Vesting Requirements

·         Not all owners are required to be on the application but everyone currently on title must continue to be vested on title. Owners may not be added or removed at closing.

·         The most recent quit claim deed must be seasoned for a minimum of 12 months prior to the application date. Owners may not be added or removed in the most recent 12 months.

·         Not all owners are required to be on the application but everyone currently on title must continue to be vested on title. Owners may not be added or removed at closing.

·         The most recent quit claim deed must be seasoned for a minimum of 12 months prior to the application date. Owners may not be added or removed in the most recent 12 months. At closing, only a spouse may be added to title.  No other parties may be added.

Credit Inquiries

A max of 2 personal finance, retail and bankcard revolving and charge inquiries are allowed within 90 days of application.

A max of 3 inquiries are allowed within 90 days of application.  A max of 4 mortgage inquiries within 30 days.  No limit on installment inquiries

Flood Insurance Coverage

Real estate taxes and homeowner’s insurance must be current at the time of funding date.

Real estate taxes, homeowner’s insurance and flood insurance must be current at the time of funding date.

Total Monthly Debt Obligations

The total monthly debt obligation is the sum of all housing expenses plus all other monthly debt obligations or expenses incurred by the Borrower. Monthly debt obligations include:

·         Real Estate Mortgages & Related Expenses

·         Rental Payments

·         Authorized User Accounts

·         Installment Debt

·         Auto and Commercial Lease Payments

·         Revolving Charges/Lines of Credit

·         Student Loans

·         Monthly HOA Dues

The total monthly debt obligation is the sum of all housing expenses plus all other monthly debt obligations or expenses incurred by the Borrower. Monthly debt obligations include:

·         Real Estate Mortgages & Related Expenses

·         Rental Payments

·         Authorized User Accounts

·         Installment Debt

·         Auto and Commercial Lease Payments

·         Revolving Charges/Lines of Credit

·         Student Loans

·         Monthly HOA Dues

·         Child Support and Alimony

Flood Insurance as part of DTI

Mortgage payments and related expenses (including principal, interest, real estate taxes, hazard insurance premiums, Homeowner association dues on the subject property must be included in the Borrower’s recurring debt obligations.

Mortgage payments and related expenses (including principal, interest, real estate taxes, hazard insurance premiums, Flood Insurance and Homeowner association dues on the subject property must be included in the Borrower’s recurring debt obligations.

Ineligible Income

Gig Economy income is not allowed

Gig Economy income that is not identifiable on tax returns is not allowed.

Gig Economy Income as SE Income

Silent

Gig Economy Income is included as eligible self-employed income if it is the borrower’s primary income source and has been filed on the most recent two years of tax returns.

Ineligible Property Types

·         Properties located in a flood zone

·         Properties located in a current disaster area as defined by FEMA

·         Properties located in Texas, New York, Louisiana, Missouri, Nebraska, Tennessee, Utah, Vermont, Illinois, Hawaii, Puerto Rico, Guam and the US Virgin Islands

·         Properties located in a flood zone

·         Properties located in an active FEMA Disaster Area

·         Properties located in Texas, New York, Louisiana, Missouri, Nebraska, Tennessee, Utah, Vermont, Illinois, Hawaii, Puerto Rico, Guam and the US Virgin Islands

Appraisal AVM Requirements

The AVM must be ordered in the below order and receive an acceptable Forecast Standard Deviation (“FSD”) score:

·         The AVM will first be ordered through CoreLogic and must have an FSD score < 0.22.

·         If Corelogic cannot determine a value, then an AVM will be ordered through Clear Capital. Clear Capital must have an FSD score < 0.13

The AVM must be ordered in the below order and receive an acceptable Forecast Standard Deviation (“FSD”) score:

·         The AVM will first be ordered through CoreLogic and must have an FSD score < 0.15.

·         If Corelogic cannot determine a value, then an AVM will be ordered through Clear Capital. Clear Capital must have an FSD score < 0.15

Disaster Areas

Silent

All properties must be verified that they are not located in an area designated as an Active FEMA declared disaster area with individual assistance prior to closing. Any property closing within 60 days of the FEMA incident end date must provide a post disaster inspection with exterior and street photos. Please note that if damage is noted, this will result in a decline for collateral.

