융자지식171- OCCUPANCY

by usezloan | Aug 12, 2021 | Financial study

융자지식171- OCCUPANCY

OCCUPANCY
PRINCIPAL RESIDENCE
A one-to-four family property that is the borrower’s primary residence. At least one of the borrowers
must occupy the property.
A primary residence is the residential property physically occupied by an owner as the principal home
domicile. Among the criteria one should consider in evaluating whether a property is a principal home
are the following:
• It is occupied by the owner for the major portion of the year
• It is in a location relatively convenient to the owner’s principal place of employment
• It is the address of record for such activities as federal income tax reporting, voter registration,
occupational licensing, and similar functions
• It possesses the physical characteristics to accommodate the owner’s immediate dependent
family
• The borrower states an intention to occupy the property as a primary residence within 60 days
of closing
o Freddie Mac will deem the property as owner occupied if the borrower occupies the
property no later than 90 days after the Note date when a borrower is purchasing the
property under an employee relocation program.
Applications for an owner-occupied transaction after closing on a previous owner-occupied transaction
with Flagstar on a different property within the last 12 months will be ineligible. This guideline will not
apply if the previous subject property has been sold or refinanced as a non-owner-occupied residence.
For owner occupied transactions, the borrower warrants they will occupy the property for at least 12
months.
MORTGAGED PREMISES OCCUPIED BY BORROWER’S PARENT OR DISABLED CHILD
The following describes the conditions under which the subject may be considered a primary residence
even though the borrower will not be occupying the property.
In the Declarations section, the non-occupying borrower may select Yes for the question, Does the
Borrower intend to occupy the property as his/her primary residence?
Flagstar, at its discretion, may determine that a property is not a primary residence.
Conventional Underwriting Guidelines
VI. Underwriting Guidelines 50 of 149 0422/2021
Return to Menu
Fannie Mae
Principal Residence Conditions
Borrower Types Requirements for Owner-Occupancy
Parents wanting to provide housing
for their disabled adult child
If the child is unable to work or does not have sufficient income to
qualify for a mortgage on his or her own, the parent is considered
the owner/occupant.
Children wanting to provide housing
for elderly parents
If the parent is unable to work or does not have sufficient income
to qualify for a mortgage on his or her own, the child is
considered the owner/occupant. Parents must take title to
property being purchased. Must provide 1 year Tax Return for
parents to support on fixed income and unable to qualify for
housing.
Freddie Mac
Principal Residence Conditions
Borrower(s) may provide mortgage financing for their parents
Borrower(s) may provide mortgage financing for a disabled individual when the borrower is the parent of
legal guardian
SECOND HOMES
Second homes must meet the following criteria:
• Must be located a reasonable distance away from the borrower’s principal residence
• Must be occupied by the borrower for some portion of the year
• Restricted to 1-unit dwellings
• Must be suitable for year-round occupancy
• The borrower must have exclusive control over the property
• Must not be subject to any timeshare arrangement or other shared ownership agreement
• Cannot be subject to any agreements that give a management firm control over the occupancy
of the property
• Must not be used as a rental property. When a property is classified as a second home, rental
income may not be used to qualify the borrower.
Freddie Mac
• Allow property with seasonal limitations on year-round occupancy (e.g. lack of winter
accessibility) provided the appraiser includes at least one comparable with similar seasonal
limitations to demonstrate marketability
• Property may be rented out on a short-term basis provided the following requirements are
met:
Conventional Underwriting Guidelines
VI. Underwriting Guidelines 51 of 149 0422/2021
Return to Menu
o The borrower must keep the subject property available for personal use for more
than half of calendar year; and
o The property is not subject to rental pools or agreements that require the borrower to
rent, give a management company or entity control over occupancy of the property
or involve revenue sharing between owner and developer or another party.
Underwriting validation must be completed to confirm (e.g. property cannot be listed
on a rental property management site such as Airbnb.com, tax returns do not
indicate payments to a management company which controls occupancy)
o Rental income from the subject property may not be used
Properties occupied by a party other than the borrower will be considered an investment property.
The determination of the second home status’s acceptability may be scrutinized and Flagstar Bank, in
its discretion, may determine that a property is not a second home.
INVESTMENT PROPERTIES
A one-to-four family property that the borrower does not occupy.
