Department of Housing and Urban Development (HUD)
The U.S. Department of Housing and Urban Development (HUD) oversees & regulates Fannie Mae, Freddie Mac, and Ginny Mae. HUD also sets permanent affordable housing goals, based on income and population diversity. These goals require that a certain percentage of the mortgages purchased by Fannie & Freddie help provide housing for low- and moderate-income families.

HUD’s mission is to increase homeownership, support community development and increase access to affordable housing free from discrimination.

Federal National Mortgage Association (FNMA or Fannie Mae)
A federally chartered, stockholder owned corporation which supports the secondary market by selling residential mortgages to lenders (Conventional, FHA insured, and VA guaranteed home loans).

FNMA also purchases pools of mortgages from lenders with securities, the largest single holder of home mortgages in the United States. It provides a ready market for government secured mortgages held by primary lenders which provides them a greater turnover of money for new loans.

Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac)
A federally chartered stockholder owned corporation which supports the secondary market for conforming mortgages by purchasing existing approved Conventional, FHA insured, and VA guaranteed home loans from insured depository institutions and HUD-approved mortgage bankers and resells them to individual investors or financial institutions.

Government National Mortgage Association (GNMA or Ginnie Mae)
Ginnie Mae provides sources of funds for residential mortgages, insured or guaranteed by FHA/VA. Responsible for administering secondary market programs involving insured mortgage loans such as
the Mortgage-backed Securities Program.

Ginnie Mae does not buy or sell loans or issue mortgage-backed securities (MBS), although GNMA guarantees mortgage-backed securities issued by private financial intermediaries (Fannie Mae & Freddie Mac).

Ginnie Mae securities are the only MBS to carry the full faith and credit guaranty of the United States government, which means that even in difficult times an investment in Ginnie Mae MBS is one of the safest an investor can make.

FHA – Federal Housing Administration (FHA)
An agency of the U.S. Department of Housing and Urban Development (HUD). It insures residential mortgage loans made by private lenders. FHA also sets standards for underwriting mortgages.

An FHA Mortgage is a Home Mortgage that is fully insured by the Federal Housing Administration (FHA) under Sections 203(b), 203(h) or 203(i) [Home Unsubsidized], 222 [Servicemen] or 234 [Individual Condominium Unit] of the National Housing Act, as amended.
VA – Department of Veterans Affairs (VA)
Established March 15, 1989, succeeding the Veterans Administration, responsible for providing federal benefits to veterans and their dependents nationwide.

VA Insured Guaranteed Home Loans

VA mortgages are made by private lenders, such as banks, savings & loans, or mortgage brokers to eligible veterans for purchasing or refinancing a home, and is intended to encourage lenders to offer veterans loans with more favorable terms. Guaranteed under Section 1810, Chapter 37 of Title 38, United States Code as amended. The guaranty protects the lender against the borrower defaulting on the loan The amount of guaranty on the loan depends on the loan amount and whether the veteran used some entitlement previously. Formerly referred to as G.I. guaranteed mortgage.

Farmers Home Administration (FmHA)
Provides financing to farmers and other qualified borrowers who are unable to obtain loans elsewhere.

Federal Emergency Management Agency (FEMA)
Federal agency that directs activities of the Federal Insurance Administration and establishes flood insurance rates and terms of coverage, issues policies, processes claims and identifies and maps flood-prone areas.

Federal Home Loan Bank Board (FHLBB)
The former name for the regulatory and supervisory agency for federally chartered savings institutions. Agency is now called the Office of Thrift Supervision

U.S. Department of Agriculture (USDA)

In 1862, when 48% of the people were farmers needing good seeds and information to grow their crops, President Abraham Lincoln founded the U.S. Department of Agriculture, he called it the “people’s Department.” USDA continues serving all Americans and remains committed to helping America’s farmers and ranchers.

USDA brings housing, modern telecommunications, and safe drinking water to rural America.
Department of Agriculture’s Rural Housing Service (RHS)
As a part of USDA Rural Development, RHS provides funding for single family homes, apartments for low-income persons or the elderly, housing for farm laborers, childcare centers, fire and police stations, hospitals, libraries, nursing homes, schools, and much more.

In partnership with non-profits, Indian tribes, state and federal government agencies, and local communities, RHS creates packages of technical assistance and loan and grant funds to assist more rural communities and individuals.

Department of Housing and Urban Development’s Office of Public and Indian Housing (PIH)
The Office of Public and Indian Housing (PIH) ensures safe, decent, and affordable housing, creates opportunities for residents’ self-sufficiency and economic independence, and assures the fiscal integrity of all program participants.

