| 2013 Credit Requirements for A Kentucky Rural Housing RHS Mortgage Loan |
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| REQUIREMENTS |
- · Credit report must match GUS Findings.
- · Must not be older than 120 days on the date of closing for existing properties and 180 days for proposed and new construction.
- · Must contain complete information provided by all three repositories.
- · The credit report must show the following three required FICO scoring models for the report to be valid with Platinum Mortgage, Inc.:
1. Equifax Beacon 5.0
2. Transunion FICO Risk Score, Classic 04
3. Experian/Fair Isaac Risk Model V2.
- · Must reflect a minimum of 1 score per borrower.
TRADELINE REQUIREMENTS:
GUS Approved: Each credit report must contain 2 acceptable tradelines with at least 12 month history and last active within the last 24 months (see below regarding acceptable tradelines).
Manual Underwrite: As determined acceptable by the underwriter. |
| CREDIT SCORE |
- · If more than one score is supplied by the same repository, the lesser of the scores will be used.
- · Determining Qualifying Credit Score:
o Middle of 3
o Lower of 2
o If only one score is provided, that score is the qualifying credit score for that borrower.
Minimum credit score for:
- · Manual Underwrite = 660
- · GUS Approval = 660
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LIABILITIES & CREDIT HISTORY
(INDEX)
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| H |
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| OPEN CHARGE ACCOUNTS |
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| ALIMONY, CHILD SUPPORT, OR SEPARATE MAINTENANCE |
- · Court-ordered payments should be documented by a copy of the court order.
- · Borrower(s) must have an acceptable existing repayment plan for any arrearages and proof of 12 months on time payments, and/or be required to pay account in full prior to, or at closing.
- · See Collections/Chargeoffs for additional requirements if there are arrearages.
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| CONTINGENT LIABILITIES |
- · If the borrower is a co-signer on an account paid by a 3rd party, the liability may only be excluded from the borrower debt ratios if evidence the primary obligor has been making the payments on time on the debt for a minimum of 12 months can be obtained.
- · Court-ordered assignment of debt should be documented by a copy of the court order. Must have 12 months cancelled checks from the payer of the court ordered debt in order to exclude from the debt ratio.
PREVIOUS MORTGAGE:
- · Section 1980.345(c)(1)(ii) requires all previous mortgage liabilities disposed of through a sale, trade, or transfer without a release of liability, to be included in the debt ratio calculation unless evidence can be obtained to confirm the remaining party has made payments over the last 12 months.
- · In divorce settlements when one person retains ownership of a residence as a result of the proceedings, it does not imply that the person relinquishing ownership is automatically released of the financial liability associated with an existing mortgage debt. The divorce decree along with a release of liability from the mortgage creditor must be presented as evidence that an applicant is no longer legally responsible for the mortgage payment. If no release of liability is granted by the creditor then the applicant remains legally obligated for the debt. Quit claim deeds do not remove liability for mortgage debts.
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| DEFERRED INSTALLMENT DEBT |
May not be omitted from debt ratio. If the credit report does not reflect a monthly payment due at the end of the deferment period, the lender may request a copy of the applicant’s payment letter, or utilize the industry standard of estimating student loan payments as 1% of the loan balance. |
| NON-REIMBURSED EMPLOYEE EXPENSES |
If the borrower claims any non-reimbursed employee expenses (IRS Form 2106 or 1040 Schedule A), the borrowers monthly income should be reduced by the annualized monthly average. |
| BUSINESS DEBT IN BORROWER’S NAME |
When the account in question does not have a history of delinquency, the debt may be excluded with satisfactory evidence the obligation was paid out of company funds (such as 12 months cancelled company checks). If the account in question has a history of delinquency, the full debt obligation must be included in the borrower’s debt ratio. |
| FINANCED PROPERTIES |
Additional financed properties are generally not permitted as borrower may not own any other suitable housing at time of closing. |
| DEBTS WITH <6 REMAINING PAYMENTS |
The total debt ratio should include revolving debt regardless of when the debt will be retired. Installment loans will only be considered if the debt will be retired in more than six months. However, if the monthly payment on the debt is substantial, the payment will also be included in long term debt. The GUS system will automatically exclude debt that is eligible to be excluded. If not excluded by GUS the debt must be included in the debt ratio. |
| “PAYING DOWN” ACCOUNTS |
Not permitted. Settlement offers will not be considered as proof of balance |
| SETTLEMENT OFFERS |
Are acceptable on accounts that will be paid in full at closing as long as the offer is in writing from the creditor reporting on the credit report. |
| PAST DUE ACCOUNTS (NOT A COLLECTION OR CHARGE OFF) |
Recent derogatory credit >1×30 within the previous 12 months is not permitted unless approved by GUS. All past due accounts must be current at time of closing. |
| COLLECTIONS/ CHARGE OFFS |
- · No accounts converted to Collection/Charge off in previous 12 months allowed, unless approved by GUS.
GUS Approved:
- · Medical Collections/Charge offs are not required to be paid.
- · Other Collections/Charge offs, if >24 months, not required to be paid, otherwise accounts must be paid in full prior to, or at, closing.
Manual Underwrite:
- · Medical Collections/Charge offs are not required to be paid.
- · Other Collections/Charge offs must be paid in full prior to, or at closing.
Any unpaid Collections/Charge offs will require a satisfactory letter of explanation from the borrower. |
| OUTSTANDING FEDERALLY INSURED OR GUARANTEED DEBT |
Borrower(s) must have an acceptable existing repayment plan (minimum of 12 months), and/or be required to pay account in full prior to, or at closing. Borrower must also be cleared through CAIVRS. |
| JUDGMENTS/LIENS |
- · Must be paid at, or prior to, closing.
- · Borrower(s) may not have any new Judgments/Liens within the previous 12 months, unless approved by GUS.
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| BANKRUPTCY (ALL) |
3 years seasoning required from Discharge or Dismissal date. |
| FORECLOSURE |
3 years seasoning required. |
| DEED-IN-LIEU OF FORECLOSURE |
3 years seasoning required. |
| SHORT SALES |
3 years seasoning required. |
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| COMPENSATING FACTORS |
Some compensating factors include:
- · Conservative use of credit
- · Minimal increase in borrower’s housing expense
- · Substantial cash reserves after closing
- · Credit score >660
- · Low total debt ratio (does not compensate for high housing ratio)
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| MULTIPLE RISK LAYERING |
Multiple risk layering is not allowed on manually underwritten loans:
- · Payment Shock (>100%)
- · Ratio Waiver
- · Credit Waiver
- · Credit Score <660
- · Short Duration of Employment (less than 12 months employment with current employer)
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Kentucky USDA Mortgage Lender for Rural Housing Loans 