While rent information may not be required by AUS when the borrower qualifies without any rental
income from the property, the monthly rent information is required when delivering the loan to Fannie
Mae and Freddie Mac. One of the following documents are required:
• Lease agreement
• Form 1007/1000
• Letter from seller, realtor, or borrower indicating the estimated market rent
• For refinance transactions, the amount from the REO section of the 1003 can be used
• The income listed on the schedule E from the borrower’s 1040’s
• Zestimate from Zillow.com. The Zestimate must be retained in the mortgage file.

융자지식170- BORROWERS

by usezloan | Aug 12, 2021 | Financial study

융자지식170- BORROWERS

BORROWERS
Flagstar will purchase mortgages made to natural persons. We require that title to the property be in the
name of the individual borrower(s). However, we will accept an inter vivos revocable trust as an eligible
borrower under certain conditions outlined in the Closing in Trust section. A mortgage is not eligible for
delivery to us if the borrower is another type of legal entity – such as a corporation, general partnership,
and limited partnership or real estate syndication.
A borrower is any credit applicant(s) whose credit is used for qualifying purposes to meet loan eligibility
requirements. A co-borrower is used to describe any borrower(s) other than the primary borrower who is
listed on the application.
See Settlement/Closing Requirements procedures for closing document signature requirements for
borrowers, co-signors and co-owners.
BORROWER(S) AGE
The borrower must have reached the age at which the mortgage note can be legally enforced in the
jurisdiction in which the property is located. There is no maximum age limit for a borrower. All
applicants are evaluated on their ability to meet our underwriting guidelines.
BORROWER ELIGIBILITY
Borrower(s) with any ownership in a business that is federally prohibited, regardless if the income is not
being considered for qualifying, will be considered an ineligible borrower.
CLOSING IN TRUST
The following guidelines must be met in order for a loan to close in the name of a Trust:
Conventional Underwriting Guidelines
VI. Underwriting Guidelines 46 of 149 0422/2021
Return to Menu
• The trust must be a living revocable trust also known as a family trust or an inter vivos trust.
• Land Trusts are not eligible.
• Texas 50(a)(6) loans may not close in trust. These loans must close in an individual’s name
only.
• All property and occupancy types are eligible.
• For owner occupied transactions, at least one individual establishing the trust (settlor) must
occupy the subject property and sign the loan documents as a borrower.
• The title company must agree to insure over the trust with no exceptions for the trust or trustees.
• A copy of the full trust agreement must be provided.
o Fannie Mae- allows for only the pertinent pages within the trust to be provided to
document closing in trust requirements have been met.
• Title vested in Trust:
o Fannie Mae- title to be vested solely in the trustee(s) of the inter vivos revocable trust,
jointly in the trustee(s) of the inter vivos revocable trust and in the name(s) of the
individual borrower(s), or in the trustee(s) of more than one inter vivos revocable trust
o Freddie Mac-full title to the property must be vested in the trust; there may be no other
owners.
• The settlor(s) must be the primary beneficiary of the trust.
o As long as the income or assets of least one of the grantors or settlors will be used to
qualify for the mortgage and that grantor or settlor will occupy the property and sign the
mortgage instruments in his/her individual capacity there may be more than one primary
beneficiary on the trust.
• The trust document must give the trustee or trustees the authority to mortgage trust assets, to
incur debt on behalf of the trust, and to hold legal title to and manage trust assets.
An attorney’s opinion letter stating all above warranties are met will be required on all loans closing in
trust; or Certificate of Trust, Doc. #3954
• For California properties, a certificate of trust is acceptable in lieu of an attorney’s opinion letter.
Refer to the California Trust Certificate, Doc. #3951.
CO-SIGNERS AND NON-OCCUPANT CO-BORROWERS
Loans underwritten in conjunction with LPA or DU, if correctly identified with a non-occupant coborrower, AUS will determine the acceptability of housing and debt ratios. The maximum
LTV/CLTV/HCLTV for loans with a non-occupant co-borrower underwritten with LPA or DU is 95% if an
Accept or Approve response is received.
A guarantor or co-signor is a credit applicant who does not have an ownership interest in the security
property. A borrower with an interest in the property sales transaction (e.g. property seller, the builder,
the real estate broker) is not an eligible co-signer or guarantor.