In brief, HUD oversees Fannie Mae, Freddie Mac, and Ginny Mae. Fannie Mae & Freddie Mac both purchase Conventional and Government loans from lending institutions and sell them in pools of mortgages used as collateral for the issuance of securities in the secondary market (wall street) to investors as “Mortgage-backed securities” (MBS).

MBS are commonly referred to as “pass-through” certificates because the principal and interest of the underlying loans is “passed through” to investors (guaranteed by the full faith and credit of the United States government). By selling the bonds, Freddie Mac, and Fannie Mae obtain new funds to buy new pools so lenders can get more money to lend to new borrowers.

Ginnie Mae does not buy or sell loans or issue mortgage-backed securities (MBS). Ginny Mae guarantees Fannie Mae’s & Freddie Mac’s Government loans (FHA/VA). However, Ginnie Mae MBS are created when eligible mortgage loans (those insured or guaranteed by FHA, the VA, RHS or PIH) are pooled by approved issuers (Fannie Mae & Freddie Mac) and securitized. Ginnie Mae MBS investors receive a pro rata share of the resulting cash flows (net of servicing and guaranty fees).

The interest rate of the security is lower than the interest rate of the underlying loan to allow for payment of servicing and guaranty fees. Ginnie Mae MBS are fully modified pass-through securities. Regardless of whether the mortgage payment is made, investors in Ginnie Mae MBS will receive full and timely payment of principal as well as interest (a safe investment that earns a higher interest rate than treasury bonds).

NOTE: Conventional Mortgage
A mortgage securing a loan made by private investors without governmental participation (not F.H.A. insured or V.A. guaranteed). Conforming Conventional mortgages fall within FNMA/FHLMC loan guidelines.

NOTE: Government Loans
A type of mortgage insured by the FHA (Federal Housing Authority), VA (Veteran’s Administration), RHS (Rural Housing Authority), or Office of Public and Indian Housing (PIH).

FHA/VA Mortgages sold to Fannie Mae & Freddie Mac must be sold with recourse.

* * * * *

Loan amounts exceeding Fannie Mae and Freddie Mac guidelines are called “non-conforming” loans, or “jumbo” loans. Nonconforming also refers to borrowers that don’t meet Fannie or Freddie ideal requirements or loan programs not guaranteed by the government. These loans are packaged into different pools and are also sold to investors, other than Freddie or Fannie. Typically, securitized and sold as mortgage backed securities as well.

This buying and selling of mortgages and mortgage backed securities is called “mortgage banking,” and it is the backbone of the mortgage industry.

Banks and Savings & Loans

Banks, plus, Savings & Loan institutions usually operate as portfolio lenders, mortgage bankers, or a combination of both.

Correspondents

Correspondent typically refers to a company which originates and closes home loans in their own name, (MTG, closes in the name of the lender) then sells them individually to a larger lender, called a sponsor.   The sponsor acts as the mortgage banker, re-selling the loan to Fannie Mae or Freddie Mac, as part of a pool of loans. 

The sponsor typically underwrites and funds the mortgages (correspondent may fund the loans they originate).  Correspondents are usually dedicated to one sponsor(typically an FHA sponsor), if they don’t meet all the requirements of HUD to be their own loan originator.

Credit Unions

CU’s typically operate as correspondents, and if large enough, operate as portfoliolenders or mortgage bankers.

Portfolio Lenders

An institution which lends it’s own money and originating their own portfolio of loans for itself.  Portfolio lenders often retain their loans and are not concerned with selling them on the secondary market, therefore, they can exceed the envelope of Fannie Mae & Freddie Mac guidelines (expanding lending criteria such as credit worthiness guidelines, loan amount limitations, avoiding income and employment conditions, and allowing investors to purchase multiple properties, etc…).

Portfolio lenders typically (consist of the larger banks and savings & loans institutions) fit into the category of mortgage bankers because they also offer Traditional and Government – FHA / VA financing as well as their own line of mortgages. 

Mortgage Bankers

A Mortgage Banker is a lender that originates loans and create pools of loans to sell directly to Fannie Mae, Freddie Mac, and other loan investors (such as those servicing Jumbo or other non-conforming loans).  Mortgage Bankers may have wholesale lending divisions and service their own loans.

Direct Lenders

Direct lenders draw up loan documents and fund the loans in their own nameand typically fit into the category of mortgage bankers or portfolio lenders.  Direct lenders such as Banks and Savings & Loans can use deposits to fund mortgage loans, but usually use “warehouse lines of credit” from which they draw the money to fund the loans.

