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HUD Handbook 4000.1 Summary

Go Back - Home > HUD Handbook 4000.1 Summary

Sun West Underwriting policy as per new FHA Handbook 4000.1

Introduction

The HUD handbook 4000.1 has consolidated approximately 450 handbooks, mortgage letter and other policy statements. The list of the mortgagee letter and handbook that has been superseded full or in parts is available in the Handbook and should be referred for any discrepancy between previous policy and new policy.

Per new FHA handbook 4000.1, Sun West Mortgage Company, Inc. is updating underwriting policy for FHA loans. The summary of major changes in underwriting policy is mentioned here. However, this is not an all-inclusive list. HUD Handbook and SWMC Underwriting guide should be referred for the most updated policy.

The new HUD handbook can be accessed through FHA Handbook page in below link :
http://portal.hud.gov/hudportal/HUD?src=/program_offices/administration/hudclips/handbooks/hsgh.

FHA has published the guideline online which can be accessed in the link present in the HUD Handbook Page as shown below.

SWMC underwriting policy can be accessed through Seller Guide and Product Guideline from AllRegs which is accessible through SWMC website for wholesale and Correspondent Channel.

NEW HUD HANDBOOK 4000.1 – FHA SINGLE FAMILY HOUSING POLICY UPDATES

FHA has published the new handbook on Single Family Housing Policy 4000.1 which encompasses origination through post-closing process and policy. The new handbook will become effective from case assignment dates as early as September 14th, 2015.

Below are a few significant changes that have been incorporated in the new handbook for FHA Single Family Housing – Origination/Processing Policies 4000.1.

Underwriting the borrower

Underwriting using Total Score card

Credit history
  • If cumulative payment of all the installment accounts which will be paid off within 10 months is less than or equal to 5% of borrower’s gross monthly income, then those accounts can be excluded from ratio analysis.

  • Deferred student loans cannot be excluded from ratio analysis. Either of the following need to be considered as monthly payment for ratio analysis:

    • The actual payment listed on the credit report or payment letter (if available); or

    • 2% of the outstanding balance.

    • If actual payment is 0 or not available, 2% of the outstanding balance must be used.

  • If payment is not available on deferred non-student loans (installment or revolving), 5% of the outstanding balance must be used in calculating the DTI.

  • Accounts for which the Borrower is an authorized user must be included in a Borrower’s DTI ratio unless the Borrower can document that the primary account holder has made all required payments on the account for the previous 12 months. . If less than three payments have been required on the account in the previous 12 months, the payment amount must be included in the Borrower’s DTI.

  • If credit report shows that borrower has paid the outstanding balance for 30 day charge account in full for the past 12 months, account can be excluded from ratio analysis. If credit report reflects any late in the last 12 months, 5% of the outstanding balance will be considered as borrower monthly debt for ratio analysis.

  • Child Support, Alimony or Maintenance expense must be treated as a recurring liability. The amount of monthly obligation will be the greater of:

    • The amount shown on the most recent decree or agreement establishing the Borrower’s payment obligation; or

    • Amount of Child Support, Alimony or Maintenance as verified from borrower’s pay stub covering no less than 28 consecutive days.

  • When a self-employed Borrower states debt appearing on their personal credit report is being paid by their business, there must be documentation to support that the debt is paid out of company funds and that the debt was considered in the cash flow analysis of the Borrower’s business.

  • Borrower is not required to provide an explanation for Collection, Charge-Off, Judgments or accounts with late payments within the last 24 months.

judgments: exception policy clarification

Verification is required that the court-ordered Judgments are resolved or paid off prior to or at closing.

Exception:

  • A judgment is considered resolved if the Borrower has:

    • Entered into a valid agreement with the creditor to make regular payments on the debt;

    • Has made timely payments for at least three months of scheduled payments; and

    • The judgment will not supersede the FHA-insured mortgage lien.

  • The borrower cannot prepay scheduled payments in order to meet the required minimum of three months of payments.

  • Note: All judgment liens must be subordinated.

Income Requirement
  • For borrowers who are paid hourly and whose hours vary, the effective income will be calculated based on the average of income over the previous 2 years. If increase in pay rate can be documented, then effective income can be calculated based on the most recent 12 months average of hours at the current pay rate.

  • If the Borrower has changed jobs more than 3 times in the previous 12 months, or changed line of work; then following needs to verified to document the stability of the income:

    • Transcripts of training and education demonstrating qualifications for a new position; or

    • Employment documentation evidencing continual increase in income and/or benefit.

