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FHA-GuideLInes

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									 FHA LOAN PROGRAMS
Standard FHA Loan Programs

 Loan Purpose      •       Purchase
                   •       Rate & Term Refinance
                   •       Cash-Out Refinance
                   •       (Stellar Capital, Inc. (SC) offers Streamline Refinance as a separate product. See below)

  Amortization         •      Fixed Rate: 15 Years and 30 Years
  Term                 •      Adjustable Rate: 3/1 and 5/1

  Occupancy            •      Owner-occupied properties only

  Eligible             •      Attached / Detached SFRs
  Properties           •      PUDs
                       •      HUD-approved Condos
                       •      2-4 Units

  Credit Scores
                                                                                                                      Minimum
                             Loan Purpose                                  Loan Scenario
                                                                                                                        FICO

                                                    DTI Back Ratio <= 43 and Housing Payment Shock <= 20%                620

                                                    DTI Back Ratio > 43 and Housing Payment Shock <= 20%                 640
                           Purchases                DTI Back Ratio <= 43 and Housing Payment Shock > 20%                 640

                                                    DTI Back Ratio > 43 and Housing Payment Shock > 20%                  680

                                                    HUD Repo with Down Payment < 3.5%                                    680

                           Rate & Term              DTI Back Ratio <= 43                                                 620
                           Refinances               DTI Back Ratio > 43                                                  640

                                                    LTV<= 75%                                                            660
                           Cash-Out Refinance
                                                    LTV > 75%                                                            720

                           All Loan Purposes        2-4 Units                                                            680

                       Note:
                              •   Non-traditional credit is not allowed.
                              •   The FICO requirement for borrowers using Down Payment Assistance (DPA) program is 680 and
                                  borrower must have 3 months’ reserves.

  Approval Type        AUS (DU / LP) Only.

  Self Employed        Allowed

  Bankruptcy &         •     For a Bankruptcy discharged or a Foreclosure recorded within the last 3 years, no 30-day late
  Foreclosures               payments or derogatory credit of any type is acceptable from the date Bankruptcy was filed or
                             Foreclosure was recorded.
                       •     Borrowers must have re-established credit.

  Mortgage Lates       •      None in last 24 months on any mortgage

  Collection           •      Housing-expense related collection accounts within 24 months are not allowed.
  Accounts             •      Other collections (including medical) are subject to UW discretion on the file.

  Housing              This guideline is applicable to Purchase transactions only. Housing Payment Shock is calculated as the
  Payment Shock        difference between the new housing payment and existing housing payment divided by existing housing
                       payment times 100. Existing housing payment must be documented.

                           Loan Scenario                                                                        Maximum Housing
                                                                                                                 Payment Shock

                           620 <= FICO < 640 and DTI Back Ratio <= 43                                                20%

                           640 => FICO < 680 and DTI Back Ratio > 43                                                 20%


  Subordinate          Allowed
  Financing
  Maximum Loan         •      Honolulu      $793,750
  Amount (SFR)         •      Kauai         $773,750
                       •      Maui          $790,000
                       •      Hawaii        $618,750
                       (Call for 2-4 unit limits)

  Maximum
  Number of            •      2 (inclusive of subject)
  Properties
  Financed by
  borrower
  Flip Waiver          Stellar Capital offers Property Flip Waiver as a separate product. See below to view FHA Property Flip
                       Waiver guidelines.
PITI Reserves       •      3 months’ reserves, excluding Gift Funds, required for First Time Home Buyer if Housing Payment
                           Shock > 20% and FICO < 680 and DTI Back Ratio is > 43
                    •      3 months’ reserves, excluding Gift Funds, required for 3-4 unit properties;
                    •      3 months’ reserves on 2-unit properties if DTI Back Ratio without rental income exceeds 60
                    •      6 months’ reserves if LTV/CLTV > 80% and proposed rents are used to qualify and DTI Back Ratio
                           without rental income exceeds 60

Gift Funds          •      Allowed if FICO is 680 or higher.
                    •      680 not required if borrower has 3 months reserves, excluding gift funds.

LTV / CLTV
                        Loan Purpose                                                                          LTV      CLTV

                        Purchase                                                                          96.5%       100%1

                        Rate & Term Refinance                                                            97.75%       97.75%2

                        Cash-Out Refinance                                                                    85%      85%

                           1
                    •          CLTV allowed is 105% for purchases, if using a Govt. Down Payment Assistance Program.
                           2
                    •       CLTV allowed for R/T refinances is 115% for loans qualifying under HUD ML 10-23 with FICO more
                           than 720.
                    •      Maximum LTV for 2-4 unit properties, with non-occupying co-borrower, is 75%.

