Mountain West Financial USDA Rural Developments Single Family

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Mountain West Financial USDA Rural Development’s Single Family Housing Guaranteed Loan Program

Mountain West Financial USDA Rural Development’s Single Family Housing Guaranteed Loan Program

Getting Connected If you’re having audio difficulties e-mail: webinars@mwfinc. com

Getting Connected If you’re having audio difficulties e-mail: webinars@mwfinc. com

USDA LOANS

USDA LOANS

USDA LOANS The mission of USDA Rural Development’s Single Family Housing Guaranteed Loan Program

USDA LOANS The mission of USDA Rural Development’s Single Family Housing Guaranteed Loan Program is to assist low to moderate income homebuyers in rural areas to achieve their dream of homeownership!

SERVING RURAL AREAS A rural community generally has a population of 10, 000 or

SERVING RURAL AREAS A rural community generally has a population of 10, 000 or less; however, a community with a population of 35, 000 or less can be considered “rural” if located outside a Metropolitan Statistical Area (MSA).

Homebuyer Benefits • 100% financing – no down payment • 30 -Year Fixed Rate

Homebuyer Benefits • 100% financing – no down payment • 30 -Year Fixed Rate • Flexible credit guides • Thin credit • FICO as low as 620 (see restrictions) • Gift/Grant Funds/MCCs/Seller Concessions are allowed

Homebuyer Benefits • Borrowers do not have to be “First- Time Homebuyers” • Up

Homebuyer Benefits • Borrowers do not have to be “First- Time Homebuyers” • Up to 6% Seller Concessions allowed • No reserves required • No loan limits or sale price limits

Homebuyer Benefits Loans may include funds for closing costs, the guarantee fee, legal fees,

Homebuyer Benefits Loans may include funds for closing costs, the guarantee fee, legal fees, title services, cost of establishing an escrow account and other prepaid items, if the appraised value is higher than the sales price

Loan Purposes • Purchase (New and Existing) • Non-Streamlined Refinance (Rate and Term with

Loan Purposes • Purchase (New and Existing) • Non-Streamlined Refinance (Rate and Term with an Appraisal) • Streamline Refinance Without an Appraisal (Mountain West Financial must be the original lender on the loan being refinanced)

Other Criteria • Primary residence only • Borrowers may own other property at the

Other Criteria • Primary residence only • Borrowers may own other property at the time of the subject closing with restrictions • Borrowers must lack sufficient assets for a 20% conventional down payment

Eligible Borrowers • U. S. Citizens • Permanent and Non-Permanent Resident Aliens • Must

Eligible Borrowers • U. S. Citizens • Permanent and Non-Permanent Resident Aliens • Must have valid Social Security numbers • Legal capacity • Borrowers who are of age to enter into a binding contract prior to the execution of the Note and Security Instrument • Vesting in the name of a trust, partnership, or corporation is not permitted

Ineligible Borrowers • Borrowers without a valid, legitimate Social Security number • Foreign Nationals

Ineligible Borrowers • Borrowers without a valid, legitimate Social Security number • Foreign Nationals • Borrowers with diplomatic immunity • Corporations, estates, life estates, limited or general partnerships, not-for-profit organizations, schools, churches, etc… • Non-occupant co-borrowers • Co-signers

Prohibited Purposes • Construction Draws • Furniture & Personal Property • Manufactured homes older

Prohibited Purposes • Construction Draws • Furniture & Personal Property • Manufactured homes older than 12 months old, and previously occupied. • Income Producing Property • No Duplexes • No Second Homes • No Non-Essential Buildings & Land for Income Producing Purposes

Standard Qualifying Score & Ratios Transaction FICO Max DTI Purchase with GUS Accept Greater

Standard Qualifying Score & Ratios Transaction FICO Max DTI Purchase with GUS Accept Greater than or equal to 620* 39/47% Purchase with GUS Refer 620 – 679* 29/41% Purchase with GUS Refer Greater than or equal to 680* 32/44% Must meet Ratio Waiver Requirements (Ratio Waiver is indicated on GUS Findings) Refinance 620 – 639* 29/41% Refinance Greater than or equal to 640* 39/47% 639 and below require a “credit exception” w/ supporting documentation confirming circumstances leading to derogatory credit attributing to the low score. • Minimum of two scores required