  • Effective income for self-employed income will be calculated by using the lesser of:

    • The average gross Self-Employment Income earned over the previous 2 years; OR

    • The average gross Self-Employment Income earned over the previous year.

  • For VA Disability benefit, VA Form 26-8937 (Verification of VA Benefits) is required, showing the amount of assistance and the expiration date of the benefits, if any. One of the following documents is also required:

    • Federal tax returns; OR

    • The most recent bank statement evidencing receipt of the income from the VA.

  • The percentage of Non-Taxable Income that may be added cannot exceed greater of 15 percent or the appropriate tax rate for the income amount, based on the Borrower’s tax rate for the previous year. If the Borrower was not required to file a federal tax return for the previous tax reporting period, may gross up the Non-Taxable Income by 15 percent.

EMPLOYED BY FAMILY BUSINESS

Required Documentation:

  • The following documents can be accepted to verify that the Borrower is not an owner in the family owned business:

    • Corporate resolutions or other business organizational documents, business tax returns or Schedule K-1 (IRS Form 1065), U.S. Return of Partnership Income, or an official letter from a certified public accountant on their business letterhead.

  • Signed personal tax returns or tax transcripts of the borrower must also be submitted.

  • Sun West will not allow recent increase in income and will average income earned over the period.

Asset Requirement
  • Paper trail for earnest money deposit (EMD) is required if EMD exceeds 1% of purchase price or appears excessive based on borrower history of accumulated saving.

  • Where real estate taxes are paid in the arrears, the seller’s real estate tax credit may be used to meet MRI (minimum required investment); if it is documented that:

    • Borrower has sufficient assets to meet the MRI and the Borrower paid closing costs at the time of underwriting.

    • Note: This permits the borrower to bring a portion of their MRI to the closing and combine that portion with the real estate tax credit for their total MRI.

  • For recently opened accounts and recent individual deposits of more than 1% of the adjusted value, paper trail is required. Deposits of more than 1 percent of the adjusted value are considered a Large Deposit. This will be applicable to both purchases and refinances. Multiple deposits of more than 1% that do not conform to Borrower’s saving pattern will also be included in the requirement of paper trailing.

  • Access letter is required from joint owner of account; even if joint account holder is spouse.

  • Donor bank statement is required whenever Gift fund is being used. 1 month donor bank statement is required to make a reasonable determination that the gift funds were not provided by an unacceptable source.

  • Gift is allowed from family member. The definition of family member has changed per the updated HUD 4000.1 Handbook. Family member includes:

    • Spouse or Domestic Partner.

    • Child, foster child, parent or grandparent.

    • A child is defined as a son, stepson, daughter or stepdaughter;

      • A parent or grandparent includes a step-parent/grandparent or foster parent/grandparent;

      • Legally adopted son or daughter, including a child who is placed with the Borrower by an authorized agency for legal adoption.

    • Brother, step-brother and sister, step-sister;

    • Uncle or Aunt.

    • Son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law or sister-in-law of the Borrower.

DOCUMENT VALIDITY
  • Maximum Document validity period for general documents cannot exceed 120 days from loan disbursement date for both existing and new construction properties. Day one to be considered as the day after the effective date or issue date of the document, whichever is later.

  • 120 day validity period can be extended for 30 days if:

    • Loan is approved or HUD commitment is issued prior to expiration of the appraisal OR

    • Borrower signed a valid sales contract prior to expiration date of the appraisal.

  • Appraisal update must be performed before the initial appraisal is expired (without extension. The validity period for the updated appraisal is 240 days after the effective date of the initial appraisal report.

  • Any online printout of documents must indicate the Uniform Resource Locator (URL) address, as well as the date and time the documents were printed. If the main website affiliated in the URL is not verified as valid and a password protected site, then the documents may not be considered as a valid document and further documentation will be requested.

INITIAL DOCUMENTS AND/ OR DISCLOSURES
  • A signed copy of initial 1003 and initial 92900-A need to be submitted before the loan can be submitted for underwriting; irrespective of interview type.

    • If loan has been submitted without signed 1003, the file will not be processed for underwriting until the signed copy is received.