Maximum DTI
                        Loan Scenario                                                            Max. Front         Max. Back
Ratios
                                                                                                   Ratio              Ratio
                        620 <= FICO < 640 and Housing Payment Shock <= 20%                               43            43

                        FICO => 640 and Housing Payment Shock <=20%                                      45            55

                        640 < FICO <= 680 and Housing Payment Shock > 20%*                               43            43

                        FICO => 680 and Housing Payment Shock > 20%                                      45            55

                        3-4 unit properties                                                              31            43

                    Note: When a non-occupying co-applicant is used to qualify the borrower:
                    •      DTI Back Ratio calculated without using non-occupying applicant's income must not exceed 60.
                    •      Proposed rents cannot be used as income to qualify.
                    *If the borrower has at least 3 months’ PITI reserves excluding gift funds, the maximum ratios allowed
                    are 45% (Front) and 55% (Back).

Down Payment        Allowed in conjunction with first mortgage loans with following overlays:
Assistance          •      The DPA meets all published requirements of FHA; and
(DPA)               •      The first Mortgage sold to SC is not subject to any terms or conditions of a bond program; and
                    •      The DPA does not restrict the transfer of servicing rights of the first Mortgage sold to SC. In
                           addition, it may not require prior notification or approval from the sponsoring authority in the event
                           of the transfer of the first mortgage’s servicing rights.
                    •      The FICO requirement for borrowers using DPA program is 680 and borrower must have 3 months’
                           reserves.

Cash Out on         Not allowed
Short Pay-Off
Escrow Holdback     Not allowed
for Minor
Repairs
FHA Refinance       An FHA Refinance involving the refinance of both 1st and 2nd liens into a single FHA loan, in which the
consolidating 1st   2nd lien was a HELOC more than 12 months old, is permissible as a Rate and Term refinance. The
and 2nd liens       HELOC loan balance eligible to be added to the new loan amount would be:
                    •      The current loan balance, if there were no draws in the last 12 months or if the draws were for the
                           purposes of repairs and rehabilitation.
                    •      If there were draws in the last 12 months which were for the purposes other than repair and
                           rehabilitation, only the draws of up to $1,000 may be added to the refinance loan amount.
                    •      If the balance or any portion of an equity line of credit in excess of $1,000 was advanced within the
                           past 12 months and was for purposes other than repairs and rehabilitation of the property, that
                           portion above and beyond $1,000 of the line of credit is NOT eligible for inclusion in the new
                           mortgage. These amounts must be paid from the Borrower's funds at closing or the transaction
                           must be treated as a Cash-Out Refinance and must meet the Cash-Out refinance guidelines (85%
                           LTV, etc).
FHA Manufactured Housing

Loan Purpose     •      Purchase
                 •      Rate & Term Refinance
                 •      (Stellar Capital, Inc. offers Streamline Refinance as a separate product. See below)

Amortization     •      Fixed Rate: 30 Years
Term
Occupancy        •      Owner-occupied properties only

Eligible         •     1-Unit Manufactured Home
Properties       •     HUD-approved Manufactured Condos
                 •     Leasehold Manufactured Home Properties
                 Note: Single-wide Manufactured Homes are not allowed.

Credit Scores
                                                                                                                   Minimum
                        Loan Purpose                                  Loan Scenario
                                                                                                                     FICO

                                               Housing Payment Shock <= 20%                                          660
                     Purchases
                                               Housing Payment Shock > 20%                                           680

                     Rate & Term
                                               All Rate and Term Refinances                                          660
                     Refinances

                     All Loan Purposes         Leasehold Properties                                                  700

                 Note:
                        •   Non-traditional credit is not allowed.
                        •   The FICO requirement for borrowers using Down Payment Assistance (DPA) program is 680 and
                            borrower must have 3 months’ reserves.

Approval Type    AUS (DU / LP) Only.


Self Employed    Allowed

Bankruptcy &     •     None allowed in last 3 years
Foreclosures     •     None allowed ever for leasehold properties

Mortgage Lates   •      None in last 24 months on any mortgage
                 •      None allowed ever for leasehold properties

Collection       •      Housing-expense related collection accounts within 24 months are not allowed.
Accounts         •      Other collections (including medical) are subject to UW discretion on the file.
                 •      No collection accounts or charge offs allowed ever for leasehold properties.

