1. ESSEX OFFERS:
Home Ready (DU)
Home Possible (LP)
2/8/2016

2. HOME READY(DU) & HOME POSSIBLE (LP)
Conventional Financing
3% Down Payment
0% Required from borrower’s own funds
Flexible sources of income and assets
Mortgage Insurance reduced
Competitive Pricing – due to price caps
No Condo hits for 680+ FICO
No LTV hits for 680+ FICO
No upfront MIP as on an FHA loan
2/8/2016

3. REDUCED MORTGAGE INSURANCE
How does this program compare to standard mortgage insurance:
Conventional financing at 97%; 680 FICO, $250,000 loan amount
Cancellable once you have 20% equity; unlike FHA.
Monthly MI
Standard 35%
“non refundable”
Monthly MI
Home Ready 25% “non refundable”
Home Possible 18% “non refundable
Coverage/$mo.
1.31%/$272.91
.96%/$200.00
.80%/$166.00
2/8/2016

4. How do the 2 programs compare?
HOME READY (DU)
HOME POSSIBLE (LP)
DU only
LP only
MI Coverage: 25% % and above
18% over 95%; 16% greater than 90% to 95%
FICO: 620 Minimum (lower FICO’s may not pass the high cost test and may require borrower paid)
FICO LP 620 minimum
(lower FICO’s may not pass the high cost test and may require borrower paid)
Conforming LTV’S: 97% Purchase R/T: 1 unit SFR, Condo & PUD’s;
95%
2 units to 85%; 3-4 to 75%
Conforming 97% LTV;
High balance 95% LTV
LTV’S: 97% Purchase 1 unit SFR, Condos & PUD’s;
95% 1-4 units
95% R/T Refinance
Conforming loan limits only
2/8/2016

5. Program Comparison cont…
Down Payment:
0% minimum borrower’s own funds – 1 unit
3% minimum borrower own funds – 3-4 units
3% Seller Contributions Okay
Down payment:
0% minimum borrower’s own funds
1 Unit
3% minimum borrower own funds for 2-4 units
3% seller contributions okay
No 1st time homebuyer requirement
SAME
Acceptable sources of down payment and closing costs: Gifts, grants, community 2nd’s, cash on hand (cash on hand 1 unit only)
Reserves – none for 1 unit;
DU will determine for 2 units
Reserves – none for 1 unit
2 months reserves for 2-4 units
Occupant borrower(s) may not have any ownership interest in any other residential property at time of closing
2/8/2016

6. Program comparison cont…
Boarder income: Up to 30% of qualifying income
Rental income from an accessory unit (1 unit only)
For acceptable examples:
Boarder Income - SAME
No rental income from accessory unit.
MCC’s (Mortgage Tax Credits) ok to 95% only
SAME
2/8/2016

7. Program Comparison Cont….
Non occupant borrower: Consider income, assets, credit and liabilities (DU up to 95%); subject to Home Ready income limits.
Extended-income Household Income (EIH’s)
may be considered as a compensating factor in DU allowing ratios up to 50%; not required to be a family member. Non borrower(s) income must be at least an aggregate of 30% of the total monthly qualifying income and must reside in property for a minimum of 12 months. EIH members include adult children, parents, other relatives, domestic partners and non-relatives
Non non occupant co borrowers allowedd.
All borrowers must occupy – no non occupant co borrower.
Same
2/8/2016

8. Flexible Down Payment HR&HP
Personal gifts, gifts or grants from qualified entity, employer assistance
Cash on hand – okay for 1 unit properties only:
The borrower customarily uses cash for expense, and the amount funds saved is consistent with the borrower’s previous payment practices.
Funds for the down payment and closing costs must exist in a financial institution account or an acceptable escrow account. Funds must be on deposit at the time of application, or no less than 30 days prior to closing.
2/8/2016

9. Flexible down payment cont… HM & HP
The cash on hand is not borrowed and could have been saved by the borrower
The credit report does not show more than 3 trade lines for the borrower.
The updated credit report and other verifications should indicate limited or no use of credit and limited or no depository relationship between the borrower and a financial institution.
2/8/2016

10. Non Borrower Household Income – Home Ready
The existence of income from a non –borrower household member may be considered as a compensating factor for loans underwritten through DU to allow for a higher DTI ratio. A “household member” is defined as any person who intends to live with the borrower in the subject property for a minimum of 12 months. An individual who is considered a non-borrower household member in accordance with these guidelines may not also be the contributor of rental income (two-to four-unit properties), accessory unit income (one-unit properties), or boarder income the subject transaction.
The income from the non-borrower household member is not added to the borrower’s income for qualifying purposes; however, the existence of this income is considered a compensating factory that may allow the borrower to have a DTI ratio greater than 45% up to 50%. That income must be entered as Non-Borrower Household income in the Other Income section of H2O. If the non-borrower income is needed as a compensating factor to allow a DTI ratio greater than 45% up to 50%, the following requirements apply:
 The non-borrower household income must be documented in accordance with Fannie Mae’s standard documentation requirements applicable to the type of income required.
 The amount of the non-borrower household income must be 30% or more of the total qualifying income used to underwrite the loan.
 The lender must obtain a written statement from the non-borrower that he or she intends to reside with the borrower in the subject property for a minimum of 12 months.
Because the non-borrower’s income is not being used for qualifying purposes, it is not considered when determining whether the mortgage loan meets the HomeReady income limit requirements.
2/8/2016