NON-ARMS-LENGTH TRANSACTIONS
Non-arm’s-length transactions are purchase transactions in which there is a relationship or business
affiliation between the seller and the buyer of the property including, but are not limited to:
• Applicants related by blood or marriage to the seller
• Fiancé, fiancée, or domestic partner
Conventional Underwriting Guidelines
VI. Underwriting Guidelines 47 of 149 0422/2021
Return to Menu
• Employer or business partner
• Renters buying from landlord
• Trading properties with seller
• Builder/developer
Ineligible Non-Arms-Length Transactions
Non-arm’s length transactions are not eligible for the following transactions:
• Second Home New Construction
• Investment Property New Construction
NUMBER OF BORROWERS
Desktop Underwriter
The maximum number of borrowers Desktop Underwriter can assess on a single loan is four.
Loan Product Advisor
The maximum number of borrowers Loan Product Advisor can assess on a single loan is five.
RESIDENT AND IMMIGRATION STATUS
Non-U.S. citizens who are lawful permanent or non-permanent residents of the United States are
eligible under the same terms, mortgage product, transaction type, occupancy status, and loan-to-value
ratios that are available to United States citizens. Borrowers that are not citizens must currently reside
in the United States to be eligible. All borrowers must have a valid social security number.
Flagstar must be able to evaluate a borrower’s credit history to determine whether the borrower has
demonstrated the willingness to meet credit obligations. Borrower must have a valid two-year work
history, be employed within the U.S. and income must be expected to continue for the next three years
Loan requiring MI may have additional restrictions.
Permanent Resident Alien
A permanent resident alien (immigrant) is an individual who is lawfully accorded the privilege of
residing permanently in the United States. Refugees and others seeking political asylum, who are
immigrating to and seeking permanent residency in the United States, are classified under the
permanent resident alien status. The INS has special immigration programs that enable these
individuals to seek and accept employment while they are in the process of obtaining their
permanent resident alien status, which generally will take from two to three years.
Documentation
• Permanent Resident Alien status must be documented with a copy of the borrower(s)’ green
card
• Refugees and asylees may provide valid form I-94 with the indicator of refugee or asylum
admission status and copy of EAD card.
Document Expiration
• Conditional 2-year green card- borrower must provide evidence of petition for permanent
resident status if the card is expiring within 90 days of the application.
Conventional Underwriting Guidelines
VI. Underwriting Guidelines 48 of 149 0422/2021
Return to Menu
• Permanent green card with 10-year renewal- If the green card contains an expiration date,
and will expire within 6 months of the application, the borrower must provide evidence of
filing an I-90 form to replace the card. Note: an expired 10-year green card does not, in
itself, impact the borrower’s status to lawfully reside in the United States.
• Refugee and Asylum status- If an EAD card expiration is within six months of the application
the borrower must show evidence they have applied for an extension
Non-Permanent Resident Alien
A nonpermanent resident alien is an individual who seeks temporary entry to the United States for a
specific purpose (e.g. foreign government officials, visitors for business or pleasure, aliens in transit
through the United States, treaty traders and investors, students, international representatives,
temporary workers and trainees, representatives of foreign information media, exchange visitors,
fiancés or fiancées of U.S. citizens, intra-company transferees, and NATO officials)
Documentation
• For borrower’s with DACA c(33), a work status that is under a deferred action, an unexpired
authorization status is required. DACA status is eligible for Fannie Mae only.
• For all other borrowers who are lawful non-permanent resident aliens of the United States,
with an acceptable Visa classification, evidence must be provided with one of the following:
o An acceptable visa, or
o An acceptable expired visa along with I-797A with detachable I-94, or
o EAD card
Acceptable Visa Types:
• E Series (E-1, E-2, E-3)
• G Series (G-1, G-2, G-3, or G-4 only) which must document that the borrower does not have
diplomatic immunity. Verification that the borrower does not have diplomatic immunity can
be determined by reviewing the visa, passport or the U.S. Department of State’s Diplomatic
List here. The transmittal summary requires a comment indicating that the borrowers visa
status does not require the payment of taxes and therefore tax transcripts are not available.
• H Series (H1-B, H1-C, H-2, H-3, H-4)
• L Series (L-1A, L-1B, L-2)
• O Series (O-1)
• NATO (TN-1 and TN-2) For NAFTA professionals from Canada and Mexico a VISA or EAD
card is not required as long as the borrower(s) has an unexpired passport that is stamped
with the H1B status.
