Top Trending Questions

See a list of top trending questions from lenders and servicers received from the Selling Guide Support Team and Servicing Solutions Center.

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This video series offers quick, focused answers to popular underwriting questions.

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Note: The actual provisions of the Fannie Mae Selling and Servicing Guides, as may be amended by the lender’s or servicer’s contracts with Fannie Mae, shall govern in the event of any inconsistency with these answers.

Trending Questions

Question Answer
If a home is purchased at auction, is it acceptable to include the buyer's premium in the sales price? Yes. Fannie Mae will permit the combining of the buyer's premium and the winning bid to calculate the final sales price. However, the amount of the buyer's premium should be common and customary (that is, an amount that is consistent with a typical auction transaction). As with all purchase transactions, the lesser of the sales price or appraised value must be used when establishing the LTV, CLTV, and HCLTV ratios. (ref: Selling Guide B2-1.2-01: Purchase Transactions)
For employment offers and contracts, if the lender is unable to obtain a paystub to meet the Selling Guide requirements, do we have options? In lieu of a paystub, the lender can obtain a fully completed Verification of Employment (VOE) with earnings to verify the income used to qualify. (Ref: B3-3.1-09, Other Sources of Income)
Can the borrower's parent, who is also the selling realtor, give a gift of cash or commission to the borrower for down payment? No, the donor may not be, or have any affiliation with, the builder, the developer, the real estate agent, or any other interested party to the transaction. (Ref: B3-4.3-04, Personal Gifts)
Can we use the credit report to support a mortgage that was included in a bankruptcy if the credit report states "included in a BK?" "Included in a BK" does not necessarily mean the debt was discharged in the bankruptcy. In order to disregard a mortgage debt that was included in a BK, the lender must obtain documentation that the debt was discharged. (Ref: B3-5.3-07 Significant Derogatory Credit Events - Waiting Periods and Re-establishing Credit)
When a borrower converts their primary into an investment, do we still have to follow the old guidelines, in reference to 30% equity and 6 months reserves? The equity and reserve requirements that applied specifically when a borrower converted their current principal residence in to an investment property have been eliminated. The lender should follow standard reserve requirements and rental income policy. (Ref: Selling Guide: B3-6-06)
When the borrower earns W-2 wages (which may include bonus income), do we need to subtract the 2106 expenses? The lender is not required to consider unreimbursed business expenses when evaluating salary or bonus income. The lender must consider unreimbursed business expenses when evaluating commission income that represents 25% or more of the borrower's total annual employment income. (Ref: Selling Guide: B3-3.1-06)
Are gift funds allowed from a donor's business? Yes, as long as the check and gift letter are from an acceptable donor and not from the business. (Ref: Selling Guide: B3-4.3-04 Personal Gifts)
If a borrower has a joint bank account with another party that is not a borrower on the loan, are all funds in the account considered the borrower's even if there are large deposits from the other party? Yes. The lender must evaluate large deposits and investigate any indications of borrowed funds. The lender must document that large deposits needed to complete a purchase transaction are from an acceptable source. (Ref: Selling Guide: B3-4.2-02 Depository Accounts)
Are we allowed to use employment-related assets as qualifying income for both income and assets? Only the assets that are not used in the calculation of the monthly income stream may be considered as available funds when determining sufficient funds to close and or meet financial reserve requirements. (Ref: Selling Guide: B3-3.1-09 Other Sources of Income)
One of the requirements for second homes is that the property may not be a "rental property." If the borrower is refinancing a second home and reports receiving rental income from the subject property, can the transaction be eligible as a second home? Yes, as long as rental income from the property is not used to qualify and the borrower continues to occupy the property as their second home, it is not considered "rental property" and the loan is eligible as a second home, if all of the other Second Home Requirements in the Selling Guide (ref: B2-1-01: Occupancy Types) are met.
What is considered a large deposit? Is there a certain percentage? When bank statements (typically covering the most recent two months) are used, the lender must evaluate large deposits, which are defined as a single deposit that exceeds 50% of the total monthly qualifying income for the loan. (Ref: Selling Guide: B3-4.2-02, Depository Accounts)