  • The purchase contract must have a clause or addendum to affirm that the borrower has received EPA-approved information pamphlet on identifying and controlling lead-based paint hazards (“Protect your family from Lead in your Home”). It is to be verified that either borrower was given a 10 day period before becoming obligated to purchase the home for inspection or borrower has waived the requirement.

    • If the clause is not present in the purchase contract, then a signed addendum verifying the above information must be submitted prior to closing.

  • Form HUD-92564-CN “For Your Protection: Get a Home Inspection” is required to be provided in initial disclosures for all purchase transactions, including Pre-Qualification.

NON-BORROWING SPOUSE REQUIREMENTS
  • Non-borrowing spouse consent and authorization for any Non-Borrowing spouse residing in a Community Property State and/ or the Subject Property is located in a Community Property State must be included in the loan file.

  • The debt of the non-borrowing spouse must be on the initial 1003 if the subject property is in a community property state.

  • SSN Verification is required for borrower as well as non-borrowing spouse, wherever applicable. Therefore, an executed copy of non-borrowing spouse consent (form SSA-89) needs to be submitted on all loans.

POWER OF ATTORNEY & MILITARY PERSONNEL
  • For Military Personnel, a POA cannot be used on both 1003 (initial and final.) Borrower has to sign at least one of the documents.

  • POA could be used if service member is on overseas tour; and

    • Borrower Signature cannot be obtained by fax or mail; and

    • Specific POA is used and it is acceptable to Sun West.

  • Military Personnel who are on active duty can be considered as an Owner Occupied borrower if a family member resides at the principal residence or the borrower intends to occupy the subject property upon discharge from military services.

    • A copy of the Borrower’s military orders evidencing the borrower’s active duty status and duty station is more than 100 miles from the subject property needs to be submitted prior to closing.

MIXED USE PROPERTY

Mixed use properties are acceptable if:

  • 51% of the Gross Building Area (GBA) is for residential use; and

  • Commercial use will not affect the health and safety of the occupants of the residential property.

RENTAL INCOME

History of Rental Income and Calculation:

  • Where the Borrower has a history of Rental Income from the subject property since the previous tax filing year, verify and document the existing Rental Income by obtaining the Borrower’s most recent tax returns, including Schedule E, from the previous two years.

  • For properties with less than two years of Rental Income history, Documentation verifying the date of acquisition is required by providing the deed, settlement statement or similar legal document.

  • If Borrower does not have a history of rental income because the property was recently acquired; effective income is as lesser of:

    • The monthly income reported on Freddie Mac Form 998 (operating income statement) OR;

    • 75% of the lesser of:

      • Fair Market Rent reported by appraiser;

      • The rent reflected in the lease or other rental agreement.

  • If Borrower has history of rental income; then effective Income is calculated as:

    • Average of Income reported on Income Tax Return. If owned for < 2 years, income to be annualized for the length of the ownership period.

Documentation of Rental Income received from Departing Residence:

  • If Rental Income is claimed from departing residence; then:

    • Borrower must be relocating in an area more than 100 miles from departing residence.

    • A lease agreement for at least 1 year must be submitted.

    • Evidence of the payment of the security deposit or first month’s rent must be submitted.

    • Borrower must have 25% equity in converting residence.

Documentation of Rental Income received from another property:

  • If Borrower does not have history of rental income from the property since previous tax filing:

    • Borrower must have at least 25% equity in the property verified from an appraisal.

    • For one-unit property, Single Family Comparable Rent Schedule (FNMA form 1007) and Operating Income Statement (FNMA for 216) and lease is required if available.

    • For two-four unit property, Small Residential Income Property Appraisal Report (FNMA Form 1025) is required.

    • Note: Vacancy factor should be considered as 25% only, regardless of HOC vacancy and maintenance factor.

INDUCEMENT TO PURCHASE

Rent below Fair Market:

  • Rent may be an inducement to purchase when the sales agreement reveals that the Borrower has been living in the Property rent-free or has an agreement to occupy the Property at a rental amount considerably below fair market rent.

  • Rent below fair market is not considered an inducement to purchase when a builder fails to deliver a Property at an agreed-upon time, and permits the Borrower to occupy an existing or other unit for less than market rent until construction is complete.

Defining Inducement to Purchase:

  • Contributions exceeding 6 percent of the purchase price;

  • Contributions exceeding the origination fees, other closing costs and discount points.