Repayment Ability May exceed ratio limits with documented compensating factors such as: • •

Repayment Ability May exceed ratio limits with documented compensating factors such as: • • • Zero to little payment shock Excellent Credit scores 2+ years on the job Cash reserves And more…

Credit Verification • Verification • Residential Mortgage Credit Report (RMCR) • Tri-Merged Credit Report

Credit Verification • Verification • Residential Mortgage Credit Report (RMCR) • Tri-Merged Credit Report • Credit Alert Interactive Voice Response System (CAIVRS) • Rent History – 12 months rating required to shore-up “thin credit”

Credit History • The following are indications of unacceptable credit history and must be

Credit History • The following are indications of unacceptable credit history and must be investigated: • • • More than one housing payment is more than 30 days late in last 12 months Judgment in past 12 months Outstanding tax liens, regardless their age, currently delinquent Two or more rent payments paid 30 days or more past due Previous RHS debt resulted in loss Any outstanding judgment obtained by United States in federal court (other than tax lien) • Regardless of AUS decision, minimum underwriting score requirements for all Rural Housing loans is 620

Credit Guidelines • Age of credit report: 120 days or less • Two or

Credit Guidelines • Age of credit report: 120 days or less • Two or more eligible trade lines are necessary to validate an applicant’s credit report score • Eligible trade lines consist of credit accounts (revolving, installment etc. ) with at least 12 months of repayment history reported on the credit report • All installment debt with more than six months remaining shall be included in the qualifying ratios • Student loans shall be included in the qualifying ratios regardless of the remaining term (< of 1% or actual payment)

Credit Guidelines NON-PURCHASING SPOUSE: When the applicant resides in a community property state, a

Credit Guidelines NON-PURCHASING SPOUSE: When the applicant resides in a community property state, a credit report must be obtained for the non-purchasing spouse and debts of the non-purchasing spouse must be included in the applicant’s qualifying ratios

Credit Guidelines Adverse Credit: • Foreclosure, Short Sale, and Deed in Lieu of Foreclosure

Credit Guidelines Adverse Credit: • Foreclosure, Short Sale, and Deed in Lieu of Foreclosure - Not allowed within previous 36 months • Chapter 7 – Not allowed within previous 36 months • Chapter 13 – • • Borrowers who have yet to complete repayment (repayment plan in progress) or have completed payment in the most recent 12 months will be considered as a manual underwrite. If currently in Chapter 13, approval from bankruptcy court is required. Plans that are completed for 12 months or greater do not require a credit exception

Credit Guidelines Collection Accounts: 1) Determine if the total outstanding balance of all collections

Credit Guidelines Collection Accounts: 1) Determine if the total outstanding balance of all collections accounts of all applicants is equal to or greater than $2, 000 2) Collection accounts of a non-purchasing spouse in a community property state are included in the cumulative balance of all collections 3) Remove all medical collections and all types of charge off accounts from the total balance. Medical collections and charge off accounts must be clearly identifiable on the credit report

Collection Accounts, cont. 4) If the remaining outstanding balance of collection accounts are equal

Collection Accounts, cont. 4) If the remaining outstanding balance of collection accounts are equal to or greater than $2, 000, any of the following actions will apply: a. Payment in full of all collection accounts at or prior to closing b. Payment arrangements are made with each creditor for each collection account remaining outstanding • A letter from the creditor or evidence on the credit report is required to validate the payment arrangements • The agreed upon monthly payment for each outstanding collection account will be included in the borrower’s debt-to-income ratio c. In the absence of a payment arrangement, the lender will utilize 5% of the outstanding balance in the debt to income ratio

Thin Credit Mountain West Financial, Inc. will consider closing loans involving borrowers with thin

Thin Credit Mountain West Financial, Inc. will consider closing loans involving borrowers with thin credit provided acceptable supplemental credit references are provided similar to FHA guidelines. Consult our full Underwriting Manual for acceptable alternative credit tradelines and procedures.