Warehouse Lenders

The company either directly or through its syndicate and / or participant banks provides temporary financing on certain one to four single-family residential dwellings, which have been originated.  All of the loans are pre-sold in the secondary market to large institutional investors, many of whom are New York Stock Exchange companies.

Warehouse lines of credit are real estate secured short-term lines of credit that allow mortgage bankers to fund loans into the secondary market until the loans are purchased by the end institutional investors. 

Wholesale Lenders

Most mortgage bankers and portfolio lenders also act as wholesale lenders, catering to mortgage brokers for loan origination. Some wholesale lenders do not even have their own retail branches, relying solely on mortgage brokers for their loans.

Imperfect Credit Lenders

For borrowers with less than perfect credit criteria (“B/C and D” Credit Ratings)receive loans based on non-conforming guidelines.  Non-Conforming Mortgage Lendersprovide loans to borrowers and for properties that do not meet traditional, conforming, and conventional loan requirements per lender guidelines (as based on HUD home loan regulations).

Almost any conforming loan type can be substituted with a non-conforming, non-traditional, non-conventional mortgage loan (Whether the loan is for a First lien positioned loan, or Second mortgage loan) if any of the following items fall outside the lender conforming criteria guidelines.

  • Loan amount
  • Imperfect Credit
  • Income Ratio
  • Property
  • Employment
  • Residence

 

The main differences between conforming and non-conforming mortgages is that Non-traditional lenders assess higher rates and fees when there is a lower credit gradea lack of income documentation or a high loan-to-value ratio.

 

City & State Lenders – (Secondary Financing Assistance)

Affordable Seconds – Are established, documented secondary financing or financial assistance programs administered by an Agency that meet the following criteria:

  • The program must include specific procedures to provide Borrower qualification and processing and loan program administration on an ongoing basis.
  • The interest rate, if any, should not be higher than 2% above the interest rate of the Affordable Mortgage.
  • Interest, if any, should be payable monthly as accrued, without negative amortization.
  • No balloon payments should be due prior to the maturity or payment in full of the Affordable Mortgage.
  • Affordable Second loans may only consist of a second-lien mortgage.  Third liens are not acceptable (i.e., there may be no more than two (2) liens on the property).

Community Second – A Community Second is an established, documented subordinate financing or financial assistance program, commonly referred to as a Community Second mortgage, which is sponsored/administered by an agency (as defined below) and meets the following standard criteria:

Community Seconds are the only eligible subordinate financing.  Funds from the Community Second can be applied toward closing costs and prepaid items.  Any excess amount after satisfying closing costs, prepaid item requirements, and the minimum borrower down payment is to be applied towards the down payment.

  • The program guidelines must include specific procedures to provide applicant qualification, and processing and loan program administration on an ongoing basis.
  • The interest rate, if any, shall not be higher than the interest rate of the Affordable first mortgage.
  • The interest, if any, shall be due prior to maturity or payment in full of the Affordable first mortgage.
  • No balloon payments shall be due prior to the maturity or payment in full of the Affordable first mortgage.
  • No prepayment penalty.
  • Negative amortization is not allowed.
  • May be forgivable over time.

Note:  There are no restrictions on the lien position of the Affordable Community Second, provided the program guidelines do not require the loan to be in second lien position.

 

Agency – The sponsor of a Secondary Financing Program – may be:

  • A duly authorized authority or agency of the state, local, or municipal government;
  • A not-for-profit, 501(c)(3) corporation or a tax exempt religious organization
  • The Borrower’s employer.

In addition to purchase money transactions, this program allows for rate and term refinances if the original loan was processed under the 103% Zero Down Program

The mortgage insurance premium, closing costs, and prepaids may be financed up to a maximum of 3% and a maximum LTV of 103%. There is no minimum loan amount, however, there is a minimum LTV of 97.01%.

Note:

  • Closing costs and/or prepaids: Up to a maximum of three (3) percent of the lesser of the appraised value or sales price may be financed into the loan amount. *The maximum LTV when closing costs and/or prepaids are financed is 103%.
  • Secondary Financing: Not Allowed.
  • Cash-Out: Not Allowed.

The program is for Borrowers with good credit (700 FICO) who may have insufficient savings to close. There are no income limitations. The program is not limited to first time homebuyers and the Borrower may own other real estate, however, the subject property must be their primary residence.

