When the Right of Rescission Period Begins and Ends

  • It begins at midnight the day after loan docs are signed
  • And ends 3 business days later
  • This time period includes Saturdays
  • But excludes Sundays and federal holidays

The rescission period begins at midnight the day after loan documents are signed, and ends three business days later, including Saturdays, but not Sundays or federal holidays.

Here are the guidelines:

 

A valid foreign passport (verify borrower does not have diplomatic immunity), and

 

F Series (F-1 Student and F-1/OPT Student) – Given to individuals who are in the U.S. in order to engage in full-time academic study or granted OPT status (Optional Practical Training) which extends the F-1 student status and permits the individual to remain in the U.S. after completing their academic program with permission to work in their field of study. Additional requirements for F Series are as follows: § F-1 Student – required to attend school full-time unless authorized by a Designated School Official (International Student Advisor)

§ F-1/OPT Student or Post-completion OPT – employment is acceptable as long as the work being performed is directly related to their major area of study

§ Two-year credit and income history is required. Additional credit and income references needed may be obtained from a foreign country if the borrower has not been employed two full years in the U.S.

§ Must reside and be employed in the U.S.

§ Internal Exception Code 1004

• Unexpired Employment Authorization Document (EAD, Form I-766) is required to evidence work status

B3-4.1-02: Interested Party Contributions (IPCs) (12/19/2017)

https://www.fanniemae.com/content/guide/selling/b3/4.1/02.html


AGENT CREDIT to borrower:

Comment: Agent credits are a part of interested party contributions. The max will depend on the LTV. If the LTV is greater than 90 = 3% IPC limit. If between 75.01-90% = 6%, If below 75% = 9% on primary/second home. The credit can go towards the reserves, escrows, any other closing costs. It cannot go towards the down payment.

Interested party contributions (IPCs) are costs that are normally the responsibility of the property purchaser that are paid directly or indirectly by someone else who has a financial interest in, or can influence the terms and the sale or transfer of, the subject property.

Interested parties to a transaction include, but are not limited to, the property seller, the builder/developer, the real estate agent or broker, or an affiliate who may benefit from the sale of the property and/or the sale of the property at the highest price possible. A lender or employer is not considered an interested party to a sales transaction unless it is the property seller or is affiliated with the property seller or another interested party to the transaction. (For Fannie Mae's purposes, an affiliation exists when there is direct common ownership or control by the lender over the interested party or vice versa, or when there is direct common ownership or control by a third party over both the lender and the interested party. A typical ongoing business relationship — for example, the relationship between a builder and a lender that serves as its financial institution — does not constitute an affiliation.)

IPCs are either financing concessions or sales concessions. Fannie Mae considers the following to be IPCs:

  • funds that are paid directly from the interested party to the borrower;

  • funds that flow from an interested party through a third-party organization, including nonprofit entities, to the borrower;

  • funds that flow to the transaction on the borrower’s behalf from an interested party, including a third-party organization or nonprofit agency; and

  • funds that are donated to a third party, which then provides the money to pay some or all of the closing costs for a specific transaction.

A lender credit derived from premium pricing is not considered an IPC even if the lender is an interested party to the transaction.

See B3-4.1-03, Types of Interested Party Contributions (IPCs), for more information.

Fannie Mae does not permit IPCs to be used to make the borrower’s down payment, meet financial reserve requirements, or meet minimum borrower contribution requirements.

IPC Limits

The table below provides IPC limits for conventional mortgages.

IPCs that exceed these limits are considered sales concessions. The property’s sales price must be adjusted downward to reflect the amount of contribution that exceeds the maximum, and the maximum LTV/CLTV ratios must be recalculated using the reduced sales price or appraised value.

Occupancy Type LTV/CLTV Ratio Maximum IPC
Principal residence or second home Greater than 90% 3%1
75.01% – 90% 6%
75% or less 9%
Investment property All CLTV ratios 2%

Lender Checklist for IPCs

The lender must ensure that all of the following requirements for an IPC are satisfied.

Lender Checklist for IPCs
Ensure that any and all IPCs have been identified and taken into consideration.
Provide the appraiser with all appropriate financing data and IPCs for the subject property granted by anyone associated with the transaction.
Ensure that the property value is adequately supported.
Ensure that the LTV and CLTV ratios, after any IPCs are taken into consideration, remain within Fannie Mae’s eligibility limits for the particular product.
Ensure that mortgage insurance coverage, if applicable, has been obtained, based on the LTV ratio after any IPC adjustments have been made.
Scrutinize all loan and sales contract documents, including but not limited to the sales contract, the loan estimate, the Uniform Residential Loan Application (Form 1003 or Form 1003(S)) (particularly Section VII, Details of Transaction), the appraisal report, and the settlement statement.
Ensure that all elements of the settlement statement were taken into consideration during the underwriting process.
Ensure that fees and expenses are consistent between all documents. Analyze any differences and review any discrepancies.

