QuaintOak.com UNDERWRITING FIRST TIME HOMEBUYERS Member FDIC Equal Housing Lender ©2012 Quaint Oak...

QuaintOak.comMember FDIC Equal Housing Lender ©2012 Quaint Oak Mortgage, LLC | NMLS 211466 1

UNDERWRITING FIRST TIME HOMEBUYERS

QuaintOak.comMember FDIC Equal Housing Lender ©2012 Quaint Oak Mortgage, LLC | NMLS 211466

UNDERWRITERS CONCERNS

Payment shock

Affordability

Inadequate reserves

History of savings

Job stability

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LACK OF KNOWLEDGE OF HOME OWNERSHIP

Property taxes

Insurance

Property maintenance

Lack of equity

Lack of principal paid in the first seven

years3


Compensating Factors

Income not used in the transaction

Other income producing household

members

4


How We Mitigate Risk

AUS (Automated Underwriting Systems)

Appraisals

5


What Borrowers Should Know

The sheer amount of documentation

required

Don’t use cash

Credit is re-pulled before closing

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What Borrowers Should Know

Federal debts must be paid or have a

payment plan

No discrepancies

Documents can’t be handled by

interested parties to the transaction

7


UNDERWRITING RULES

THE 4 C’S

Credit

Capacity (Income)

Capital (Assets)

Collateral (Property)

8


90%+ of our First Time Homebuyers obtain FHA financing. The rules that follow are geared towards that. Conventional, USDA, and VA have their own requirements.

9


Credit Documentation

Valid social security number

Photo ID and legally allowed to work in

the USA

Credit report

Letters of explanation

10


Credit Rules

Two year residency

Bankruptcy

Foreclosure

Deferred student loans

Medical collections

11


Credit Rules

Judgments

Charge offs

Non-medical collections and disputed derogatory

credit accounts

What’s included in the debt to income ratio PITI, liabilities from credit report, federal debt, borrowed funds,

wage garnishments, child support/alimony.

12


Income Documentation

Paystubs

W2’s

Tax returns

Tax transcripts (lender obtains)

Employer verifications (lender obtains)

13


Income Rules

Two year history of verifiable income

Unreimbursed job expenses

Overtime, bonus, and commission

income

Self-Employment income

Other sources of income14


Asset Documentation

Bank statements

Cancelled earnest money deposit check

Gifts

15


Asset Rules

Funds for closing

Reserves

Cash on hand

Bank statements

16


Asset Rules

Gifts

Loans can be obtained from family

members.

No unsecured borrowed funds

Downpayment Assistance Programs

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Collateral Documentation

Full appraisal

Final inspection

Property inspections

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Collateral Requirements

Property must be safe, sound, and secure

Appraiser concerns must be addressed/rectified

No chipped/peeling paint

Must have safe and potable water, hot water, heat, and electricity.

Roof

Appliances

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Consumer Hurdles to Home Buying & How Industry Partners Can Help You Help Your Clients

Consumer Risk Factors

• Clarifi Clients (912)– 80% are low-to-moderate income– 55% have dependents– 74% are not married– 49% have some post-secondary education


• Services to Address Risk Factors– Homeownership Education– Homeownership Steps– Pre-Purchase Counseling– FEC Counseling

Ways to Engage Industry Partners

• Education Workshops should always include an industry partner

• Invite industry partners to your employee meetings to discuss their products and their role in the home-buying process

Ways to Engage Industry Partners

• Work with affordable housing developers• Work with affordable lending programs and CDFI

programs– Foreclosure Rescue– Home Rehabilitation

Right StepA Positive Change

Version 4.0

Internal

Community Reinvestment Act (CRA)

The Community Reinvestment Act is intended to encourage Banks to help meet the credit needs of the communities in which they operate, including low to moderate income people and neighborhoods.

Low to moderate income is Annual income that is less than 80% of the Area Median Income for each metropolitan statistical area (“MSA”) or rural non-metropolitan area (County) as published by the Department of Housing and Urban Development.

The CRA requires that each Bank’s record in helping meet the credit needs of its entire community be evaluated periodically by its prudential regulator. That record is taken into account in considering an institution's application for mergers and acquisitions, or the expansion of its branches or proprietary, deposit-taking ATM network.

