Terms 30 Year Terms 15 Year Terms Maximum LTV/CLTV LTV/CLTV Score LTV/CLTV Score Non-Credit Qualifying N/A N/A Credit Qualifying 97.75% 97.75% Applies to Case Numbers assigned on or after January 26, 2015 for base loan amounts <= $625,000.00 LTV UFMIP Annual LTV UFMIP Annual > 95% 1.75% 0.85% > 90% 1.75% 0.70% Mortgage Insurance Factors 95% 1.75% 0.80% 78% 1.75% 0.45% Applies to Case Numbers assigned on or after June 11, 2013 for Streamline Refinance loans with Endorsements Prior to May 31, 2009 only. LTV UFMIP Annual Score LTV UFMIP Annual Score Appraisal Requirements Arms All 0.01% 0.55% All 0.01% 0.55% Non-Credit-Qualifying Streamline Refinances: No appraisal or AVM required. Value determined by original value shown on the FHA Netting Authorization. Credit-Qualifying Streamline Refinances: Must have a full 1004 appraisal if closing costs are being rolled into the loan amount. LTV/CLTV for program requirements and value entered into Encompass should be based on the original value as reflected on the MIP refinance netting form. FHA ARMS are based off of the 1yr T-Bill index. 5/1 ARMS are qualified at the note rate. Margin = 2.00% Caps: 5/1 ARM: 1/1/5 (1% initial cap, 1% periodic cap, 5% lifetime cap). Large Deposits: Any large deposit that is not consistent with the applicant's employment, or earning and savings profile must be explained and sourced. Even if the deposit in question is not required for cash to close or reserves. A large deposit can be a single deposit or multiple deposits over a period of time that in aggregate results in a large deposit. If the aggregate total of deposits during any calendar month, other than deposits for regular earnings, exceeds 15% of the applicant's gross qualifying monthly income, then the deposits must be sources and seasoned from an acceptable source. Any deposits less than 15% may require further investigation and documentation if deemed necessary by the underwriter. If the funds are deemed unacceptable or cannot be fully documented, they may be able to be backed out of the account balance with an acceptable letter regarding the source of the funds signed and dated by the borrower. If the funds are backed out, they would not be considered for funds to close or reserves. This decision is based on underwriter discretion after thoroughly reviewing assets and explanation. Assets Stocks, Bonds and Mutual Funds: Stocks, government bonds and mutual funds are an acceptable source for the down payment, closing costs and reserves. Must verify: The borrower s ownership of the account, and Value of the account at the time of liquidation, and The borrowers receipt of the funds. When using for reserves, funds do not need to be liquidated however only enter 70% of value. Retirement Accounts: 401K/IRA/SEP/Keogh accounts are an acceptable source for the down payment, closing costs and reserves. Must verify: The borrower s ownership of the account, and Value of the account at the time of liquidation, and The borrowers receipt of the funds. Document terms of withdrawal for IRA, SEP and Keogh accounts o Accounts that only allow withdraw upon termination of employment or death is not an acceptable source for down payment or reserves. When using for reserves, funds do not need to be liquidated however only enter 60% of value.
U.S. citizens. Permanent resident aliens, with proof of lawful permanent residence. Non-Permanent resident aliens with appropriate documentation. Ineligible Borrowers : Foreign Nationals; Borrowers with diplomatic immunity; Borrowers with no SS#. A borrower is eligible for a streamline refinance if; At least six months of regularly scheduled payments have been made on the loan being paid off; and Borrower Eligibility At least six months must have passed since the first payment due date of the loan being paid off; and At least 210 days have passed from closing/note date of the mortgage being refinanced. Must be a net tangible benefit to the borrower, defined as: A 5% reduction in PI and annual MIP or Condominiums Credit Derogatory Credit Borrower Additions or Deletions to the Title Student Loans: If the borrower resides in or the subject property is located in a community property state and only one spouse is the new loan, a credit report of the non-purchasing spouse must be pulled and all of the debts included in the qualifying ratios for the loan. The payment history is not factored into the loan decision and CAVIRS, LDP & GSA checks are not completed for the non-purchasing spouse. Chapter 13: No minimum time required, provided: One year of the pay-out period under the bankruptcy has elapsed, and The borrower's payment performance has been satisfactory and all required payments have been made on time, and The borrower has received written permission from bankruptcy court to enter into the mortgage transaction. 3 years elapsed since completion of Foreclosure, Deed in Lieu or Short Sale Collections: Refinancing from an ARM to a fixed rate mortgage (see chart on last page). Borrowers may only be deleted on full credit qualifying streamlines. Project Approval is not required for Streamline FHA-to-FHA transactions; however, if the condominium project has an ID number assigned to it then this information should be entered in FHA Connection when the FHA case number is requested. All borrowers on the loan must have a minimum of one credit score. Bankruptcies: Use the payment showing on the credit report; If no payment is showing on the credit report, documentation from loan servicer showing payment is required. If neither option above establishes a qualifying payment, then 5% of the outstanding balance will be used to generate a qualifying payment. Chapter 7 & 11: elapsed since the completion or discharge of Bankruptcy. Foreclosure/Deed in Lieu/Short Sale: o The wait period for short sales can be waived if all of the following conditions are met: The loan was current at the time of the short sale, and The loan was paid on time in the 12 months preceding the short sale, and All other installment debts were paid on time in the preceding 12 months. If the total outstanding balance for all borrowers is less than $2,000, a capacity analysis is not required to be performed. If the total outstanding balance for all borrowers is equal to or greater than $2,000 at time of underwrite, lender must perform a capacity analysis. Capacity analysis includes: - Payment in full of collection accounts, prior to or at closing, along with documentation of acceptable source of funds, - Borrower has an existing payment arrangement, provides proof of arrangement & payment included in DTI, or - 5% of the outstanding balance of each collection account is included as monthly payment in DTI. Collections of a non-purchasing spouse in a community property state are included in the cumulative balance. Judgments: Medical collections and charge offs are excluded. Judgments must be paid prior to or at closing.
