Underwriting Guidelines (USDA Loans) Underwriting Guidelines (USDA Loans) Mortgage Lending Division Version 4.7 – 06/23/21 DOCUMENT OVERVIEW Purpose The following document describes the responsibilities and requirements of the Carrington Mortgage Services, LLC (CMS) Mortgage Lending Division USDA Certified Underwriter when reviewing and underwriting United States Department of Agriculture Office of Rural Development (USDA) mortgage loan applications. Table of Document Overview ......................................................................................................... 2 Contents USDA Underwriting ........................................................................................................ 11 Overview ................................................................................................................. 11 USDA Loan Programs and Compliance ....................................................................... 11 Overview ................................................................................................................. 11 USDA Guarantee Program ........................................................................................ 11 Overview ................................................................................................................. 11 Property Eligibility ................................................................................................... 11 USDA Loan Eligibility .................................................................................................... 12 Overview ................................................................................................................. 12 LDP and GSA Procurement/Non-Procurement ...................................................... 12 Requirements .......................................................................................................... 12 USDA Case Number ............................................................................................... 12 Documenting Clearances ........................................................................................ 12 Uniform Residential Loan Application .................................................................... 13 Loan Application Requirements .............................................................................. 13 Face-To-Face Interview ............................................................................................. 13 Overview ................................................................................................................. 13 Identity and Social Security Number Validations ................................................... 14 Identity Verification .................................................................................................. 14 Social Security Number Validation ......................................................................... 14 Occupancy Types ...................................................................................................... 15 Overview ................................................................................................................. 15 Primary Residence .................................................................................................. 15 Borrowers, Co-Borrowers, Co-Signers, and Non-Purchasing Spouses .............. 16 Borrowers and Co-Borrowers ................................................................................. 16 Ineligible Borrowers ................................................................................................ 16 Non-Purchasing Spouse ......................................................................................... 16 Community Property States- ................................................................................... 17 Previous Financial Crimes ........................................................................................ 17 Policy ....................................................................................................................... 17 Transaction Types ..................................................................................................... 18 Overview ................................................................................................................. 18 Purchase Mortgage ................................................................................................. 18 Refinance Mortgages .............................................................................................. 19 Principal Curtailment ............................................................................................... 21 Refinance Transactions with Escrow Credits ......................................................... 22 Loans on Leasehold Estates .................................................................................... 22 Overview ................................................................................................................. 22 Definition ................................................................................................................. 22 Lease Requirements ............................................................................................... 22 CMS Policies & Procedures Page 2 of 211 Proprietary and confidential. For Internal use only. Do not distribute externally. Underwriting Guidelines (USDA Loans) Mortgage Lending Division Version 4.7 – 06/23/21 Requirements .......................................................................................................... 23 Loan-to-Values ........................................................................................................... 23 Calculating Combined Loan-to-Value ..................................................................... 23 Minimum Borrower Investment ................................................................................ 23 Overview ................................................................................................................. 23 Acquisition Cost ...................................................................................................... 23 Seller Contribution Limitations ................................................................................ 24 Contributions/ Contributors ..................................................................................... 24 Inducements to Purchase ....................................................................................... 24 Premium Pricing ...................................................................................................... 25 Secondary Financing— Down Payment Assistance .............................................. 25 Allowable Borrower Paid Closing Costs ................................................................. 25 Requirements .......................................................................................................... 25 Guarantee Fee ............................................................................................................ 26 Overview ................................................................................................................. 26 Up-Front Mortgage Insurance Premiums ............................................................... 26 Examples ................................................................................................................ 26 Monthly/Annual Premium ........................................................................................ 27 USDA Risk Management ........................................................................................... 27 Overview ................................................................................................................. 27 Requesting the Loan Guarantee Certificate ........................................................... 27 Requesting the Guarantee Certificate .................................................................... 27 Insuring an USDA Guarantee Loan .......................................................................... 27 Requirements .......................................................................................................... 27 Risk Controls ............................................................................................................. 28 Verifications Sent to Post Office Boxes .................................................................. 28 Fraud/Red Flags ..................................................................................................... 28 Appraisal Transfer ................................................................................................... 36 Appraisal Assignment ............................................................................................. 36 USDA Documentation .................................................................................................... 37 Overview ................................................................................................................. 37 Minimum Documentation Requirements ................................................................ 37 Documentation Requirements to Close an USDA Loan ......................................... 37 Documentation Requirements to be Eligible for Underwriting ................................ 39 Document Images ................................................................................................... 39 Electronic Signatures