Income Household and Qualifying Income

Income Household and Qualifying Income

Household Income Household income includes all income from all household occupants whether borrowing, signing

Household Income Household income includes all income from all household occupants whether borrowing, signing or otherwise Household income includes: All adults (anyone 18 or older) • Non-purchasing spouse must disclose if they have income • Obtain letter from non-purchasing party indicating not gainfully employed and no additional income sources Exception: Household member is a full time student Use lesser of actual income or $480/month for calculating household income.

Qualifying Income (1008/1003) includes only the income of the Note signers (borrowers) Important note:

Qualifying Income (1008/1003) includes only the income of the Note signers (borrowers) Important note: Qualifying income may be different than adjusted household income used by USDA

Adjusted Household Income Borrowers’ adjusted household income cannot exceed the maximum allowable income limit

Adjusted Household Income Borrowers’ adjusted household income cannot exceed the maximum allowable income limit set forth in Rural Development Instruction 1980 -D § 1980. 348, Exhibit C (use moderate-income limits) Moderate income is defined as the greatest of: • 115% of U. S. median family income • 115% of average of state-wide and state non-metro median family incomes • 143. 75% of area low-income limit

Income • An income calculator is available on the Rural Development website at: http:

Income • An income calculator is available on the Rural Development website at: http: //eligibility. sc. egov. usda. gov • From the homepage, click “Single Family” under “Income Eligibility”

Income Limit Qualifying Deductions Adjustments to reduce annual income: • $480 per minor or

Income Limit Qualifying Deductions Adjustments to reduce annual income: • $480 per minor or full-time student • Actual cost of child care expense for children 12 years or under (obtain letter from child care provider along with documentation supporting child care expense) • $400 where borrower or co-borrower is elderly or disabled • Medical expenses for an elderly family member can be deducted if they exceed 3% of gross annual income

Non-Taxable Income • Non taxable income maybe grossed-up by 25% • The grossed-up income

Non-Taxable Income • Non taxable income maybe grossed-up by 25% • The grossed-up income used for qualifying must be the same income used to determine that the borrowers’ income eligibility is within the established income limits

Miscellaneous Income Part-time or Second Job employment • Must have history of 24 months

Miscellaneous Income Part-time or Second Job employment • Must have history of 24 months Seasonal Employment • Must have history of 24 months Alimony and Child Support • Must continue for 3 years and have no less than a 12 -month history Overtime, Commission, Self-Employment, & Bonus Income • Must have a history of 24 months Salary Increases • Within 60 days of the first payment date are acceptable

Assets Verification of Funds: • Verification of Deposit (VOD) with average two months balance,

Assets Verification of Funds: • Verification of Deposit (VOD) with average two months balance, OR • Two consecutive months bank statements dated within 45 days of initial loan application date

Assets Gift Funds: • Document through an executed Gift Donor Letter and establish the

Assets Gift Funds: • Document through an executed Gift Donor Letter and establish the gift does not have to be repaid • PROOF of transfer from the donor to the applicant or escrow • All gift funds, including grants, must be from an eligible source (i. e. , a relative, domestic partner, fiancé, church, municipality, or non-profit)

Assets Retirement Accounts: • Obtain the most recent statement(s) and conditions under which funds

Assets Retirement Accounts: • Obtain the most recent statement(s) and conditions under which funds may be withdrawn or borrowed • Retirement funds may be utilized as cash reserves and/or a compensating factor if the account allows for withdrawals by the applicant • Retirement accounts that restrict withdrawals, only in connection with the applicant’s employment separation, retirement, or death, will not be considered as cash reserves or a compensating factor • Calculate 60% of vested balance to allow for penalties

Assets Down Payment Assistance Programs (DPA) • CALHFA and other locally sponsored “Silent Second”

Assets Down Payment Assistance Programs (DPA) • CALHFA and other locally sponsored “Silent Second” Programs • Sapphire Grant Program • MCC The more restrictive of each additional program will apply.