  • Decorating allowances, repair allowances;

  • Excessive rent credit;

  • Moving costs; paying off consumer debt;

  • Personal Property;

  • Sales commission on the Borrower’s present residence; and

  • Below-market rent, except for Borrower’s who meet the Identity-of-Interest exception for Family Members.

NON TAXABLE INCOME

Non-Taxable Income can be grossed up as follows:

  • The amount of continuing tax savings attributed to Non-Taxable Income may be added to the Borrower’s gross income.

  • The percentage of Non-Taxable Income that may be added cannot exceed the greater amount of 15 percent or the appropriate tax rate for the income amount, based on the Borrower’s tax rate for the previous year.

  • If the Borrower was not required to file a federal tax return for the previous tax reporting period, Non-Taxable Income may be grossed up by 15 percent.

  • Any additional adjustments and / or allowances based on the number of dependents for the Borrower are not allowed.

  • Must document and support the amount of income to be grossed up for any Non-Taxable Income source and the current tax rate applicable to the Borrower’s Income that is being grossed up.

maximum mortgage amounts - refinance

Adjusted value for a refinance transaction is calculated based on the length of ownership which is determined at the time of case assignment.

  • For properties acquired by the Borrower within 12 months of the case assignment date, the adjusted value is the lesser of:

    • The original purchase price, plus any documented improvement made subsequent to purchase; or

    • The Property Value/Appraised Value

  • For properties acquired within 12 months of case assignment date by inheritance/gift OR properties acquired greater than or equal to 12 months of the case assignment date, adjusted value is the property value.

MAXIMUM LOAN TO VALUE (LTV) LIMITS for identity of interest transactions

Maximum LTV limit for a transaction with identity of interest:

  • Limited to 85%, unless any of the exceptions mentioned below are met:

    • Family Member transaction, where borrower purchases:

      • The principal residence of another family member; or

      • A property owned by another family member, where the borrower has been a tenant for at least 6 months predating the sales contract date. A lease or other evidence of occupancy must be provided prior to the closing of the mortgage.

    • If an employee of a builder, who is not a family member, purchases one of the builders properties as a principal residence.

    • Tenant purchase transaction:

      • If tenant has rented the property for at least six months immediately predating the sales contract date. A lease or other evidence of occupancy must be provided prior to the closing of the mortgage.

DELINQUENT FEDERAL TAX & NON-TAX DEBT

Borrowers with delinquent tax debt are ineligible for FHA mortgage unless borrower has entered into a valid agreement with federal agency and has made timely payments for at least three months.

  • Documentation from the IRS evidencing the payment agreement and verification of payment proof must be submitted prior to approval of the loan.

Borrowers with previous federal non-tax debt must provide documentation evidencing the federal debt has been successfully paid or borrower is in agreement with federal agency to pay the debt per the requirements of the agency.

  • Borrowers will be ineligible for FHA mortgage if federal non-tax debts are verified as currently delinquent from CAIVRS, public records, credit report or any other public sources.

minimum property requirements and minimum property standards

Overhead Electric Power:

  • Overhead Electric Power Transmission Lines must not pass directly over any dwelling, structure or related property improvement, including pools.

    • The power line must be relocated for a Property to be eligible for FHA-insured financing.

    • The residential service drop line may not pass directly over any pool, spa or water feature.

Built in Appliances:

  • Must ensure that cabinets and built-in appliances that are considered Real Property are present and operational.

Water Supply System – Individual Water Supply:

  • The water quality of any individual water supply of the property must meet the requirements of the health authority of jurisdiction.

    • If there are no local (or state) water quality standards, then water quality must meet the standards set by the EPA, as presented in the National Primary Drinking Water regulations.

    • A water test is a mandatory requirement for any individual water supply which needs to be conducted by an independent third party.

      • Note: Soil poisoning is an unacceptable method for treating termites unless the satisfactory assurance is submitted that the treatment will not endanger the quality of the water supply.

Water Supply System – Shared Well:

  • If a property is serviced by a shared well:

    • A shared Well Agreement will be required to determine eligibility.

    • Connection to a public or community system is not feasible.

    • Each dwelling unit is assured of 3 gallons per minute supply.

    • Provide safe and portable water and require same inspection as individual well.

    • Has a valve on each service line.

    • Service no more than 4 living units or properties.

NEW CONSTRUCTION

Before ordering of an Appraisal on New Construction:

  • A fully executed form HUD-92541, Builder’s Certification of Plans, Specifications and Site, dated no more than 30 days prior to the date of the appraisal order will be required.

