BUYING TIPS: UNDERWRITING GUIDELINES -
FNMA
MAXIMUM MORTGAGE AMOUNT
(Based on loan program and cost area):
$207,000 ($310,500 in Alaska, Guam, Hawaii and U.S. Virgin Islands).
QUALIFICATIONS RATIOS:
Total Housing Expense Ratio 28%.
Total Debt Expense Ratio 36%.
UNDERWRITING RATIOS BASED ON:
Gross monthly income.
The following income can be considered to the extent that such payments are likely to
continue for a minimum of 3 years:
Social Security income, alimony, public assistance payments, child support or maintenance
payments.
COMPENSATING FACTORS that can justify higher underwriting ratios:
(These lists are not all-inclusive or in order of priority.)
Property qualifies as an energy-efficient dwelling.
Large downpayment toward the purchase of the property, or have a strong equity position in
a property that is being refinanced.
Demonstrated ability to accumulate savings and to maintain a good credit history or a
debt-free position.
Potential for increased earnings and advancement because of their education or job
training, even though they have just entered the job market.
Net worth substantial enough to evidence their ability to repay the mortgage.
Short-term income (such as social security income, alimony or child support, notes
receivable, mortgage differential payments, trust income, VA benefits) that could not be
counted as "stable" income because it would not continue to be received for at
least three years beyond the date of the mortgage application.
Purchasing their home as the result of a corporate relocation of the primary wage-earner
and the secondary wage-earner, who has a history of employment in the previous location,
is expected to return to work (even if he or she has not yet obtained employment in the
new location).
OR
Purchasing a property that qualifies as an energy-efficient dwelling.
BANKRUPTCY POLICIES
Bankruptcy must have been fully discharged and borrower must have reestablished good
credit and demonstrated an ability to manage financial affairs.
Good credit standing has been established with demonstrated ability to manage financial
affairs for at least 2 years between the discharge of the bankruptcy and the mortgage
application.
Will allow a shorter period (but not less than 12 months) if lender can document
extraordinary circumstances caused the bankruptcy, such as an extended illness that is not
covered by health insurance and that the borrower's current situation is such that the
events that led to the bankruptcy are not likely to recur.
In all cases, the lender must have sufficient documentation to support its decision that
the borrower is creditworthy.
INVESTOR LOANS
The LTV (Loan to Value) ratio cannot exceed 70%.
May not own more than 4 properties that are currently financed which includes principal
residence.
REFINANCES
Limit Cash-Out:
Owner Occupied Principal Residence First Mortgage:
One- to two-family: maximum LTV is 90%
Three- to four-family: maximum LTV is 80%
Second home: maximum LTV is 70%
Investment property: maximum LTV is 70%
Equity (Cash Back):
Maximum loan-to-value ratio 75%. No investors.
Second Home:
70% LTV. All borrowers restricted to no cash out loans.
MINIMUM DOWNPAYMENT
Generally 5% minimum equity from borrower unless family gift is equal to or greater than
20% of value.
SELLER CONTRIBUTION LIMITS
2% of the lesser of sales price or appraisal value if fixed-rate mortgage for
investment property.
3% of the lesser of sales price or appraisal value if property is principal residence and
LTV is greater than 90%.
6% of the lesser of sales price or appraised value if property is principal residence and
LTV is 90% or less.
6% of the lesser of the sales price or appraised value if property is second home and LTV
is 80% or less (or CLTV is 90% or less).
ANNUAL PAYMENT INCREASE LIMITS
Scheduled (GPMs)
After the first year, has annual 2% payment increases until the last payment
change date.
Scheduled (Buydowns)
Buydown period can range between 1 and 10 years in 12-month increments.
Unscheduled (Capped 1-year ARMs)
1% or 2% change per year.
4%, 5% or 6% life cap over original note rate, depending on the plan.
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