Lender Incentives for Borrowers

Cash or Cash-like Incentives for all Transaction Types: The lender may provide the borrower with a cash or cash-like (e.g., a gift card) incentive that is not reflected on the settlement statement provided that

  • the amount of the incentive does not exceed $500, and

  • no repayment is required.

Because the lender is not typically a party to the sales transaction, these types of lender incentives are not considered IPCs and, as a result, are not included in the IPC limit calculation. Furthermore, these incentives are not considered cash out to the borrower and do not have to be included in the cash back to borrower at closing calculation.

Note: Documentation of compliance with this policy will not be required at the loan level. However, the lender must establish policies and/or procedures to ensure that the loans with these types of incentives that it delivers to Fannie Mae, whether or not the loans were originated by the lender, are in compliance with this policy.

Pay Down of Existing Mortgage Balance for Eligible Refinance Transactions: For DU Refi Plus and Refi Plus transactions, the lender may provide an incentive to the borrower in the form of a payment to pay off a portion of the mortgage loan being refinanced provided that

  • the amount of the incentive does not exceed $2,000,

  • no repayment is required, and

  • the payment is reflected on the settlement statement as a lender credit.

Because these are refinance transactions, the incentive is not considered an IPC and, as a result, is not included in the IPC limit calculation. Furthermore, this incentive is not considered cash out to the borrower and it does not have to be included in the cash back to borrower at closing calculation.

Down Payment Requirements and Gifts/Grants

Gifts/grants, from an allowable Fannie Mae source, are allowed on primary residences and second homes.

LTV/CLTV/ HCLTV Ratios Source of Funds Minimum Borrower Contribution
Requirement from Borrower's Own Funds
Personal Gifts Gift or Grant from entity, Employer Assistance, Community Seconds
80% or less 1 - 4 unit principal residence None
Funds needed to complete the transaction can come from the source of funds noted here.
Second Homes* NA
Greater than 80% 1 - unit principal residence None
Funds needed to complete the transaction can come from the source of funds noted here.
Two - to four - unit principal residence
Second Homes
Borrower must make a 5% contribution from his or her own funds.
After the minimum borrower contribution has been met from the borrower's own funds, the source of funds can be used to supplement the down payment, closing costs, and reserves.


* Please note: Second Homes transactions with LTV/CLTV/HCLTV of 80% or less, may not apply a donation from entities, employer assistance or community seconds as meeting minimum borrower contribution. Only a gift may be received to meet the borrower's contribution.




Factors to Consider for a Self-Employed Borrower
Any individual who has 25% or greater ownership interest in a business is considered to be self-employed.

 

Length of Self Employment

Generally, a two year history prior earning history must be obtained as a means of demonstrating the likelihood that the income will continue to be received.

However, a person who has a shorter history of self-employment -- 12 to 24 months -- may be considered, as the long as the borrower's most recent signed federal income tax returns reflect the receipt of such income as the same (or greater) level in a field that provides the same products or services as the current business or in an occupation in which he or she had similar responsibilities to those undertaken in connection with the current business. In such cases, careful consideration must be given to the nature of the borrower's level of experience, and the amount of debt the business has acquired

Verification of Income

Verification of a self employed borrower's employment and income is completed by obtaining from the borrower copies of his or her signed federal income tax returns (both individual returns and in some cases business returns) that were filed with the IRS for the past two years (with all applicable schedules attached).

When two years of signed individual federal tax returns are provided, the requirement of business tax returns may be waived if:

  • the borrower is using his or her own personal funds to pay the down payment and closing costs and satisfy applicable reserve requirements,

  • the borrower has been self-employed in the same business for at least five years, and

  • the borrower's individual tax returns show an increase in self-employment income over the past two years.

For certain loans, Gemstone AU will issue a message permitting only one year personal and business tax returns, provided the income is documented by:

  • obtaining signed individual and business federal income tax returns for the most recent year,

  • confirming the tax returns reflect at least 12 months of self-employment income, and

  • Self-Employed Analysis Worksheet [WSL:915] is completed.


.

 




Where to get a free annual credit Report ?