Pricing:

  • Price and commit as a Non-Conforming Expanded Criteria (Fixed 30 or 15)Zero Down for all loan amounts up to and including the maximum of $453,200 (maximum base loan amount of $440,000).
  • Add-ons apply.

 

CREDIT CONSIDERATIONS – The Credit Score may be based on as few as one (1) tradeline as long as the Borrower(s) meet(s):

  • 700 FICO Minimum
  • Revolving and Installment: Late payments are considered in the credit score.
  • Mortgage Lates: Maximum mortgage lates permitted:
    • 1 x 30 last 12 months
    • 0 x 60 last 24 months
  • Bankruptcy, Foreclosure, Deed-in-Lieu, Short Sale:
    • No bankruptcies, foreclosures, judgments, garnishments, or other legal proceedings.
  • History of Credit Counseling:
    • Active participant: Not Allowed.
    • Previous participant: Depends on lender criteria (usually 3 yrs, 12 months depending on circumstances with obvious credit improvement)
  • Judgments, Collections, Charge-Offs:
    • Any charge-offs or collection accounts must have been PAID at least two (2) years prior to the application.

Note: There are NO Exceptions to these credit guidelines.

 

Occupancy Requirements: Owner-Occupied

Pre-Payment Penalty Option: Not allowed.

Temporary Buydowns: Not allowed.

Secondary Financing: Not allowed.

Seasoning Requirements: Not applicable.

Ratios: 33/38% (There are NO Exceptions to these ratio guidelines.)

Documentation Requirements: The Appraisal must indicate stable or increasing property values. Note: If the appraisal indicates the property also shows evidence of declining property values, an oversupply of property and / or a marketing time of more than six (6) months, soft market guidelines must also be followed.

Reserves: Two (2) months reserves are required. Note: Cash advances from credit cards are not allowed to meet the reserve requirement.

Energy Efficient Mortgages: Not allowed.

No Prepayment Penalty

Ideal for first-time homebuyers and move-up Borrowers
who lack the funds for down payment and closing costs,
and interested in obtaining maximum 15, 20, 25 or 30 year term financing.

With this loan program, the  first-time homebuyers or move-up Borrowers get a loan that covers 97% of the homes value and also covers the 3% downpayment, resulting in 100% mortgage financing.

 

Key Features Overview

Purchase financing has to be a single family residence (no duplex or larger allowed)
Single Family Housing (1-Unit) 
$322,700 (2003), and up to $333,700 for 2004:

  • SFRs (Single Family Residence)
  • Modular (double-wide unit, at minimum, built after June 15, 1976)
  • PUDs (Property Under Development) (include: modular homes)
  • Condos
  • Townhomes

 

No down payment is required from the Borrower, however, the borrower is required to pay at least 3% of the sales price, all of which may be applied towards closing costs and/or prepaid items (i.e. insurance & taxes etc…).

Acceptable Sources of Down-payment and Closing Cost Funds
(
contributions limited to 3% of the lesser of the sales price or appraised value)

  • Borrower funds on deposit including checking, savings, certificate of deposit, Individual Development Account or other depository accounts.
  • Borrower’s own secured assets, such as a 401(k) loan.
  • Grants, Gifts or unsecured loan from a relative, domestic partner, fiancé, or fiancée, nonprofit agencies, nonprofit community organization, government agency, or the Borrower’s employer that need not be repaid.
    • Unsecured loan from the Borrower’s employercannot be due and payable, and the Borrower must retain the right to continue making payments on it in the event that the Borrower no longer works for the employer.
    • Contribution plus the LTV may not exceed 100%. No Exceptions.
    • Premium pricing limited to 2% of value. (i.e. 2% of $200,000 = $4,000)

Unacceptable Sources of Funds

  • Cash-on-hand
  • Sweat equity

 

Maximum Financing (multiply home value by .05)
per these guidelines

Borrowers can finance up to 105%  
Maximum LTV/CLTV (
loan to Value/Combined Loan to Value): 100/105
LTV = Loan Amount divided by Home Value (as appraised)
CLTV = LTV + Secondary Financing

  • If the CLTV is greater than 100%, the subordinate financing may only be aCommunity Second. Funds from the Community Second can be applied toward closing costs and prepaid items. Any excess amount after satisfying closing costs and prepaid item requirements is to be applied towards the down payment.

