1. If someone has a Ch. 7 Bankruptcy, what’s the timeframe needed before they are eligible for an FHA mortgage? 2 years. Can do after 1 year on an exception basis only (circumstances beyond their control…such as death of a spouse…divorce….cancer)

2. Ch13 timeframe? Must be in it for a minimum of 1 year with no late payments. So, theoretically a borrower currently in a Ch 13 BK is eligible to buy a home

3. If someone has had a foreclosure, what’s the timeframe until they are eligible? 3 years. Can be 2 on an exception basis (circumstances beyond their control…same as above)

4. If someone filed a Ch 7 BK and included their mortgage in it, what’s the timeframe until they are eligible? The clock begins on the date the mortgage was satisfied (3 years from then). What that means is that if the bank foreclosed and it took them a year to sell the property (well after the Ch 7discharge date), the borrower is not eligible for 3 years from the time the bank sold the property and had the mortgage satisfied.

5. Can you do cash out refi to pay off the remaining balance on a Ch 13 Bankruptcy? Yes. You can go up to 95% too assuming there have been no lates on the BK or the mortgage (conforming only, Jumbo cash outs are limited to 85% regardless of the BK)

6. If you have an open tax lien and are currently in a payment plan with the IRS, do you have to pay it off at or prior to closing? No, the IRS can subordinate their lien to the new mortgage and they do routinely do so

7. What’s the maximum number of months left on an installment loan that allows you to remove it from the DTI? 10 mos. However, if the payment exceeds $300/mo and will hinder the borrower's ability to make the mortgage payment in the 1st 10 months, then it will need to be paid to zero

8. Do you have to pay off collection accts and charge-off’s prior to closing? No, FHA does not require it. The loan of course still has to qualify based on credit

9. When do you need to build alternate credit? When the borrowers do not have 3 open active trades' for12 months in their credit report

10. How is alt credit built and evaluated? See attached

11. How long does a student loan need to be deferred for you to leave it out of the ratios?

12 months from the expected closing date

12. If the middle FICO score is under 580, what are the ways we can try to get it up? We can run a 2^{nd Trans Union score, separate model that is FNMA accepted. We can also run a Score Wizard that will show what can be done to get the scores up by allocating money to different creditors}

13. Can you gross up Child Support income? Yes, it will depend on the borrower's tax bracket…either 15% or up to 25%

14. How long must you have been receiving child support (or alimony) to be able to use it as income? 12 months, and it must be documented that it was received on time. It also needs to continue for a minimum of 3 years

15. On a multi-family purchase, how do you establish the rent to be used for income? Based on the appraisal. The appraiser will show the current fair market rents and you can use 85% of that.

16. On a multi-family refi, what needs to be provided if you are using rental income? 2 years of Sch E’s from their tax returns.

17. What income docs are required for a self-employed borrower? 2 years of 1040’s and a current YTD P&L. The P&L does not need to be audited unless specifically called for by the underwriter. In cases where there has been a large increase in income over the passed year, an audited P&L will likely be called for.

18. What is considered alternate documentation when it comes to verifying income? 2 yrs W-2’s and 30 day’s of consecutive pay stubs. The standard way is a VOE and 1 recent pay stub

19. If someone has recently returned to the work force after an extended absence (possibly even for a number of years….for example: a woman returning to work after having children and decided to stay home and raise them) do they need to wait for 2 years to re-establish an employment history to allow you to use their income? No. If they are back to work for a minimum of 6 months and can document, prior to leaving the work force, that they had a complete 2 yr full-time history, the income can be used.

20. If someone is currently renting the home they are looking to purchase, can the seller/landlord give them a down payment credit for the rent they have paid? Yes and No. The seller/landlord can give a credit but only for payments made in excess of the fair market rent. For example, if the fair market rent for the house is $1000/mo and the purchaser paid $1200/mo, then the $200 that was paid over and above the fair market rent could be used as a credit.

21. When refinancing a multi-family home, how is the income from the rentals calculated? Off the 2 yr average of the Sch E’s. You go to line #22 to see if there’s an income or a loss. You then add back depreciation, taxes and interest. When you’ve done that for both years, added them together and divided by 24 (to get the 2 yr avg)….if the number is a positive, it’s added to income, if it’s a negative, it’s added to debt.

22. When a borrower has investment properties, how do you calculate the income/loss? Same as above however, you can only add back in depreciation (not the taxes and interest). After you’ve determined if there’s an income or a loss and applied it correctly to either the income or the debt, you eliminate the mortgage payment for that property from you ratios.

23. Can you rent out your existing home and purchase a new primary residence with an FHA loan? Yes, under 3 circumstances. If there’s a 75 LTV on your existing (proven by an appraisal) or if you are relocating for work, you can use the rental income. If none of those apply and you qualify counting both the existing mortgage and the new mortgage (and therefore don’t need the rental income), you are also eligible.

24. Why do union workers need to supply 1040’s? Because they often write off un-reimbursed expenses and often have multiple employers.

25. When someone has a raise coming up, can we use the income before they receive it? Yes, as long as it’s going to be rec’d within 60 days of closing and is fully documented by the employer.