Tips on preparing for IDV - Obtain a free annual credit report from www.annualcreditreport.com prior to beginning your credit report request in NMLS to allow you to resolve any issue on the credit report prior to providing to regulator(s). Access TransUnion’s Credit Dispute page for information on the dispute process.

Non-Permanent Resident Borrowers


 

Non-Permanent Resident Borrowers are those Borrowers seeking temporary entry into the United States for a specific purpose (i.e. schooling, career development, engagement to a U.S. citizen or Foreign Treaty Traders). The source of the individual's income must be reasonably expected to continue for three years. Non-Permanent Resident Borrowers must be legal residents of this country and be able to document current U.S. employment and current U.S. residence to be eligible for mortgage financing. They cannot, however, be resident under governmental protection, either military or diplomatic.

Non-permanent Resident Borrowers with an AUS Approval must have the following additional credit requirements:

  • One (1) year credit depth (Credit report consist of credit history dating back at least one (1) year from the date the report was pulled). This does not apply to the HomeReady product.

  • Minimum of two (2) open trade lines. Each tradeline does not need be open for one (1) year. Tradelines only need to be open, not active. This does not apply to the HomeReady product.

  • Loans without an AUS Approval and that have Mortgage Insurance are subject to additional guidelines.

All non-permanent resident borrowers must have a valid social security number and provide evidence of a valid passport with an acceptable visa classification. Visa status allows a borrower to enter the U.S. for various reasons for a certain period of time, as well as providing both legal non-permanent residency and legal purpose.

Either a copy of the unexpired visa or an acceptable I-797 Notice of Action/Notice of Approval form with valid extension dates and the I-94 Arrival/Departure Receipt must be included in the loan file evidencing one of the visa classifications listed below. No other visas are acceptable. For more information and a complete list of visa classifications, visit the USCIS website at www.uscis.gov/portal/site/uscis.

Acceptable visa classifications for Conforming Fixed, Conforming Standard ARM, FNMA DU Refi Plus, and HomeReady™ Mortgage Loans

E Series (E-1, E-2, E-3) Treaty Trader/Investor

  • Applies to nationals of countries with which the United States has a treaty concerning commerce and navigation who are coming to the United States to carry out "substantial" trade, between the United States and the treaty country, or to direct operations of an enterprise in which the national has invested.

  • If the applicant is not the principal investor, he or she must be employed in a supervisory, executive, or highly specialized skill capacity.

G Series (G-1, G-2, G-3, G-4, G-5) International Organization

  • Applies to employees of international organizations that are located in the United States.
  • Some examples include the United Nations, Red Cross, World Bank, UNICEF and the International Monetary Fund.

  • Verification that the applicant does not have diplomatic immunity must be obtained from the applicant's employer and/or by viewing the applicant's passport.

H Series (H-1B, H-1C, H-2, H-3, H-4) Temporary Worker

  • Applies to persons in specialized knowledge along with at least a bachelor's degree or its equivalent, and their immediate family members. For example, architecture, engineering, development projects administered by the Department of Defense, mathematics, physical sciences, social sciences, medicine and health, education, business specialties, accounting, law, theology , and the arts.

L Series (L-1A, L-1B, L-2) Intra-Company Transferee

  • L-1A and L-1B applies to professional employees who have been employed continuously for 1 year by a non-U.S. firm or corporation who are temporarily transferred to an office, branch, or subsidiary of that company in the United States.

  • The L-2 applies to the spouse and children of the L-1 nonimmigrant

NATO Series (NATO 1-6)

  • Applies to representatives, officials, and experts coming to the U.S. under applicable provisions of the NATO Treaty and their immediate family members.

O Series (O-1)

  • Applies to an individual with extraordinary ability in sciences, arts, education, business or athletics

TN-1, Canadian NAFTA visa

  • Used by Canadian citizens for professional or business purposes.

TN-2, Mexican NAFTA visa

  • Used by Mexican citizens for professional or business purposes.

For non-permanent resident borrowers who have an unexpired visa, if the visa will expire within six (6) months of loan application and the borrower has not changed employers, a copy of the employer's letter of sponsorship for visa renewal must be provided. If the borrower is or has changed employers at or after loan application, a valid employment authorization document (EAD) must be obtained.

Please Note: Initial EADs are valid for one (1) or two (2) years while the Application for Adjustment of Status (green card) is pending. For EADs expiring within 90 days after the date of loan approval, documentation must be obtained that the borrower has applied for a renewal of their EAD.