• I-797 Notice of Action/Approval with valid dates. The document must refer to an acceptable
visa classification as indicated above.
Documentation Expiration
• Acceptable Visa:
o If expiration is within six months of the loan application and the borrower has not
changed employers, a copy of the employer’s letter of sponsorship for visa renewal
must be provided.
o If Visa has expired, a valid from I-797A with detachable I-94 must be provided
Conventional Underwriting Guidelines
VI. Underwriting Guidelines 49 of 149 0422/2021
Return to Menu
• EAD- If expiration is within six months of the application the borrower must show evidence
they have applied for an extension or provide letter from the employer indicating they will
continue to sponsor their employment.
TAX IDENTIFICATION NUMBERS
All borrowers must have a valid social security number.

융자지식169- MONTHLY DEBT OBLIGATIONS

by usezloan | Aug 11, 2021 | Financial study

융자지식169- MONTHLY DEBT OBLIGATIONS

MONTHLY DEBT OBLIGATIONS

ALIMONY AND CHILD SUPPORT
• When the borrower is required to pay under a legal written legal order or agreement, and
• Payments are required to continue to be made for more than 10 months.
• Child support is treated as a liability
Conventional Underwriting Guidelines
VI. Underwriting Guidelines 39 of 149 0422/2021
Return to Menu
• For alimony, when reduced from the qualifying income a copy of the divorce decree or other
court order equivalent documentation must be provided.
o Fannie Mae- Alimony must first be listed as a liability, if DU recommendation of ineligible
or refer due to ratios the amount may be entered as a negative figure under the income
type of Alimony
o Freddie Mac- the alimony amount must be entered as a negative figure under the
income type of Alimony
AUTHORIZED USER ACCOUNTS
The borrower must qualify with the payment unless one of the following applies:
• The authorized user tradeline belongs to another borrower on the mortgage loan, or
• It can be documented someone else other than the borrower is making the payment. See NonMortgage Debts Paid by Others section for requirements
BRIDGE (OR SWING) LOAN
A bridge (or swing) loan that is collateralized by a borrower’s present home, so that the funds from that
loan can be used for closing on a new home, may only be excluded when the following is provided:
• A fully executed sales contract for the current secured residence is received, and
• Confirmation that any financing contingencies have been cleared.
BUSINESS DEBT IN BORROWER’S NAME
The borrower’s business account payment, reporting on a personal credit report, does not need to be
considered as part of the borrower’s individual recurring monthly debt obligations if all the following
requirements are met:
• The account in question does not have a history of delinquency.
• The business provides acceptable evidence that the obligation was paid out of company funds,
such as 12 months of canceled company checks.
• The cash flow analysis of the business took payment of the obligation into consideration.
The account payment does need to be considered as part of the borrower’s individual recurring monthly
debt obligations in any of the following situations:
• If the business does not provide sufficient evidence that the obligation was paid out of company
funds.
• If the business provides acceptable evidence of its payment of the obligation, but the lender’s
cash flow analysis of the business does not reflect any business expense related to the
obligation, such as an interest expense and taxes and insurance, if applicable, equal to or
greater than the amount of interest one would reasonably expect to see given the amount of
financing shown on the credit report and the age of the loan. It is reasonable to assume that the
obligation has not been accounted for in the cash flow analysis.
• If the account in question has a history of delinquency. To ensure that the obligation is counted
only once, the lender should adjust the net income of the business by the amount of interest,
taxes or insurance expense, if any, which relates to the account in question.
CALCULATING MONTHLY REAL ESTATE TAX PAYMENT – SUBJECT PROPERTY
Real estate tax amounts included in the monthly housing expense must be based on the value of the
improvements plus the value of the land.
Conventional Underwriting Guidelines
VI. Underwriting Guidelines 40 of 149 0422/2021
Return to Menu
• When calculating the real estate tax payment for existing (not new construction) properties, the
following documentation must be used:
o The taxes listed on the title commitment or property tax bill/cert unless a change to taxes
based on transfer of ownership is disclosed; or
o When disclosed that a property is located in a jurisdiction where transfer of ownership
causes or results in a recalculation of taxes (e.g. purchase of an investment property
with current homestead exemption), the monthly housing expense must include an
estimate of the recalculated tax amount using information provided on the title
commitment, tax bill or local assessor’s office; or
o Evidence from the local assessor’s office of the current tax rate calculated by the
appraised value.
