FHA mortgage loans are issued by federally qualified lenders and insured by the U.S. Federal Housing Authority, a division of the U.S. Department of Housing and Urban Development.

FHA loans are an attractive option, especially for first-time homeowners:

• Generally easier to qualify for than conventional loans.
• Lower down payment requirements.
• Cannot exceed statutory loan limits.

Learn more about FHA loans. (Department of Housing and Urban Development)

SPECIAL PROGRAM
NOTES:
For credit approvals on or after January 1, 2009:
***Base loan amounts (excluding UFMIP) that exceed the loan amounts below must be
submitted on the FHA High Balance Program 4090-00. ***
1 Unit 2 Units 3 Units 4 Units
Continental US $417,000 $533,850 $645,300 $801,950
Hawaii $625,500 $800,775 $967,950 $1,202,925
REMINDER: FHA PROGRAM DESCRIPTIONS ARE NOT INTENDED TO REPLACE
THE 4155. PLEASE REFER TO THE 4155 FOR GUIDELINES THAT DO NOT APPEAR
IN THIS DOCUMENT OR FOR FURTHER CLARIFICATION OF GUIDELINES.
SECTION 1: CODING
PROGRAM CODES: 30- and 25- Year Fixed term: 4000-00
30-Year Fixed w /DAP: 4016-00
15-Year Fixed term: 4100-00
3/1 ARM: 4861-00
3/1 Arm w/DAP: 4816-00
5/1 ARM: 4862-00
5/1 Arm w/DAP: 4841-00
FHA Streamline Refinance Codes:
30- and 25- Year Fixed term: 4049-00
15-Year Fixed term: 4149-00
3/1 ARM: 4443-00
5/1 ARM: 4445-00
FHA REO Codes:
30-Year Fixed Term 4027-00
15-Year Fixed Term 4127-00
FHA EEM Codes:
30-Year Fixed Term 4048-00
15-Year Fixed Term 4148-00
Co-borrower with No Credit Score – use special program codes:
30 and 25 Year Fixed Term: 4008-00
15 Year Fixed Term: 4108-00
Temporary Buydown codes:
Buydown Term Lender Paid Seller Paid Lender Paid
Buydown with DAP
Seller Paid
Buydown with DAP
2/1 Buydown 4219L-00 4219S-00 4283L-00 4283S-00
1/0 Buydown 4220L-00 4220S-00 n/a n/a
Second Lien Program
Codes:
Not applicable
SECTION 2: LTV/CLTV/LOAN AMOUNTS BY DOC TYPE
FULL
DOCUMENTATION:
Purchase Only:
LTV* CLTV/HCLTV OCC. PROPERTY
96.50% *** Owner 1-4 Units
* The LTV including the upfront MIP may not exceed 100% (except EEMs and certain HUD REOs)
􀂙 ** See the Maximum Loan Amount section below for information on determining the
maximum loan amount. The maximum base loan amount may not exceed the statutory
limit for each county/MSA.
FHA FIXED RATE AND TREASURY ARM
4000-00 Page 2 of 32 11/15/11
This information is subject to change at any time without notice. Please contact your account manager for current information.
Purchase:
(cont’d)
*** See the Subordinate Financing section below for information on determining the
CLTV/HCLTV
Maximum LTV/CLTV 100% for properties in West Virginia. This includes government
assistance programs where the combined loan amount may exceed 100% LTV/CLTV/HCLTV
Rate term Refinance
Only:
LTV CLTV/HCLTV OCC. PROPERTY
97.75% 97.75%* Owner 1-4 Units
New subordinate liens are not permitted behind rate/term refinance first liens.
* For case numbers issued on or after September 7, 2010: The maximum combined amount of
the 1st & 2nd may not exceed 97.75% CLTV/HCLTV
For case numbers issued prior to September 7, 2010: There is no maximum CLTV when existing
subordinate liens are put behind the FHA first lien. Please see subordinate financing section for
requirements. New subordinate liens are not permitted behind rate/term refinance first liens.
Maximum LTV/CLTV 100% for properties in West Virginia. This includes government
assistance programs where the combined loan amount may exceed 100% LTV/CLTV/HCLTV.
Streamline Refinance: REFER TO SECTIONS BELOW REGARDING MAXIMUM LTV FOR STREAMLINE REFINANCE
TRANSACTIONS: MAXIMUM LOAN AMOUNT, CALCULATING LTV/CLTV/VALUE &
REFINANCES.
Note: Effective with case numbers issued on and after 11/17/09: Maximum CLTV/HCLTV is
125% for streamline refinance transactions with existing subordinate financing.
Cash-out Refinance:
LTV CLTV/HCLTV OCC. PROPERTY
85% 85%* Owner 1-2 Units
* For case numbers issued on or after September 7, 2010: The maximum combined amount of
the 1st & 2nd may not exceed 85% CLTV/HCLTV
For case numbers issued prior to September 7, 2010: The maximum CLTV with new subordinate
financing is 85%. Re-subordinated subordinate liens may remain in place with no limit to CLTV.
Maximum LTV/CLTV 100% for properties in West Virginia. This includes government
assistance programs where the combined loan amount may exceed 100% LTV/CLTV/HCLTV.
SECTION 3: PROGRAM PARAMETERS
MINIMUM LOAN AMT: $40,000 (base loan amount)
MAXIMUM LOAN
AMOUNT:
FHA Loan Limits
1 Unit 2 Units 3 Units 4 Units
Floor $271,050 $347,000 $419,400 $521,250
Continental US $417,000 $533,850 $645,300 $801,950
Hawaii $625,500 $800,775 $967,950 $1,202,925
• The maximum base loan amount may not exceed the statutory limit for each county/MSA.
This includes streamline refinance transactions.
• Effective with case numbers issued on or after September 7, 2010: For all refinance
transactions, except streamline refinances, the combined amount of the FHA-insured
first mortgage and any subordinate lien may not exceed the applicable FHA loan to
value ratio.
• See non-occupant co-borrower section below for the maximum loan amount requirement for
transactions with non-occupant co-borrowers.
• Maximum LTV/CLTV 100% for properties in West Virginia. This includes government
assistance programs where the combined loan amount may exceed 100% LTV/CLTV.
FHA FIXED RATE AND TREASURY ARM
4000-00 Page 3 of 32 11/15/11
This information is subject to change at any time without notice. Please contact your account manager for current information.
MAXIMUM LOAN
AMOUNT:
(cont’d)
Note: The statutory limit varies by the program and number of units in the dwelling. Each
FHA office publishes the limits for each county or city within their jurisdiction.