  • An I-797 Notice of Action/Notice of Approval with valid dates may be used as sufficient evidence of lawful U.S. residency. This document must reference an acceptable visa classification and indicate an expiration date no earlier than twelve (12) months after loan approval date.

  • If the employer on the I-797 Notice of Action/Notice of Approval is different than the employer listed on the loan application, the I-797 is no longer valid.

  • If either the visa or the I-797 Notice will expire within six (6) months after loan application, I-797 within twelve (12) months after loan approval, it is acceptable to obtain a letter from the employer documenting the borrower's continued employment and continued visa renewal sponsorship (employer on the loan application must be the same as on the unexpired visa).

  • If a non-permanent resident borrower is borrowing with a U.S. citizen, it does not eliminate or reduce any visa or other non-permanent resident borrower documentation requirements.

Borrowers Applying for Permanent Resident Alien Status

  • Borrowers in the process of changing their residency status from non-permanent resident alien to permanent resident alien are eligible.

    • The following must be included in the loan file:

    • I-797 Receipt Notice of I-485 Application to Register Permanent Residence or Adjust Status

    • letter from employer verifying employment,
    • an unexpired EAD,

      Note: Initial EADs are valid for one (1) or two (2) years while the Application for Adjustment of Status (green card) is pending. A valid EAD is one that will not expire within 90 days after the date of loan approval. For EADs expiring within 90 days after the date of loan approval, documentation must be obtained that the borrower has applied for a renewal of their EAD.

  • Non-permanent resident borrowers visa requirements do not apply 



Mortgage related to Foreigner

Q: Can I get a mortgage if I am working aboard?

A:  it depends
if you are working for a U.S company aboard,  you can.. The rules are the same.

if you are working for a non-US company aboard,  we can do it too with very limited bank. It involve in the verification of employment.

RRecast/Curtailmentsecast/Curtailments
Recast and Curtailment
  1. Borrower must send letter requesting the recast with a $250.00 fee and a minimum of $10,000 for the principal reduction. All signers on the Note must sign the request.

Mail to:
New York Community Bank

Special Loans
Mail Code: OH98-0814

1801 East Ninth Street, Suite 200

Cleveland, OH 44114

  1. Principal payment (curtailment) will be applied immediately. The new principal and interest payment will take effect in 30 days.

  2. Borrower will receive a loan modification agreement to sign and return. A cover letter will indicate the total amount of the new payment, including escrow (if applicable). The letter also includes the effective date of new payment pending receipt of signed loan modification.

  3. The payment changes are usually effective the next payment after receipt of the signed loan modification.






CASH-OUT Refinance

Q: Can I do cashout after purchasing a property in CASH?
A: Yes, you can.  The term for it is Delay Refinance.

Delayed Refiance


>> Delayed Financing Exception
Borrowers who purchased the subject property within the past six months (measured from the date on which the property was purchased to the new first mortgage loan underwriting final approval date) are eligible for a cash-out refinance if ALL of the following requirements are met:

Requirements for a Delayed Financing Exception
The original purchase transaction was an arms-length transaction.

For this refinance, the borrower must meet borrower eligibility requirements as described in the Seller's Guide and Gemstone Product pages for cash-out transactions. The borrowers may have initially purchased the property as one of the following:

  • A natural person;
  • An eligible inter vivos revocable trust, when the borrower is both the individual establishing the trust and the beneficiary of the trust;
  • An LLC or partnership in which the borrower(s) have an individual or joint ownership of 100%.
The original purchase transaction is documented by the Closing Disclosure, which confirms that no mortgage financing was used to obtain the subject property. (A recorded trustee's deed [or similar alternative] confirming the amount paid by the grantee to trustee may be substituted for the Closing Disclosure if the Closing Disclosure was not provided to the purchaser at the time of sale.) The preliminary title search or report must confirm that there are no existing liens on the subject property.
The sources of funds for the purchase transaction are documented (such as bank statements, personal loan documents, or a HELOC on another property).
If the source of funds used to acquire the property was an unsecured loan or a loan secured by an asset other than the subject property (such as a HELOC secured by another property), the Closing Disclosure for the refinance transaction must reflect that all cash-out proceeds be used to pay off or pay down, as applicable, the loan used to purchase the property. Any payments on the balance remaining from the original loan must be included in the debt-to-income ratio for the refinance transaction.