The minimum LTV (Loan divided by value) is as follows:

  • With no secondary financing, 90% is the minimum LTV
  • With secondary financing, there is no minimum LTV

 

Mortgage Insurance (MI) Requirements

  • Borrower Paid only (TAMI not allowed)
  • Loans with a representative credit score less than 620:
    • Require delegated manual MI, and
    • A-minus rates may apply, and
    • An MI certificate must be in the loan file prior to closing
  • For MI requirements for energy-efficient mortgages may differ among lenders
  • All manufactured housing requires non-delegated manual MI.  
    • An MI certificate must be in file prior to closing.
    • The certificate must be from PMI, RMIC, or Triad.

Bankruptcy – Discharged with confirmation
Foreclosure – 
Copy of Satisfaction of Debt (Cancellation of Debt issued by all creditors)

Borrowers in the following professions may qualify for 1- or 2-unit property under terms and conditions that are less restrictive than standard guidelines (Higher loan to value limits, lightened credit requirements, for purchaces and refinancing):

 

Teachers

  • Teacher or administrator (including principal, vice principal, librarian or healthcare specialist or a similar professional at the elementary or secondary levels), and
  • Full-time employee of a public or private school or federal, state, county or municipal educational agency, and
  • State certified, be in the process of becoming state certified or be employed by a school that is recognized by a state or regional accrediting association.

 

Public Safety Employee

  • Full-time sworn employee of a police department, sheriff’s office or corrections department that is a part of or administered by the federal government, a state a political subdivision of a state, a commission created by an interstate compact, a university, a hospital, a utility, or an airport or port authority who is responsible for the prevention and detection of crime, the enforcement of the penal, traffic, or highway laws, or the incarceration or detention of offenders, or
  • Full-time sworn member of a local, state, or federal fire department or agency and responsible for at least one of the following:
    • Fire suppression
    • Emergency medical response and patient care
    • Fire and injury prevention
    • Arson investigation
    • Hazardous materials incident response and management
    • Response to acts of terrorism.

 

Income Verification – Teachers or Public Safety Employees Only:

For borrowers qualifying as a teacher or public safety employee, overtime and part-time income may be used to qualify the borrower under all of the following conditions:

  • The employer verifies that the borrower has received the income for the last 12 months. (2 years for most all other borrowers)
  • The employer indicates in all probability it will continue.
  • The income used to qualify is a most recent 12 month average.
  • Rental Income: If one of the units is rented or intended to be rented, 75% of the rent or projected rents for the unit may be added to the borrower’s income when calculating the debt ratios.

Debt Ratios Comparrison:

Non-teacher/public safety borrowers:

  • The maximum single qualifying ratio (total-expenses to total-income ratio) is41%.

 

Borrowers qualifying as a teacher or public safety employee:

  • The maximum single qualifying ratio is 45%.

Note: Borrowers qualifying as a teacher or public safety employee may have a qualifying ratio greater than 45% and equal to 50% with all the following requirements:

  • The borrower must have two months reserves. The borrower must meet all the credit requirements shown in
  • the credit section, except the borrower must in all cases have a traditional or nontraditional credit report.
  • The borrower must have strong documented compensating factors.
  • All two unit properties: The maximum qualifying ratios are 35/43%.

 

NOTE: Reserves are not required for standard borrowers but 2 months are required if borrower is a Teacher or Public Saftey Employee (Reserves are a required amount of funds that are readily available as liquid cash for making a determined number of monthly mortgage payments)

Secondary Financing Assistance such as Affordable Seconds are established, documented secondary financing or financial assistance programs, or A Community Second which is an established, documented subordinate financing or financial assistance program, commonly referred to as a Community Second mortgage, managed by an approved agency


Affordable Seconds 

Affordable Seconds are established, documented secondary financing or financial assistance programs administered by an Agency that meet the following criteria:

  • The program must include specific procedures to provide Borrower qualification and processing and loan program administration on an ongoing basis.
  • The interest rate, if any, should not be higher than 2% above the interest rate of the Affordable Mortgage.
  • Interest, if any, should be payable monthly as accrued, without negative amortization.
  • No balloon payments should be due prior to the maturity or payment in full of the Affordable Mortgage.
  • Affordable Second loans may only consist of a second-lien mortgage. Third liens are not acceptable (i.e., there may be no more than two (2) liens on the property).

 

Agency – The sponsor of a Secondary Financing Program may be:

  • A duly authorized authority or agency of the state, local, or municipal government;
  • A not-for-profit, 501(c)(3) corporation or a tax exempt religious organization
  • The Borrower’s employer.

 

Community Second

A Community Second is an established, documented subordinate financing or financial assistance program, commonly referred to as a Community Second mortgage, which is sponsored/administered by an agency (as defined below) and meets the following standard criteria:

Community Seconds are the only eligible subordinate financing. Funds from the Community Second can be applied toward closing costs and prepaid items. Any excess amount after satisfying closing costs, prepaid item requirements, and the minimum down payment required from the borrower is to be applied towards the down payment.

