Cash-out Refinance
– Borrower must have owned property for at least 6 months from date of purchase
– Pay off of subordinate lien(s) < 1 year seasoned
– Pay off of private financing which is seasoned at least 1 year from the subject note date and financing must require a minimum monthly payment of no less than interest only as evidenced by the promissory note
– Pay off of construction loan after building is completed and meets the following:
    1. The lot was acquired 12 or more months before the subject application date
    2. The LTV/CLTV is based on the lesser of 1) current appraised value and 2) total acquisition costs (sum of construction costs and the lower of sales price or current appraised value of the lot)
– Pay off a modified mortgage loan if: 1) the modification was not performed because the borrower was in a distressed situation, 2) the modification was initiated by lender/servicer, and there were 0x30 late payment in the past 24 months, 3) there were 0x30 late payment in the past 24 months
-Must meet Continuity of Obligation requirements
– No maximum cash-out limits 

Ineligible for Cash Out:
– Non-occupant co-borrower(s)
– A third (or more) refinance in less than 12 months
– Texas 50(a)(6) loans
– Power of Attorney (POA)
– Pay off of existing mortgage loan that had a borrower initiated modification

CREDIT
Minimum Credit Score
– Minimum credit score of 680 required for all borrowers, regardless of Automated Underwriting decision

Mortgage or Rental Rating
– No lates accepted in the last 24 months

Bankruptcy
– CH7, 11 or 13 Dismissal or discharge at least 7 years prior to subject mortgage loan application date

Foreclosure
– Foreclosure Sale (completion of foreclosure) at least 7 years prior to subject mortgage loan application date

Deed-in Lieu
Deed transferred to servicer at least 7 years prior to subject mortgage loan application date

Short Sale
Short sale completed at least 7 years prior to subject mortgage loan application date

Past Mortgage Modification (as loss mitigation action) on non-subject property
Permanent modification date at least 2 years prior to subject mortgage loan application.  Borrower(s) must not have been a party to a mortgage loan that was modified due to the inability to repay under the original terms within the last 2 years.

Credit Profile
– Minimum 2 scores are required for all borrowers
– A valid trade line is a trade line rated for 12 months with a 12 month payment history
– Trade lines must comply with credit history criteria
– Non-traditional credit is not allowed
– Authorized User accounts are not considered as acceptable trade lines
– Past due accounts must be brought current prior to closing
– A maximum of one 30 day (1 X 30) late payment allowed on revolving or installment (non-mortgage related) accounts in the last 24 months
– Borrower(s) must provide a satisfactory explanation for late payment on any revolving or installment account within the past 24 months
– Liabilities paid-off on or prior to closing: Pay off of installment debt to qualify is allowed
– Current or previous past due child support payments must provide evidence all past due payments have been made unless borrower is making payments according to a court approved plan. In this case, borrower must demonstrate payments are current according to the plan
– Judgments, collections, garnishments, charge-offs, liens and tax liens must be paid in full by or at closing

Credit Actions Not Permitted
– Rapid Re-score
– IRS tax re-payment plan may not remain open, must be paid off prior to closing and document on-time payment history during past 12 months
– Pay off of revolving debt to qualify is not allowed
– Pay down of revolving and/or installment debt to qualify is not allowed
– Consumer Credit Counseling 

INCOME
Qualifying Ratios
– Current guidelines refer to the Fannie Mae or Freddie Mac automated underwriting response
– Max debt-to-income 38% to 43%

Salaried | Hourly Borrowers
– Two-year employment history must be documented via the two most recent tax returns
– Previous two years W-2s
– Recent paystubs to illustrate earnings for the previous 30 days

Self-Employed Borrower
– Business must have been in existence for at least two years
– Personal signed individual tax returns as well as the corporate or partnership tax returns for the two most recent tax periods

Ineligible Income
– Trailing co-borrower income
– Capital Gains
– Subject investment properties with a negative cash flow are ineligible
– Stock options and restricted stock grants
– Retained earnings
– Any unverifiable source
– Income that is temporary or a one-time occurrence
– Education benefits
– Mortgage differential payments from an employer to subsidize an employee’s mortgage payments
– Asset Depletion