Note: Funds received as a gift and used to purchase the property may not be reimbursed with proceeds of the new mortgage loan.
The new loan amount can be no more than the actual documented amount of the borrower's initial investment in purchasing the property plus the financing of closing costs, prepaid fees, and points on the new mortgage loan (subject to maximum LTV/CLTV/HCLTV ratios for cash-out transaction based on current appraised value).
All other cash-out refinance eligibility requirements are met. Cash-out pricing is applicable.



Q: what are the Acceptable Uses for cash-out?

A:  Here are the list of items that you can use it for

 

>> Acceptable Uses
The following are acceptable uses for cash-out refinance transactions:

  • Paying off the unpaid principal balance of the existing first mortgage;

  • Financing the payment of closing cost, points, and prepaid items. The borrower can include real estate taxes in the new loan amount. Delinquent real estate taxes (taxes past due more than 60 days) can be included in the new loan amount but if they are, an escrow account must be established, subject to applicable law or regulation;

  • Paying off any outstanding subordinate mortgage liens of any age;

  • Taking equity out of the subject property that may be used for any purpose;

  • Financing a short-term refinance mortgage that combines a first mortgage and a non-purchase-money subordinate mortgage into a new first mortgage or a refinance of a short-term refinance within six months.

Q: Where can i get third party translation service?
A: Please see the following link for the service provider.

REV

ABStraslation

CreditEvl




Q: where can i get the IRA Distribution Rule?
A: IRS's public 590B talked about the distribution.  You can get it from IRS.

IRA Distribution Publication 590B

Q: if spouse is not on the mortgage, is the spouse required to sign the closing doc?

A: It depends:

No borrower spouse has to sign on a primary residence, either as a co-borrower or a non-borrowing spouse.

they have docs to sign, deed of trust, riders, truth-in-lending, etc. They do not sign the note and a couple other documents, but yes, they sign docs.

A primary residence in the state of Texas and they are married, spouse needs to sign.

If it was a 2nd home or investment she doesn’t have to be on the docs but she would still need to sign the non-homestead affidavit since they are married and are occupying the homestead together.

Q: what is Texas Equity Section 50(a)(6)?
A: Under Texas law, a new Texas Section 50(a)(6) mortgage is an equity take-out mortgage (a cash-out refinance transaction).

A Texas Section 50(a)(6) mortgage cannot be closed until after a twelve (12) day cooling off period in which the borrower is allowed to change his or her mind about obtaining the mortgage. This cooling off period runs from the later of the date of the loan application or the date that the borrower receives the required notice about the extension of credit. The borrower must also be allowed to rescind the loan (without incurring a penalty or charge) within three (3) days after the extension of credit is made.


>> Acceptable Uses
The following are acceptable uses for cash-out refinance transactions:

  • Paying off the unpaid principal balance of the existing first mortgage;

  • Financing the payment of closing cost, points, and prepaid items. The borrower can include real estate taxes in the new loan amount. Delinquent real estate taxes (taxes past due more than 60 days) can be included in the new loan amount but if they are, an escrow account must be established, subject to applicable law or regulation;

  • Paying off any outstanding subordinate mortgage liens of any age;

  • Taking equity out of the subject property that may be used for any purpose;

  • Financing a short-term refinance mortgage that combines a first mortgage and a non-purchase-money subordinate mortgage into a new first mortgage or a refinance of a short-term refinance within six months.

Q: What is the repurchase or purchase of Mortgage Loan/Early payment Default or Payoff?
A:

(1) . If any one or more of the first six (6) monthly payments due to Lender, or its assigns, following the funding of a Mortgage Loan by Lender is not paid in full by the Mortgagor, pursuant to the terms of the Mortgage Loan, within 60 days after the date when such payment was due, Client shall pay Lender i) an amount equal to the premium paid by Lender in excess of par (100%), regardless of the transaction's compensation source, and, if applicable, any Lender Paid Compensation paid by Lender to Client or ii) $1500.00, whichever is greater.


(2). Upon (i) failure of the Client to pay any amount due to Lender pursuant to sub section (a), above, within 15 days of demand therefore by Lender, (ii) discovery by Lender of a breach of any of the representations and warranties contained in the Agreement or this Seller's Guide, or (iii) the failure of Client to deliver to Lender the Mortgage Loan Documents for a Mortgage Loan as specified in the Agreement or in this Seller's Guide, then, within 15 days after the earlier of Client's discovery or its receipt of notice from Lender of any such event or occurrence, Client shall repurchase or purchase, as the case may be, said Mortgage Loan at a price equal to the higher of the purchase price or 100% of par, with adjustments for accrued interest, prepayments and any comparable items at the time of repurchase, plus fees, if any previously paid by Lender to Client in connection with any Mortgage Loan that is a HELOC, plus attorney's fees, legal expenses, court costs or other expenses that may have been incurred by Lender in connection with the Mortgage Loan. In addition, to the extent not already repaid pursuant to sub section (a), above, Client shall promptly repay to Lender any and all compensation received by Client or owing to Client from Lender with respect to the Mortgage Loan to be repurchased or purchased.