  • The program guidelines must include specific procedures to provide applicant qualification, and processing and loan program administration on an ongoing basis.
  • The interest rate, if any, shall not be higher than the interest rate of the Affordable first mortgage.
  • The interest, if any, shall be due prior to maturity or payment in full of the Affordable first mortgage.
  • No balloon payments shall be due prior to the maturity or payment in full of the Affordable first mortgage.
  • No prepayment penalty.
  • Negative amortization is not allowed.
  • May be forgivable over time.

Note:

  • There are no restrictions on the lien position of the Affordable Community Second, provided the program guidelines do not require the loan to be in second lien position.

Our 97% LTV Purchase Loans designed to open doors for more low to moderate income borrowers, first-time homebuyers and move-up borrowers, and those that lack the funds for a down payment and closing costs.  This loan program is made possible by lowering the customary 5-20% down payment range to just 3%, and by expanding sources of funds that borrowers can use for their down payment and closing costs.

 

Key Features Overview

  • Owner-occupied Primary Residences (attached or detached home)
  •  Offering a low down payment to more easily qualify for home financing
  •  NO – Prepayment Penalty
  • No Reserves – NONE (2mo. recommended for emergencies) or 1 pending credit histories or 2 months if Teacher or Public Safety Employee
  • Affordable Seconds – permitted (see: Affordable Seconds) Maximum CLTV: 105%
  • Community Second – permitted (see: Secondary Financing Assistance) Max. CLTV: 100%
  • PUDs (Property Under Development) financing
  • Cooperatives – for Teachers or Public Safety Employees Only (max. LTV 90%)
  • 1-unit SFRs (Single Family Residence) 15, 20, 30 year terms
    •  Modular homes, and Prefabricated homes (double-wide unit built after 06/15/76)
    • Min. LTV: 95.01% Max. LTV: 97%
  • 2-unit (30 year term for 2-unit)
    • for Teachers or Public Safety Employees Only
    • Min. LTV: 97%, Max. LTV: 105%
  • 3, 4-Units Not Allowed

 

Borrower Funds for the 3% downpayment, closing costs, financing costs and prepaids/escrows, can be obtained from a variety of sources (5% for 2-unit home with 3% from borrowers own funds).

  • Seller’s Contribution – Limited to 3% of the lesser of the sales price or appraised value.
  • Borrower’s personal cash – checking, savings, 401(k) account or a life insurance policy, or similar accounts, or
  • Cash-on-hand for Borrowers who do not use checking, savings, or similar accounts, but may be a limited user of credit. Cash-on-hand may be used if the following are verified:
    • Monthly receipts or alternative doc’s indicating Borrower has no checking, savings, or similar accounts
    • and Updated credit report shows no new accounts or no substantial increase to existing accounts that approximate the amount of cash on hand,
    • and It can be confirmed that the Borrower would have sufficient income, given normal household expenses, to have saved the cash provided.
  • Gifts from relatives, domestic partner, personal finance, or financing from fiancé
  • Affordable Seconds (80/20 loans)
  • Community Second
  • Grants, Gifts or unsecured loan from a relative, domestic partner, fiancé, or fiancée, nonprofit agencies, nonprofit community organization, government agency, or the Borrower’s employer that need not be repaid.
    • Unsecured loan from the Borrower’s employercannot be due and payable, and Borrower must retain the right to make payments on it in the event that the Borrower no longer works for the employer.

Note: None of the required 3% may come from any lender generated or funded source.

 

 

Borrower’s Income
Borrower’s income may be up to and including 100% of area median income with exceptions in certain high-cost areas designated by Freddie Mac.  Information about median income, central cities and targeted census tracts for Colorado can be found at:

http://www.freddiemac.com/sell/affgold
and
http://ww3.freddiemac.com/ds2/sell/affgold.nsf/frmState?OpenForm&State=COLORADO

Note: 
No income limitation if the subject property is located in a concentrated area. A concentrated area is:

  • An area designated by HUD as a central city.
  • A census tract with an area median family income of 80% or less.
  • Any 1990 census tract where nonwhite and Hispanic persons comprise 50% or more of the population

 

Income – Teachers or Public Safety Employees Only:

For borrowers qualifying as a teacher or public safety employee, overtime and part-time income may be used to qualify the borrower under all of the following conditions:

  • The employer verifies that the borrower has received the income for the last 12 months.
  • The employer indicates in all probability it will continue.
  • The income used to qualify is a most recent 12 month average.
  • Rental Income: If one of the units is rented or intended to be rented, 75% of the rent or projected rents for the unit may be added to the borrower’s income when calculating the debt ratios.

