The following updates are effective immediately, unless otherwise noted.
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Conforming Transactions Overlay Removals and Guideline Updates |
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Topic |
Current Guideline |
New Guideline |
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Primary Residence Credit Scores (excluding manufactured homes) |
· Purchase: 640 · Rate & Term: 640 · Cash-out: 660 |
620 credit score |
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Second Homes Credit Scores (excluding manufactured homes) |
· Purchase: 640 · Rate & Term: 640 · Cash-out: 660 |
620 credit score |
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Investment Property Credit Scores (excluding manufactured homes) |
· Purchase: 660 · Rate & Term: 660 · Cash-out: Not permitted |
Purchase: 620 Rate & Term: 620 Cash-out: · 620 credit score · 1-unit to 75% LTV/CLTV · 2-4 units to 70% LTV/CLTV |
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Primary Residence Co-op Credit Scores |
· Purchase: 640 · Rate & Term: 640 · Cash-out: 660 |
· Purchase: 620 · Rate & Term: 620 · Cash-out: 640 |
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Second Home Co-op Credit Scores |
· Purchase: 660 · Rate & Term: 660 |
· Purchase: 620 · Rate & Term: 620 |
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Self-employed Borrowers |
Most recent year’s tax return required if DU/LPA conditions for one year tax return |
Follow agency guidelines per DU or LPA |
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Freddie Mac LPA |
Lesser of $2000 or 2% of loan amount |
The greater of $2,000 or 1% of the loan amount |
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Unique Properties |
Not permitted |
· Permitted per agency guidelines · Not permitted o Container homes o Tiny homes o List is not all inclusive |
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HomeReady and Home Possible · Boarder Income · Cash on hand |
· Boarder income permitted for refinance only · Cash on hand not permitted |
· Boarder income permitted for purchase and refinance · Cash on hand permitted |
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Manufactured Housing |
Requires 5% of borrower’s own funds into transaction |
Follow agency guidelines |
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Cryptocurrency |
Ineligible source of funds |
Ineligible source of funds; however may be liquidated and deposited into a traditional bank account and be used for down payment, closing costs and reserves with proper documentation. |
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Gift Funds
Guideline Update (Freddie Mac Bulletin 2021-25) |
Gift for an earnest money deposit must be transferred to the borrower from donor. |
· Earnest money deposit may be paid by the donor directly to the builder or real estate agent. · Transfer of funds from the donor’s account in a financial institution to the earnest money deposit holder is required. |
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Bank Statements for Refinance Transactions
Guideline Update (Fannie Mae SEL-2021-06) |
For rate and term refinance and cash-out refinance transactions, the most recent two-month’s bank statement with 60 days’ account activity is required to document bank statements or investment portfolio statements |
For rate and term refinance and cash-out refinance transactions, the most recent one-month’s bank statement with 30-days account activity is required to document bank statements or investment portfolio statements |
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Rate and Term Refinance (Fannie Mae SEL-2021-07)
Guideline Update Effective for loan applications dated on or after September 1, 2021 |
NA |
A rate and term refinance transaction is not eligible if the borrower completed a cash-out refinance transaction with a Note date 30 days or less prior to the application date of a new refinance secured by the same property. |
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Credit Card Reward Points
Guideline Update (Fannie Mae SEL-2021-07) |
NA |
· Credit card reward points are acceptable funds for use towards closing costs, down payment, and financial reserves, provided the reward points are converted to cash prior to closing. · The credit card reward points must be converted to cash and deposited into the borrower’s depository account (for example, checking or savings) |
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REMOVAL OF AGENCY COVID-19 OVERLAYS – EFFECTIVE IMMEDIATELY · Freddie Mac Bulletin 2021-28 · Fannie Mae LL-2021-03 |
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Age of Documentation |
Income and asset documentation 60 days old |
All documents must not be more than four months (DU) or 120 days (LPA) old as of the Note date. |
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Stocks and Mutual Funds – Evidence of Liquidation |
Required when funds are used for closing |
Required when funds are needed for closing unless combined asset value ≥ 20% of amount needed for closing |
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Stocks and Mutual Funds –Reserves |
When used for reserves, only 70% of the value of the asset may be considered. |
No balance reduction required |
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FHA, VA, USDA Transaction Overlay Removals |
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Topic |
Current Guideline |
New Guideline |
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Age of Income and Asset Documentation |
60 days old as of the Note date |
· FHA and USDA: 120 days · VA: 120 days and 180 days for new construction |
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Eligible Properties |
Not permitted · Live-work units · Property with manufactured homes on site being used as storage |
Permitted per FHA, VA, and USDA guidelines |
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FHA Transactions |
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Subordinate financing |
Not permitted |
Permitted per FHA guidelines |
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Purchase CLTV |
96.5% CLTV |
100% CLTV per FHA guidelines with subordinate financing |
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Prior Mortgage Reject loans |
Not permitted |
Permitted with supporting documentation to overcome the prior mortgage reject decision. |
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Down Payment Assistance |
Not permitted |
Permitted per FHA guidelines |
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VA Transactions |
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Credit Score, DTI, and loan amount |
Purchase and Refi · $1,000,000 with 620 credit score |
Purchase and Refi · $1,000,000 with 600 credit score |
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Portfolio VA IRRRL ) |
· Primary residence: 580 credit score · Non-owner occupied: 620 credit score |
· Primary residence and non-owner occupied: No credit score requirement |
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Non-Portfolio VA IRRRL (DTI change for credit qualifying only) |
· Primary residence: 600 credit score to 50% DTI · Non-owner occupied: 640 credit score to 50% DTI |
· Primary residence: 600 credit score to 55% DTI · Non-owner occupied: 620 credit score to 55% DTI |
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Residual Income |
Per VA |
Purchase, Cash-out Refi and Non-Portfolio Credit Qualifying · Loan amounts greater than $1,000,000 and a DTI greater than 45% up to 55% requires 250% residual income |
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Payoff Revolving Debt |
Account needs to be closed unless: · Credit score 680; or · Credit score < 680 & ≤ 50% DTI |
Follow VA guidelines for debt pay off |
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Short Sale and Deed-in-Lieu |
Short Sales with or without mortgage late payments that were completed over one year, but less than two years will require a letter of explanation and supporting documentation to establish an extenuating circumstance and to confirm short sale was not due to credit negligence or taking advantage of a declining market |
· For a short sale or DIL, document the facts and circumstances in which the borrower(s) voluntarily surrendered the property. · If the borrower’s payment history was not affected before the short sale or deed in lieu and was voluntarily communicating with the servicer or holder, then a waiting period from the date transfer of the property may not be necessary. · If short sale or DIL was on a VA-guaranteed loan, then a borrower may not have full entitlement available for the new VA loan. Ensure that the borrower’s COE reflects sufficient entitlement. |
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USDA Transactions |
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Streamlined Assist Refinance |
620 credit score |
600 credit score |