Housing          This guideline is applicable to Purchase transactions only. Housing Payment Shock is calculated as the
Payment Shock    difference between the new housing payment and existing housing payment divided by existing housing
                 payment times 100. Existing housing payment must be documented.

                     Loan Scenario                                                                         Maximum Housing
                                                                                                            Payment Shock

                     660 <= FICO < 680                                                                             20%

                     FICO => 680                                                                                   N/A

Non-occupying    Not allowed for credit qualification
Co-borrower
Subordinate      Not allowed
Financing
LTV / CLTV

                     Loan Purpose                                                                          LTV           CLTV

                     Purchase                                                                             96.5%          96.5%

                     Rate & Term Refinance                                                                97.75%     97.75%

Maximum Loan     Note: HUD Repo is not allowed with LTV > 96.5%. At least 3.5% down payment is must.
Amount           •     1 Unit: Lesser of $417,000 or maximum county limits
Maximum          •     1 (inclusive of subject)
Number of        •     Limitation does not apply if loan purpose is streamline refinance
Properties
Financed by
borrower
PITI Reserves    3 months’ reserves required

Gift Funds       Not allowed

Flip Waiver                                                                                      iew FHA Property Flip
                 Stellar Capital, Inc. offers Property Flip Waiver as a separate product. Please v
                 Waiver guidelines.
Escrow Holdback   Not allowed
for Minor
Repairs
Maximum DTI
                      Loan Scenario                                                            Max. Front      Max. Back
Ratios
                                                                                                 Ratio           Ratio

                      All property types except leasehold properties                                35              45

                      Leasehold properties                                                          29              35


Down Payment      Allowed in conjunction with first mortgage loans with following overlays:
Assistance        •      The DPA meets all published requirements of FHA; and
(DPA)             •      The first Mortgage sold to SC is not subject to any terms or conditions of a bond program; and
                  •      The DPA does not restrict the transfer of servicing rights of the first Mortgage sold to SC. In
                         addition, it may not require prior notification or approval from the sponsoring authority in the event
                         of the transfer of the first mortgage’s servicing rights.
                  •      The FICO requirement for borrowers using DPA program is 680 and borrower must have 3 months’
                         reserves.
FHA Streamline Refinance

Loan Program           •     Standard Fixed Rate - SO11S01F00
                       •     Standard ARM - SM11S00F00
                       •     Manufactured Housing - AA12S01F00
                       •     FHA Jumbo - SO41S00F00

Loan Purpose           •     Streamline Refinance

Amortization Term      •     Fixed Rate: 15 Years*
                       •     Fixed Rate: 30 Years
                       •     Adjustable Rate: 3/1**
                       •     Adjustable Rate: 5/1
                             *Applicable only of Standard Fixed Rate Loan Program
                             **Not offered on FHA Jumbo Loan Program
                             Adjustable Rate are not offered on Manufactured Housing

Occupancy              •     Owner-occupied properties only

Eligible Properties    •     Attached / Detached SFRs
                       •     PUDs
                       •     HUD-approved Condos
                       •     2-4 Units
                       •     Manufactured Housing

Debt to Income
                                                                           Max Front          Max Back
(DTI) Ratio & FICO         Product Type       Unit Properties                                                Minimum FICO
                                                                            Ratio 1            Ratio1
Matrix
                                                    1-2 Units                45%                 55%               640
                           Standard FHA
                                                    3-4 Units                31%                 43%               640

                                                    1-2 Units                40%                 45%               660
                           FHA Jumbo
                                                    3-4 Units                31%                 43%               660

                                                Manufactured
                                                                             35%                 45%               660
                           Manufactured          Properties
                           Housing               Leasehold
                                                                             29%                 35%               660
                                                 Properties

                       1
                        Ratio assessment is for FHA required credit-qualifying streamlines and SC’s income qualification
                       requirement.

Approval Type          •     Manual underwriting is acceptable.
                       •     AUS (DU/LP) approval will only be acceptable on FHA required credit-qualifying streamlines.
                       •     FHA required credit-qualifying streamlines must meet standard credit and income requirements.

Mortgage Lates         •     None in last 24 months on any mortgage
                       •     None allowed ever for manufactured leasehold properties

Subordinate            •     Allowed for all types except for Manufactured Housing
Financing
LTV / CLTV             •     125 / 125
                       •     Maximum LTV for 2-4 unit properties, with non-occupying co-borrower, is 75%.

Collateral             •     AVM required for all properties acquired prior to 05/01/2010 except as detailed below.
Assessment             •     Exterior only appraisal required when AVM cannot be obtained. A full appraisal is also
                             acceptable.
                       •     Exterior only appraisal may be required when a property is located within a disaster area.