 

Debt Ratios(total-expenses to total-income ratio)
Non
-teacher/public safety borrowers: The max. SFR qualifying ratio is 41%.

A teacher or public safety employee: The max. SFR qualifying ratio is 45%or 50% w/two months reserves. Note:  All two unit properties: The max. qualifying ratios are 35/43%.

 

Rental Income
Rental Income from a related person residing in the Borrower’s primary residence is allowed provided all of the following conditions are met:

  • The relative has resided and paid rent on a regular basis with the Borrower for at least one (1) year.
  • The relative will continue to reside with the Borrower in the new residence.
  • The rent paid does not exceed 30% of the total qualifying income.
  • The relative has supporting documentation for the residency and the receipt of rental income is verified.

 

Credit Requirements – Credit Score > 600 preferred) and credit score < 660 A-minus rates may apply.

 

Housing Payment History – If the borrower has had either of the following, careful evaluation of their credit history to determine if the problems were due to extenuating circumstances or financial mismanagement:

  • More than one 30-day late housing payment in the last 12 months, or
  • More than two 30-day late housing payments or more than one 60-day late payment in the last 24 months.

 

Mortgage Insurance REQUIRED (must have certificate prior to closing)

  • A minus (A-) pricing applies for borrowers with credit scores less than 660
  • Credit scores < 660 and the subject property is a 1 unit or < 620 and a 2 unit property
  • Borrower has Nontraditional credit or no credit score

Borrowers either Purchase, Construct, or Refinance property

First Time Home Buyers
2nd time home owners
Government Employees (Teachers, Police, Fire Fighters, Veterans, etc…)
Investors
Residential Borrowers
Commercial Property Owners

First Time Home Buyers (New Purchase)
The very first time for a borrower to purchase a home. A second time buyer can be a first time buyer if there is substantial time between purchases where the mortgage account drops off all credit repository records.

 

Second Time Home Borrowers (2nd Home Financing)
A property designated as a second residence (i.e.. vacation home), and is livable year round. The property owner generally resides at different property referred to as “Primary Home” that is not intended as rental property. Second (vacation) homes are not considered investment properties. (See VA home loans).

 

Refinance / Refinancing
The process of paying off one loan with the proceeds from a new loan secured by the same property.

The main reasons for refinancing is to better the borrower with a lower interest rates, loan term reduction, switch to or from a fixed or ARM loan, receive cash out, debt consolidation, or to eliminate a balloon payment.

Once a borrower has made the payments on a portfolio loan for over a year without any late payments, the loan is considered to be “seasoned.” Once a loan has a track history of timely payments it becomes marketable, even if it does not meet Freddie/Fannie guidelines.

 

VA Home Loans – Eligible Veterans and Their Families including Reservists
VA allows veterans and servicemen discounts on home purchasing. The first time user of VA Benefits realizes the greatest savings. VA loans must be in the First Lien Position. VA guarantees only one home per eligible veteran and a 2nd time home borrower is a Veteran that has previously used VA funding on a prior home.

 

Government Employees – Teachers or Public Safety Employees
Borrowers in the following professions may qualify for 1- or 2-unit property

Teachers

Teacher or administrator (including principal, vice principal, librarian or healthcare specialist or a similar professional at the elementary or secondary levels)
Full-time employee of a public or private school or federal, state, county or municipal educational agency,
State certified, in the process of state certification, or employed by a school recognized by a state or regional accrediting association.

Public Safety Employee
Full-time sworn employee of a police department, sheriff’s office or corrections department that is part of or administered by the federal government, a state a political subdivision of a state, a commission created by interstate compact, university, hospital, utility, airport or port authority responsible for prevention and detection of crime, penal enforcement, traffic, highway laws, incarceration or detention of offenders, or
Full-time sworn member of a local, state, or federal fire department or agency responsible for at least one:
Fire suppression
Emergency medical response and patient care
Fire and injury prevention
Arson investigation
Hazardous materials incident response and management
Response to acts of terrorism.