Go to: https://entp.hud.gov/idapp/html/hicostlook.cfm to look up the maximum loan amount
for the number of units in the property for the county or MSA where the property is located.
REMINDER: For loans funding AFTER September 30, 2011, the “October 1, 2011 –
December 31, 2011” loan limits apply.
Purchase Transactions:
• The maximum loan amount for a purchase transaction is calculated by applying 96.5% to the
lesser of either of the appraiser’s estimate of value or the contract price of the property minus
any adjustments:
Purchase Transaction with an Inducement to Purchase:
Sales Price: $218,000; Appraised Value: $220,000
Gift Card: $3,000
Adjusted Base Sales Price: $215,000 ($218,000 - $3,000)
Maximum Base LTV: 96.5% (Reciprocal of 3.5% Down Payment)
Maximum Base Mortgage: $207,475 ($215,000 X 96.5%)
Minimum required down payment: $10,525 ($218,000 - $207,475)
UFMIP Factor = 1.0%
UFMIP Amount: $2074.75 ($207,475 X 1.0%)
Total Mortgage with UFMIP: $209550 ($207,475 + $2074.75) may not exceed the lesser of
the contract sales price or appraised value.
• An inducement to purchase must result in a dollar-for-dollar reduction to the sales price before
applying the LTV ratio. These inducements may include, but are not limited to, decorating
allowances, repair allowances, moving costs, gift cards, etc. Personal property such as cars,
boats, lawn mowers, furniture, televisions, etc. given by the seller to consummate the sale also
must result in a reduction to sales price before applying the LTV ratio.
• On a purchase transaction, seller/interested party contributions exceeding 6% must be
subtracted from the sales price (or value, if less) before applying the down payment percentage
multiplier.
• HUD REO sales with $100 down payment incentive: HUD properties with the $100 down
payment incentive will be permitted as follows:
o Check availability of incentive programs with HUD. Purchase contract must reference $100
down payment incentive. Incentive may not be currently available.
o The total base loan amount (including financed UFMIP) for $100 down payment
transactions will be limited to 100% of the as-appraised value from the initial HUD
REO appraisal report that set the listing price for the subject property. NOTE: this
loan to value calculation is different from the standard FHA LTV guideline calculation
that is determined by the Base loan amount (excluding UFMIP) divided by the sales
price or appraised value, whichever is less.
o The cost of HUD approved repair escrows may be added to the base loan amount for
purchases of HUD REO properties in combination with the low down payment sales
incentive.
o Repair escrows are permitted (line 4 of sales contract indicates 203b with Repair Escrow).
The maximum amount of allowable repairs is $5000.
o Maximum DTI 45% (DTI > 45% must have compensating factors plus a 2nd signature)
regardless of AUS approval.
o Where a discount on the sales price is being provided, the mortgage amount must be based
on the lesser of the “as-is” value or the discounted sales price, not the contract sales price.
o The program code for FHA REO MUST be used for this option (4027-00 30 yr fixed/4127-00
15 yr fixed)
o Follow 4155 guidance and HUD requirements. See ML 2011-19 for loan amount calculation
details.
o Standard program only, fixed rate. ARMS not permitted.
FHA FIXED RATE AND TREASURY ARM
4000-00 Page 4 of 32 11/15/11
This information is subject to change at any time without notice. Please contact your account manager for current information.
MAXIMUM LOAN
AMOUNT:
(cont’d)
Rate Term Refinance Transactions:
• For a rate term refinance the maximum mortgage is the lower of the LTV limitation of
97.75% OR the calculation below and may never exceed the maximum loan limit for the
property location (excluding the upfront MIP):
􀂙 Multiply the appraised value of the property by 97.75% OR
􀂙 Add together the amount of the existing first lien, any purchase money second, any junior
liens >12 months old, closing costs, prepaid expenses, borrower paid repairs required by
the appraiser, discount points, then subtract any refund of the upfront MIP.
􀂙 If the property was acquired less than one year before the loan application and is not already
FHA-insured, in addition to the calculations described above, the original sales price of the
property also must be considered in determining the maximum mortgage. With conclusive
documentation, expenditures for repairs and rehabilitation incurred after the purchase of
the property may be added to the original sales price in calculating the mortgage amount.
• Note: If any portion of the funds from an equity line >$1,000 was advanced within the last
12 months and was used for any purpose other than repairs and rehabilitation of the
property, the line of credit is NOT eligible for inclusion in the new mortgage.
• Note: For a rate/term or streamline refinance the costs cannot exceed actual costs.
There cannot be cash-back to the borrower except for incidental cash proceeds not to
exceed $500.00.
• For case numbers issued on or after September 7, 2010: the combined amount of any
FHA-insured first mortgage and any subordinate lien may NOT exceed 97.75% CLTV
STREAMLINE REFINANCE TRANSACTIONS
At the time of application, the borrower must have made at least 6 payments within the month due
on the FHA-insured mortgage being refinanced.
• For a CREDIT QUALIFYING streamline refinance WITH an appraisal the maximum
mortgage is the lower of
􀂙 The outstanding principal balance minus the applicable refund* of the UFMIP, plus closing
costs, prepaid items to establish the escrow account and the new UFMIP
*Note: The applicable refund of the UFMIP is the lesser of:
􀂃 Unearned UFMIP (from FHA refinance Authorization)
OR
􀂃 New Estimated UFMIP
OR
􀂙 97.75% of the appraised value of the property plus the new UFMIP.
􀂙 Discount points may not be included in the new mortgage. If the borrower has agreed to
pay discount points, the lender must verify that the borrower has the assets to pay them
along with any other financing costs that are not included in the new mortgage amount.
• For streamline refinances WITHOUT an appraisal AND non-credit qualifying refinances
WITH an appraisal, (owner occupied properties) the maximum mortgage is
􀂙 The outstanding principal balance minus the applicable refund* of the UFMIP
*Note: The applicable refund of the UFMIP is the lesser of:
􀂃 Unearned UFMIP (from FHA refinance Authorization)
OR
􀂃 New Estimated UFMIP
PLUS
􀂙 The new UPFMIP that will be charged on the refinance
• Note: The outstanding principal balance may include interest charged by the servicing lender
when the payoff is not received on the first day of the month, but may not include delinquent
interest, late charges or escrow shortages.
• The maximum base loan amount may not exceed the statutory limit for each county/MSA.
This includes streamline refinance transactions.
Additional Refinance Transaction Notes:
􀂙 See the refinance section below for calculating the LTV on a cash-out refinance and for
additional information on refinance transactions.
