FREQUENTLY ASKED QUESTIONS

Asking questions will help you better understand the mortgage lending process

Is there any way to get an exception for a cash out refinance on a jumbo loan?

Send your request to  info@ilendinglink.com. Include the 1008, 1003 and a copy of the credit report. Also, be sure to give the reason why the exception is needed and why it should be granted.

What needs to be documented for a property with an underground oil tank?

If the oil tank is leaking or needs to be removed, we need to verify that it is removed and remediated in accordance with Department of Environmental Protection (DEP) codes, passes all soil sample tests, and the DEP provides a "No Further Action" notice. However, because the DEP can take months to provide the "No Further Action" letter, it is generally acceptable to close the loan with proof that the tank was removed and remediated properly and proof that all soil tests have passed if the oil tank company states in their report that they see no reason why the letter will not be issued. If you are unable to obtain a "No Further Action" letter from the DEP, you can submit an exception request to your underwriter for review.

My borrower would like to purchase a house without central heating or air conditioning. The house has portable electric heaters, and the home was built with thick walls that have extra insulation. Would a conventional or USDA loan require a furnace or air conditioning? Are portable baseboard heaters acceptable?

This guidance should be followed for consideration of acceptability: Heating Sources If a property uses an alternative heating source, the appraiser must confirm: 

  • Sufficient to heat entire dwelling

  • Habitable as a year-round residence

  • Poses no safety hazards

  • Complies with all local codes and regulations and applicable state and federal laws and regulations

  • Market acceptance of the heating source

  • Market acceptance should be demonstrated by selecting comparable sales with same/similar alternative heating source

For a Freddie Mac loan, can the 20% down payment be entirely a gift?

Yes, as long as the property is not an investment and the loan-to-value (LTV) is 80% or less. If the LTV is greater than 80%, the the buyer needs to supply at least 5% down.

Can we assist a client that would like to purchase a second home or Investment property with 25% down under an LLC ?

The borrower would need to purchase the property in their individual name, living trust, or land trust (if the investor will allow the property to close in a trust).

My borrower wants to do a cash out refinance of his primary residence that he owns free and clear. He took the house off the market about three months ago. Am I going to run into any problems?

Generally, the house must be off the market for six months in order to do a cash out transaction. However, Fannie Mae will allow the transaction up to 70% loan-to-value (LTV) as long as the property is removed from the market prior to taking an application.

My borrower is currently in a loan with a 25 year term. Can she do a streamline refinance into a 30 year term?

 

Yes, provided your borrower meets the Net Tangible Benefit requirements.

For a Fannie Mae conventional purchase, can a borrower pay off an auto loan to eliminate the monthly debt to bring payment ratios down in order to meet debt-toincome (DTI) qualifications?

According to Fannie, payoff or pay down of debt solely to qualify must be carefully evaluated and considered in the overall loan analysis. The borrower’s history of credit use should be a factor in determining whether the appropriate approach is to include or exclude debit for qualification. Generally,

  • Installment loans being paid off or paid down to 10 or fewer remaining monthly payments do not need to be included in the borrower’s long-term debt

  • If a revolving account will be paid off and closed, the monthly payment on the current balance does not need to be included in the borrower’s long-term debt

  • It can be excluded from the debt-to-income (DTI) ratio

  • If a revolving debit is to be paid off and not closed, a monthly payment on the current balance should be considered long-term debt

If a borrower has impounds (uses an escrow account) for taxes and insurance, do they have to impound for flood and homeowners insurance? Or can they just impound the homeowners and not the flood?

No. If the borrower is impounding homeowners insurance, the borrower must impound the flood insurance, too.

I have a client buying a builders model and he wants to do a conventional loan close in 45 days and the builder wants to rent it back for about 5 months. If this is in the sales contract, does it matter for Fannie or Freddie direct?

 

Borrowers must take possession and occupy within 60 days of closing.

My borrower from the Philippines is sponsored by his company. What types of sponsorship's can we do?

 

It depends on the type of visa, or if an EAD (employment authorization) card is involved; as well as if there have been any prior renewals.

