend to occupy the housing as a principal residence within 60 days from date of closing on all loans 17. Eligible Properties: All housing must be permanently affixed to land; stilts, piers, jacks or cement blocks on piers are not considered permanent foundations. (Or as outlined under housing type) All dwelling units must have at least 1 bedroom evidenced on the appraisal. Any property that is situated on a private road will need a recorded road maintenance agreement Single Family Home means a residence containing: One dwelling unit occupied as a principal residence by the mortgagor. 2-4 Family: One unit must be owner-occupied for life of loan. In non-targeted area must have been occupied as a residence at least five (5) years prior to mortgage loan. Newly constructed two-family housing is eligible for purchase in targeted areas only. No PITI reserves are required for one and two unit properties regardless of LTV. 3-4 family must have three months PITI reserves. Reserves do not have to be escrowed (FHA, VA, RD loans must satisfy governmental agency requirements). 75% of gross monthly rental income is added to Borrower(s) income to qualify and cannot exceed program income limits. If combining with FHA you can use 85% which also needs to be added to income and can not exceed our limits. All two to four dwelling units must consist of a single unit structure on the mortgaged premises. Condominiums Must be approved by private mortgage insurance, and/or FHA, VA, RD as well as New Hampshire Housing. Lenders must check with New Hampshire Housing for availability when application is taken. Any condominium that was originally a conversion or currently being converted will need prior approval by New Hampshire Housing. All units must have separate utilities to include heat, water, sewer and electric. 4

5 New Hampshire Housing will finance a maximum of 33% of the completed units or 50 units; whichever is lower, in new projects. New Hampshire Housing will finance a maximum of 50% of the completed units or 50 units; whichever is lower, in existing projects. 25% of units planned or approved must be complete prior to the purchase of any units by New Hampshire Housing. New Hampshire Housing will finance in a new project with no more than 30% investor concentration. Maximum of 40% investor in a seasoned project. New Hampshire Housing, in its sole discretion, may allow a higher investor ratio in a seasoned project. Association budget should not have in excess of 5% in delinquencies. If association fee delinquencies exceed 5%, the association must submit evidence of forbearance on each of the delinquent unit owners, together with the forbearance agreement and history of payments for each unit owner. Condex Approval New Hampshire Housing will finance one of the two units in a condex. These units must have separate utilities, if they utilize a shared well and or septic system they would not be eligible for our programs. The Lender must submit the following documents: 1. Arbitration Agreement 2. Declarations and Bylaws (if applicable) 3. Certification of Insurances, with closing package 4. Appraisal information as required by New Hampshire Housing 5. Must be able to be insured (FHA/VA/RD) Planned Unit Development (PUD) Prior to purchase of any mortgage loan, secured in part by Common Elements, the financial institution shall certify to New Hampshire Housing that: 1. The written agreement for the common elements is acceptable to the financial institution. 2. The PUD plan, or other property description, has been approved for mortgage insurance or guarantor. 3. All common elements are insured under an all-risk hazard insurance policy, a liability insurance policy, and if applicable a flood insurance policy. New Hampshire Housing shall be covered as the mortgagee of the dwelling securing the mortgage loan. 4. In a new PUD, for every New Hampshire Housing financed loan, there should be an equal number of homes financed by other lenders. 5

6 Manufactured Housing Manufactured after June 15, 1976 in accordance with the National Manufactured Housing Construction and Safety Standards Act. Lender must obtain an appraisal report that confirms the existence of a HUD structural certification label and a HUD data plate on the Manufactured Housing. The Housing must have a permanent support system that meets all applicable State and local laws. If the Housing is newly placed, it must be permanently attached to or anchored to land in accordance with the manufacturer s specifications. Must be permanently affixed to land owned or to be purchased by the borrower, or located in a New Hampshire Housing approved cooperative. For existing Housing: o All wheels, axles, and hitches on the housing must be removed. o Compatible exterior skirting or covering material that extends from the bottom of the housing to the ground must be installed around the perimeter to protect water pipes and exposed undercarriage from air infiltration. o If the floor of the Manufactured Housing is not insulated, the skirting must be insulated. o The unit must be connected to utilities. o The Appraiser will need to indicate the type of foundation on the Manufactured Housing Supplemental Appraiser s Report. o Or the foundation needs to meet FHA guidelines. If the Manufactured Housing is located in a New Hampshire Housing approved cooperative, the Borrower must provide a cooperative occupancy or lease agreement. Appraisal must be made on Manufactured Appraisal Form. A final inspection must be performed on newly placed Manufactured Housing. New Hampshire Housing Approved Cooperatives: Financing of Manufactured Housing located in a manufactured housing cooperative shall be at the sole discretion of New Hampshire Housing, and the manufactured housing cooperative in which the unit is located or will be located must be reviewed and approved by New Hampshire Housing. Approval will be subject to the following: Review of organizational and financial status documents of the Cooperative Housing Association. Association fee delinquencies in the latest budget should be less than 5%. Loans financed by New Hampshire Housing must not total more than 50% of the units in the manufactured housing cooperative. Investor ratios in the cooperative must not exceed 20%. 6