􀂙 See non-occupant co-borrower section below for the maximum loan amount requirement for
transactions with non-occupant co-borrowers.
FHA FIXED RATE AND TREASURY ARM
4000-00 Page 5 of 32 11/15/11
This information is subject to change at any time without notice. Please contact your account manager for current information.
MAXIMUM LOAN
AMOUNT:
(cont’d)
Energy Efficient Mortgages – USE PROGRAM CODE 4048-00(30 yr)/4148-00 (15 yr):
• Allowable for purchase or refinance of a principal residence to incorporate the cost of energyefficient
improvements into the mortgage.
• Existing 1-4 unit properties including condos are permitted. New construction is not permitted.
• Borrower may finance 100% of the total cost of improvements into the mortgage if the total cost
of the improvements including maintenance is less than the total present value of the energy
saved over their useful life. Appraisal of improvements is not required.
• Once it is determined that the borrower and the property qualify for an FHA loan, the maximum
dollar amount of the cost-effective energy package that can be added to the loan amount will be
determined using the energy rating report (HERS) and EEM worksheet.
o The maximum amount for the portion of the EEM for energy improvements is the
lesser of:
o The actual cost of the improvements
OR
5% of
􀂃 The value of the property (FHA appraised value of the property as
indicated on the DE statement of appraised value), OR
􀂃 115% of the median area price of a single family dwelling, OR
􀂃 150% of the conforming Freddie Mac limit
o The calculated amount can be added to the base loan amount to total the final FHA
insured loan amount before adding any UFMIP.
o For existing properties, energy-related weatherization items (refer to HUD 4155.1
Rev 5, 1-7 (C) (2) for maximum additions to the mortgage amount) may be
combined with the EEM, where the maximum dollar amount allowed under an EEM
does not cover the cost of the entire energy package. The weatherization amount
would be the cost of the improvements not covered by the EEM amount.
o The fees charged to the borrower for the home energy rating, including the physical
inspection, the HERS report, and any post-installation test, must be customary &
reasonable. These fees may be included and financed as part of the energy
package if the entire package (including fees) is cost-effective. If not, such fees
are in the allowable closing costs.
o The FHA maximum loan limit for the area may be exceeded by the cost of the
energy efficient improvements to be financed. However, the base loan amount
can not exceed maximum county limits, including streamline refinances, for
the current year loan limits.
o For streamline refinances, the borrower’s payment on the new loan including the
energy package may be greater than the current payment provided the estimated
monthly energy savings as shown on the HERS report exceeds the increase in the
payment.
o New construction properties must have the energy package installed as part of the
total construction, and must be completed prior to closing. Standard escrow
holdback policies apply for existing construction.
o FHA has issued several Mortgagee Letters that address requirements that must be
met: ML 2005-21 includes underwriting instructions and information regarding
HERS that are used to determine the cost of improvements and energy savings.
o Note: Appliances may NOT be included in an EEM (only allowable on 203k).
• EEM Processing/Underwriting Instructions:
o Borrower is qualified using standard underwriting requirements and qualifying
ratios. FHA total scorecard may be utilized. UW calculates maximum mortgage
amount using existing instructions. (Loan does not need to be rerun through Total
Scorecard for the loan amount including EEM)
o A HERS (Home Energy Rating System) report is required (by a qualified home
energy rater) showing the estimated costs of installing the energy efficient
improvements (incl. maintenance costs) and annual savings in utility costs that will
result from the installation of the energy efficient improvements.
o The UW must determine that the energy efficient improvements are “cost effective”
by completing the EEM worksheet. EEM Worksheet can be found in J:\Operational
Tools\FHA. This is to be placed directly behind the 2900-LT or WS, along with the
HERS report. The cost effective energy improvement are then added to the
maximum mortgage amount.
FHA FIXED RATE AND TREASURY ARM
4000-00 Page 6 of 32 11/15/11
This information is subject to change at any time without notice. Please contact your account manager for current information.
MAXIMUM LOAN
AMOUNT:
(cont’d)
o The UW will then calculate the UFMIP based on the loan amount with the EEM
included, and include in the remarks section of the 2900-LT or WS.
o The Lender must establish an escrow for the funds, and the improvements are to
be completed within 30 days (Stearns policy) of closing. Any funds remaining in
the account after construction is over must go to reduce the principal. The borrower
cannot be paid for labor on work that they perform, and no cash back.
o The installation of the energy efficient items may be inspected by HERS qualified
person, or a HUD Fee Inspector, and the borrower may be charged an inspection
fee. (If fee inspector, they must be supplied with a copy of the EE report.) This
additional fee should be included in allowable closing costs.
o The branch is responsible for following up with the broker/borrower to ascertain
when the work is to be completed, and monitor the progress of the job. Stearns will
only allow a 30 day time frame to get this work completed. CIR or HERS
inspection is to be forwarded on to loan delivery department upon receipt.
o The borrower may be charged up to a $200 allowable closing cost for the HERS
report. Inspection fees are only allowed that are typical and common for the area.
o The Lender must execute a Mortgagees Assurance of Completion. ( Hud form 9-
2300)
o The loan can be insured with the work outstanding.
o When work is completed, HUD is notified via FHA connection. This is to be done
when the escrow account is paid out/cleared.
ALLOWABLE TERMS: 30, 25 & 15 year fixed rate term
The ARM programs have a 30 year term
CASH PROCEEDS: No restrictions on a cash-out refinance.
SPECIAL PROGRAM
REQUIREMENTS:
Not applicable
ARM ADJUSTMENTS: The index is the (CMT), the weekly average yield on United States Treasury Securities adjusted to a
constant maturity of one year.
ARM loans adjust as follows:
Fixed Term Adjustment Life Cap
3 Year 36 months 1%/annual 5%
5 Year 60 months 1%/annual 5%
• The loans are not convertible.
• The loan may be assumable subject to lender approval.
• On the 3 year and 5 year ARMs borrowers are qualified at the start rate (note rate) regardless of
the LTV
INTEREST ONLY: Not applicable
TEMPORARY
BUYDOWNS:
• NOTE: BUYDOWNS ARE CURRENTLY SUSPENDED UNTIL FURTHER NOTICE
• Lender and seller paid buydowns are permitted on the 30-year fixed rate term.
• Buydowns are not permitted on ARM programs.
• Allowed on purchases only.
• Not allowed on refinances.
• 2/1 & 1/0 buydowns are permitted.
• Increases cannot exceed 1% per year.
• Borrowers are qualified based on the note rate. (Not the bought down rate)
• See coding section above for program codes.
