PennyMac Closed End Second Mortgage Program
PennyMac offers a closed end second mortgage for homeowners and eligible real estate investors who want to access equity without refinancing their existing first mortgage. The program is available for primary residences, second homes, and non owner occupied properties, subject to program requirements.
Because this is a closed end second mortgage, the full loan proceeds are disbursed at closing rather than accessed through a revolving credit line.
Closed End Second Mortgage Highlights
Minimum credit score starting at 660
Maximum CLTV up to 85%
Loan amounts up to $500,000
Owner occupied, second home, and non owner occupied properties eligible
Debt may be paid off through the transaction to qualify
10, 15, 20, and 30 year fixed terms available
One year of qualifying income documentation may be available
AVM eligibility available on qualifying owner occupied transactions
Soft pull tri merge credit report may be used when program requirements are met
Credit Score and CLTV Requirements
Program eligibility varies based on credit score, combined loan-to-value, loan amount, and other underwriting factors.
Examples include:
660 minimum credit score for transactions up to 65% CLTV
680 credit score may qualify up to 85% CLTV
700 minimum credit score for certain scenarios up to 70% CLTV and a $250,000 maximum loan amount
Final CLTV eligibility is determined by the complete borrower and property profile.
Debt-to-Income Requirements
The standard maximum debt-to-income ratio is 45%.
Certain borrowers may qualify with a debt-to-income ratio up to 50% when:
Maximum loan amount is $250,000
Maximum CLTV is 80%
Minimum credit score is 680
Existing debts may be paid off with loan proceeds when necessary to meet qualification requirements.
Loan Amounts and Property Valuation
Loan amounts are available up to $500,000, subject to credit, CLTV, property valuation, and underwriting requirements.
An automated valuation model, or AVM, may be used for qualifying owner occupied transactions with loan amounts up to $400,000.
For a $500,000 loan amount, a full appraisal is required.
When a transaction qualifies for an AVM, a drive by property inspection may still be required as a prior to documents condition.
AVM Requirements
PennyMac provides an online Home Value Estimator that may be used to determine whether the property qualifies for AVM treatment.
The FSD score must be 15 or lower for the AVM value to be eligible for use.
Because AVM results and FSD scores may change, the valuation should be checked again before submission. A copy of the valuation page showing both the estimated property value and FSD score should be included with the transaction.
AVM tool:
https://tpo.pennymac.com/home-value-estimator
Available Loan Terms
Available fixed terms include:
10 years
15 years
20 years
30 years
The 20 year term may provide more favorable pricing than the 30 year option, particularly for loan amounts above $150,000 and CLTVs below 65%.
Current pricing is subject to change and should be confirmed when the loan is priced.
Income Documentation
The program may allow qualification using one year of income documentation.
Salaried Borrowers
Documentation may include:
Year to date paystub
Most recent W-2
Verbal verification of employment completed within 10 days of the applicable underwriting or closing requirement
Self-Employed Borrowers
Self-employed borrowers may qualify using one year of federal tax returns, subject to underwriting requirements.
Existing First Mortgage Requirements
The existing first mortgage may include an Interest-Only payment structure if at least seven years remain in the Interest-Only period.
Borrowers generally cannot have completed a prior cash out refinance on the subject property within the previous 12 months, measured from the prior note date.
An exception may be available when the new combined loan-to-value is below 75%.
Credit Report and Trended Data Requirement
The closed end second mortgage program requires trended credit data.
The PennyMac soft pull tri merge credit report may be used for this program.
If an outside credit report is imported, it must include the required trended data. This is a program specific requirement for the closed end second mortgage product.
Closing and Disbursement
Because this is a closed end second mortgage, all available loan proceeds are disbursed at closing.
Applicable owner occupied transactions are subject to the three business day right of rescission, and a Closing Disclosure is issued as required.
PennyMac may open title and escrow after the loan is submitted.
ServiceLink is the preferred negotiated title and escrow provider.
Administrative Fee
The standard administrative fee is $795.
The administrative fee is currently being waived, although lender fees and promotions are subject to change.
Eligible States
The program is not currently available in:
Iowa
Indiana
Michigan
New York
Tennessee
Vermont
Texas transactions may be available subject to additional restrictions.
Important Program Notes
Loan eligibility, interest rates, pricing, valuation requirements, fees, and underwriting guidelines are subject to change.
AVM eligibility should be verified close to submission because property values and FSD scores may update frequently.
All loans remain subject to PennyMac underwriting approval and applicable state and federal requirements.
Last Updated on 4 weeks ago by Broker Mortgages