Minimum &              See applicable product guidelines.
Maximum Loan
Amount
Maximum Number of      •     Limitation does not apply if loan purpose is streamline refinance
Properties Financed
by borrower
PITI Reserves          •     3 months’ reserves required for Manufactured Housing and 3-4 unit properties

Payment History        •     Non-credit qualifying streamline refinance must evidence at least a 6-month mortgage history.
Documentation
Streamline             •     Based on the borrower’s original acquisition/purchase date guidelines apply as shown below.
Refinance Qualifying
                       •     For properties acquired prior to 05/01/2010
Requirements
                           FICO                                 Option 1                         Option 2

                           680 and above                        Income Qualification2            AVM LTV less than 125%
                                                                                    2
                           Below 680                            Income Qualification AND AVM Based LTV less than 125%
                       •    For properties acquired on or after 05/01/2010
                       2
                         See “Income Qualification” section for details
                           FICO                                            Requirement
                           680 and above                                   No additional requirements
                           Below 680                                       Income Qualification Required2
Income Qualification   •        Income qualification applies to non-credit qualifying streamlines only (i.e. SC required
Options                         income qualification). FHA required credit-qualifying streamlines must meet standard credit
                                and income requirements.
                       •        Income qualification can be completed by using either Option 1 or Option 2 discussed below:
                           Option 1                           Acceptable Forms                 Unacceptable Forms

                                                              1 month of bank statements
                                                                                               401K, IRA, Pensions, Gift
                           3 Month PITI Reserves              sourcing all large deposits in
                                                                                               Funds
                                                              accordance to FHA guidelines

                           *3-month PITI reserves is net of the funds required at closing.

                                                                                               Documentation Needed to
                           Option 2                           Income Type
                                                                                               Qualify
                                                                                               •   4506-T
                                                              For W-2 Wages Only               •   2011 W-2(s)
                                                                                               •   1 month of pay stubs

                                                                                               •   VOE
                           Limited Doc Review                                                  •   4506-T

                                                              For income other than W-2        •   2011 Income
                                                              wages                                Documentation
                                                                                               •   Full tax returns for 2009,
                                                                                                   2010 and supporting
                                                                                                   documentation

                       •        For option 2, ratios must be within DTI matrix guidelines above.

 AVM Value Checks           •     You may order a Value Check for $15 through the SC Vendor Order System in SunSoft.
                       •        Estimated three-Hour turn-times for Value Checks.
FHA Property Flip Waiver

Loan Purpose            •      Purchase

Amortization Term       •      Fixed Rate: 30 Years

Occupancy               •      Owner-occupied properties only

Eligible Properties     •      Attached / Detached SFRs
                        •      PUDs
                        •      HUD-approved Condos
                        •      2-4 Units
                        •      Manufactured Homes

Credit Scores
                                                                                                                         Minimum
                                                                Loan Scenario
                                                                                                                           FICO

                            DTI Back Ratio <= 43 and Housing Payment Shock <= 20%                                          620

                            DTI Back Ratio > 43 and Housing Payment Shock <= 20%                                           640

                            DTI Back Ratio <= 43 and Housing Payment Shock > 20%                                           640

                            DTI Back Ratio > 43 and Housing Payment Shock > 20%                                            680

                            HUD Repo with Down Payment < 3.5%                                                              680

                            2-4 Units                                                                                      680

                        Note:
                           ƒ  Non-traditional credit is not allowed.
                           ƒ  The FICO requirement for borrowers using Down Payment Assistance (DPA) program is 680
                              and borrower must have 3 months’ reserves.

Approval Type           AUS (DU / LP) Only.

Self Employed           Allowed

Bankruptcy &            •     For a Bankruptcy discharged or a Foreclosure recorded within the last 3 years, no 30-day late
Foreclosures                  payments or derogatory credit of any type is acceptable from the date Bankruptcy was filed or
                              Foreclosure was recorded.
                        •      Borrowers must have re-established credit.

Mortgage Lates          None in last 24 months on any mortgage

Collection              •      Housing-expense related collection accounts within 24 months are not allowed.
Accounts                •      Other collections (including medical) are subject to UW discretion on the file.

Housing Payment         This guideline is applicable to Purchase transactions only. Housing Payment Shock is calculated as the
Shock                   difference between the new housing payment and existing housing payment divided by existing
                        housing payment times 100. Existing housing payment must be documented.

