Reduced Maximum Loan-to-Value (LTV / CLTV)

Many Banks have the following Maximum LTV’s / CLTV’s and Loan Limits*:  

 

 

LTV
The Loan-to-Value (LTV) is calculated by dividing the loan amount into the Sales Price or Appraised Value, whichever is lower. For refinance loans, it is calculated by dividing the loan amount into the appraised value. 

CLTV
The Combined Loan-to-Value (CLTV) is calculated by dividing the total of the Loan Amount and any additional subordinate financing into the Sales Price or Appraised Value, whichever is lower, or simply into the appraisal value for refinance loans 

 Standard Conforming – Full Documentation – Fully Amortized  

One – Four Unit Single Family (attached or detached) One Unit PUD and Condo (attached & detached) Occupancy Loan Amt Limits Purchase Max LTV/CLTV No Cash Out Max LTV/CLTV Cash Out Max LTV/CLTV Primary Residence 1 Unit $417,000 95% / 95% 95% / 95% 80% / 80% 2 Units $533,850 80% / 80% 80% / 80% 75% / 75% 3 Units $645,300 75% / 75% 75% / 75% 75% / 75% 4 Units $801,950 75% / 75% 75% / 75% 75% / 75% Second Home 1 Unit $417,000 80% / 85% 80% / 85% 75% / 75% Non-Owner 1 Unit $417,000 80% / 85% 75% / 75% 75% / 75% 2 Units $533,850 75% / 75% 75% / 75% 70% / 70% 3 Units $645,300 75% / 75% 75% / 75% 70% / 70% 4 Units $801,950 75% / 75% 75% / 75% 70% / 70%   General Notes: Minimum FICO credit score of 620 is required. Maximum Debt-to-Income (DTI) Ratio is 55% 1% of HELOC amount will be added to the DTI calculation   Loans with an LTV greater than 80% must meet the following requirements: Maximum Debt-to-Income Ratio of 41%. Minimum FICO credit score of 680 is required. Secondary financing (second mortgage) is not permitted. LTV greater than 90 %:  Minimum FICO of 740   Cash-Out Requirements: Cash-Out transactions require 12 month seasoning and ownership history. The maximum Cash-Out permitted is $200,000. This limit includes the balance of any non-rate and term items paid off with the subject loan.   Declining Market Notes: Soft Declining Market when the LTV is greater than 80%:  Maximum LTV of 90%. First-time buyers are permitted to 95% LTV on a purchase transaction. Minimum FICO of 700 Distressed Declining Market when the LTV is greater than 80%: Minimum FICO of 720. Maximum LTV of 90%.

Super Conforming (Jumbo) – Full Documentation – Fully Amortized   

One Unit Single Family (attached or detached) One Unit PUD (attached & detached) Occupancy Purchase Max LTV/CLTV No Cash Out Max LTV/CLTV Minimum FICO Purchase and No Cash Out Cash Out Max LTV/CLTV Minimum FICO Cash Out Primary Residence 1 Unit 90% / 90% 90% / 90% 720 75% / 75% 720 85% / 85% 85% / 85% 700 75% / 75% 75% / 75% 660 Second Home 1 Unit 60% / 60% 60% / 60% 660 – – Non-Owner 1 Unit 60% / 60% 60% / 60% 660 – – General Notes: Maximum Debt-to-Income Ratio: 45% No 30-day late housing payments in the last 12 months. Seasoning Requirements: Refinance transactions require a minimum of 6 months seasoning (i.e. six payments made) since the most recent refinance or date of purchase. Reserve Requirements (checking, savings, CD, 401K, IRA…): Primary Residence Transactions: 2 months PITI (principal, interest, tax, insurance) Second Home and Non-Owner Occupied Transactions: 6 months PITI. Reserves are required to be liquid reserves and are exclusive of closing costs and cash-out received. Maximum Cash-out: The maximum cash-out permitted is $200,000. This limit includes the balance of any non-rate and term items paid off with the subject loan. For loan amounts greater than $625,500: Purchase and “no cash-out” refinance: Maximum LTV/CLTV is 80%. Cash-out refinance: Maximum LTV/CLTV is 65%. Loans with an LTV greater than 80% must meet the following requirements: Maximum Debt-to-Income ratio is 41%. Secondary financing is not permitted. Attached PUDs are ineligible. Reserve Requirements: 6 months PITI reserves are required for each property owned including the subject property. Declining Market Notes: Minimum FICO credit score of 720 is required when the LTV is greater than 80%.

*Some Banks that don’t use Freddie Mac and Fannie Mae platform permit cash-out refinance up to 90% LTV for 1 unit primary residence with minimum 650 credit score without PMI and interest rate adjustment (up to 900K loan amount). HELOC (home equity line) – up to 350K, maximum 85% LTV

Initial Documentation Required for a Mortgage

When you apply for a mortgage, you should have the initial documentation readily available to your broker to analyze your situation, do math, understand your aims. A broker will run your scenario with different banks trying to find lenders that are willing to accept your application, especially on today’s market, choose the best lenders for you, and develop comprehensive mortgage plan that fits into your financial goals. Only then, he will discuss with you available mortgage options and provide the actual rate quote. 

You will need to provide the following documents:

1) Income Documentation – This represents your income and work experience. Banks want you to have 2 years  experience preferably without gaps.
-Explanation letter of job history/gaps/unemployment
-For Employees:
        –Past 2 years W-2 statements 
        –Most recent 30 day’s pay stubs
-For Self-Employed or Commissioned:
        -Most recent 2 years signed federal tax returns
        -Business Certificate/License
        -YTD profit and loss
-For Divorced People:
        -Complete Divorce Decree or Separation Agreement with stipulations regarding payment of child   support, alimony and separate maintenance
        -Verification of Alimony/Child support payments
-For Investment Property Owners:
        -Lease agreements (all rental properties)
        -Most recent 2 years signed federal tax returns

2) Assets Documentation – Available liquid assets for down payment, closing costs, and reserves need to be verified.  Any large deposits on the accounts may also need to be explained. You can present copies of paper statements mailed to you, or online printouts as long as your name and bank are clearly legible on the printout.
-Most recent 2 months statements for checking and savings accounts
-Latest statements for investment accounts (401K, IRA, Stocks, Bonds, etc.) – Will be used 70% of investment value

3) Liabilities Documentation – You will sign Borrower Signature Authorization form that allows a broker to run your credit history. He will calculate your total liabilities and Debt-to-Income (DTI) ratio, check your middle credit score and derogatory trades. Different lenders have different guidelines for DTI.

There might be other documents required for final approval, but the above is a good start.