This non-prime mortgage program is designed for borrowers who may fall outside traditional agency or prime mortgage credit guidelines. Financing is available with credit scores as low as 500 for eligible purchase, rate/term refinance, and cash-out refinance transactions on primary residences.
Loan amounts range from $200,000 to $1.5 million. Eligible borrowers may qualify for up to 70% LTV on purchase and rate/term refinance transactions and up to 60% LTV on cash-out refinances. Cash-out proceeds may also be used to satisfy reserve requirements.
Non-Prime Loan Program Highlights
- Minimum FICO score: 500
- Purchase, rate/term refinance, and cash-out refinance
- First-time homebuyers permitted with a minimum 580 FICO
- Up to 70% LTV for purchase and rate/term refinance
- Up to 65% LTV for cash-out refinance
- Loan amounts from $200,000 to $1,500,000
- Maximum 45% DTI
- 30-year fixed-rate term
- Manual underwriting required
- Primary residences only
- SFR, 2–4 unit, PUD, and condominium properties eligible
- Cash-out proceeds may be used for reserves
- No stated maximum cash-in-hand limit, subject to program requirements
Credit Score Requirements
The minimum qualifying credit score is 500. Two credit scores are required. For transactions with multiple borrowers, the primary wage earner’s decision credit score is used for qualification.
First-time homebuyers are eligible with a minimum 580 FICO score.
Loan-to-Value and Loan Amounts
Purchase and rate/term refinance transactions are available up to 70% LTV/CLTV. Cash-out refinance transactions are available up to 65% LTV/CLTV.
Eligible loan amounts range from $200,000 to $1,250,000.
Debt-to-Income and Residual Income Requirements
The maximum debt-to-income ratio is 45%. Exceptions to 45% with compensating factors.
Borrowers must also satisfy residual income requirements. Minimum residual income is $1,250 per month for a one-person household and $1,500 per month for a two-person household, with an additional $125 required for each additional household member.
Income Documentation
This is a full-documentation non-prime mortgage program.
Wage Earners
Wage earners are generally required to provide a current paystub and two years of W-2 forms.
Self-Employed Borrowers
Self-employed borrowers are generally required to provide two years of personal tax returns, applicable business tax returns, and a profit and loss statement.
Cash-Out Refinance Requirements
Cash-out refinancing is available up to 65% LTV/CLTV. The borrower must generally have owned the property for at least six months, and more than six months must have passed since a prior cash-out refinance.
Cash-out proceeds may be used to satisfy reserve requirements. There is no stated maximum cash-in-hand limit, subject to applicable underwriting and transaction requirements.
Reserve Requirements
A minimum of six months of reserves is required. Cash-out proceeds may be used toward the reserve requirement.
For borrowers with additional financed properties, two additional months of reserves are required for each financed property, calculated using the subject property’s PITIA.
Credit Events
Bankruptcy, short sale, pre-foreclosure, foreclosure, deed-in-lieu, forbearance, mortgage charge-off, and mortgage modification generally require five years of seasoning. Multiple unrelated credit events are not permitted.
Collections and charge-offs with an aggregate balance greater than $5,000 must generally be paid. Medical collections and charge-offs may remain open, although applicable open-account payments may be included in the DTI calculation.
Housing History
The program permits a maximum housing history of 1×30 during the most recent 12 months. Borrowers living rent-free are not eligible.
Payment shock may not exceed 300% of the borrower’s current housing payment. Properties owned free and clear are exempt from the payment-shock limitation.
Tradeline Requirements
Each borrower must satisfy at least one of the following minimum credit tradeline requirements:
- Three tradelines reporting for at least 12 months with activity during the most recent 12 months
- Two tradelines reporting for at least 24 months with activity during the most recent 12 months
- One revolving tradeline reporting for at least 60 months with activity during the most recent 12 months
- One installment tradeline reporting for at least 36 months with activity during the most recent 12 months
Eligible Property Types
Eligible properties include:
- Single-family residences
- 2–4 unit properties
- Planned unit developments (PUDs)
- Condominiums
Properties are limited to a maximum of 25 acres. Non-warrantable condominiums and rural properties are not eligible.
Eligible Borrowers
Eligible borrowers include U.S. citizens and permanent resident aliens. Non-occupant co-borrowers are not permitted.
Gift Funds and Secondary Financing
Gift funds are permitted provided the borrower contributes at least 10% of their own funds.
Secondary financing is permitted up to the program’s maximum LTV/CLTV limits. Interested party contributions are limited to 6%.
Appraisal Requirements
One appraisal and a secondary valuation are required. Transferred appraisals are not permitted.
Additional Program Requirements
- Escrow/impound accounts are required
- Maximum of 8 financed properties, including the subject property
- Temporary buydowns are not permitted
- Delayed financing is eligible when the property was purchased for cash within six months of the application date and is treated as a cash-out transaction
- For rate/term refinancing, a previously listed property must be removed from the market at least one month before application
- For cash-out refinancing, properties listed for sale within the previous six months are not eligible for market value rather listing price will be utilized for LTV quaulification
Geographic Restrictions
The program is not available in Alaska, Hawaii, New Jersey, New York, Massachusetts, Cook County, Illinois, or U.S. territories. Texas Section 50(a)(6) transactions are also ineligible.
Program guidelines are subject to change. Additional underwriting requirements may apply, and not all borrowers, properties, or transactions will qualify.
Last Updated on 2 months ago by Broker Mortgages