PREPAYMENT
PENALTY:
Not applicable.
SECTION 4: BORROWER ELIGIBILITY
FIRST TIME
HOMEBUYER:
Allowed, no restrictions.
FHA FIXED RATE AND TREASURY ARM
4000-00 Page 7 of 32 11/15/11
This information is subject to change at any time without notice. Please contact your account manager for current information.
NON-OCCUPANT COBORROWER:
• Permitted on purchase or rate/term refinance transactions to maximum 75% LTV with the
following exception:
􀂙 Maximum financing is permitted if the non-occupant borrower is related by blood (parentchild,
siblings, uncle-aunt, etc) OR for unrelated persons that can document evidence of a
family-type long-standing and substantial relationship not arising out of the loan transaction.
􀂙 If the LTV is >75%, only one-unit properties are permitted.
• The non-occupant borrower’s income may be used for qualifying.
• The non-occupant borrower cannot be a party to the transaction such as the seller, builder or
real estate broker.
• Non-occupant co-borrowers or co-signers may not be added on a cash-out refinance
transaction per mortgagee letter 08-40, page 5. Co-signers must occupy the property.
• For streamline refinance, the same borrowers should be on existing loan and new loan OR a
borrower may be added to those currently on Note without credit qualifying. If deleting a borrower
with another existing borrower remaining on new loan, the remaining borrower must credit
qualify.
• Properties known as “kiddie condos” (purchase transaction involving a parent who is buying a
home with their child who is a college student) are permitted as follows:
• Occupant borrower must have sufficient credit for an AUS approval (including minimum 640
credit score), income and ratios may follow AUS findings.
PERMANENT
RESIDENT ALIEN:
• Allowed under the same terms as US citizens.
• Permanent resident aliens must provide proof of their residency (i.e. green card).
NON-PERMANENT
RESIDENT ALIEN:
• Non-permanent resident aliens are permitted provide they occupy the property as their primary
residence, have a valid social security number AND are eligible to work in the US.
• A legible copy of one of the following acceptable visa types must be submitted in the file: E-1, H-
1B, H-2A, H-2B, H-3, L-1, G series, and NAFTA workers (TN or TC).
• The following are not acceptable visa types: A-1, A-2, A-3, E-2, F-1, F-2, M-1, O-1.
• For any visa types not listed above, please contact your branch to research acceptability, all visa
types may not be listed here.
• A legible copy of the unexpired passport with I-94 is also required.
• If an EAD issued by the USCIS is provided, the borrower is eligible to work in the United
States and does not need to provide visa, passport or I-94 documentation.
• Borrowers with diplomatic immunity are not permitted.
FOREIGN NATIONAL: Not eligible
NON-ARMS LENGTH
TRANSACTIONS:
• A non-arms length transaction is defined as a direct relationship between any of the parties to the
transaction including, buyer, seller, employer, lender, broker, appraiser, etc.
• Non-arms length transactions may be acceptable provided there is adequate verification the
borrower is making the required minimum down payment from their own funds, there is an
executed sales contract, and the appraisal supports the value and the appraiser comments on
whether the market value is affected by the relationship of the parties.
• The maximum LTV is 85% unless the property has been occupied by the seller as their
primary residence OR the buyer has occupied the property as a tenant for at least 6
months.
• A non arms length transaction may not be used to bail out a family member or any other owner
with an established relationship to the borrower from a delinquent mortgage.
• The title commitment may not show any evidence of foreclosure proceedings or NOD.
• If the seller is a corporation, partnership or any other business entity, there must be proof that
the borrower is not an owner of the business entity selling the subject property.
FHA FIXED RATE AND TREASURY ARM
4000-00 Page 8 of 32 11/15/11
This information is subject to change at any time without notice. Please contact your account manager for current information.
NUMBER OF OTHER
PROPERTIES:
Number of financed properties Stearns permits:
• For Owner Occupied properties, there is no limit to the number of financed properties that the
borrower may own.
• Reminder: HUD has rules regarding ownership in more than 7 rental units - please
consult the 4155 if your borrower owns multiple rental units
• If the transaction is the purchase of a principal residence, but a previous mortgage transaction
within the past 12 months was also the purchase of a principal residence, the borrower must
provide reasonable documentation to justify the new transaction (e.g. a letter of explanation, or
other acceptable documentation). Any address discrepancies or "red flags" must be fully
addressed.
• A borrower purchasing a new primary that is of lesser size or value should be carefully
analyzed by the underwriter
• Relocation and/or extenuating circumstances must be documented and verified
• Non occupant coborrower/co-signer situations (where the previous owner occ purchase was a
cosigned loan) must also be verified and fully documented.
• Stearns has the right to refuse the occupancy type if it cannot be adequately established.
Number of properties HUD will insure:
• HUD will generally not insure more than one property per borrower. Any person, individually or
jointly owning a property insured by HUD, may not purchase another primary residence with FHA
mortgage insurance unless one of the following occurs:
􀂙 The borrower is relocating and establishing residency in another area not with in a
reasonable commuting distance from their current primary residence. (Generally 50 miles
is considered reasonable)
􀂙 The borrower outgrows their present property because of an increase in family size. The
borrower also must pay down the outstanding FHA mortgage (secondary liens do not need
to be paid off or paid down) on the present property to a 75 percent or lower loan-to-value
(LTV) ratio. A current residential appraisal must be used to determine LTV compliance.
Tax assessments, market analyses by real estate brokers, etc., are not acceptable as proof
of LTV compliance.
􀂙 The borrower vacates a property that will remain occupied by a co-borrower. (I.e. divorce).
􀂙 A non-occupying co-borrower of an FHA mortgage being purchased as a primary residence
may have a joint interest in that property as well as a primary residence covered by the FHA
loan.
􀂙 Note: properties previously acquired as non-owner are not subject to the restrictions above.
􀂙 Reminder: HUD has rules regarding ownership in more than 7 rental units - please
consult the 4155 if your borrower owns multiple rental units
Note: The more restrictive of Stearns Policy or HUD policy must be adhered to.
SECTION 5: CREDIT CRITERIA
UNDERWRITING:
• All loans must be underwritten by DU or LP and receive an approve/eligible or accept
recommendation.
• Loans underwritten through DU/FHA Total Scorecard that receive an “approve/eligible”
recommendation may be documented per the AU findings report.
• AUS Approve/Eligible transactions where a manual downgrade is required per Total Scorecard
User Guide should follow HUD guidelines.
• Refer is allowed under certain guidelines only, see credit requirements below.
• Manual underwriting is not permitted (except where noted below)
• Case number assignments must show clear and validated with no warnings or sanctions.