I have a Conforming Conventional Purchase loan application at 70% LTV. The buyer is the son of the seller and the seller (Dad) is gifting 30% equity to his son.  The title to this home is held by the dad’s small corporation, not the dad personally. The purchase contract would be between our borrower as buyer and his dad’s small corp. Does this still qualify as “his dad is the seller” so that the gift equity is allowable?  Do we need to have the dad transfer the ownership deed of title of the subject property into his own name and then start our application and do the loan?

A gift of equity must be from an individual based on the conforming guidelines below. If the gift is coming from a corporation, that would make it
ineligible. If the father is selling the home as an individual then he would need to be on title as an individual prior to the execution of the purchase
contract.

My borrower has a revocable grantor trust without an EIN that exists only for estate planning purposes. The borrower and his wife will be responsible for the monthly mortgage payment. Is it possible to get a loan in both their names but draft a deed in the name of the grantor trust instead?

Yes. A borrower can take title in trust.

I have a borrower that has US bank accounts and accounts in France. The loan officer is on the list to translate French documents, is this acceptable or do I need to find someone else to translate?

The loan officer cannot translate documents for a loan that he is originating. It is a conflict of interest. All non-English documents must have a certified translation attached.

I have a borrower that has US bank accounts and accounts in France. The loan officer is on the list to translate French documents, is this acceptable or do I need to find someone else to translate?

The loan officer cannot translate documents for a loan that he is originating. It is a conflict of interest. All non-English documents must have a certified translation attached.

My borrower works in Indianapolis four days a week, and is looking to purchase 73 acres in Kentucky as a second home, not as a working farm. What information is needed to treat this as a second home?

This question cannot be answered without reviewing the appraisal and any investor guidelines on acreage. The property needs to meet the definition of a second home. It must be in location to function reasonably as a second home (i.e. remote enough in distance from the borrowers primary residence), suitable for year-round occupancy, available for the borrower's exclusive use and enjoyment. The acreage must be residential in nature, comply with multiple parcels if applicable and sufficient comps provided with similar acreage to support common for the area.

I have a client whose wife is on the mortgage and he is only on title. The wife died 5-6 years ago and he has been making the payments. Would this be eligible for Refi Plus or Open Access?

Here are the guidelines:

Fannie Mae
DU Refi Plus Borrower Eligibility
An existing borrower(s) may be removed from the new loan provided that at least one of the original borrower(s) is retained on the new loan.
Borrower(s) may be added to the new loan, provided the existing borrower(s) is retained.

 

Freddie Mac

The borrower(s) obligated on the note on the Relief Refinance Mortgage – Open Access must be the same as the borrower(s) obligated on the note on the mortgage being refinanced, except that: A borrower on the mortgage being refinanced may be omitted from the Relief Refinance Mortgage for any reason.


A borrower who is not on the mortgage being refinanced may be added to the Relief Refinance Mortgage, except that a non-occupying borrower may not be added to a mortgage secured by a primary residence. In all cases, at least one borrower(s) from the mortgage being refinanced must be retained.


NOTE: In all cases, at least one borrower(s) from the mortgage being refinanced must be retained.

A brother and sister who are clients of mine are co-trustees for their parents’ trust. The parents died, and the two children need to pay off the reverse mortgage on the property, but the property is still in the parents’ trust. The trust identifies each child will receive half ownership of the property. The sister has terrible credit and for tax reasons it’s important that she not relinquish her percentage of the property in the immediate transfer from the trust. We would like her brother to be the borrower and list the sister on title only. Is that a problem?

You need legal documentation to show the borrower has the right to refinance the property solely in his name with no funds owed to the other party that is inheriting the property. Make sure to have a copy of the trust along with probate papers that confirms your borrower has inherited the property. Continuity of obligation must be supported.  The sister does not have to be on our loan and she can remain in title. Contact the closing department to see if they have restrictions.

Will Fannie or Freddie allow an investment refinance to stay in the name of the LLC, or will this need to revert back to the borrower's name?

The title will need to be in the sole name of the borrower.

My borrower called his bank last year and settled the balance on his home equity line of credit for less than he owed the bank. I’m trying to refinance his first mortgage, and the loan is coming up “approve eligible” in AUS. Can we do this loan?

A HELOC settled for less than owed would follow short sale seasoning guidelines. As long as those guidelines have been satisfied, this loan can be submitted.

M O R T G A G E

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L O A N 

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