• If the transaction is a new construction and the property has not been fully assessed, the taxes
may be calculated based on the current tax rate as obtained from the local tax assessor’s office
or 1.5% of the appraised value. If the disclosed tax rate is higher it must be used for qualification
over the 1.5%.
• For purchases of new and existing properties in California only, property taxes may be
calculated using the higher rate of 1.25% of the purchase price, current tax bill, or the current
tax rate as obtained from the local tax assessor’s office.
• If a special assessment levied against the property is not part of the annual tax payments or
paid at loan closing, the monthly payment must include 1/12 of any estimated annual payment
toward the assessment
• A tax abatement may be used to qualify at a reduced monthly expense provided there is
evidence of the tax abatement and documentation to show continuance for at least 5 years after
the Note date. If the abatement increases annually, the annual taxes that will be required at the
end of the 5th year after the first mortgage payment date must be used for qualification.
COURT-ORDERED ASSIGNMENT OF DEBT
When a borrower has an outstanding debt that was assigned to another party by court order and the
creditor does not release the borrower from liability;
• The contingent liability will not be considered as part of the borrower’s recurring monthly debt
obligation when evidence of transfer of ownership, if applicable, and court ordered
documentation is provided.
• Although not required to evaluate the payment history for the assigned debt after the effective
date of the assignment, borrower’s payment history for the debt before its assignment cannot be
disregarded.
CURRENT RESIDENCE PENDING SALE
The PITIA for the Borrower’s current primary residence pending sale, but will not close prior to the
subject transaction, may be excluded if one of the following requirements are met:
• An executed sales contract for the property-pending sale. If the executed sales contract
includes a financing contingency, the mortgage file must also contain evidence that the
financing contingency has been cleared or a lender’s commitment to the buyer of the property
pending sale; or
• And executed buyout agreement that is part of an employer relocation plan where the
employer/relocation company takes responsibility for the outstanding mortgage(s). There cannot
be any financing contingencies and the relocation agreement must be fully executed by both the
borrower and relocation company with no right to cancel.
Conventional Underwriting Guidelines
VI. Underwriting Guidelines 41 of 149 0422/2021
Return to Menu
o For Freddie Mac an employer relocation plan with an unexecuted buy-out agreement
may be used with the following requirements:
 The borrower has sufficient reserves, above those required on the LPA
response, to pay the monthly payment amount for the property pending sale until
the expiration date of the buy-out as indicated in the agreement, and
 The borrower(s) provide a signed statement indicating his intention to accept the
buy-out agreement if the current primary residence is not sold prior to the
expiration date of the agreement
NON-MORTGAGE DEBTS PAID BY OTHERS
In order to exclude a non-mortgage debt all of the following requirements must be met:
• The most recent 12 months’ cancelled checks (or bank statements) from the other party
documenting a 12–month satisfactory payment history must be provided dated within 120 days
of the Note date,
• There must be no delinquent payments for the debt, and
• The payer is not required to be an obligated party on the debt however they may not be an
interested party to the transaction (e.g. seller or realtor).
• The underwriter must evaluate the validity of circumstances under which the payments are
being made by another party. For example, payments on multiple student loans made by the
borrower’s parent represent a common situation. However, additional investigation and
documentation might be necessary when a Borrower’s multiple installment and revolving debts
are being paid by the borrower’s spouse who is not on the subject Mortgage.
DEFERRED INSTALLMENT DEBT
Deferred installment debt must be included as part of the borrower’s recurring monthly debt obligations.
For deferred installment debts other than student loans, if the borrower’s credit report does not indicate
the monthly payment that will be payable at the end of the deferment period, a copy of the borrower’s
payment letter or forbearance agreement should be provided to document the payment amount to use
in calculating the borrower’s total monthly obligations. For information about deferred student loans,
see Student Loan section.
FEDERAL TAX INSTALLMENT PLANS
The monthly payment due under an IRS income tax installment agreement can be included in the DTI
ratio (in lieu of full payment), provided the following requirements are met:
• There is no indication that a Notice of Federal Tax Lien has been filed against the borrower in
the county in which the subject property is located.
• The underwriter must obtain the following documentation:
o An approved IRS installment agreement with the terms of repayment, including the
monthly payment amount and total amount due; and
o Evidence the borrower is current on the payments associated with the tax installment
plan. Acceptable evidence includes the most recent payment reminder from the IRS,
reflecting the last payment amount and date the next payment owed and due date. At
least one payment must have been made prior to closing.