(3).  Lender requires full repayment of the premium paid by Lender in excess of par (100%) and, if applicable, any other amount(s) paid by Lender to Client associated with the subject Mortgage Loan (the sum of which is the "EPO Premium Amount"), for any Mortgage Loan that is paid-in-full, regardless of the reason, up to and including 180 days after the applicable Funding Date (the "Early Payoff Period"). Such a payment-in-full is referred to as an "Early Payoff ". Lender reserves the right to increase or decrease the Early Payoff Period applicable to a single Client or group of Clients at will and shall give any affected Client prior written notice thereof and an effective date.

Further, Lender may waive payment of the EPO Premium Amount for any Mortgage Loan that is paid-in-full between the 121st day and the 180th day after the Funding Date (referred to as the "EPO Premium Waiver Period"), provided that the Mortgagor's new loan is purchased or funded by Lender. Lender reserves the right to modify the granted Eligible EPO Premium Waiver Period applicable to a single Client or group of Clients at will and shall give any affected Client(s) prior written notice thereof and an effective date.

Q: is the jumbo ARM rate is better than 15yr or 30yr fixed term?

A: yes, here is the example per today’s rate:

 

Jumbo 5/1 ARM  with escrow is at 3.0%

Jumbo 15yr fixed term with escrow  is 4.375%

Jumbo 30yr fixed term with escrow is 4.625%


Q. What does the Conforming ARM Loans  - Margin 2.25  CAPS 5/2/5

A. This means that the loan product is a 30 year term during which the first 5 years are at the fixed rate you're being quoted. After those first five years (60 months) are up, the loan will convert to an adjustable rate mortgage (ARM) for the remaining 25 years. Each year during that time (that's where the "1" comes from) there will be a rate adjustment based on the index of the loan, plus a fixed margin. Once the loan begins its adjustments it will have rate caps. The first "5" in the "5-2-5" means that the rate can adjust no more than 5% over your start rate. The "2" means that each year from that point, the rate cannot adjust more than 2% (up or down) from the previous rate, and finally, the rate has a lifetime cap of 5% over the start rate.

Q. Can I convert my primary house into a rental since I am buying another house for a new job?

 

A: yes. It depends on how much equality you have on your current house.  If the equality of current house is over 30% of your property value,  you are allowed to use the rental income or possible rental income as your income. Otherwise, you are not allowed to use the rental income.



Q.  How much can I borrow?

A. 45% DTI (debt to income) is the maximum ratio you can hit.  For instance, if your income is $10000/month,  and your debt is 3K, then the maximum additional debt you can have is 1.5K.

 

 

For your case, your income is 15K/month. The current debt is 2.8K (let say 3K). Then the maximum debt you can have is 3.75K.




Can i use the income from the house to be rent?

Conversion of Primary Residence to Second Home or Investment
  • Both the current and the proposed mortgage payments must be used to qualify the borrower for the new transaction: and

  • Six (6) months of PITI for both properties is required to be in reserves. Reduced reserves may be considered of no less than 2 months for both properties if there is documented equity of at least 30 percent in the existing property. Valuation can be derived from an appraisal or automated valuation model (AVM), minus outstanding liens for conforming loan amounts. See Jumbo Fixed and Jumbo ARM product page for minimum appraisal requirements for verification of equity. Valuation is subject to underwriter approval.  Gemstone AU is not able to calculate the additional reserves for a conversion of a primary residence therefore the additional reserve requirement must be calculated manually outside of Gemstone AU. To determine the total amount needed to be verified for the transaction, add the amount of funds required by Gemstone AU to the amount of funds that were manually calculated outside of Gemstone AU.

The rental income must be documented with all of the following:

  • a copy of the fully executed lease agreement;

  • the receipt of a security deposit from the tenant; and

  • bank statement showing the deposited security funds.

For a one-unit property, if documented equity in the current principal residence is... Then...
Greater than or equal to 30% 75% of gross rental income may be used as income
Less than 30% No rental income is allowed

 



Can i use my rental income?