11. Rental Income and Boarder Income Home Ready
Rental Income from the Subject Property
Rental income is an acceptable source of qualifying income in the following instances:
 One-unit principal residence with an accessory unit.
 Two-to four-unit principal residence properties
Boarder Income for Home Ready:
 The rental payments that any borrower receives from one or more individuals who reside with the borrower (but who are not obligated on the mortgage debt and may or may not be related to the borrower) may be considered as acceptable stable income when qualifying for a one- family property, in an amount of up to 30% of the total gross income that is used to qualify the borrower for the mortgage if:
o The individual(s) has lived with (and paid rent to) the borrower for the last 12 months.
o The boarder can provide appropriate documentation to demonstrate a history of shared residency (such as a copy of a driver’s license, bill, bank statement, etc., that shows the boarder’s address as being the same as the borrower’s address).
o The boarder can demonstrate (such as copies of canceled checks) the payment of rental payments to the borrower for the last 12 months. Payment of rent by the boarder directly to a third party is not acceptable
2/8/2016

12. Rental Income – Home Possible
Rental Income Calculations on Two – to Four- Unit Properties
 Refer to Conforming Rental Income guidelines for LP.
Boarder Income
 The rental payments that any borrower receives from one or more individuals who reside with the borrower (but who are not obligated on the mortgage debt and may or may not be related to the borrower) may be considered as acceptable stable income when qualifying for a one- family property, in an amount of up to 30% of the total gross income that is used to qualify the borrower for the mortgage if:
o The individual(s) has lived with (and paid rent to) the borrower for the last 12 months.
o The boarder can provide appropriate documentation to demonstrate a history of shared residency (such as a copy of a driver’s license, bill, bank statement, etc., that shows the boarder’s address as being the same as the borrower’s address).
o The boarder can demonstrate (such as copies of canceled checks) the payment of rental payments to the borrower for the last 12 months. Payment of rent by the boarder directly to a third party is not acceptable.
o The Borrower must attest, by affidavit executed at application, to the:
Source of the rental income
Fact that the person providing the rental income has resided with the Borrower for the past year and intends to continue residing with the Borrower in the new residence for the foreseeable future.
2/8/2016

13. ADDITIONAL INFO ON: Non Occupant Income Home Ready only (HP does not allow n/o/o)
Non-Occupant Borrower Income Flexibility
Income flexibilities help to meet the diverse needs of today’s home buyers by expanding access to creditworthy, low- to moderate-income borrowers. The non-occupant borrower income flexibility allows a parent, or anyone else willing and financially able, to be a borrower on the loan.
Sample Scenario: Loan Underwritten in Desktop Underwriter® (DU®)
A millennial couple is buying their first home, and his mother would like to help. She is willing and able to be a borrower on the mortgage loan, but she will not live in the home. Because the borrower’s mother will be an actual borrower on the mortgage loan, her income and liabilities are considered from a qualifying perspective and will be included in the combined debt-to- income (DTI) ratio.
Bor
Borrowers’
Income
$6,000/month
Non-Occupant Borrower’s Income
$9,000/month
NOTE: The maximum LTV is 95% for DU. The DTI ratio is calculated using the income and liabilities of all borrowers; there is no separate DTI ratio requirement for the occupant borrower. Loans with non-occupant borrowers also are eligible for manual underwriting; however, additional requirements apply, including a maximum LTV of 90%, and the occupant borrower must have a DTI ratio no higher than 43%, based solely on their own qualifying income and liabilities.
2/8/2016

14. Additional info on: Extended Household Income Flexibility Home Ready
Homeownership for the Way We Live Today
Home Ready™ mortgages support homeownership for the way we live today. Extended-household living arrangements are more common among underserved populations, including low- to moderate-income, minority, and immigrant households. These households often have lower incomes overall, compared with a broader population, and that may impact their access to credit – but many also are “extended-Income households” or EIH’s.
What is an extended-income household?
EIHs (for our purposes, limited to homeowners with a mortgage) are defined as households in which a member other than the mortgage holder or spouse has an income equal to at least 30 percent of that of the borrower(s).
Who lives in EIHs?
Among all households with a mortgage (based on 2013 data – the most recent available), 14 percent are EIHs. And, among all households with a mortgage, 25 percent of Hispanic, 20 percent of African American, and 17 percent of Asian households are EIHs with one or more adults having combined income equal to at least 30 percent of that of the borrower(s).
EIH members include adult children, parents, other relatives, domestic partners, and non relatives
2/8/2016

15. Non-Borrower Household Income Requirements
Home Ready Example:
Non-borrower household income must be underwritten in DU.
 Non-borrower income must be at least 30 percent of the total monthly qualifying income being used by the borrower(s). (Note: Income from more than one non-borrower household member may be considered.)
 Non-borrower income is not considered part of qualifying income.
 Non-borrower household members may be relatives or non-relatives.
 The non-borrower must 1) document his or her income, and 2) sign a statement of intent to reside with the borrower(s) for a minimum of 12 months. (See optional Fannie Mae Form 1019.) Sample Scenario: Extended-Income Household
A single woman with children is looking to buy a larger home, so her father can move in with her. Her father has monthly income and, although he will not pay rent to his daughter, he may contribute to household expenses periodically.
The father’s income is not considered as qualifying income; therefore, there is no change to the borrower’s DTI ratio of 47%. The existence of the father’s income, however, is considered the compensating factor that allows the borrower to have a DTI ratio greater than 45%.
2/8/2016

16. Income Limitations: DU Income Limits:
LP Income Limits:
Note: Many census tracks do not have any income limitations.
2/8/2016

17. Counseling Required (units require Landlord as well)
HomeReady
org/
Home Possible
2/8/2016

18. Home Ready CLTV to 105% Home Ready Community 2nds:
eet/community-seconds-fact-sheet.pdf
Community 2nd Checklist:
eet/community-seconds-checklist.pdf
2/8/2016