HOME EQUITY LINES OF CREDIT
The payment on a home equity line of credit must be considered as part of the borrower’s recurring
monthly debt obligations.
Conventional Underwriting Guidelines
VI. Underwriting Guidelines 42 of 149 0422/2021
Return to Menu
• Fannie Mae- If the home equity line of credit does not require a payment, there is no recurring
monthly debt obligation and no need to develop an equivalent payment amount.
• Freddie Mac-HELOC payments must be included in the housing expense-to-income ratio when
there is an outstanding balance on the account. In the absence of a monthly payment on the
credit report, and if there is no documentation indicating a monthly payment amount, 1.5% of
the outstanding balance will be used to determine the qualifying payment.
INSTALLMENT DEBT
Must considered as part of the borrower’s recurring monthly debt obligations if there are more than 10
monthly payments remaining to be paid on the account.
• An installment debt with ≤ 10 monthly payments remaining should also be considered as a
recurring monthly debt obligation if it significantly affects the borrower’s ability to meet credit
obligations.
LEASE PAYMENTS
The lease payments must be considered a recurring monthly debt obligation, regardless of the number
of months remaining on the lease. This is because the expiration of a lease typically leads to a new
lease or debt obligation.
LOAN SECURED BY FINANCIAL ASSETS
A loan secured against the borrower’s financial asset such as a 401K, IRA, CD, Stocks, etc.
• The loan is not considered as part of the borrower’s recurring monthly debt obligations, as long
as the lender obtains a copy of the applicable loan instrument that shows the borrower’s
financial asset as collateral for the loan.
• The value of the asset must be reduced by the proceeds from the secured loan, and any related
fees, to determine remaining funds which may be applied toward asset reserves.
MORTGAGE ASSUMPTIONS
When a borrower sells a mortgaged property and the property purchaser assumes the outstanding
mortgage, this liability does not have to be counted when all of the following requirements are met:
• A copy of the executed formal assumption agreement, with or without a release of liability,
• Evidence must be provided of the transfer of ownership,
• Fannie Mae – also requires that if the borrower is unable to document timely payments during
the most recent 12-month period on the assumed property, the entire PITI payment must be
included in the borrower’s total debt ratio.
MORTGAGES PAID BY OTHERS
When a borrower is obligated on a mortgage debt, but is not the party who is actually repaying the debt
the monthly mortgage payment may be excluded when all of the following requirements are met:
• The party making the payments is obligated on the mortgage debt,
• Document that someone other than the borrower makes the payments by obtaining copies of
canceled checks, bank statements, etc.,
• Most recent 12-month payment history with no delinquencies within the most recent 12 months
dated within 120 days of the Note date,
• The borrower is not using rental income from the applicable property to qualify,
Conventional Underwriting Guidelines
VI. Underwriting Guidelines 43 of 149 0422/2021
Return to Menu
• The mortgaged property must still be included in the borrower’s multiple financed property
count,
• Meet guideline Reserve Requirements,
• Freddie Mac –also requires that the party making the payments is not an interested party to the
subject real estate or Mortgage transaction
OPEN 30-DAY CHARGE ACCOUNTS
An open 30-day account (account which the balance is required to be paid in full monthly) may be
identified when the account does not reflect a revolving monthly payment on the credit report, lacks
documentation in file to indicate a revolving monthly payment, or credit reflects the monthly payment is
identical to the outstanding balance.
Fannie Mae
• The account is not included in the borrower’s monthly debt obligations. Sufficient assets
must be verified to cover the account balance, in addition to any funds required for closing
and reserves based on the transaction type. DU findings will include the balance of the 30-
day charge account in the required reserves to be verified. When a borrower is receiving
cash back from the transaction the required amount will be reduced by the cash back up to
the full balance of the account.
Freddie Mac
• The account is not included in the borrower’s monthly debt obligations when sufficient
assets to cover the account balance, in addition to any funds required for closing and
reserves based on the transaction type. LPA findings will not include the balance in the
assets to be verified, the balance will need to be manually calculated by adding the balance
to the assets required by the AUS response. Cash back is not an eligible source of funds
unless the balance is being paid off with the transaction.