26. What’s the max DTI allowed for an FHA? None, it varies per deal. From a manual underwriting stand point, MOST LENDERS rarely will go over 45% for either a purchase or refi without a D/O approval. Always keep in mind that whenever you exceed the guideline ratios of 31/43, compensating factors will be needed.

27. What states, that we are currently licensed in, are Community Property States that require us to include the spouse’s debts into the DTI? CA and TX.

28. Can you have a non-occupying co-borrower on 95% cash out refi? No. Non-Occupying co-borrowers are allowed for purchases, rate and term refi’s and cash outs up to 85%.

29. Can you have a non-occupying co-borrower on a 3 fam purchase? Yes, but the max LTV is 75%. Non-occupying co-borrowers are limited to a 75 LTV for all loans except 1 fam’s and condo’s where you can go up to max financing.

30. Does a non-occupying co-borrower need to be family? No, can be a long standing friend.

31. Does a non-occupying co-borrower have to sign the note and the mortgage? No, they can sign the note only (obligating themselves for the debt). HUD’s rule is that anyone who is in title must sign the mortgage and the note so non-occupying co-borrowers have a choice as to whether they want to be in title.

32. On a cash out refi, with a 1x30 on the mortgage in the last 12 months, what’s the max LTV? 85%. The 95% cash out requires no mortgage lates in the last 12 mos.

33. What’s the max LTV on a rate and term refi if there’s a 1x30 in the last 12 months? 97.75%. There’s no restriction for a rate and term.

34. On a 3 fam cash out refi, what’s the max LTV? 85%. The 95% cash out is for 1 or 2 fam’s and condo’s only.

35. What’s the max LTV on a 3 fam rate and term refi? 97.75%. The number of units does not matter for rate and term refi’s.

36. If you have owned the property for less than 1 year, can you do a cash out refi? Yes, up to 85% off the lower of the appraised value or purchase price.

37. When refinancing and paying off a 1st and 2nd mortgage, and the 2nd is a HELOC, can you do a 97.75% rate and term refi? Yes, but there must not have been a draw on the line in the last 12 mos. If there has been, you must fit into the cash out guidelines.

38. When a borrower is getting divorced and they are buying out their spouse, is it considered a cash-out? No, it’s considered a rate and term (and therefore you can go to 97.75%) because the money going to the spouse is considered “property-related indebtedness”. The buyout agreement needs to be supplied.

39. If a property is foreclosed on and bought at the steps by an investor, is there a timeframe that needs to be met before he can sell it to a borrower who is using FHA financing? Yes, 90 days. One of the exceptions that waive a timeframe is for a bank owned REO (or one of their affiliates used to handle the sale) Note: the Contract of Sale cannot be dated before the 91st day.

40. If a property is acquired by inheritance, do they need to wait the 90 days to sell it to someone using FHA financing? No, the add’l exceptions to the 90 day rule are: Sales of properties acquired by inheritance, HUD owned REO’s, sales by other gov’t agencies, sales by non-profits approved to purchase HUD REO’s, sales of properties by employers with regards to relocating employee’s.

41. When is a 2nd appraisal required for a flipped property? When the sale is between 91 and 180 days from the purchase and the resale price is 100% or more of the price paid by the seller.

42. What are the reserve requirements for 2-4 Families? None for 2 fams, 3 months for 3’s and 4’s.

43. Can reserves be a gift? No, must be borrowers own money.

44. For 3 and 4 Families the properties must be self-sufficient, what does that mean? Simply put, the total of all of the rents must be equal to or greater than the monthly mortgage payment (PITI). The calculations are based on the fair market rents that are supplied by the appraiser and they include the owner occupied unit. The concept behind it is that in case of a foreclosure, the property will sustain itself with the rental payments. The formula: Total of all of the rents x 85% (for the vacancy rate) = PITI.

45. Can you have more than 1 FHA loan? Yes. The exceptions are: If you’re relocating, increase in family size and your existing is a 75 LTV or better, vacating a jointly owned property (like in a divorce) or if you were a non-occupying co-borrower for someone else, you can get your own FHA loan.

46. Does a Condo need to be HUD approved to allow FHA financing? No, we can “spot” approve a condo. There’s a questionnaire that needs to be filled out for us to determine if it’s eligible. Some of the basic requirements are: units must be 90% sold, if there are 30 units or more, no 1 entity can own more than 10% and if there’s less than 30 units, no entity can own more than 20%.

47. What is a 203k Streamline? When the repairs required are less than $15,000, (HUD is $35,000 but MOST LENDERS has limited it to the $15,000) for a streamline, all you need is a contractor's estimate to match the required repairs per the appraiser. If it’s above the $15,000, a HUD-Approved Pre-Planner must also estimate the repairs.

48. Can we pay a non HUD-approved mortgage broker (Borrower Direct) from the proceeds on a rate and term refi at 97%? No, because the broker fee paid to them is not considered an “allowable” closing cost, it’s more of an “elective closing cost. Rate and term refi’s can only have “allowable” closing costs to be financed into the loan.

49. If we have a D/O approved loan that has limited open/active accts and the findings do not call for alternate credit, do we need to document it anyway? Yes, we need to verify 3 open/active accts for 12 mos.

50. What will be the minimum down payment requirement on 1/1/09? 3.5%