GUS Guaranteed Underwriting System • The purpose of GUS, like all automated underwriting systems,

GUS Guaranteed Underwriting System • The purpose of GUS, like all automated underwriting systems, is to provide consistent and efficient loan file reviews and underwriting recommendations • GUS will consider waivers of the basic standards, based on the applicant's strengths, and provide approvals for applications that require certain waivers • The GUS underwriting recommendations allow the Loan Officer and the Underwriter to quickly review and verify loan data to arrive at responsible lending decisions

GUS UW Recommendations • Accept / Eligible • Loan is eligible for RD loan

GUS UW Recommendations • Accept / Eligible • Loan is eligible for RD loan guarantee • Accept / Ineligible • Credit risk acceptable. Must be referred to an Underwriter to verify if eligible for RD loan guarantee • Refer or Refer with Caution • To be referred to Underwriting for potential manual underwrite

Guarantee Fee Rural Housing Guarantee Fee Program Upfront One-Time Guarantee Fee Include in Monthly

Guarantee Fee Rural Housing Guarantee Fee Program Upfront One-Time Guarantee Fee Include in Monthly Payment Annual Fee Purchase 2. 75% 0. 50% Refinance 2. 75% 0. 50%

Guarantee Fee Effective October 1, 2016 Rural Housing Guarantee Fee will decrease Program Upfront

Guarantee Fee Effective October 1, 2016 Rural Housing Guarantee Fee will decrease Program Upfront One Time Include in Monthly Guarantee Fee Payment Annual Fee Purchase 1. 00% . 50% Refinance 1. 00% . 50%

How to Calculate the 2. 75% Upfront Guarantee Fee and Loan Amount • Loan

How to Calculate the 2. 75% Upfront Guarantee Fee and Loan Amount • Loan value = lesser of appraised value or sales price (if appraised value exceeds sales price , closing costs can be financed up to amount of appraised value) • Loan Value / 0. 9725 = Total Loan Amount • Calyx Point and most Loan Origination Systems already have the formula defaulted

How to Calculate the 2. 75% Upfront Guarantee Fee and Loan Amount Example: Sales

How to Calculate the 2. 75% Upfront Guarantee Fee and Loan Amount Example: Sales Price and Appraised Value are $200, 000 divided by. 9725 = $205, 655. 53 Less base loan - $200, 000. 00 = Guarantee Fee $ 5655. 53 (entire Guarantee Fee including cents is remitted to USDA) Base Loan Amount $200, 000. 00 Guarantee Fee + 5655. 00(leave off cents) = Total Loan Amount $205, 655. 00

Guaranty Fee Calculator The annual fee calculator is now online, and located at Lender

Guaranty Fee Calculator The annual fee calculator is now online, and located at Lender Interactive Network Connection at the following link: https: //usdalinc. sc. egov. usda. gov/USDALinc. Trai ning. Resource. Lib. do

How to Calculate the 2. 75% Upfront Guarantee Fee When Financing Closing Costs Example:

How to Calculate the 2. 75% Upfront Guarantee Fee When Financing Closing Costs Example: Purchase Price Appraised Value $250, 000 $258, 000 Borrower wants to finance $8, 000 of closing costs into the loan since the appraised value is higher than the purchase price. In addition, they will finance USDA’s Guarantee Fee Loan Amount $258, 000/. 9725 = Total Loan Amount $265, 295. 63 minus $258, 000 (sales price + c/c) = $7, 295. 63 Guarantee Fee

Swimming Pools Properties w/ in-ground swimming pools are permitted

Swimming Pools Properties w/ in-ground swimming pools are permitted

Qualifying Form Use Conventional form 1008 “Uniform underwriting and Transmittal Summary” for USDA loans

Qualifying Form Use Conventional form 1008 “Uniform underwriting and Transmittal Summary” for USDA loans

Escrow Requirements Escrow Impound Waivers are not permitted

Escrow Requirements Escrow Impound Waivers are not permitted

Property Eligibility • Must be in rural area • http: //eligibility. sc. egov. usda.