• In lieu of obtaining sufficient funds to cover the balance, the full balance of an open 30-day
charge account may be used as the qualifying payment and included in the debt-to-income
ratio for qualification purposes.
PAYMENTS ON REAL ESTATE CO-OWNED
When the borrower is on title to a property as an owner but is not a signor on the note or mortgage
he/she must qualify with the taxes and insurance for the said property.
PAYMENTS ON REAL ESTATE MORTGAGES
When the borrower owns mortgaged real estate, the full PITIA the borrower is obligated to pay is
considered as part of the borrower’s recurring monthly debt obligations.
PAYOFF OR PAYDOWN OF DEBT FOR QUALIFICATION
Payoff or pay-down of debt solely to qualify must be carefully evaluated and considered in the overall
loan analysis. The borrower’s history of credit use should be a factor in determining whether the
appropriate approach is to include or exclude debt for qualification. As a rule of thumb:
• Installment loans that are being paid off or paid down to 10 or fewer remaining monthly
payments should generally not be included in the borrower’s long-term debt.
Conventional Underwriting Guidelines
VI. Underwriting Guidelines 44 of 149 0422/2021
Return to Menu
• If a revolving account is to be paid off at or prior to close, a monthly payment on the current
outstanding balance does not need to be included in the borrower’s long-term debt, i.e., not
included in the debt-to-income ratio.
• Open 30 day charge accounts must be paid off at or prior to closing if the borrower is unable to
document sufficient assets to cover the unpaid balance.
PROPERTY SETTLEMENT BUY-OUT
When a borrower’s interest in a property is bought-out by another co-owner of the property, as often
happens in a divorce settlement, but the lender does not release the borrower from liability under the
mortgage, the borrower has a contingent liability. We will not require that this contingent liability be
considered as part of the borrower’s recurring monthly debt obligations, as long as documentation can
be obtained to confirm the transfer of title to the property.
RENTAL HOUSING PAYMENT
A borrower’s monthly rental housing expense, when applicable, must be evaluated for non-occupant
co-borrowers and for all second homes or investment property transactions. The obligation must be
included and documented by one of the following:
• Six months cancelled checks (or equivalent payment source)
• Six months bank statements reflecting consistent payments to an organization or individual
• Direct verification of rent from a management company or individual landlord; or
• A current, fully executed lease agreement and two months cancelled checks to support the
rental payment amount
Borrower(s) without a credit score who require non-traditional credit verification must meet the nontraditional credit documentation requirements.
REVOLVING CHARGE ACCOUNTS
Revolving charge accounts and lines of credit must be considered part of the borrower’s recurring
monthly debt obligations.
• If the credit report does not show a required minimum payment amount, use an amount equal to
5% of the outstanding balance.
STUDENT LOANS
Fannie Mae
Repayment Terms Qualification Requirements
Repayment, Forbearance,
and Deferred
• The monthly payment on the credit report
• If there is no payment or payment of $0 on credit:
o 1% of the outstanding loan balance (even if amount is lower
than the amortizing payment); or
o A fully amortizing payment using the documented loan
repayment terms
Income-Driven Repayment
(IDR)
• The documented payment, even if $0, as long as the loan is not
in deferment
Freddie Mac
Repayment Terms Qualification Requirements
Conventional Underwriting Guidelines
VI. Underwriting Guidelines 45 of 149 0422/2021
Return to Menu
Repayment, Forbearance,
and Deferred
• The monthly payment on the credit report or other file
documentation
• If there is no payment or payment of $0 on credit:
o 0.5% of the outstanding loan balance (even is amount is
lower than the amortizing payment); or
Forgiveness, Cancelation,
Discharge and
Employment-Contingent
Repayment Programs
The payment may be excluded when one of the following is met:
• The student loan has 10 or less monthly payments remaining
until the full balance of the student loan is forgiven, canceled,
discharged or in the case of an employment-contingent
repayment program, paid,
Or
• The monthly payment on a student loan is deferred or is in
forbearance and the full balance of the student loan will be
forgiven, canceled, discharged or in the case of an employmentcontingent repayment program, paid, at the end of the
deferment or forbearance period; And
• The borrower is eligible or approved for the student loan
forgiveness, cancellation, discharge or employment-contingent
repayment program, as applicable, and there are no known
circumstances that will make the borrower ineligible in the
future. Evidence of eligibility or approval must come from the
loan program or employer, as applicable.