Underwriting Criteria

Home » Products and Services » Mortgage Lending » Underwriting Criteria

Products and Services - Mortgage Lending

Underwriting How to Apply Fequently Asked Questions Downloads

ECD, together with Fannie Mae, has developed mortgage underwriting criteria specifically for the markets ECD serves, with the intent of stimulating more mortgage lending in low-income communities and to low- and moderate-income individuals and families.

ECD's typical underwriting criteria are as follows:

Term and Amount	30-year, fixed-rate, level payment, fully amortizing loans. Loan amount will be limited by debt-to-income ratios of the borrower.
Maximum Loan to Value	The minimum required down payment from the borrower's own funds is 1% or $500, whichever is less. This calculation is based on the lesser of the sale price or the appraised value.
Down Payment and Closing Costs	Borrower's remaining down payment can come from gifts and/or grants. Borrower's closing costs can come from gifts, grants, and/or seller contributions.
Credit	Flexible credit guidelines emphasizing recent rental or housing payments.
Seller Contribution	Seller contributions are allowed up to a maximum of 3% of the sale price.
Interest Rate	Enterprise Corporation of the Delta's 30-year conventional fixed rate.
Fees	ECD will receive a $250 document preparation fee and a $200 underwriting fee. The lender is allowed to charge origination and other fees.
Debt Ratio	43% total debt ratio
Homebuyer Education	All borrowers will be required to complete an ECD approved Home Buyers' Education program. A certificate of completion is required prior to closing.
Purchase Agreement	Required before closing.
Co-Borrowers	Non-occupying co-borrowers are acceptable; however, occupants must qualify on their own.
Escrow Accounts	An escrow impound account must be established for real estate taxes, hazard insurance and flood insurance when applicable.
Mortgage Insurance	Up to 35% Private Mortgage Insurance coverage is required for loans over 80% LTV.
Subordinate Financing	Soft second mortgages (forgivable grants) are allowed as long as the borrower meets the minimum cash contribution and the combined loans are still within the allowable debt ratios and the cumulative maximum loan-to-value. Terms and details of the soft second must be included in the loan package prior to underwriting. When subordinate financing is used, the combined LTV may not exceed 105%.
Assumptions	Not Permitted
Repairs and Improvements	Health hazards, safety hazards and unsound conditions must be repaired and inspected before closing. In addition, appraisal conditions must be repaired and inspected before closing.
Reserves	No reserves required.
Eligible Properties	One unit detached, FNMA single family, owner occupied. Attached townhouses and condos are allowed. On new construction, home must be finished before permanent loan is closed.
Income	Two full years of employment must be verified by the past 2 years of W-2's, a standard verification of employment or two months of current pay stubs accompanied by the Processor's telephone certification. Receipt of public or private assistance will not be a disqualifying factor. Also, continuity of income over a 3-year period will be emphasized. Past two years of tax returns are required if self-employed. Must have been self-employed for a minimum of two years, no exceptions. When child support or alimony is used as qualifying income, the borrower must document that such income has been regularly received for previous 12 months and is expected to continue for the succeeding three years. Documentation can include, but is not limited to, canceled checks, money order receipts, bank statements, court records and letters of assurance of future payments. Total household income may include undocumented income up to the lesser of $600 per month or 15% of gross income. Undocumented income will only be considered if borrower or other contributing household member has total income less than the IRS taxable minimum.