A borrower has an IRA with $200k in it. Does he/she have to be receiving a regular distribution, or can he/she just withdraw as needed to be able to use as retirement income? Fannie Mae offers two options for a borrower to use this asset to qualify as income. The lender 1) must document regular receipt of the income in the form of a distribution from a 401(k), IRA, or Keogh retirement account, as well as confirm that will continue for at least three years; or 2) may create an income stream using eligible "employment-related assets" when a distribution is not already set up or the distribution amount is not enough to qualify. (Ref: B3-3.1-09, Other Sources of Income)
Well water is present, however public water utilities are not. Is that ok? If public sewer and/or water facilities -- those that are supplied and regulated by the local government -- are not available, community or private well and septic facilities must be available and utilized by the subject property. The owners of the subject property must have the right to access those facilities, which must be viable on an ongoing basis. (Ref: Selling Guide: B4-1.3-04, Appraisal Report Review: Site Utilities)
Can a borrower get cash out from a home he/she purchased (or acquired) three months ago? If so, does the lender use appraised value or purchase price? Yes, but only if the loan meets one of two exceptions outlined in the Selling Guide, one of which is the Delayed Financing Exception. This exception applies if the borrower originally purchased the subject property without a mortgage within the prior 6 months. The current appraised value is used to determine the LTV ratio. (Ref: B2-1.2-03, Cash-Out Refinance Transactions)
My borrower has a commercial property and I'd like to use that income. Where is that in the Guide? If the income is derived from a property that is not the subject property, there are no restrictions on the property type. For example, rental income from a commercial property owned by the borrower is acceptable if the income otherwise meets all other requirements (it can be documented in accordance with the requirements referenced here: Selling Guide: B3-3.1-08, Rental Income).
Can a real estate agent give their commission to the buyer for a down payment? Fannie Mae does not permit interested party contributions (IPCs) to be used to make the borrower's down payment, meet financial reserve requirements, or meet minimum borrower contribution requirements. (Ref: Selling Guide: B3-4.1-02, Interested Party Contributions)
Can we use an appraisal that was done six months ago? Yes, properties must be appraised within the 12 months that precede the date of the note and mortgage. However, for appraisals that are more than 4 months old, the property must have an exterior re-inspection from at least the street, a photograph of the front of the subject must be provided, and Form 1004D completed. (Ref: Selling Guide B4-1.2-02)
Does Fannie Mae purchase loans subject to resale restrictions? Fannie Mae will purchase mortgages subject to resale restrictions where the resale restriction sponsor is eligible, where the borrower is eligible, and where the loan is secured by one-unit properties (including eligible condo projects and PUDs) or two-unit properties. The property must be the borrower's principal residence. Mortgages secured by manufactured homes, co-op projects, and three- or four-unit properties are not eligible. (Ref: Selling Guide: Part B5-5.3-02, Loans With Resale Restrict...
How soon after a bankruptcy can a borrower qualify for another Fannie Mae loan? With a Chapter 7 or Chapter 11 bankruptcy, a 4-year waiting period is required from the discharge or dismissal date. If extenuating circumstances are documented, it could be a 2 years. A Chapter 13 bankruptcy requires 2 years from the discharge date or 4 years from the dismissal date. (Ref: B3-5.3-07, Significant Derogatory Credit Events)
Can I exclude the credit report mortgage payment history if my borrower is separated but not yet divorced? Yes, depending on the date of the court-ordered assignment of debt. Prior to that date, the borrower would have liability to the creditor. After that date, the lender can disregard the borrower's payment history for that debt. (Ref: Selling Guide B3-6-05)
What's the difference in borrower waiting periods after a foreclosure vs. preforeclosure? Borrowers must wait 7 years from the completion date of a foreclosure action as reported on the credit report or other foreclosure documents before being eligible for a Fannie Mae loan. With a preforeclosure (short sale), borrowers are eligible for a Fannie Mae loan after 4 years. If extenuating circumstances can be documented, the waiting period requirements differ. (Ref: B3-5.3-07, Significant Derogatory Credit Events)
Does Fannie Mae require a minimum borrower down payment? Can a "gift" be used? A minimum borrower contribution is not required for one-unit primary-residence loans, and, yes, a portion or all funds may come from a gift. (Ref: Selling Guide, B3-4.3-04, Personal Gifts)