  • When New Construction is less than 90% complete at the time of the appraisal, the Appraiser must document the floor plan, plot plan, and exhibits necessary to determine the size and level of finish.

APPRAISAL TRANSFER

As per updated HUD 4000.1 Guidelines, the appraisal must be transferred within 5 days to the new lender, when any loan is canceled and a request is received to transfer the new appraisal. This includes any appraisal that has been transferred to Sun West from a prior lender.

MANUAL UNDERWRITING OF THE BORROWER

The mortgage must be manually underwritten on applications where:

  • TOTAL issues a Refer;

  • Applications that were downgraded to a manual underwrite; OR

  • Application for FHA Programs for which the program requires manual underwriting.

Loan has to be manually downgraded if the following requirement is not met:
  • Information or documentation that cannot be entered into or evaluated by Total Score card.

  • Minimum waiting period is not met for major derogatory event. Waiting period will be measured from case assignment date.

  • Borrower has $1,000 or more collectively in Disputed derogatory Credit Accounts;

  • Self-employment income shows a decline greater than 20% over the analysis period.

  • Borrower has any undisclosed debt. Sun West will require borrowers to execute the undisclosed debt obligation acknowledgment prior closing of the loan. If a mortgage debt is not reported on the credit report or on the loan application and mortgage payment is not considered by AUS, the loan will need to be manually downgraded.

  • For Purchase and No Cash Out Refinance, any mortgage trade line, including mortgage line-of-credit payments, during the most recent 12 months reflect:

    • 3 or more late payments of greater than 30 Days;

    • 1 or more late payments of 60 Days plus 1 or more 30-Day late payments; OR

    • 1 payment greater than 90 Days late.

  • For Cash Out Refinances; any mortgage trade line, including mortgage line-of-credit payments reflect:

    • A current delinquency

    • Any delinquency within 12 months of the case number assignment date.

CREDIT REQUIREMENTS

Credit Score:

  • The same credit report and credit scores that were used for TOTAL Scorecard Evaluation will be utilized.

non traditional and insufficient credit

Borrowers without a credit score must either obtain a:

  • Non-Traditional Mortgage Credit Report (NTMCR); or

  • Independently develop the Borrower’s credit history.

Independent Verification of Non-Traditional Credit Providers:

  • Through public records the existence of each credit provider;

  • A published address or telephone number for the credit provider; and

  • Obtain the most recent 12 months cancelled checks or equivalent proof of payment.

SUFFICIENCY OF CREDIT REFERENCES
  • To be sufficient to establish the Borrower’s credit, the credit history must include three credit references, including at least one or more from the list below:

    • Rental Housing payments;

    • Telephone Service (cellphone is acceptable); and

    • Utilities (not included in rent)

      • Gas;

      • Electric;

      • Water;

      • Television service; and

      • Internet.

  • Two credit references can be used from the list provided below:

    • Insurance premiums not payroll deducted;

    • Payment to child care providers (business);

    • School tuition;

    • Retail store credit cards;

    • Rent-to-own;

    • Patient obligation for medical bills;

    • A documented 12-month history of savings evidenced by regular deposits resulting in an increased balance to the account that:

      • were made at least quarterly;

      • were not payroll deducted, and;

      • caused no insufficient funds (NSF) checks;

    • An automobile lease;

    • A personal loan from an individual with repayment terms in writing and supported by cancelled checks to document the payments; or

    • A documented 12-month history of payment by the Borrower on an account for which the Borrower is an authorized user.

Authorized User Accounts:

  • Borrower Authorized User Accounts may be used as a credit reference. However, documentation must be provided to evidence that the Borrower:

    • Has been making regular on-time payments during the previous 12 months;

    • Does not have a history of delinquent payments on the loan; and

    • Note: The debt payment is to be included in the Borrower’s DTI ratio.

PAYMENT HISTORY ON HOUSING OBLIGATIONS

Verification of the Borrower’s Housing Obligation payment history is required. This to be verified through:

  • The Credit Report

  • Verification of rent received directly from the landlord (for landlords with no Identity of Interest with the Borrower);

  • Verification of Mortgage received directly from the mortgage servicer; or

  • A review of cancelled checks that cover the most recent 12-month period.

For Borrower’s who indicate that they are living rent-free, verification from the property owner where they are residing indicating that the borrower has been living rent-free and the amount of time the Borrower has been living rent-free is required.