STREAMLINE REFINANCES:
• AUS (Total Scorecard) must NOT be used on Streamline refinances.
FHA FIXED RATE AND TREASURY ARM
4000-00 Page 9 of 32 11/15/11
This information is subject to change at any time without notice. Please contact your account manager for current information.
CREDIT SCORES:
• A 3 bureau merged in-file report or full credit report (RMCR) must be obtained that contains at
least 2, but preferably 3 credit scores for each borrower.
• A “representative score” (lower of 2, middle of 3) will be chosen for each borrower on the loan.
• On a purchase, rate/term, or cash out refinance, a co-borrower (occupying or non-occupying) may
have NO score, as long as at least one occupant borrower has a 640 credit score. If the coborrower
has no credit score, an AUS Approval is mandatory (no manual downgrade or Refer),
and non-traditional credit may not be considered.
• SPECIAL PROGRAM CODE MUST BE APPLIED IF THE CO-BORROWER HAS NO
CREDIT SCORE – SEE PROGRAM CODES SECTION ABOVE
• ALL borrowers must have a minimum 640 credit score on Streamline refinances. No Exceptions.
• Credit scores must be entered into FHA Connection. If multiple scores exist, all scores must be
entered.
CREDIT
REQUIREMENTS:
Non Traditional Credit: Not permitted.
Credit Requirements:
• Follow DU/LP FHA Total Scorecard credit requirements except where noted below.
• If required by AUS findings, the borrowers housing history must be documented for the last 12
months on a credit report, OR with a verification of rent directly from the landlord, OR with 12
months canceled checks, OR a verification of mortgage from the loan servicer.
• The borrower’s mortgage history must reflect 0x30 in the last 12 months and must be
documented as current for the month due, regardless of AUS.
• AUS Approve/Eligible or Accept recommendations where the credit report or AUS indicates
prior bankruptcy, foreclosure or short sale are permitted as long as FHA guidelines are met (3
years since foreclosure or short sale, 2 years since chapter 7 discharge), however the
underwriter should verify the data integrity in these instances. Reminder in regards to Chapter 13
bankruptcy with AUS Accept, per FHA: If the Chapter 13 bankruptcy has not been discharged for
a minimum period of two years, the loan must be downgraded to a Refer.
• AUS Refer or manual downgrade permitted with the following criteria only:
• Chapter 7 Bankruptcy: Must be discharged 3 years
• Chapter 13 Bankruptcy: Must be discharged 1 year
• Foreclosure or Short Sale: Must be discharged for 5 years
• Maximum DTI 45%
• Temporary Buydowns not permitted
• Short payoffs or settlements on a mortgage lien are considered the same as a foreclosure so
must be seasoned at least 3 years with an AUS Approval and 5 years with an AUS Refer or a
manual downgrade. Please note that AUS may not recognize the short sale so this should be
analyzed by the underwriter.
• Borrower may currently be in active consumer credit counseling if:
• AUS Approval required no Refer or manual downgrade permitted.
• The borrower has participated in the plan for 1 year with no lates
• An explanation letter from the borrower regarding the counseling is required
• If the transaction is a purchase, payment shock > 25% will require a 2nd signature from
corporate support.
• Major derogatory credit (i.e. judgments, collections, etc.) requires a written explanation.
• Reminder, TOTAL approvals must be downgraded for any derogatory debt, including, but not
limited to, collection accounts, tax liens, charge-offs or judgments discovered during processing
but not showing on the credit report.
• Inquiries: A detailed explanation letter that specifically addresses both the purpose and
outcome of each inquiry is required. If additional credit was obtained, a verification of that debt
must be obtained and the AUS findings must be updated to include the debt.
• Court ordered judgments must be paid off before a borrower will be eligible for an FHA loan
unless the borrower has agreed to a payment plan with the creditor and has been making timely
payments per the payment plan.
• If the borrower is currently delinquent on any federal debt (i.e. VA loan, title 1 loan, federal
student loan, Small Business Administration loan, delinquent federal taxes) or has a lien placed
against their property for a debt owed to the Federal government, they are not eligible for FHA
insurance until the delinquent account is brought current, paid or otherwise satisfied.
FHA FIXED RATE AND TREASURY ARM
4000-00 Page 10 of 32 11/15/11
This information is subject to change at any time without notice. Please contact your account manager for current information.
CREDIT
REQUIREMENTS:
(cont’d)
• Non purchasing spouse credit reminder: A credit report is required on a non-purchasing
spouse in a community property state. Although the non-purchasing spouse's credit history is not
to be considered a reason for denial, it must be obtained in order to determine the debt-toincome
ratio of the borrower.
• If TOTAL Scorecard issues a referral to manual underwriting based on the presence of one or
more disputed accounts, lenders should ignore the TOTAL finding to refer the account to
manual underwriting in any of the following circumstances:
• The disputed account has a zero balance
• The disputed account is marked as “paid in full”, or “resolved”
• The disputed account is both less than $500, and more than 24 months old
Streamline refinance transactions: Effective 9/9/10, the following credit requirements apply:
• There should be no pending foreclosures on any property (including investment properties also
owned by the borrower).
• There should not be any foreclosures or short sales completed in the last 24 months on any
property owned by the borrower.
• There should be no bankruptcy discharged in the last 24 months.
Loan modifications:
• Refinance transactions on previously modified loans are not permitted.
• New purchase transactions where the borrower’s previous loan was modified and the property is
being retained as a 2nd home or investment property are not permitted.
• New purchase transactions where the borrower’s previous loan was modified and the property is
being sold should be treated with caution and reviewed for delinquencies and short payoffs.
• Refinances where another property (not the subject property) has a loan modification should be
reviewed with caution to ensure that there was no short refinance (treated as a short sale).
QUALIFYING:
• On the 3/1 ARM and 5/1 ARM the borrower is qualified based on the start rate (note rate).
• On loans with buy downs, the borrower is qualified based on the note rate.
• Child support/alimony payments are included in the DTI regardless of the number of payments
remaining.
• Installment debt with <10 payments remaining are not included in the DTI unless the payment
amount is substantial enough to affect the borrowers DTI ratio. HUD considers payments
>$100.00 to be substantial.
• Loans secured by a liquid asset (i.e. 401K) are not included in the debt calculation.
• Deferred student loans will be included in the DTI unless the borrower can prove that
payments will not start for at least 12 months after closing.
• Paying revolving debt off to qualify is permitted provided the borrower has the funds in verified
assets to pay the account(s) and the payoff is documented (HUD-1).