Rental Income Calculation

  • For properties listed on the borrower’s 1040 Schedule E, net rental income must be calculated as the total:

(income + depreciation + interest + taxes + insurance) -- current PITIA

                              months of income provided

  • If rental income is not included on the borrower’s 1040s, a current executed lease agreement to demonstrate gross rental income. The net rental income must be calculated as the gross monthly rental amount multiplied by 75%.

  • Net rental income must be added to the borrower’s total monthly income.

  • Net rental loss must be added to the borrower’s total monthly obligations.

Contributions/Concessions  (3/3/2016 2:39:22 PM)
Borrower closing costs paid by the property seller or by any other interested party to the transaction (i.e. builder, developer, real estate agent, lender or any of their affiliates) are considered contributions. Items paid by the property seller that are the responsibility of the seller are not contributions (i.e. real estate sales commissions, charges for pest inspections or costs that the property seller is required to pay under state or local law). Funds the purchaser receives from a non-participant to the sales transaction are not considered contributions, even when they are used to pay closing or settlement costs (i.e. the property purchaser’s employer or a family member).
Standard Conforming
  • Primary residence/second home > 90% LTV = 3% of value.
  • Primary residence/second home > 75-90% LTV = 6% of value.
  • Primary residence/second home < 75% LTV = 9% of value.
  • Non-owner occupied properties = 2% of value.

    Super Conforming

  • Primary residence/second home = 3% of value.
  • Non-owner occupied properties = 2% of value.
  • The amount of any contributions in excess of the limitations set forth above will be considered a sales concession. Any amount contributed by an interested party that exceeds the costs to close the loan, must be considered a concession and subtracted from the purchase price.

    Additional examples of contributions granted by any interested party to the transaction that are considered to be sales concessions (regardless of the of the limits above) are:

    • Vacations.
    • Furniture or decorator allowances.
    • Personal property items being left in the property.
    • Automobiles.
    • Moving costs or other "giveaways.".
    For purposes of determining the LTV and CLTV, the dollar amount of any sales concessions or contributions that exceed the maximum allowed must always be deducted from the purchase price. The LTV and CLTV are then calculated using the lower of the reduced purchase price or the appraised value. The appraisal must reflect the effect that any subsidies, contributions or sales concessions have on the market value for the property. The AU Feedback must accurately reflect the LTV and CLTV adjusted for any financing or sales concessions in the transaction.


    Jumbo Fixed


    Our Jumbo Fixed program offers aggressive loan amounts on all types of transactions, including cash-out refinances up to $2,500,000. 


    Our Jumbo Fixed program offers aggressive loan amounts on all types of transactions, including cash-out refinances up to $2,500,000.

    Eligibility Matrix

    Loan Amount

    Purchase (1), (3), (4), (6)

    Occupancy

    Units

    LTV/CLTV/HCLTV

    Loan Amount

    Credit Score

    Owner-Occupied
    (Primary Residence)

    1

    80/80/80

    Up to $1,500,000

    720
    1

    70/70/70

    Up to $1,000,000

    700
    1 75/75/75

    Up to $2,000,000

    720
    1 70/70/70

    Up to $2,500,000

    720
    2 65/65/65

    Up to $1,000,000

    700
    2

    60/60/60

    Up to $1,500,000

    720

    Second Home

    1

    75/75/75

    Up to $1,000,000

    720
    1 70/70/70 Up to $1,500,000 720

    1

    65/65/65

    Up to $2,000,000

    720

    1

    50/50/50

    Up to $2,500,000

    720

     

    Rate/Term Refinance (2), (3), (4), (5), (6)

    Occupancy 

    Units

    LTV/CLTV/HCLTV

    Loan Amount

    Credit Score

    Owner-Occupied
    (Primary Residence)

    1 80/80/80

    Up to $1,000,000

    720
    1 70/70/70

    Up to $1,000,000

    700
    1 75/75/75

    Up to $1,500,000

    720
    1 70/70/70

    Up to $2,000,000

    720
    1 60/60/60

    Up to $2,500,000

    720
    2 65/65/65

    Up to $1,000,000

    700
    2 60/60/60

    Up to $1,500,000

    720

    Second Home

    1 75/75/75

    Up to $1,000,000

    720
    1 70/70/70

    Up to $1,500,000

    720
    1 65/65/65

    Up to $2,000,000

    720
    1 50/50/50

    Up to $2,500,000

    720

     

    How to Calculate the rental income:

    (1). if using TAX return,

    Net Income/Loss (Line 21 )
    +Depreciation
    +TAX
    +Mortgage
    +Insurance
    +non-recurring cash expense