7 18. Three year requirement: Eligible borrower(s) cannot have any prior ownership interest in a principal residence for the previous 3 years unless purchasing in a targeted area. This includes the prior home ownership of a manufactured home regardless of how the home was attached to the land. In targeted areas the previous home must be sold and closed prior to closing on the New Hampshire Housing loan. The Borrower(s) must provide a copy of the settlement statement. To verify non-ownership the Authority requires 3 years SIGNED federal income tax returns from all borrowers applying for a loan. In such cases where a person who is married but does not wish to include his/her spouse as a Co-Borrower, the Borrower and spouse must submit sufficient information to determine that both are eligible under the first time buyer rule. 19. Mortgage Insurance Requirements: For all loans insured by a qualified private mortgage insurer, the maximum uninsured value of the mortgage loan may not exceed sixty-eight percent (68.0%) of the lesser of the sales price or the appraised value of the mortgaged premises as determined by an appraiser and on which a down payment of at least three percent (3.0%) has been made. Exceptions are VA, RD and FHA insured mortgages. When the loan is submitted for purchase, all necessary certificates must be included in the file. If the certificates are not included New Hampshire Housing will be unable to purchase the loan. The Homeowners Protection Act of 1998 became effective July 29, 1999 and New Hampshire Housing will follow this policy % LTV will require mortgage insurance approval and will NOT need to be reviewed for prior approval by New Hampshire Housing. Declining Markets: New Hampshire Housing does not have a declining market policy. However the mortgage insurance company you choose may have. The insurance coverage is determined as per the insurer used. 20. Prior Approval: On occasion a lender might want a loan to be reviewed for specific reasons prior to closing. This loan may be submitted with a cover letter advising of the specific problem to be reviewed and including the New Hampshire Housing contact person who gave the authorization to submit the prior approval. Any loan(s) we take without mortgage insurance will need to be prior approved. 7

8 21. Calculating Acquisition Cost: The Lender shall assist the Borrower(s) in the completion of the calculations as required on the Borrower(s) Affidavit. The Borrower(s) Affidavit and Seller(s) Affidavit must be submitted with the mortgage loan. The Seller shall also certify as to the Acquisition Cost of the housing in the Seller(s) Affidavit. 22. New Construction on borrower owned land: If an existing lien on the residence and/or the land has an original term of greater than 24 months, the Applicant does not satisfy the New Mortgage Requirement and is therefore ineligible unless one of the following conditions applies: The value of the original balance of the land loan is paid off with assets other than the proceeds of the New Hampshire Housing mortgage loan; The value of the original balance of the land loan is subordinated and not financed with the proceeds of the New Hampshire Housing mortgage loan; If the lien on the land has been paid off through the proceeds of a construction loan, but the original land loan had an original term of greater than 24 months, the Applicant does not satisfy the New Mortgage Requirement. If the lien is on the residence and the land, but it qualifies as a construction loan or interim financing (an original term of 24 months or less), the Applicant satisfies the New Mortgage Requirement and the financing may be refinanced with the proceeds of the mortgage loan assuming all other program requirements have been satisfied. In the case of a mortgage loan made to refinance a loan for the construction of housing, New Hampshire Housing will not make such mortgage loan until it has determined that such construction has been satisfactorily completed according to plans and specifications approved by New Hampshire Housing or the lending Institution s engineer or appraiser. Interim financing is based on the date of the closing of the existing lien to the date of closing of the New Hampshire Housing loan. Please Note: The cost of land that has been lien free for at least two years as of the date of construction does not need to be added to the Acquisition Cost. The value of land, which was a gift to the Borrower, should not be included in the Acquisition Cost. 8

9 23. BUY DOWNS: New Hampshire Housing will purchase a mortgage loan where a buyer, seller or any other party (not New Hampshire Housing s Cash Assistant funds) agrees to buy down the interest rate on such mortgage loan as an inducement to an Eligible Borrower(s) to purchase a residence, upon approval by the qualified Mortgage Insurer, if any, and in accordance with the following conditions: For mortgage loans with a loan-to-value ratio greater than 90.0%, the amount of the buy down may not exceed 3.0% of the appraised value of the housing or the purchase price whichever is lower. For mortgage loans with a loan-to-value ratio less than or equal to 90.0%, the amount of the buy down may not exceed 6.0% of the appraised value of the housing or the purchase price, whichever is lower. The terms of the buy down must be contained in a written agreement between the third party, if applicable and the Eligible Borrower(s). The mortgage note will make no reference to the buy down and the interest rate and monthly payments provided for in the mortgage loan will not take the buy down into account; The third party will deposit moneys sufficient to effectuate the buy down into an account maintained by New Hampshire Housing in accordance with the provisions of HFA 309:10, with provision for scheduled monthly releases to supplement the Eligible Borrower(s) monthly payments. The buydown agreement must conform to the following: The increase in the Eligible Borrower(s) principal and interest payment cannot exceed the greater of 7.5% per year or the amount caused by a 1% per year increase in the effective interest rate. The payment may only be increased annually; The Eligible Borrower(s) must agree that the buy down funds in the account will be automatically applied each month to reduce the monthly interest amount to the extent provided under the buy down plan for the term of the subsidy; All parties to the buy down agreement must relinquish all right, title and interest to the buy down funds, except for application of such funds to payment of the mortgage loan according to the buy down schedule; In the event of default or prepayment of the mortgage loan, New Hampshire Housing will apply the remainder of funds being held to reduce the unpaid principal balance of the mortgage loan; The maximum housing debt ratio for a buydown mortgage will not exceed 28.0% and the total debt ratio will not exceed 36.0%, unless the loan is insured or guaranteed by a government agency or private mortgage insurance. The term may not be less than one year nor more than three years. Moneys in such account will not be used to pay any past due payments of the mortgagor on the mortgage loan. The Lending Institution's documentation on the loan that is subject to the buy down must clearly reflect the calculation of the total cost of the buy down. 9