• Lease payments will be included in the DTI regardless of the number of payments remaining in
the lease.
• Co-signed obligations will not be included in the DTI if there is evidence the primary borrower
has made payments as agreed for the last 12 months (copies of canceled checks, front and
back). A copy of the note must also be provided to show that the person that is making the
payments is also an obligor on the note. Being placed on title only is insufficient.
• Contingent liabilities (i.e. property settlement “buy-outs” or court-ordered assignment of debt)
will not be included in the DTI if there is proof the debt belongs to another person. A copy of a
court order, divorce decree or property settlement may provide proof of the contingent debt.
• Payments on bridge loans will not be included in the debt ratio.
• New purchase transactions where the borrower’s previous loan was modified and the property is
being retained as a 2nd home or investment property are not permitted.
• Mortgage Credit Certificates may not be used as income or to offset housing payment. Stearns
is not participating in any MCC programs at this time.
Primary Residence being vacated in favor of another principal residence:
• The underwriting analysis may not consider any rental income from the property being
vacated except under circumstances described below.
FHA FIXED RATE AND TREASURY ARM
4000-00 Page 11 of 32 11/15/11
This information is subject to change at any time without notice. Please contact your account manager for current information.
QUALIFYING:
(cont’d)
• Exceptions: Rental income on the property being vacated, reduced by the appropriate vacancy
factor as determined by the jurisdictional FHA Homeownership Center (see
http://www.hud.gov/offices/hsg/sfh/ref/sfh2-21u.cfm) may be considered in the underwriting
analysis under the following circumstances.
􀂙 Relocations: The homebuyer is relocating with a new employer, or being transferred by the
current employer to an area not within reasonable and locally recognized commuting
distance. A properly executed lease agreement (i.e., a lease signed by the homebuyer and
the lessee) of a least one year’s duration after the loan is closed is required. FHA
recommends that underwriters also obtain evidence of the security deposit and/or evidence
the first month’s rent was paid to the homeowner.
􀂙 Sufficient Equity in Vacated Property: The homebuyer has a loan-to-value ratio of 75
percent or less, as determined by either a current (no more than six months old) residential
appraisal or by comparing the unpaid principal balance to the original sales price of the
property. The appraisal, in addition to using forms Fannie Mae 1004/Freddie Mac 70, may
be an exterior-only appraisal using form Fannie Mae/Freddie Mac 2055, and for
condominium units, form Fannie Mae 1075/Freddie Mac 466.
RATIOS:
• DTI maximum 50% regardless of AUS recommendation (45% with AUS Refer, see “Credit
Requirements” section above, not applicable to streamline refinance) except as noted
below:
• Ratios >50% are permitted with the following criteria:
􀂃 AUS Approval required – no exceptions (no Refer, manual downgrade or manual
underwriting permitted)
􀂃 Minimum 680 credit score
􀂃 Temporary buydowns not permitted.
􀂃 Borrower must demonstrate at least 2 compensating factors as defined by HUD:
• The borrower has successfully demonstrated the ability to pay housing expenses
greater than or equal to the proposed monthly housing expenses for the new
mortgage over the past 12-24 months, or there is only a minimal increase in the
borrower’s housing expense.
• The borrower has substantial documented cash reserves (at least three months
worth) after closing.
• The borrower makes a large down payment of 10 percent or higher toward the
purchase of the property
• The borrower demonstrates an ability to accumulate savings and a conservative
attitude towards credit.
• A borrower's previous credit history shows that he/she has the ability to devote a
greater portion of income to housing expenses.
• The borrower receives documented compensation or income that is not reflected in
effective income, including significant non-taxable income or unused trailing spouse
income that can be documented. Note: Income not used for qualifying should be a
significant amount (ie enough to bring the DTI into the acceptable range if used)
• The borrower has a potential for increased earnings, as indicated by job training or
education in his/her profession.
CALCULATING
LTV/CLTV/VALUE:
Purchase Transactions:
• The maximum loan amount for a purchase transaction is calculated by applying 96.5% to the
lesser of either of the appraiser’s estimate of value or the contract price of the property minus
any adjustments:
Purchase Transaction with an Inducement to Purchase:
Sales Price: $218,000; Appraised Value: $220,000
Gift Card: $3,000
Adjusted Base Sales Price: $215,000 ($218,000 - $3,000)
Maximum Base LTV: 96.5% (Reciprocal of 3.5% Down Payment)
Maximum Base Mortgage: $207,475 ($215,000 X 96.5%)
Minimum required down payment: $10,525 ($218,000 - $207,475
UFMIP Factor = 1.0%
UFMIP Amount: $2074.75 ($207,475 X 1.0%)
Total Mortgage with UFMIP: $209550 ($207,475 + $2074.75) may not exceed the lesser of
the contract sales price or appraised value.
FHA FIXED RATE AND TREASURY ARM
4000-00 Page 12 of 32 11/15/11
This information is subject to change at any time without notice. Please contact your account manager for current information.
CALCULATING
LTV/CLTV/VALUE:
(cont’d)
• An inducement to purchase must result in a dollar-for-dollar reduction to the sales price before
applying the LTV ratio. These inducements may include, but are not limited to, decorating
allowances, repair allowances, moving costs, gift cards, etc. Personal property such as cars,
boats, lawn mowers, furniture, televisions, etc. given to by the seller to consummate the sale
also must result in a reduction to sales price before applying the LTV ratio.
• On a purchase transaction, seller/interested party contributions exceeding 6% must be
subtracted from the sales price (or value, if less) before applying the down payment percentage
multiplier.
• HUD REO sales with $100 down payment incentive: HUD properties with the $100 down
payment incentive will be permitted as follows:
o Check availability of incentive programs with HUD. Purchase contract must reference $100
down payment incentive. Incentive may not be currently available.
o The total base loan amount (including financed UFMIP) for $100 down payment
transactions will be limited to 100% of the as-appraised value from the initial HUD
REO appraisal report that set the listing price for the subject property. NOTE: this
loan to value calculation is different from the standard FHA LTV guideline calculation
that is determined by the Base loan amount (excluding UFMIP) divided by the sales
price or appraised value, whichever is less.
o The cost of HUD approved repair escrows may be added to the base loan amount for
purchases of HUD REO properties in combination with the low down payment sales
incentive.
o Repair escrows are permitted (line 4 of sales contract indicates 203b with Repair Escrow).