28Not for External Distribution

Internal

Product Description

Product Description Fully Amortizing 30 Year Fixed Rate MortgageLow to Moderate Income Customers or Customers Residing in an Low to Moderate Income Census Tract

Eligible Transactions Primary Residence (Purchase & Rate and Term Refinances)

Loan Amount Up to $417,000

Loan to Value 97% LTV and 100% CLTV with a FICO Score of 660– Single Family, Condo, and PUDs to 97% LTV / 100% CLTV

– Multi Unit 90% LTV / 100% CLTV

– Manufactured to 80% LTV / 100% CLTV

Ratios 33% Housing and 41% Total Debt to Income

Customer Contribution Required to Contribute 3% into the Transaction

Subordinate Financing Grant with No Repayment Requirement is Permitted, Provider must be Approved by TD Bank

Mortgage Insurance Not Required


Internal

Product Description

Homeowner Buyer Education/ Landlord

All Customers will be Required to Attend a HUD approved Homeowner Education Class and if the Subject Property is a 2-4 Unit a HUD Approved Landlord Education Course

Limitations on Real Estate

The Customer may not own any other Residential Real Estate at the Time of Closing

Escrows Required on all loans

Co-Signors Not Allowed

Geographic Locations Entire TD Bank footprint

Income Limits Customer Must Meet Low to Moderate Income Limit Requirements or be Located in a Low to Moderate Income Census Tract

Reserves Not Required

Seller Credit The Seller can Contribute 3% toward Closing Costs and Pre-Paids at 90.01 - 97% LTV, higher seller contributions are permitted at lower LTVs


Internal

Income Documentation Requirements

The Right Step® Mortgage requires full documentation

Tax Returns may be required under certain circumstances– e.g. A Self Employed Borrower

Income will be calculated using all the Customer’s income and will include rental income from the subject property, if applicable– Remember: A Customer may only own one property


Internal

Income Requirements Customers must meet low to moderate income limits or the

Subject Property must be located in a low to moderate income census tract


Internal

Homeowner Buyer / Landlord Course

All Customers will be required to attend a HUD approved Homeowner Education Course, and, if applicable, a HUD approved Landlord Education Course for 2-4 unit properties– The Customers must provide a certificate of completion as documentation they

attended the class

Customers will receive instructions on how to obtain a certificate after making application, see sample below:

Below are options for finding an approved class or classes near you: Access the HUD Website at http: / /www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm and

click on the appropriate State for a list of classes from which to choose. I f you need assistance accessing or navigating this website please contact your processor at the number listed below.

I f you do not have internet access ask your processor for assistance in obtaining

a list of approved classes and locations. For applicants wishing to take an online class, the following websites have

approved classes available. Please contact your processor at the number listed below for guidance on accessing these on line courses.

http: / /www.homebuyerfunds.com/online_homebuyer_education.htm http: / /www.ehomeamerica.org/ http://www.mgic.com/lender-services/homebuyer-education.html

https://homebuyereducation.genworth.com/register/

I f you have any further questions regarding this requirement please contact your processor, [processor name] @ [800-xxx-xxxx] for assistance.


Internal

Grants

A Grant is a gift that is not required to be paid back– A Grant does not have a monthly payment and is not included in the debt ratio

– A Grant is typically offered by a not-for-profit or municipality


Internal

Product Highlights

A Customer can qualify for a Right Step loan if their property is located in a Low to Moderate Income census tract regardless of their income

If the subject property is not located in the LMI census tract, the Customer must meet Low to Moderate Income guidelines

97% LTV on a purchase or rate/term refinance of a single family home with no mortgage insurance!

3% down payment (must contribute 3% into transaction)

660 minimum credit score


Downpayment/Closing Costs

How do I pay for these?

What’s the Problem?

• Creditworthy, “low wealth” buyers• Tightening of mortgage underwriting criteria• Costly mortgage insurance alternatives

First Front Door (FFD) provides grant assistance toward down payment and closing costs to families at or below 80 percent of the area median income.

The FHLBank will match the homebuyer's contribution $3 for every $1 provided by the homebuyer, up to $5,000.

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Who Qualifies?

Qualified first-time homebuyers can use FFD grants toward down payment and closing costs. Each prospective homebuyer must:• Be a first-time homebuyer (not owned a home within the past three

years or owned a home only while married but not as a single person within the past three years – this includes a married couple if either has not owned a home within the past three years)

• Contribute personal funds as part of the down payment and closing costs

• Have household income at or below 80 percent of the area median income (based on HUD income limits) at the time of registration

• Complete at least four hours of homeownership counseling, including the topic of predatory lending, prior to the purchase of the home

How Does It Work?

• Participating FHLBank member– Provides first mortgage

• Homebuyer registration– Six month “reservation”

• 5 year retention– Forgivable grant

• For more information: www.fhlb-pgh.com

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