10 24. Closing costs are limited to the following: All actual out of pocket expenses usual and customary to loan closing. The maximum fee allowed for Box 1 of the Good Faith Estimate is $ this covers processing, underwriting, document preparation. Tax service fee is required (when permitted) FHA Commitment Fee, whatever FHA permits. Flood insurance life of loan certification is required on all loans. 25. Child Care Expenses are not counted as debt except for VA loans where it is a requirement. 26. Co-Signer: Cosigners are not permitted. 27. Credit Standards: Minimum credit score is 620. Collections - $250 per item to a max of $1,000. Medical are on a case by case basis with New Hampshire Housing approval. Credit reports must be dated no more than 120 days from date of application to closing (180 days for new construction). If the document exceeds 120 (180) days an updated soft copy of the borrower(s) credit report must be submitted. Credit reports should verify the Applicant s current employment, income and debts listed on the application. The report should list all undisclosed debts in addition to any actions discovered by a search of the public records. If an Applicant has declared bankruptcy, a satisfactory explanation must be furnished. The applicant must have re-established credit for a period of two years since the bankruptcy discharge, with no history of late payments. FORECLOSURE: (see HFA: (g)) Debt: Revolving debt: o Must be used at the greater of $20 or 5% of the unpaid balance to qualify, or minimum payment per statement. Installment debt: o Any loans with 10 or more payments must be included. o Student loans must be in deferment for at least 12 months in order to not be included in the debt. Written verification will be needed. Child Support & Alimony: o Support payments are considered as a debt obligation of the applicant. Such payments are not deducted from the applicant s gross monthly income prior to calculating the payment and debt obligations. 10

11 28. Down payment: Minimum borrower contribution for every New Hampshire Housing loan, regardless of program, is 1% of their own funds, not a gift. The only current exception to this policy is a zero percent VA loan. This amount must be verified as saved by the borrower(s). Large deposits into a savings account require verification of source of funds. We require copy of deposit check and evidence it has cleared account prior to closing. At least 3% of the sales price must be part of the transaction, unless insured by RD, FHA, or VA. Gift Funds: When using gift funds of either land or money, a gift letter and evidence of receipt is required, copy of the cancelled check and/ or proof of deposit. Seller Contribution: We will accept whatever is the insurers policy. Rent / Lease Option to purchase: The portion of a rental payment that exceeds the market rent can be applied to the downpayment if there is a valid rental/purchase agreement in effect. The original term of the lease must have been at least 12 months. Please Note: Dealer contributions on new manufactured housing are not an acceptable source of down payment. 29. Secondary Financing: Is allowed on a case-by-case basis. The terms and conditions of the secondary financing must have prior written approval by New Hampshire Housing and prove to be beneficial to the borrower. 30. Employment: Must be verified on all borrowers for the prior two-year period with any unemployed periods satisfactorily explained. We will require paystubs for the most recent 30 day period and they must include year to date earnings. If a borrower has terminated a position in the prior two years it must be verified. Termination of employment prior to 60 days of application must be explained in writing. Borrower(s) Self-Employed: o Two full years (at least 2 tax filings) will be eligible. P&L or Selfemployment Affidavit will be required. If there is a change indicated on the affidavit we need a current P&L. o This also applies for people who are self-employed on a part time basis. Income from second jobs: will be utilized with verification as long as 11

12 there has been at least a two (2) year history. Income from Overtime, Commissions, or Self-Employment: Will be used to qualify by averaging over a two year period. Child Support & Alimony: can be used provided they will continue for at least three (3) years. 31. Assets: If assets remaining after closing exceed $5, calculate imputed income at the current annual rate used by banks and add to income, unless proof of dividends and interest is shown. 32. Affidavits: All affidavits must be completed and signed before submitting to New Hampshire Housing. 33. Recapture: A recapture provision is required on all mortgage loans. The lender is responsible for advising the borrower(s) of this provision. Please Note: All Mortgagors must execute the Mortgage and the Mortgage Note.** *Refer to Eligible Borrower in the Single Family Mortgage Program Rules. *Refer to Mortgage Loan Purchase Agreement Section 3 paragraph D. 12