The maximum amount of allowable repairs is $5000.
o Maximum DTI 45% (DTI > 45% must have compensating factors plus a 2nd signature)
regardless of AUS approval.
o Where a discount on the sales price is being provided, the mortgage amount must be based
on the lesser of the “as-is” value or the discounted sales price, not the contract sales price.
o The program code for FHA REO MUST be used for this option (4027-00 30 yr fixed/4127-00
15 yr fixed)
o Follow 4155 guidance and HUD requirements. See ML 2011-19 for loan amount calculation
details.
o Standard program only, fixed rate. ARMS not permitted.
• Re-negotiated purchase agreement policy:
• Stearns will not accept re-negotiated purchase agreements that increase the sales price
after the appraisal has been completed if:
􀂃 The appraised value is higher than the contracted sales price provided to the appraiser,
and
􀂃 The new purchase agreement and/or addendum used to modify the sales price is dated
after the appraisal is received, and
􀂃 The only change to the purchase agreement is an increase in sales price.
• If the purchase agreement is re-negotiated after the completion of the appraisal, the loan to
value will be based on the lower of the original purchase price or the appraised value,
unless:
􀂃 A re-negotiation of seller paid closing costs and/or pre-paids occurs if customary for the
market and supported by comparables, not to exceed standard seller contributions, or
􀂃 An amended purchase agreement for a new construction property is obtained due to
improvements that impact the value. In the event of such changes, an updated
appraisal must be obtained to verify the value of the modifications.
Rate Term Refinance Transactions:
• For a rate term refinance the maximum mortgage is the lower of the LTV limitation of
97.75% OR the calculation below and may never exceed the maximum loan limit for the
property location (excluding the upfront MIP):
􀂙 Multiply the appraised value of the property by 97.75% OR
􀂙 Add together the amount of the existing first lien, any purchase money second, any junior
liens >12 months old, closing costs, prepaid expenses, borrower paid repairs required by
the appraiser, discount points, then subtract any refund of the upfront MIP.
FHA FIXED RATE AND TREASURY ARM
4000-00 Page 13 of 32 11/15/11
This information is subject to change at any time without notice. Please contact your account manager for current information.
CALCULATING
LTV/CLTV/VALUE:
(cont’d)
􀂙 If the property was acquired less than one year before the loan application and is not
already FHA-insured, in addition to the calculations described above, the original sales
price of the property also must be considered in determining the maximum mortgage. With
conclusive documentation, expenditures for repairs and rehabilitation incurred after the
purchase of the property may be added to the original sales price in calculating the
mortgage amount.
• Note: If any portion of the funds from an equity line >$1,000 was advanced within the last
12 months and was used for any purpose other than repairs and rehabilitation of the
property, the line of credit is NOT eligible fro inclusion in the new mortgage.
• For case numbers issued on or after September 7, 2010: the combined amount of any
FHA-insured first mortgage and any subordinate lien may NOT exceed 97.75% CLTV.
STREAMLINE REFINANCE TRANSACTIONS
At the time of application, the borrower must have made at least 6 payments within the month due
on the FHA-insured mortgage being refinanced.
• For a CREDIT QUALIFYING streamline refinance WITH an appraisal the maximum
mortgage is the lower of
􀂙 The outstanding principal balance minus the applicable refund* of the UFMIP, plus closing
costs, prepaid items to establish the escrow account and the new UFMIP
*Note: The applicable refund of the UFMIP is the lesser of:
􀂃 Unearned UFMIP (from FHA refinance Authorization)
OR
􀂃 New Estimated UFMIP
OR
􀂙 97.75% of the appraised value of the property plus the new UFMIP.
􀂙 Discount points may not be included in the new mortgage. If the borrower has agreed to
pay discount points, the lender must verify that the borrower has the assets to pay them
along with any other financing costs that are not included in the new mortgage amount.
• For streamline refinances WITHOUT an appraisal AND non-credit qualifying refinances
WITH an appraisal, (owner occupied properties) the maximum mortgage is
􀂙 The outstanding principal balance minus the applicable refund* of the UFMIP
*Note: The applicable refund of the UFMIP is the lesser of:
􀂃 Unearned UFMIP (from FHA refinance Authorization)
OR
􀂃 New Estimated UFMIP
PLUS
􀂙 The new UPFMIP that will be charged on the refinance
• Note: The outstanding principal balance may include interest charged by the servicing lender
when the payoff is not received on the first day of the month, but may not include delinquent
interest, late charges or escrow shortages.
• Existing subordinate financing may remain in place to a maximum of 125% CLTV if the borrower
has an acceptable payment history on all liens.
o For streamline refinances without an appraisal, the CLTV is based on the original
appraised value of the property.
o For streamline refinances with an appraisal, the CLTV is based on the new appraised
value.
• The maximum base loan amount may not exceed the statutory limit for each county/MSA.
This includes streamline refinance transactions.
Cash Out Refinance Transactions:
Cash-out refinance on a property owned <12 months:
• The maximum loan amount is based on the lesser of the following:
􀂙 85% of the appraised value OR
􀂙 85% of the original sales price.
􀂙 Sales price need not be considered if property was acquired as a result of inheritance and is
or will be the principal residence of the inheritor.
FHA FIXED RATE AND TREASURY ARM
4000-00 Page 14 of 32 11/15/11
This information is subject to change at any time without notice. Please contact your account manager for current information.
CALCULATING
LTV/CLTV/VALUE:
(cont’d)
Cash-out refinance on a property owned ≥12 months:
• The maximum loan amount is based 85% of the appraised value.
• For case numbers issued on or after September 7, 2010: the combined amount of any
FHA-insured first mortgage and any subordinate lien may NOT exceed 85% CLTV for cash
out refinance transactions
NOTES:
􀂙 Borrowers who are delinquent or in arrears on their current mortgage are not eligible.
􀂙 Existing subordinate financing may remain in place if it is subordinated to the new first
lien.
􀂙 Properties owned free & clear may be financed as cash out refinance transactions.
􀂙 Non-occupant co-borrowers or co-signers may not be added on a cash-out refinance
transaction per mortgagee letter 08-40, page 5. Co-signers must occupy the property.
􀂙 The maximum base loan amount may not exceed the statutory limit for each county/MSA.
􀂙 With HELOC subordinate financing, the CLTV should be calculated from the full amount of the
HELOC (whether or not funds have been drawn).
Energy Efficient Mortgages – USE PROGRAM CODE 4048-00(30 yr)/4148-00 (15 yr):
• Allowable for purchase or refinance of a principal residence to incorporate the cost of energyefficient
improvements into the mortgage.
• Existing 1-4 unit properties including condos are permitted. New construction is not permitted.
