30-Day Charge Accounts Borrower must have sufficient funds to cover the unpaid balance of all unpaid 30-day charge accounts (e.g., American Express).
Bankruptcy 2 years elapsed since the discharged of Ch. 7 and 13 for AUS underwriting. Chapter 13 – manual underwriting, one year pay-out and court approval to purchase subject property.
Collections/Charge Offs Collections exceeding cumulative (including non-borrowing spouse) balance of more than $2,000 a) payoff b) to be in payment arrangement to include in DTI c) include 5% of balance in DTI. Medical collections are excluded form payoff. Charge-Offs do not need to be paid.
Debts/Minimum Payment The greater of $10 or 5% of balance for revolving/installment accounts if payment not reporting. Include all revolving payments regardless of the number of payments remaining. HELOC: If not shown on the credit report, payments on a HELOC with an outstanding balance may be calculated at 1% of the outstanding balance or use billing statement.
Disputed Accounts If Case date is prior to 10/1513: Downgrade to manual underwrite is not required if the disputed account has a zero balance OR marked paid in full / resolved OR the disputed account is both less than $500 and date of dispute is >
24 months old. If Case Date 10/15/13 or after there is a $1,000 tolerance on disputed accounts where no further action is necessary.
Foreclosure 3 years elapsed since completion of Foreclosure.
Inquiries Credit inquiries within last 120 days require written explanation.
Judgments/Liens 1) All judgments against title are required to be paid in full.
2) Borrowers are not allowed to prepay scheduled payments in order to meet the required minimum months of payments. The underwriter must include the payment amount in the agreement in the calculation of the borrower’s debt- to-income ratio.
3) FHA requires judgments of a non-purchasing spouse in a community property state to be paid in full, or meet the exception guidance for judgments above, unless excluded form state law. All properties in Santa Ana Hoc
Jurisdiction, which includes CA, judgments must be paid in full regarding non-purchasing spouse.
4) If TOTAL Mortgage Scorecard generates a “Refer,” the underwriter must manually underwrite and provide a letter of explanation and supporting documentation for the reason of the unpaid judgment.
Lease Payments The lease payment must be included in the DTI regardless of the remaining number of payments.
Min FICO Min FICO 580 with AUS “Approve/Eligible” and/or manual downgrade. Non-traditional credit is allowed subject to manual underwriting. Additional reserves are required per ML 2014-02.
Min Trades/Auth User Accounts
Authorized user account cannot be used as an acceptable trade line, unless you provide 12 months cancelled checks the borrower is making the payments on the authorized user account.
Mortgage History Follow AUS findings report.
Payoff of Revolving Debt In order to qualify without the monthly payment on the current balance, a credit supplement or letter from creditor to evidence the account is closed prior to funding is required. If the revolving account is paid off, but not closed, the monthly payment shown on credit report (or the greater of $10 or 5% of the outstanding balance, if there is not payment) must be included in the DTI.
Payoff of Installment Loans Installment debts may be paid off and cannot be paid down to less than 10 months for qualifying.
Prior Restructure Reflected in
credit history Loan Modification is allowed subject to AUS approval and no delinquent interest can be paid of through the loan.
Short Sale/ Pre-foreclosure/ Deed in Lieu of A borrower in default at time of short sale requires three years seasoning.
Borrowers current on the mortgage at time of short sale are allowed, subject to: Borrower was current on the mortgage and all installment debt within the month due for the 12-month period preceding the short sale. There is no waiting period as long as it is determined the borrower did not pursue the short sale to take advance of declining markets or to buy up in value and the proceeds from the short sale serve as payment in full.
Short Refinance/Modifications Requires DU Approval; Need loan modification documents, must qualify at highest payment. If refinancing, there may be no delinquent interest in payoff.
Student Loans Deferred >12 months do not need to be considered. All efforts should be made to obtain payment on deferred student loans. If unable to obtain, 2% of balances will be used as payment in determining DTI.
Tax Liens Tax liens must be paid in full prior to closing unless both of the following items are provided:
1) Fully executed payment arrangement (minimum three (3) months payment history) and
2) Evidence timely payments have been made.
—–The payment must be included in the debt-to-income ratios.
—–Tax liens belonging to a non-borrowing spouse are subject to all of the above requirements when the borrowers live in or purchase a property located in a community property state.
—–The Internal Revenue Service (IRS) routinely takes a second lien position without the need for independent documentation. For this reason, eligibility for FHA mortgage insurance is not jeopardized by outstanding IRS tax liens remaining on the property, unless the lender has information that the IRS has demanded a first-lien position.
—–Tax liens may remain unpaid if the lien holder subordinates the tax lien to the FHA-insured mortgage.
NOTE: A borrower must be rejected if he/she is presently delinquent on any Federal debt and currently not making payments.