Derogatory Credit Employment Verification Exclusionary List Disputed Accounts: - Disputed accounts with late payments in the last 24 months The following disputed non-derogatory accounts are not included in the $1,000 limit: Newly Employed: If the cumulative outstanding balance of disputed derogatory accounts are greater than or equal to $1,000, then the TOTAL Scorecard decision requires a manual downgrade if the disputed accounts contain derogatory information. Cumulative outstanding balance of disputed derogatory accounts less than $1,000: Manual downgrade NOT required. Disputed medical accounts, disputed derogatory accounts resulting from identity theft may be excluded from the $1,000 limit. Identity theft documentation must be provided. Disputed Derogatory Accounts defined as: - Disputed charge-off accounts, - Disputed collection accounts, and - Disputed accounts with $0 balance, - Disputed accounts with late payments 24 months or older, or - Disputed accounts that are current and paid as agreed. Salaried borrowers require a Verbal VOE Self Employed borrowers require verification of the business through a 3rd party source. Retirement and/or social security income requires the most recent bank statement or award letter HUD's CAIVRS must be checked and cleared The HUD Limited Denial of Partnership (LDP) list and the General Services Administration (GSA) lists must be reviewed for all loans, if any party to the transaction, including the borrower(s), is reflected on these lists, the loan is not eligible. A borrower who has less than a two-year employment history may have their income considered on a case by case basis as qualifying income if the borrower was either attending college or in a training program immediately prior to their current employment. Supporting documentation must be provided. Re-entering the Workforce: For a borrower who is re-entering the work force after a six month or greater gap and has less than a current two year employment history, the borrower s income may be allowed as qualifying income if the file contains documentation to support that the borrower has been at their current employer for a minimum of six months and evidence of previous employment history to cover two years. Employment by a Relative: Full documentation is required when a borrower employed by a family member or employed by a family-held business. The business accountant must verify that the borrower is not self-employed by indicating his or her percentage of interest in the business. The accountant must be a disinterested third party. All of the following income documentation is required: Most recent paystub documenting 30 days of income. Income Verification W-2 s covering the most recent. Complete signed individual federal tax returns for the most recent. Self Employment: If the borrower is newly hired, previous employment in the same or related field must be verified. Follow income documentation as required by DU. Additional documentation may be required if the underwriter deems it necessary to support the decision to use the income. Profit and loss with balance sheet required to 90 days past the last tax filing date. This is for trending purposes only and will not be used for determining the income. Tax Returns: When tax returns are needed, follow documentation as required by DU. When the most recent tax filing date has past and the borrowers filed an extension the following is required: Two years most recent returns that have been filed and signed. A copy of the filed extension request. A tax transcript reflecting No record of return filed for the most recent tax period. Evidence that any taxes owned have been paid.