• Borrower may finance 100% of the total cost of improvements into the mortgage if the total cost
of the improvements including maintenance is less than the total present value of the energy
saved over their useful life. Appraisal of improvements is not required.
• Once it is determined that the borrower and the property qualify for an FHA loan, the maximum
dollar amount of the cost-effective energy package that can be added to the loan amount will be
determined using the energy rating report (HERS) and EEM worksheet.
o The maximum amount for the portion of the EEM for energy improvements is the
lesser of:
o The actual cost of the improvements
OR
5% of
􀂃 The value of the property (FHA appraised value of the property as
indicated on the DE statement of appraised value), OR
􀂃 115% of the median area price of a single family dwelling, OR
􀂃 150% of the conforming Freddie Mac limit
o The calculated amount can be added to the base loan amount to total the final FHA
insured loan amount before adding any UFMIP.
o For existing properties, energy-related weatherization items (refer to HUD 4155.1
Rev 5, 1-7 (C) (2) for maximum additions to the mortgage amount) may be
combined with the EEM, where the maximum dollar amount allowed under an EEM
does not cover the cost of the entire energy package. The weatherization amount
would be the cost of the improvements not covered by the EEM amount.
o The fees charged to the borrower for the home energy rating, including the physical
inspection, the HERS report, and any post-installation test, must be customary &
reasonable. These fees may be included and financed as part of the energy
package if the entire package (including fees) is cost-effective. If not, such fees
are in the allowable closing costs.
o The FHA maximum loan limit for the area may be exceeded by the cost of the
energy efficient improvements to be financed. However, the base loan amount
can not exceed maximum county limits, including streamline refinances, for
the current year loan limits.
o For streamline refinances, the borrower’s payment on the new loan including the
energy package may be greater than the current payment provided the estimated
monthly energy savings as shown on the HERS report exceeds the increase in the
payment.
o New construction properties must have the energy package installed as part of the
total construction, and must be completed prior to closing. Standard escrow
holdback policies apply for existing construction.
FHA FIXED RATE AND TREASURY ARM
4000-00 Page 15 of 32 11/15/11
This information is subject to change at any time without notice. Please contact your account manager for current information.
CALCULATING
LTV/CLTV/VALUE:
(cont’d)
o FHA has issued several Mortgagee Letters that address requirements that must be
met: ML 2005-21 includes underwriting instructions and information regarding
HERS that are used to determine the cost of improvements and energy savings.
o Note: Appliances may NOT be included in an EEM (only allowable on 203k).
• EEM Processing/Underwriting Instructions:
o Borrower is qualified using standard underwriting requirements and qualifying
ratios. FHA total scorecard may be utilized. UW calculates maximum mortgage
amount using existing instructions. (Loan does not need to be rerun through Total
Scorecard for the loan amount including EEM)
o A HERS (Home Energy Rating System) report is required (by a qualified home
energy rater) showing the estimated costs of installing the energy efficient
improvements (incl. maintenance costs) and annual savings in utility costs that will
result from the installation of the energy efficient improvements.
o The UW must determine that the energy efficient improvements are “cost effective”
by completing the EEM worksheet. EEM Worksheet can be found in J:\Operational
Tools\FHA. This is to be placed directly behind the 2900-LT or WS, along with the
HERS report. The cost effective energy improvement are then added to the
maximum mortgage amount.
o The UW will then calculate the UFMIP based on the loan amount with the EEM
included, and include in the remarks section of the 2900-LT or WS.
o The Lender must establish an escrow for the funds, and the improvements are to
be completed within 30 days (Stearns policy) of closing. Any funds remaining in
the account after construction is over must go to reduce the principal. The borrower
cannot be paid for labor on work that they perform, and no cash back.
o The installation of the energy efficient items may be inspected by HERS qualified
person, or a HUD Fee Inspector, and the borrower may be charged an inspection
fee. (If fee inspector, they must be supplied with a copy of the EE report.) This
additional fee should be included in allowable closing costs.
o The branch is responsible for following up with the broker/borrower to ascertain
when the work is to be completed, and monitor the progress of the job. Stearns will
only allow a 30 day time frame to get this work completed. CIR or HERS
inspection is to be forwarded on to loan delivery department upon receipt.
o The borrower may be charged up to a $200 allowable closing cost for the HERS
report. Inspection fees are only allowed that are typical and common for the area.
o The Lender must execute a Mortgagees Assurance of Completion. ( Hud form 9-
2300)
o The loan can be insured with the work outstanding.
o When work is completed, HUD is notified via FHA connection. This is to be done
when the escrow account is paid out/cleared.
SEASONING:
• Properties are not eligible for mortgage insurance if the resale date is ≤90 days following
acquisition by the seller. (unless the seller is exempt) See eligible property section below for
additional information.
• Loans with resale dates >90 days up to 12 months may require supplemental documentation,
including an additional appraisal.
• For any sale where the seller has owned the property from 91 to 180 days and the new
sales price is 100% or higher than the seller acquisition cost, a second appraisal is
required to confirm the value (refer to ML 2006-14). This 2nd appraisal fee can not be
charged to the borrower.
• Cash out refinance transactions require 6 months seasoning, measured from note date/closing
date to application date. In addition, all borrowers on the new loan must be on title for at least 6
months.
STREAMLINE REFINANCE TRANSACTIONS:
• At the time of application, the borrower must have made at least 6 payments within the month
due on the FHA-insured mortgage being refinanced.
FHA FIXED RATE AND TREASURY ARM
4000-00 Page 16 of 32 11/15/11
This information is subject to change at any time without notice. Please contact your account manager for current information.
REFINANCES:
Continuity of obligation:
• There is no seasoning requirement for rate & term refinances.
• In order to be eligible for a rate & term refinance, borrower must hold legal title to the property;
they do not have to be on the existing lien.
• However, if the borrower has owned the property for less than 12 months, and the loan is not
already FHA-insured, then the new loan amount is based on the lower of appraised value or
borrower’s acquisition cost (see the section regarding calculating the LTV/CLTV and loan
amount)
• For streamline refinance, the same borrowers should be on existing loan and new loan OR a
borrower may be added to those currently on Note without credit qualifying. If deleting a borrower
with another existing borrower remaining on new loan, remaining borrower must credit qualify.
• Cash out refinance transactions require 6 months seasoning, measured from note date/closing
date to application date. In addition, all borrowers on the new loan must be on title for at least 6
months.
• Per ML 2011-11, if the borrowers re-occupy their investment properties:
• If the former investment property has been owner occupied for 12 months or more prior to
loan application, maximum financing as owner occupied is permitted.

Apply Now

Return to Loan Options