EVALUTATING MORTGAGE HISTORY FOR A MODIFIED MORTGAGE

A Mortgage that has been modified must utilize the payment history in accordance with the modification agreement for the time period of the modification in determining late housing payments.

Mortgages in which a modification incorporated a deficiency balance are not to be considered delinquent.

MEDICAL COLLECTIONS

The Borrower must provide a letter of explanation, which is supported by documentation, for each outstanding collection account. This includes medical collections.

CREDIT INQUIRIES

A written explanation from the Borrower for all inquiries shown on the credit report that were made in the last 90 days is required.

JUDGMENTS

Verification that the court-ordered Judgments are resolved or paid off prior to or at closing is required.

Judgments of a non-borrowing spouse in a community property state must be resolved or paid in full, with the exception of obligations excluded by state law.

A judgment is considered resolved if the Borrower has:

  • Entered into a valid agreement with the creditor to make regular payments on the debt;

  • Has made timely payments for at least three months of scheduled payments prior to case assignment date; and

  • The Judgment will not supersede the FHA-insured mortgage lien.

Note: The borrower cannot prepay scheduled payments in order to meet the required minimum three months of payments. Also, all judgment liens must be subordinated.

loan program and Products

FHA has made the following changes in loan program and purpose in the new Handbook.

  • FHA has introduced a new loan purpose as Simple Refinance and removed streamline with appraisal.

  • Streamline refinance will refer to streamline without appraisal refinance only.

  • Streamline 203K program will be referred as Limited 203K.

  • Paying off an unrecorded land contract will be considered as purchase transaction.

  • FHA also includes Short Refinance and 235 Refinance which Sun West currently does not offer.

Simple Refinance

Simple Refinance refers to a no cash-out refinance of an existing FHA-insured Mortgage in which all proceeds are used to pay the existing FHA-insured mortgage lien on the subject Property and costs associated with the transaction.

Simple Refinance can be underwritten using AUS or manually. Refer to HUD handbook for payment history requirement on manually underwritten simple refinance loans.

Occupancy Requirement

Sun West will only allow simple refinance for Owner Occupied principal residence. Investment properties are not permitted. Occupancy needs to be justified by Borrower’s employment documentation or utility bills. Occupancy must be verified to evidence the Borrower currently occupies the property as their principal residence.

maximum ltv/cltv

The maximum LTV/CLTV ratio for a Simple Refinance is 97.75 percent.

PAYMENT HISTORY

Borrower may not have any late(s) within the last six months and no more than 1 x 30 day late in the preceding 6 months.

MAXIMUM MORTGAGE AMOUNT

The maximum mortgage amount or a Simple Refinance is the lesser of:

  • The Nationwide Mortgage Limit;

  • The Maximum LTV ratio allowed; or

  • The sum of existing debt and costs associated as follows:

    • Allowed costs associated with the new Mortgage; and

    • Borrower-paid repairs required by the appraisal

Less any refund of UFMIP (if financed in original Mortgage.)

UFMIP and Annual MIP

The UFMIP and annual MIP will be based previous FHA mortgage. Refer to Appendix 1.0 in Handbook 4000.1 for more details.

Ineligible lien to pay off through simple refinance

The transaction cannot be considered as Simple Refinance if following debt is included:

  • Unpaid principal balance of any Non FHA lien

  • The unpaid principal balance of any junior liens over 12 months old as of the date of mortgage Disbursement. If the balance or any portion of an equity line of credit in excess of $1,000 was advanced within the past 12 months and was for purposes other than repairs and rehabilitation of the Property, that portion above and beyond $1,000 of the line of credit is not eligible for inclusion in the new Mortgage;

  • ex-spouse or co-Borrower equity

  • any prepayment penalties assessed;

  • Recorded Land Contracts

Existing debt to which can be included:

  • Unpaid principal balance of the FHA –insured first mortgage as of the month prior to mortgage disbursement

  • Interest due on the existing Mortgage

  • MIP due on existing Mortgage

  • Late charges; and

  • Escrow shortages

Streamline Refinance

FHA has removed the appraisal requirement for streamline refinance. Streamline Refinance has to be manually underwritten.

Occupancy Requirement

Sun West will only allow simple refinance for Owner Occupied principal residence. Occupancy needs to be justified by Borrower’s employment documentation or utility bills.