Reserves
– Six months of additional reserves are required for each additional property owned based on the actual PITIA on each 1-4 unit residential financed property. If the borrower owns additional property free and clear, calculate additional 6 months reserves based on taxes and insurance for each property. (Includes departure residence not sold prior to closing)

Properties Listed for Sale
– Primary residence only 
– The subject property must be taken off the market on or before the loan closing date and the borrower must confirm their intent to occupy the subject property

Student Loans
– Underwriting may use the payment on a current credit report or a recent statement for qualifying purposes
– Otherwise 0.5% of the outstanding loan balance reported on the credit report will be calculated to determine the monthly obligation

Rental Income
– Will be determined by the supplemental income/loss reported on the respective Schedule E from the two previous tax periods

2-4 Unit Properties
– Require 6 months PITIA in reserves if rental income is used to qualify

Non-Borrowing Spouse
– Credit report for must be pulled in community property states with individual debts being included in the DTI. This applies if the subject property is located in a community property state or if the borrower’s primary residence is in a community property state even though the subject property is not in a community property state.

Assets
– Checking and Savings Accounts: The two most recent, consecutive months’ statements for each account are required.
– Marketable Securities: The two most recent, consecutive months’ stock/securities account statements or the most recent  quarterly statement is required
– Retirement Accounts: Most recent retirement account statement covering a minimum two month period or most recent quarterly statement
– Custodial Account: The two most recent, consecutive months’ account statements or the most recent quarterly statement is required
– Business Funds:  the two most recent, consecutive months’ business bank statements. Two years personal and business tax returns are required
– Foreign Accounts: Assets held in a foreign bank must be transferred to a U.S. bank. Provide 2 months bank statements of the transferred assets from the foreign account
– Sale of Real Estate: 100% proceeds from sale
– Trust Funds: 100% of the amount accessible to borrower
– Life Insurance: 100% of cash value of life insurance policy
– US Savings Bonds: Provide signed/dated statement from financial institution listing bond serial numbers, date of maturity and face and redemption value of the bonds
– Large Deposits: Large deposits are defined as a single deposit that exceeds 50% of the total monthly qualifying income. Borrower must provide a written explanation along with acceptable documentation of the source of large deposit reflected on the bank statement

Continuity of Obligation
All refinance  transactions must meet one of the following continuity of obligation requirements:
– At least one borrower who on the existing mortgage is also a borrower on the new refinance transaction
– Borrower has been on title and residing in the property for at least 12 months and has either paid the mortgage for the recent 12 months or can demonstrate a relationship (e.g. relative, domestic partner) with the current obligor
– Loan being refinanced and the title to the subject property are in the name of natural person or a limited liability company (LLC) where the borrower is a member of the LLC prior to transfer. Note: transfer of ownership from a corporation to an individual does not meet these requirements
– Borrower recently inherited or was legally awarded the subject property through a court supervised transfer process
– The LTV/CLTV/HCLTV may not exceed 50% if the borrower cannot demonstrate continuity of obligation as required above and has been on title and residing in the property for more than 6 months but less than 12 months

Subordinate Financing
– Institutional financing ONLY up to the maximum LTV/CLTV/HCLTV
– Seller subordinate financing is ineligible (purchase transaction)
– Subordinate liens must be recorded and clearly subordinate to the first mortgage lien
– Full disclosure must be made on the existence of subordinate financing and re-payment terms
– Subordinate financing requires a regular monthly payment as follows: 1) a closed end Home Equity Loan (H.E. Loan) requires an amortizing P&I payment; if the H.E. loan has a balloon feature, the balloon term cannot be shorter than five (5) years from the note date, 2) a Home Equity Line of Credit (HELOC) requires a minimum payment of monthly interest due on the line balance; negative amortization is not allowed, and 3) Seller subordinate financing not allowed
– To calculate HCLTV ratio for subject subordinate lien, must be based on the maximum credit line for all HELOCs, if applicable and the unpaid principal balance for all close-end subordinate financing. If any subordinate financing is not showing on a credit report, the supporting documentation is required from the borrower or creditor
– HELOC payment is calculated as 1% of the maximum line amount or the payment per terms of the HELOC agreement on the maximum line amount
– Terms of the subordinate financing must be consistent with those offered in the market place at the time of origination of the second mortgage