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TOC | Next | SALES CONCESSIONS
- FHA:
Limit is six percent of the sales price, and include the following:
Seller paid discount points, buyer's closing costs paid by the seller, MCC fees, buydown fees, upfront MIP, etc.
VA:
Limit is four percent of the sales price and includes the following:
VA funding fee, prepaids for taxes and insurance, discount points on interest rates lower than market, temporary buydowns, gifts such as tv, microwave,
refrigerator, etc. DOES NOT INCLUDE NORMAL DISCOUNTS (up to 4%) AND CLOSING COSTS PAID BY SELLER.
CONVENTIONAL:
2% of the lesser of the sales price or appraised value if the mortgage is a fixed-rate mortgage, if the property is an investment property. 3% of the lesser of the sales price or appraised value, if the loan is greater than 90% of value and the property will be occupied as a principal residence.
6% of the lesser of the sales price or appraised value, if the loan-to-value ratio is 90% or less and the property will be occupied as a principal residence.
6% of the lesser of the sales price or appraised value, if the loan-to-value ratio is 80% or less and the property will be occupied as a second home.
COMMON CREDIT HISTORY ISSUES
Bankruptcy
Generally, on FHA, VA, and Rural Development loans, when the applicant(s) has been declared bankrupt, a period of two years must have elapsed
from the date of the bankruptcy discharge with a credit history re-established indicating an excellent pay history on all accounts. A reasonable explanation for the bankruptcy must
accompany the file. However, if the applicant(s) is involved in a Chapter 13 Reorganization, an applicant may be considered under certain circumstances with the approval of the
Bankruptcy Court. For conventional borrowers, the time frame is generally extended to four years unless very extenuating circumstances are present. We have included a
list of acceptable extenuating circumstances; however, because of the exacting nature of conventional financing, we urge you to call us when faced with a borrower that has been through a
bankruptcy proceeding in the last four years.
Foreclosure
Generally, on FHA and VA loans, when a foreclosure has occurred, the time frame for mortgage approval is extended to three years from the date of
the sheriff's sale coupled with an excellent pay history on all accounts. Strong compensating factors and a reasonable explanation must be present for approval. For VA loans,
lenders must determine if there is an outstanding debt to the government.
For conventional financing, a period of four years must have elapsed since the date of the sheriff's
deed. For additional information, please refer to the conventional comments in the bankruptcy section above.
Past Due Accounts
Regardless of loan type, past due accounts that are brought current or collections that are paid incident to mortgage application are
considered recent adverse ratings.
Notices of Insufficient Funds on Bank Statements
N.S.F. charges reflected on the applicant(s)' bank statements, if frequent, will be considered derogatory
credit.
- Credit Alert, LDP,GSA
Credit Alert access code: FHA, VA, AND RURAL DEVELOPMENT LOANS only: if a borrower has had a claim during the last three years they are generally
prohibited from obtaining another FHA loan for 36 months.
FHA
No party to the transaction (borrowers, sellers, realtors, loan officers, title company, etc) can appear on the most current Limited Denials of
Participation list (LDP) or Lists of Parties Excluded from Federal Procurement or Nonprocurement Programs (GSA).
ALTERNATIVE DOCUMENTATION FOR CONVENTIONAL LOANS
Conforming Fixed 30 Year, 20 Year, 15 Year, 10 Year,
Non-conforming Fixed 30 Year, 15 Year
Conforming and Non-conforming ARM products
Balloon productsMAXIMUM LTV'S:
Refer to program parameters for maximum LTV's OCCUPANY:
Owner occupied only ELIGIBLE PROPERTY TYPES:
Single family residential, condominium, P.U.D., second homes.
With alternative documentation the Lender should generally retain the
original documents. However, if the borrower wishes to have the original documents returned, the lender must retain photocopies of the originals that have been signed and/or
stamped to certify that they are true copies of the originals on each copy document. (Both the front and the back of canceled checks must be copied and certified.) |
Alternative Verification of Employment
In lieu of a direct verification of employment (VOE), all of the following documentation must be provided:
1. Immediate past two year W2'S for all borrowers whose income is being used for qualifying purposes. 2. Computer generated pay stub(s) covering the most recent 30 days,
showing YTD earnings for all borrower's whose income is being used for qualifying purposes. Unconfirmed deductions must be explained.
3. Telephone employment verification as follows: When verifying employment by telephone, the processor's certification must
contain the applicant's start date, position, probability of continued employment, and salary information. In addition, the processor should
include information on the contact person such as name, title, and telephone number. The processor should also indicate that the telephone number was
obtained through a disinterested third party (directory assistance, phone book, etc.). If the employer refuses information, the processor's telephone
certification should state this, along with the name of the person who provided the information and the personnel department telephone number. Many major
employers refuse to directly provide employee information and have outsourced access to employee records. If employment information was
obtained from an employer-outsourced service, such as "Work Number for Everyone", this information is considered acceptable but the processor should
indicate how the number was obtained and the resource used. IMPORTANT NOTE: If the applicant needs secondary income from overtime, commission,
bonus, etc., to qualify, you must include a comment from the employer as the probability of it's continuance in order to justify averaging the applicant's
secondary income for qualification purposes.
Use of Bank Statements
In lieu of a direct verification of deposit (VOD), the following documentation may be used: 1. The two most current bank statements on all accounts requiring
verification, including checking, savings, securities, etc. Any large deposits and/or N.S.F. items must be explained. N.S.F.'S, if frequent, will be considered derogatory credit.
2. On-line or any other type of computer-generated statement used to support the applicant(s)' funds for closing or reserves must be certified as accurate as
well as signed and dated by a depository's employee.
Alternatives to Direct Housing Verification
In lieu of a verification of mortgage (VOM) or verification of rent (VOR) the following documentation can be used:
- Copies of 12 months canceled checks (front and back). If checks are not available, the credit bureau can report their findings on the RMCR if
they contact the mortgagee or landlord directly.
- All other standard documentation is required. ( i.e., appraisal, credit report, sales contract, etc.) In addition, all normal disclosures are
required. (i.e., Truth In Lending, Good Faith Estimate, etc.)
IMPORTANT TIP: CLOSELY EXAMINE THE DOCUMENTATION YOU ARE PROVIDED. IF THERE ARE IRREGULARITIES OR DISCREPANCIES, ADDRESS THEM WITH THE APPLICANTS. IT WILL SAVE EVERYONE'S TIME.
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