Property Eligibility • Must be in rural area • http: //eligibility. sc. egov. usda. gov/eligibility/welcome. Action. do • Input the subject address • Eligibility Finder will indicate if the home is eligible for USDA

Properties • Existing homes must be structurally sound, functionally adequate, and in good repair

Properties • Existing homes must be structurally sound, functionally adequate, and in good repair • There are no restrictions to the size or design of the home financed

Ineligible Property Types • Manufactured housing • Except MWF retail – New Manufactured Home

Ineligible Property Types • Manufactured housing • Except MWF retail – New Manufactured Home only • Properties located in flood or mudslide zone • Flood Zone Exception • Existing flood zone properties may be waived on case-by-case basis • Properties in Flood Zones (A or V) require an Elevation Cert • National Flood Insurance must be available and flood insurance required • Properties located in area not described as rural per USDA guidelines

Appraisal • Conventional appraisal – Ordered through Mortgage Works AMC and must be performed

Appraisal • Conventional appraisal – Ordered through Mortgage Works AMC and must be performed by an Appraiser from the FHA Roster • Good for 120 days • Must contain the following verbiage: “The dwelling meets HUD’s minimum property standards for existing dwellings as outlined in HUD Handbooks 4150. 2 and 4905. 1”

Property Restrictions • The site value is limited to 30% up to 50% depending

Property Restrictions • The site value is limited to 30% up to 50% depending on property location • Exceptions may apply on case-by-case basis • No large acreage allowed • Property must be contiguous to and have access to paved or all-weather surface street, road, or driveway • Property must have dependable water and waste disposal systems approved by local authorities

Well & Septic Inspections Wells and Septic Systems must have a certification Individual sewage

Well & Septic Inspections Wells and Septic Systems must have a certification Individual sewage systems may be acceptable when the cost to connect to a public or community sewage system is not reasonable as defined by the lender. The lender is required to obtain a septic evaluation. A FHA roster appraiser who certifies the property meets required HUD’s Single Family Housing Policy Handbook, a government health authority, a licensed septic system professional, or a qualified home inspector may perform the septic evaluation.

Termite Inspections If required by the Appraiser or Purchase Agreement or at MWF’s discretion,

Termite Inspections If required by the Appraiser or Purchase Agreement or at MWF’s discretion, a Termite Report must be obtained. Section I items must be completed any Section II items that are a health, safety, or sanitation issue must also be completed Note: USDA reserves the right to require Termite Inspections on older homes

New Construction New construction properties require: • One year warranty (210 Warranty) • Notice

New Construction New construction properties require: • One year warranty (210 Warranty) • Notice of Completion • Certificate of Occupancy • Termite Soil Treatment Guaranty • Job Card

Property • No deferred maintenance • Stove required – “Yes” (even if the Appraiser

Property • No deferred maintenance • Stove required – “Yes” (even if the Appraiser did not call for it and regardless if it is a stand alone or a built-in)

Cash Back The borrowers may not receive any cash back at closing, other than

Cash Back The borrowers may not receive any cash back at closing, other than the documented amount the borrower has paid in advance from their personal funds, such as earnest money deposit, fees for an appraisal or credit report fees

4506 T required in order to submit the loan to USDA for compliance approval

4506 T required in order to submit the loan to USDA for compliance approval Provide IRS form 4506 T with all submissions

The Process Loan Officer accepts application Loan Officer pre-qualifies application Loan process to be

The Process Loan Officer accepts application Loan Officer pre-qualifies application Loan process to be completed and submitted to MWF to underwrite for creditworthiness MWF submits complete application to Agency

The Process Rural Development issues Conditional Commitment within 48 -72 hours MWF closes loan

The Process Rural Development issues Conditional Commitment within 48 -72 hours MWF closes loan MWF submits closing package to Rural Development issues Loan Note Guarantee to Lender

Resource Websites Property Eligibility website: http: //eligibility. sc. egov. usda. gov/eligibility/welcome. Ac tion. do?

Resource Websites Property Eligibility website: http: //eligibility. sc. egov. usda. gov/eligibility/welcome. Ac tion. do? page. Action=sfp Administrative Notices: http: //www. rurdev. usda. gov/rd-an_list. html Income Eligibility website: http: //www. rd. usda. gov/files/RD-GRHLimit. Map. pdf

THANK YOU MOUNTAIN WEST FINANCIAL Making Homeownership A Reality

THANK YOU MOUNTAIN WEST FINANCIAL Making Homeownership A Reality