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Conforming and High Balance ARM

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Program Description:

An adjustable rate mortgage program with conforming loan amounts. Fixed for 5 or 7 years then adjust to a 1 year ARM based on the one year LIBOR index.

Program Codes: High Balance Program Codes:

C51L 5/1 Yr LIBOR ARM HB51L High Balance 5/1 Yr LIBOR ARM

C71L 7/1 Yr LIBOR ARM HB71L High Balance 7/1 Yr LIBOR ARM

C101L 10/1 Yr LIBOR ARM HB101L High Balance 10/1 Yr LIBOR ARM

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Contents: click heading below to be directed to appropriate section.

Age of Documents

Appraisals

Appraiser Requirements

ARM Program Information

Assets

Assumptions

Borrower Eligibility

Closing Requirements

Construction to Permanent

Credit

Departure Residence

Documentation

Down Payment

Escrow Holdback

Flood Insurance

Geographic Restrictions

Gifts

Hazard Insurance

Income/Employment

Interest Only

Loan Amount

Maximum LTV/CLTV/HCLTV

High Balance Maximum LTV/CLTV/HCLTV

Maximum LTV/CLTV/HCLTV

Mortgage Insurance

Mortgages to one Borrower

Non-Arms Length Transaction

Non-Occupant Co-Borrowers

Number of Properties

Occupancy

Prepayment Penalty

Property Types (Eligible/Ineligible)

Property Flipping

Properties Listed for Sale

Purchases

Ratios/Qualifying Rate

Refinances

Rate/Term

Cashout

Rent Loss Insurance

Reserves

Seller/Interested Party Contributions

Source of Funds

Subordinate Financing

Temporary Buydowns

Title Documentation

Trusts

Underwriting

Mega Capital does not make any loans, which are defined, as “high-cost” under Section 32 or any State or locally governed legislation.

Mega Capital reserves the right to amend the requirements set out in this document without providing prior notice.

All loans must meet Program Guidelines and Mega Capital Conventional Underwriting guidelines.

|Maximum DU LTV/CLTV/HCLTV |

|Purchase and Rate and Term Refinance |

|Occupancy |Units |Maximum LTV / CLTV / HCLTV1 |Minimum FICO |

|Primary Residence |1 |90%2 / 90% / 90% |620 |

| |2 |75% / 75% / 75% |620 |

| |3-4 |65% / 65% / 65% |620 |

|Second Home |1 |80% / 80% / 80% |620 |

|Investment |1 |Purchase - 75% / 75% / 75% |620 |

| | |Rate/Term Refi - 65% / 65% / 65% | |

| |2-4 |65% / 65% / 65% |620 |

|Cashout Refinance3 |

|Occupancy |Units |Maximum LTV / CLTV / HCLTV1 |Minimum FICO |

|Primary Residence |1 |75% / 75% / 75% |620 |

| |2-4 |65% / 65% / 65% |620 |

|Second Home |1 |65% / 65% / 65% |620 |

|Investment |1 |65% / 65% / 65% |620 |

| |2-4 |60% / 60% / 60% |620 |

|HCLTV is HELOC CLTV. If secondary financing is a HELOC, the loan amount plus the draw amount cannot exceed the CLTV and the loan amount plus the total |

|line amount cannot exceed the HCLTV. |

|Additional credit requirements may apply to LTV >80% due to MI restrictions. |

|Cash-out not permitted if property was purchased within the prior 6 months. If property was listed for sale in the past 6 months, LTV for Cash Out |

|Refinance may not exceed 70%. |

|Notes: |

|2-unit primary residence. Borrowers may not own any other residential property of equal or greater value in the same area in which the units are located. |

|The mailing address and property address must be verified as the same; if this cannot be done, it must be treated as an investment property. |

|High Balance Maximum LTV/CLTV/HCLTV |

|Purchase and Rate and Term Refinance |

|Occupancy |Units |Maximum LTV / CLTV / HCLTV1 |Minimum FICO |

|Primary Residence |1 |75% / 75% / 75% |680 |

| |2-4 |65% / 65% / 65% |740 |

|Second Home |1 |65% / 65% / 65% |740 |

|Investment |1 |65% / 65% / 65% |740 |

|Cashout Refinance2 |

|Occupancy |Units |Maximum LTV / CLTV / HCLTV1 |Minimum FICO |

|Primary Residence |1 |60% / 60% / 60% |740 |

|HCLTV is HELOC CLTV. If secondary financing is a HELOC, the loan amount plus the draw amount cannot exceed the CLTV and the loan amount plus the total |

|line amount cannot exceed the HCLTV. |

|Cash-out not permitted if property was purchased within the prior 6 months. |

|Notes: |

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|Age of Documents |Credit documents must be no more than 90 days old on the date the note is signed. For new construction, credit documents |

| |must be no more than 120 days old on the date the note is signed. If the credit documents are old than allowed, they must |

| |be updated. |

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| |The inspection and the appraisal update must occur within the four months that precede the date of the note and mortgage. |

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|Appraisals |Appraisal requirements as stated on DU findings are acceptable, except as noted below: |

| |Full appraisal required for: |

| |Purchase of REO1, Short Sale or Foreclosure property |

| |Refinance where most recent transaction was for purchase of REO1, Short Sale or Foreclosure property |

| |FNMA Field Review may be required. |

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| |An update, review or 2nd appraisal may be required if the appraisal is over 120 days old at time of closing. |

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| |At least 2 of the 3 comparables must be dated within 90 days of the appraisal date. |

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| |High Balance – A field review is required if the value is >$1,000,000 and the LTV/CLTV/HCLTV is >75%. |

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| |Properties with a Property Condition rating of C5 or C6 are not eligible. |

| |Properties with a Property Quality rating of Q6 are not eligible. |

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| |DU Property Inspection Waiver (PIW) |

| |Must have a DU Approve/Eligible that states the PIW is acceptable. |

| |Purchase or Rate/Term refinances with CLTV ................
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