Rental Income from Boarders of the Subject Property

Definition

Boarder refers to an individual renting space inside the Borrower’s Dwelling Unit. A renter of an ADU is not a Boarder.

Standard

Rental Income from Boarders is only acceptable if the Borrower has a two-year history of receiving income from Boarders that is shown on the Tax Return and the Borrower is currently receiving Boarder income.

Required Documentation

The Mortgagee must obtain two years of the Borrower’s Tax Returns evidencing income from Boarders and the current lease.  For purchase transactions, the Mortgagee must obtain a copy of the executed written agreement documenting their intent to continue boarding with the Borrower.

Calculation of Effective Income

The Mortgagee must calculate the Effective Income by using the lesser of the two-year average or the current lease.

Definition

Boarder refers to an individual renting space inside the Borrower’s Dwelling Unit. A renter of an ADU is not a Boarder.

Standard

The Mortgagee may consider Rental Income from existing Boarders if documented in accordance with the following requirements. Rental Income from Boarders may be considered Effective Income if the occupying Borrower has a 12-month history of receiving income from Boarders and is currently receiving Boarder income. Rental Income from Boarders is permitted whether the Borrower currently rents or owns the Dwelling Unit.

Required Documentation

The Mortgagee must verify and document the existing Rental Income from Boarders by obtaining the following:

·         Evidence of rental history over the previous 12 months

·         Evidence of Rental Income received from Boarders for at least nine of the most recent 12 months in the form of:

o    the Borrower’s Tax returns; or

o    bank statements, canceled checks, or deposit slips, showing rental payments received;

·         evidence that the Boarder’s address is the same as the Borrower’s address; and

·         A copy of the executed written agreement documenting the boarding terms and the Boarder’s intent to continue boarding with the Borrower

Calculation of Effective Income

The Mortgagee must calculate Rental Income from Boarders by using the lesser of:

·         the 12-month average; or

·         the current rent as documented in the written agreement

Where Rental Income from Boarders has been documented for at least nine of the last 12 months, the Mortgagee must average the Rental Income over a 12-month period.

The amount of the Rental Income from the Boarders used as Effective Income must not exceed 30 percent of the total monthly Effective Income used to qualify the Borrower.

Appraisal/ Valuation Requirements

For SSR and appraisal review requirements, refer to Arc Home’s Appraisal Valuation Requirements

An Arc Home Collateral Review is no longer required.

Appraiser Requirements

Cannot be on the Freddie Mac Exclusionary List

Cannot be on any GSE Agency Exclusionary List

HPML/HPCT

Loans must be originated to meet definition of a Safe Harbor or Rebuttable Presumption Mortgage Loan under the Qualified Mortgage Rule and may not have an APR-APOR spread of greater than 2.25 (or 3.5% in the case of loan balance below $110,260 (as periodically adjusted).  In the case of Investment Properties under this program, Arc may consider whether the loan may be eligible for sale as an ATR Exempt loan as defined under applicable legal and agency requirements.

Loans must be originated to meet definition of a Safe Harbor or Rebuttable Presumption Mortgage Loan under the Qualified Mortgage Rule and may not have an APR-APOR spread of greater than 2.25 (or 3.5% in the case of loan balance below $110,260 (as periodically adjusted).  In the case of Investment Properties under this program, Arc may consider whether the loan may be eligible for sale as an ATR Exempt loan as defined under applicable legal and agency requirements.

Income

Silent

·         If a Borrower is being qualified with income from new employment or a pay increase, and the new income will not start prior to closing, the guidelines from Fannie Mae Selling Guide B3-3.1- 09, Other Sources of Income; Employment Offers or Contracts; Option 2 or Freddie Mac Selling Guide Chapter 5303.2(e), Option 1 must be followed.

·         Federal law restricts marijuana related activities and therefore the income and assets from these sources are not allowed for qualifying. Related activities include:

o    Possession of cannabis or cannabis seeds

o    Processing

o    Growing

o    Harvesting/Cultivation

o    Testing

o    Packaging/Delivery

o    Wholesale or Retail sales

Ineligible Property Types

·         Condo Hotels

·         Non warrantable condos including Condotels

·         Full Log Cabin (with full log walls)

·         Unique Properties (Modular, Earth Berm, etc.)

·         Mixed Use