Updated Non-QM Product Underwriting Guidelines - DSCR FICO from 620
December 13, 2021
Overview
Carrington Mortgage Services, LLC (CMS) is pleased to announce the following Carrington Advantage product underwriting updates (highlighted in red).
Please note this is an abbreviated summary of the guideline changes. All updates should be viewed within the context of the full guidelines available on Carrington BrokerIQ.
| Investor Advantage Program | ||||||||||||||||||||||||
| Old Requirements | Updated Requirements | |||||||||||||||||||||||
Added new FICO and LTV bands for Purchase, Rate Term and Cash-Out transactions for loan amounts of $1M and under.
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| Lease Requirements For refinance transactions, an executed lease with no less than 3 months remaining at time of close is required for all units in the subject property. Month-to-month tenancy is not subject to this requirement with sufficient evidence (such as a signed extension letter). Purchase transactions may be vacant. The following requirements apply to refinance transactions:
If subject property is not leased see the Carrington Investor Advantage Program Matrix for LTV restrictions. |
Lease Requirements For refinance transactions, an executed lease with no less than 3 months remaining at time of close is required for all units in the subject property contributing to the DSCR calculation. Month-to-month tenancy is not subject to this requirement with sufficient evidence (such as a signed extension letter). Purchase transactions may be vacant. Existing leases and title reports must be reviewed to ensure clear title and first lien enforceability. Tenants must not have a first right of refusal to purchase the subject property. Lease terms must not exceed three (3) years. If subject property is not leased, proposed rents may be used for vacant units based on the appraiser's rent analysis. See the Carrington Investor Advantage Program Matrix for LTV restrictions for unleased properties on refinance transactions. |
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| All Programs | |
| Old Requirements | Updated Requirements |
| Rate/Term Refinance If the most recent first mortgage transaction on the property was a cash-out refinance within the last 6 months, the new mortgage is not eligible as a rate/term and must proceed as a cash-out refinance. Note date to note date is used to calculate the 6 months. |
Rate/Term Refinance If the most recent first mortgage transaction on the property was a cash-out refinance within the last 6 months, the new mortgage is not eligible. Note date to note date is used to calculate the 6 months. |
| Flexible Advantage/Advantage Plus Programs | |
| Old Requirements | Updated Requirements |
| First Time Home Buyers A First-Time Home Buyer is defined as a purchase transaction where any borrower has had no ownership interest in a residential property in the United States during the preceding 3-year period. The following requirements apply to First-Time Home Buyer transactions: Primary residence and second homes only Minimum 580 score 6 months reserves after closing |
First Time Home Buyers A First-Time Home Buyer is defined as a purchase transaction where any borrower has had no ownership interest in a residential property in the United States during the preceding 3-year period. The following requirements apply to First-Time Home Buyer transactions: Primary residence and second homes only Minimum 620 score 6 months reserves after closing |
| Flexible Advantage/Advantage Plus and Prime Advantage Programs | |
| Old Requirements | Updated Requirements |
| Business Assets For self-employed borrowers, business assets are an acceptable source of funds for down payment, closing costs, and reserves. The borrowers on the loan must have 100% ownership of the business and must be the owners of the account. A letter from a CPA or borrower must be obtained verifying that the withdrawal of funds for the transaction will not have a negative impact on the business. If a CPA letter is not provided, a cash flow analysis of the tax returns, business bank statements, and P&L (when applicable) must be completed by the Underwriter to determine if the withdrawal of funds from the business is acceptable. |
Business Assets For self-employed borrowers, business assets are an acceptable source of funds for down payment, closing costs, and reserves. The borrowers on the loan must have 50% ownership of the business and must be the owners of the account or demonstrate ability to access the account. Business assets must be multiplied by the borrower’s ownership percentage of the business. For bank accounts solely in the name of a business, access must be demonstrated using a canceled check signed by the borrower, signature card or other documentation from the bank, CPA letter, or corporate documents such as a corporate resolution, operating agreement or similar. A letter from a CPA or borrower must be obtained verifying that the withdrawal of funds for the transaction will not have a negative impact on the business. If a CPA letter is not provided, a cash flow analysis of the tax returns, business bank statements, and P&L (when applicable) must be completed by the Underwriter to determine if the withdrawal of funds from the business is acceptable Note: The requested information shall not be interpreted as an assurance of solvency. |
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