    (2) if using Lease
    Gross Monthly Rent
    x Vacancy Factor 75%
    -Principal and interest for property
    -Tax and insurance for the property

    About Gift Fund
    https://www.fanniemae.com/content/guide/selling/b3/4.3/04.html

    Fannie Mae Selling Guide

    please click on the link to see the Guide.

    https://www.fanniemae.com/content/guide/selling/b/index.html

     

    B2-1.2-03: Cash-Out Refinance Transactions (12/19/2017)

    https://www.fanniemae.com/content/guide/selling/b2/1.2/03.html


    TRUST Law

    A trust is a three-party fiduciary relationship in which the first party, the trustor or settlor, transfers ("settles") a property (often but not necessarily a sum of money) upon the second party (the trustee) for the benefit of the third party, the beneficiary.

    The trustee is the legal owner of the property in trust, as fiduciary for the beneficiary or beneficiaries who is/are the equitable owner(s) of the trust property. Trustees thus have a fiduciary duty to manage the trust to the benefit of the equitable owners. They must provide a regular accounting of trust income and expenditures. Trustees may be compensated and be reimbursed their expenses. A court of competent jurisdiction can remove a trustee who breaches his/her fiduciary duty. Some breaches of fiduciary duty can be charged and tried as criminal offences in a court of law.

    A trustee can be a natural person, a business entity or a public body. A trust in the United States may be subject to federal and state taxation.

    A trust is created by a settlor, who transfers title to some or all of his or her property to a trustee, who then holds title to that property in trust for the benefit of the beneficiaries.[3] The trust is governed by the terms under which it was created. In most jurisdictions, this requires a contractual trust agreement or deed. It is possible for a single individual to assume the role of more than one of these parties, and for multiple individuals to share a single role.[citation needed] For example, in a living trust it is common for the grantor to be both a trustee and a lifetime beneficiary while naming other contingent beneficiaries.[citation needed]

    An owner placing property into trust turns over part of his or her bundle of rights to the trustee, separating the property's legal ownership and control from its equitable ownership and benefits. This may be done for tax reasons or to control the property and its benefits if the settlor is absent, incapacitated, or deceased. Testamentary trusts may be created in wills, defining how money and property will be handled for children or other beneficiaries.

    While the trustee is given legal title to the trust property, in accepting the property title, the trustee owes a number of fiduciary duties to the beneficiaries. The primary duties owed include the duty of loyalty, the duty of prudence, the duty of impartiality.[4] A trustee may be held to a very high standard of care in their dealings, in order to enforce their behavior. To ensure beneficiaries receive their due, trustees are subject to a number of ancillary duties in support of the primary duties, including a duties of openness and transparency; duties of recordkeepingaccounting, and disclosure. In addition, a trustee has a duty to know, understand, and abide by the terms of the trust and relevant law. The trustee may be compensated and have expenses reimbursed, but otherwise must turn over all profits from the trust properties.


    FHLMC Rental Calculation - effective with all applications dated January 3, 2019 or after - or loan in process that will not close by January 31, 2019.

    Highlights:

    • FHLMC Form 92 is to be utilized for ALL Rental Calculations. The new calculation: Rents received - total expenses (add back expenses of Insurance; Mtg Interest; RE Taxes; Depreciate/Depletion; HOA; One-time Losses) - PITIA = Net Rental Income/Loss
    • Subject Property Purchases - A copy of the current lease must be obtained & use to determine the net rental income. In addition, Form 72 (Single Family Comparable Rent Schedule) or Form 1000 (Small Residential Income Property Appraisal) is required.
    • Lease Requirements: Leases must be current, fully executed, min 1-year original term.
    • Borrower must currently own a primary residence to use rental income to qualify when purchasing a new rental property, in such instances the rental income can only offset the PITIA of the new rental property.
    • Rental Income for Qualifying: If the rental income exceeds the PITI of the new rental property or the converted Primary Residence, as applicable, the excess rental income cannot be added to the Borrower's gross monthly income to qualify, unless, the file documentation demonstrates the Borrower has a minimum of one-year investment property management experience.
    • Non-Subject Investment Property: A signed lease may be used if the property was out of service for any time period in the prior year AND Schedule E supports this by reduced # of days in use and reflect repair costs. Form 72 or 1000 is also required and must support the income reflect on the lease.

    B3-3.1-08: Rental Income (08/07/2018)

    https://www.fanniemae.com/content/guide/selling/b3/3.1/08.html#Calculating.20Monthly.20Qualifying.20Rental.20Income.20.28or.20Loss.29