SeasoniNg Requirement

Seasoning will be measured from case assignment date and following needs to be met:

  • The Borrower must have made at least six payments on the FHA-insured Mortgage that is being refinanced;

  • At least six full months must have passed since the first payment due date of the Mortgage that is being refinanced;

  • At least 210 Days must have passed from the closing date of the Mortgage that is being refinanced; and

  • If the Borrower assumed the Mortgage that is being refinanced, they must have made six payments since the time of assumption.

Credit Qualification

Streamlines loan can be non-credit qualified or credit qualified.

A credit qualifying streamline refinance will be required if any borrower is removed from note and title (at least one borrower from the existing mortgage must remain on the new mortgage). Refer handbook 4000.1 for more details on Non Credit qualification and credit qualification.

MAXIMUM LTV AND CLTV

There will be no maximum CLTV on Streamline Refinances. There will also be no restriction on LTV based on the FICO score for credit qualifying refinances.

Asset Verification

If assets are needed to close in excess of the total mortgage payment of the new loan, then asset must be verified to determine the acceptability of the assets to be utilized of all assets needed for closing for all streamline refinance.

Subordinate Financing

The Combined Loan to Value limit (CLTV) has been removed on streamline refinance. Existing subordinate refinance does not have to pay off. Sun West will not allow new subordinate financing in streamline refinance.

Net Tangible Benefit

NTB has been simplified and is now defined as:

  • Reduced combined rate (Combined Rate refers to the interest rate on the Mortgage plus the Mortgage Insurance Premium (MIP) rate);

  • Reduction in term (provided the mortgage term is reduced; the new interest rate does not exceed the current interest rate; and the combined principal, interest and MIP payment of the new mortgage does not exceed the combined principal, interest and MIP of the mortgage being refinanced by more than $50.)

  • A change from ARM to fixed rate Mortgage that results in a financial benefit to the Borrower.

The reduction in the rate has to meet below table.

  To
From Fixed Rate
New Combined Rate
One-Year ARM
New Combined Rate
Hybrid ARM
New Combined Rate
Fixed Rate At least 0.5 percentage points below the prior Combined Rate At least 2 percentage points below the prior Combined Rate At least 2 percentage points below the prior Combined Rate
Any ARM With Less Than 15 Months to Next Payment Change Date No more than 2 percentage points above the prior Combined Rate At least 1 percentage point below the prior Combined Rate At least 1 percentage point below the prior combined Rate.
Any ARM With Greater Than or Equal to 15 Months to Next Payment Change Date No more than 2 percentage points above the prior Combined Rate. At least 2 percentage points below the prior Combined Rate. At least 1 percentage point below the prior Combined Rate

CASH OUT REFINANCE

Occupancy Requirement

Occupancy Seasoning Requirement:

  • The property securing the cash-out refinance must have been owned and occupied by the Borrower as their principal residence for 12 months prior to the date of the case number assignment. An exception to this would be for properties acquired through inheritance which have not been used for investment (rental property) at any point since inheritance of the property.

  • Must review the borrower’s employment documentation or obtain utility bills to evidence the Borrower currently occupied the property to determine the length of time the borrower has occupied the subject property as their Principal Residence.

seasoning Requirement

Cash Out Refinance Payment History Requirement:

  • Borrower must have made all payments for ALL mortgages within the month due for the previous 12 months or since the borrower obtained the Mortgages, whichever is less.

  • Additionally, the payments for all Mortgages secured by the Subject Property must have been paid within the month due for the month prior to mortgage disbursement.

  • Properties with Mortgages must have a minimum of six months of Mortgage Payments. Properties owned free and clear may be refinanced as cash-out transactions.

RATE AND TERM REFINANCE

occupancy seasoning requirement and maximum ltv
  • Verify Borrower’s employment documentation or obtain utility bills to evidence the Borrower currently occupies the property and determine the length of time the Borrower has occupied the subject property as their Principal Residence.

  • 97.75% for properties that have been Owner-Occupied for the previous 12 months, or Owner-Occupied since acquisition date if acquired within 12 months at case number assignment;

  • 85 percent for a Borrower who has occupied the Subject Property as their Principal Residence for fewer than 12 months prior to the case number assignment date; or if owned less than 12 months, has not occupied the Property for that entire period of ownership.