                            Loan Scenario                                                                        Maximum Housing
                                                                                                                  Payment Shock

                            620 <= FICO < 640 and DTI Back Ratio <= 43                                                   20%

                            FICO => 640 and DTI Back Ratio <= 43                                                         N/A

                            640 => FICO < 680 and DTI Back Ratio > 43                                                    20%

                            FICO => 680 and DTI Back Ratio > 43                                                          N/A


Subordinate             Allowed
Financing
LTV / CLTV
                            Loan Purpose                                                                          LTV          CLTV

                            Purchase                                                                             96.5%         100%1

                               1
                        •          CLTV allowed is 105% for purchases, if using a Govt. Down Payment Assistance Program.
                        •      Maximum LTV for 2-4 unit properties, with non-occupying co-borrower, is 75%.

Maximum Loan            •      Honolulu        $793,750
Amount                  •      Kauai           $773,750
                        •      Maui            $790,000
                        •      Hawaii          $618,750
                        (Call for 2-4 unit limits)

Maximum No of
Prop Financed by        2 (inclusive of subject)
borrower
PITI Reserves           •      3 months’ reserves, excluding Gift Funds, required for First Time Home Buyer if Housing Payment
                               Shock > 20% and FICO < 680 and DTI Back Ratio is > 43
                        •      3 months’ reserves, excluding Gift Funds, required for 3-4 unit properties;
                        •      3 months’ reserves on 2-unit properties if DTI Back Ratio exceeds 60
                        •      3 months’ reserves, excluding Gift Funds, required for Manufactured Homes
                        •   6 months’ reserves if LTV/CLTV > 80% and proposed rents are used to qualify and DTI Back Ratio
                      without rental income exceeds 60
Gift Funds            •      Allowed if FICO is 680 or higher.
                      •      Not required if borrower has 3 months reserves, excluding gift funds.

Cash Out on Short     Not allowed
Pay-Off
Escrow Holdback       Not allowed
for Minor Repairs
Maximum DTI
                          Loan Scenario                                                           Max. Front      Max. Back
Ratios
                                                                                                    Ratio           Ratio
                          620 <= FICO < 640 and Housing Payment Shock <= 20%                           43             43

                          FICO => 640 and Housing Payment Shock <=20%                                  45             55

                          640 < FICO <= 680 and Housing Payment Shock > 20%*                           43             43

                          FICO => 680 and Housing Payment Shock > 20%                                  45             55

                          3-4 unit properties                                                          31             43

                      Note: When a non-occupying co-applicant is used to qualify the borrower:
                      •      DTI Back Ratio calculated without using non-occupying applicant's income must not exceed 60.
                      •      Proposed rents cannot be used as income to qualify.
                      *If the borrower has at least 3 months’ PITI reserves excluding gift funds, the maximum ratios
                      allowed are 45% (Front) and 55% (Back).

Down Payment          Allowed in conjunction with first mortgage loans with following overlays:
Assistance (DPA)      •      The DPA meets all published requirements of FHA; and
                      •      The first Mortgage sold to SC is not subject to any terms or conditions of a bond program; and
                      •      The DPA does not restrict the transfer of servicing rights of the first Mortgage sold to SC. In
                             addition, it may not require prior notification or approval from the sponsoring authority in the
                             event of the transfer of the first mortgage’s servicing rights.
                      •      The FICO requirement for borrowers using DPA program is 680 and borrower must have 3
                             months’ reserves.

Listing and Selling   •      Cannot be the same or related.
Agent                 •      There must NOT be an identity of interest or a potential borrower situation.

Seller                Seller must be an individual; cannot be an LLC or corporation.
                      Exception for LLC Seller3 may be granted provided following documents are provided in the loan
                      package:
                             1.   Articles of incorporation
                             2.   List of officers, directors, and shareholders
                             3.   Certificate of Good standing
                      3
                       The underwriter carefully reviews all of the docs to determine that there is NO relation between the
                      LLC and either the mortgage broker, selling agent, or the borrower.

If Sales Price        •      A second appraisal is required with appraiser documenting the reasons for the increase in value.
exceeds 20% of        •      Property inspection ordered by Mortgagee is required.
Seller Acquisition    •      The second appraisal will be ordered by Stellar Capital, Inc.
Cost
Transfer of           •      No intermediate transfer is allowed.
Property
Transfer of Title     •      No recent transfers to the Seller are allowed.

Program               •      The program is set to expire December 31, 2012 and the expiration date applies to the date of
Expiration Date              Purchase Contract

								
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