Non-Conforming Borrowers
Almost any conforming loan type can be substituted with a non-conforming, or non-conventional mortgage loan (Whether the loan is for a First lien positioned loan, or Second mortgage loan) if any following items fall outside the lender conforming criteria guidelines, borrower loans are based on non-conforming guidelines.
Loan amount (i.e. exceeds conforming guidelines)
Imperfect Credit (i.e. Borrowers with less than perfect credit criteria (“B/C and D” Credit Ratings)
Income Ratio (D/R)
Property (i.e. non-owner occupied)
Residence (i.e. non-owner occupied, second homes not
Employment (i.e. Borrowers with disruptions in employment history, or borrowers that are paid in cash)

Expanded Criteria – Non-Conforming Income Documentation
Nonconforming loans can also refer to self-employed borrowers for i.e. that are paid in cash which results in alternate loan documentation, and for Borrowers with disruptions in employment history.

MTG believes the Non-Conforming Lending Market is expanding with competition that will produce better rates, loan programs and terms due to ever growing Traditional lender restrictions (credit ratings primarily).

Investment or Investor
Generally a term for a non-owner occupied (N/O/O)but can be owner occupied, 1-4 unit residential property, that is purchased with the intention of realizing a future profit. The investor usually owns multiple properties.

Investor – Fix-N-Flip Properties
Same as Investment Property (Investor Property) with the exception that property is purchased for immediate sale after rehabilitated (fixed & repaired – carpet, lawn care, fixtures, overall appearance etc…).

Fix-n-flip properties include 1-4 unit and 5-19 unit multifamily residential property.

 

Commercial Property Borrowers
Commercial Borrowers typically consists of an: Individual, Corp., LLC, Trust Ltd or Gen Partnership.

Lenders qualify the income potential of the commercial property, not the borrower as with residential lending.

Commercial property types
Retail (grocery chain, supply outlets, Specialty centers, etc…)
Health Care (hospital, medical practice, nursing/care facilities, etc…)
Hotels (mom and pop to national chain, Resorts, etc…)
Industrial (fabrication shops, executive/Industrial parks, warehouses, etc..)
Mixed Use (restaurant on main floor…all upper floors as business leased)
Mobile Home Parks
Multifamily (apartments (5+ Units), Student Housing, Military Housing etc.)
Office Buildings
Self Storage

Appraisal (typically required by lender)

In real estate, an estimate of the quality or value of property (the fair market value); the process by which conclusions of the value of property are assessed; also refers to the report setting forth the estimate of value together with the basis for such conclusions. For VA appraisal – Certificate of Reasonable Value – Commonly referred to as a “CRV”. Veterans Administration’s certified appraisal of value of real property. For Commercial property , an Environmental appraisal is often required as well.
The appraisal report

Must include a legible copy of the license (with renewal card, if applicable) of each appraiser who signed the report, current as of the date of the appraisal and issued by the state in which the subject property is located. The license (with renewal card, if applicable) must clearly specify the appraiser’s name, license number, license classification and expiration date.

In addition to the requirements outlined above, MTG requires the following guidelines to be followed when selecting an appraiser:
You must use a Licensed, Certified Residential, or Certified General Appraiser for appraisals on all 1-4 unit residential properties.
You must use a Certified General Appraiser for all Commercial properties.

Appraisers
An appraiser assigns a fair market value to a particular property, based on analysis of the property in question, and the market conditions in the area, and recent sales data of comparable properties in the area.
A state-licensed or state-certified appraiser, not currently suspended by MTG (or any of the agencies with which we do business), must appraise the property.
The appraiser’s license must be of a type deemed acceptable for federally related transactions and the appraiser must be a member of the National Registry.
Appraisers with training licenses (i.e. “transitional”, “provisional”, “registered”, “temporary”, etc.) may NOT appraise property (may authorize if the appraisal can be signed by a state-licensed or state-certified, supervisory appraiser not currently suspended by MTG or any of the agencies with which we do business).
NOTE: Many lenders require that appraisers be certified with their lending institution (i.e. various expanded criteria programs such as NINA & SISA loans must be lender certified). With these loans, certification for the specific lender must be verified by the lender (just because an appraiser has appraised conforming loans for a certain lender in the past, does not mean that, that appraiser or their company is approved or certified to appraise expanded criteria loans).
Appraisal Waiver
A waiver means no appraisal is needed. The lender will evaluate a comp (comparison report) of closely matching properties as described above.

Typically, an appraisal is good up to a year and the home owner is requested by the lender to obtain a new appraisal to ensure the home is still in as good or better shape than the last appraisal. It is also good for the lender to know the Fair Market Value (FMV) of the neighboring properties and an economic evaluation of the immediate community.

When the lender waives an appraisal, the value of the property is typically consistant with the County Assesor’s value.