MAXIMUM MORTGAGE

The maximum mortgage amount for a Rate and Term refinance is the lesser of:

  • The Nationwide Mortgage Limit;

  • The maximum LTV based on the Maximum LTV Ratio; or

  • The sum of existing debt plus allowed costs, which include all Borrower paid costs, associated with the new Mortgage; and any Borrower paid repairs required by the appraisal.

Less any refund of the Upfront Mortgage Insurance Premium (UFMIP), if financed in the original Mortgage.

 

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Consumer Home Loan Mortgages

Consumer Home Loan Mortgages

SWMC offers a wide range of residential home loan mortgage programs to suit different situations such as a purchase, refinance, a property rehabilitation loan or a reverse mortgage at the competitive interest rates.

FHA Purchase at 96.5% Financing, Streamline (Interest Rate Reduction) Refinance, and Cash-Out Refinance, 203(k) Rehabilitation Loan, 203(k) Streamlined Rehabilitation Loan, and the Home Equity Conversion Mortgage (Reverse Mortgage) and USDA Rural Housing mortgages.

If you are a Veteran, Sun West offers you VA guaranteed mortgages for Purchase Loans at 100% Financing, Cash-Out Refinance, and Streamline Interest Rate Reduction Refinance Loans (IRRRL).

You can use our simple mortgage calculator tools to find out your monthly payment, the house you can afford, your refinance options, or the home equity you may be able to access through a reverse mortgage (HECM).

As a full-service mortgage bank, Sun West is one of the few approved direct lenders to provide in-house origination, processing, underwriting, closing, funding, and servicing. Based in California with active presence across the country, Sun West is dedicated to offering exceptional service coupled with integrity, reliability, and experience.

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Mortgage Partner Services

You can become a partner with Sun West as a Wholesale Mortgage Broker or a Correspondent Lender. If you are a mortgage banker, ask us about our Warehouse Lending program.

In addition to residential mortgage lending, Sun West also offers FHA multifamily,commercial and portfolio lending services.

As a partner you have access to SunSoft - Sun West's state-of-the-art mortgage loan origination and servicing software. Built on over 30 years of lending and mortgage technology experience, SunSoft is compliant with federal and state requirements.

Sun West is approved by Ginnie Mae as an Issuer, Servicer and Participation Agent. This rare approval enables us to issue securities backed by the full faith and credit of the United States. Consequently, Sun West is able to offer its partners and borrowers the competitive interest rates in the market.

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Press Releases

Press Releases

  • 08/20/2015: Sun West Mortgage Company, Inc. Named Million Dollar Lender by USDA Rural Development Read More..
     
  • 07/15/2014: Ivan 'Pudge' Rodriguez to Make His Debut at the 25th Annual American Century Golf Championship, Sponsored by Sun West Mortgage Company, Inc. Read More..
     
  • 07/1/2014: USDA Rural Development Names Sun West Mortgage Company, Inc. Lender of the Year Read More..
     
  • 04/28/2014: FHA 203(k) and PowerSaver Loan Offerings From Sun West Mortgage Company, Inc. Extended With New FHA PowerSaver 203(k) Program as a Single Home Improvement Solution for Homebuyers Read More..
     
  • 02/24/2014: Sun West Mortgage Company, Inc. Continues National Expansion Read More..
     
  • 07/23/2013: Sun West Mortgage Company, Inc. Offers Homeowners Access to the Hardest Hit Fund Relief in All Eligible States and D.C. Read More..
     
  • 05/15/2012: Sun West Mortgage Company Partners with EGIA to Introduce the FHA PowerSaver Loan Program Read More..
     
  • 12/16/2011: Sun West Mortgage Company and the Cerritos Sheriff Station team up to supply little boys and girls toys this holiday Read More..
     
  • 10/03/2011: Sun West Mortgage Increases Its Reach in New Jersey Read More..
     
  • 4/22/2011: Variable Servicing Margins on Different Participations of the Same Loan for HMBS Issuers Announced by Sun West Mortgage Read More..
     
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Lender Alerts

  • 2/22/2017: Close more Loans: Reduced Overlay on Conventional Loans Read More..
     
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  • 1/9/2017: Non-Agency Premium Loan Programs Read More..
     
  • 12/28/2016: Sun West’s Implementation of Truth in Lending (Regulation Z) ​Annual Threshold Adjustments Read More..
     
  • 12/23/2016: 2017 Loan Limits for Government Loan Programs Read More..
     
  • 12/23/2016: New Year's Holiday Hours of Operation Read More..
     
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