4506-T: Signed and dated at application and closing, is required for all borrowers whose income is being used to qualify. Transcript General Requirements: Income Verification Income Documentation Required per DU Findings or an Underwriter YTD paystub YTD paystub and most recent year W-2 YTD paystub and most recent W-2 s Personal 1040 s for most recent year Personal 1040 s for most recent Personal 1040 s and business returns for most recent Number of Years Validated IRS 4506T Transcripts Required Loan Limits FHA mortgage limits for all areas are available at: https://entp.hug.gov/idapp/html/hicostlook.cfm. Current FHA mortgage limits may be exceeded on an FHA-to-FHA refinance. There must be a net tangible benefit as a result of the streamline refinance transaction, with or without an appraisal. Net Tangible benefit is defined as follows: From To Fixed Rate One-Year ARM Hybrid ARM Fixed Rate and MIP (new and MIP (new Loan Purpose One-Year ARM and MIP (new Hybrid ARM During Fixed Period and MIP (new and MIP (new Hybrid ARM During Fixed Adjustable Period and MIP (new A reduction in term is not considered a benefit and would require the loan to be underwritten/closed as a regular refinance. Manual Underwriting Reserves: 1 and 2 Unit Properties; Reserves must equal or exceed one mortgage payment. 3 and 4 Unit Properties; Reserves must equal or exceed three mortgage payments. (This is required for AUS loans as well, and is not new). Reserves must be the borrowers own funds and cannot come from cash out, gift funds or borrowed funds from any source. Ratios and Required Compensating Factors: Manually underwritten loans with ratios that exceed 31/43 will now be allowed providing the borrower(s) meet the required number of specific compensating factors as out lined below: Acceptable compensating factors are limited to the following: Verified cash reserves that equal or exceed three total monthly mortgage payments (one and two units) or that equal or exceed six total monthly mortgage payments (three and four units); New monthly mortgage payment is not more than $100 or 5% higher than previous monthly housing payment, whichever is less, and there is a documented twelve month housing payment history with no more than one 30 day late payment; and Verified and documented significant additional income that is not considered effective income. Residual income.** Ratios up to 37%/47% will be allowed when one of the first three compensating factors are met. Ratios up to 40%/50% will be allowed when two of the compensating factors are met.
Manual Underwriting Maximum Loan Amount Borrowers with No Monthly Debt: The maximum allowable qualifying ratios for borrowers with established credit lines who carry no discretionary debt (housing payment is the only account with an outstanding balance and borrower can document that revolving credit has been paid off in full monthly for at least the previous six months) are as follows: Ratios up to 40%/40% will be allowed. For borrowers meeting this criterion no other compensating factors are required. **Residual Income: FHA has modeled the calculation of residual income based on VA guidance. Residual income is calculated as follows: Calculate the total gross monthly income of all occupying borrowers. Deduct from gross monthly income the following items: State Income Taxes Federal Income Taxes Retirement of Social Security Proposed Total Monthly Fixed Payment Subtract the total deductions from the table above from the total gross monthly income of all occupying borrowers. The balance is residual income. The outstanding principal balance minus the applicable UFMIP refund plus up to 30 days interest on the old loan, plus the new UFMIP (may not include delinquent interest, late charges, or escrow shortages). Credit-Qualifying Streamline Refinances: The benefit of a full credit qualifying Streamline with an appraisal is the ability to include closing costs and prepaid items in the loan amount provided there is sufficient equity in the subject property. Closing costs and prepaid items can be rolled into the loan amount only on a full credit qualifying Streamline with an appraisal. The maximum loan amount is the lesser of: The outstanding principal balance minus the applicable UFMIP refund plus up to 30 days interest on the old loan (may not include delinquent interest, late charges, or escrow shortages), plus Closing costs, prepaid items to establish the escrow account and the new UFMIP that will be charged on the refinance. OR Residual Income, Deductions From Gross Monthly Income Estimated Maintenance and Utilities Calculated at $0.14 per square foot Job Related Expenses (e.g., child care, union dues) Non-Credit-Qualifying Streamline Refinances: 97.75% of the appraised value of the property plus the new UFMIP that will be charged on the refinance. Prepaid expenses may include hazard insurance premium deposits, monthly mortgage insurance premiums AND any real estate tax deposits needed to establish the escrow account. Discount points may NOT be included in the new mortgage. The borrower must have their own verified liquid assets to cover the cost of the discount points, along with any other financing costs not included in the new mortgage amount. Minimum Loan Amount Occupancy Property; Eligible Types Ratios Seasoning Requirements (FHA) $60,000.00 Primary Residence Only 1-4 Units. PUD - Detached or Attached. Condos - FHA Approved Condo's Ratios are not calculated for non-credit-qualifying streamline refinances. For Credit Qualifying streamline refinances, see manual underwriting section above. Loans with less than a 6 month payment history on the date of the FHA case number assignment are not eligible. The property must be self-sufficient (i.e., the maximum mortgage is limited so that the ratio of the monthly mortgage payment, divided by the monthly net rental income, does not exceed 100 percent). The mortgage calculations described below are in addition to the standard calculations. The monthly payment is the principal, interest, taxes, and insurance (PITI), including mortgage insurance, plus any homeowners' association dues, computed at the note rate. Three To Four Unit Properties Underwriting Method Net rental income is the appraiser's estimate of fair market rent from all units, including the unit chosen by the borrower for occupancy, less the appraiser's estimate for vacancies or the vacancy factor used by the jurisdictional HOC, whichever is greater. 90% of this value is used to offset debt. This calculation is used only to determine the maximum loan amount. Borrowers must still qualify for the mortgage based on income, credit, cash to close, and the projected rents received from the remaining units. The projected rent may only be considered as gross income for qualifying purposes; it may not be used to offset the monthly mortgage payment. The borrower must have reserves equivalent to three months' PITI after closing on purchase transactions. Reserves cannot be derived from a gift. Manual UW Only. See manual underwriting section above for more details for credit-qualifying streamline refinances.