VHDA Program Updates
To: VHDA Lenders
From: Janice Burgess
Date: January 17, 2003
Re:Conventional Insured Tax Exempt Bond - 103% Loan to Value Program and FHA Plus - Increased Loan Amount
We are pleased to announce enhancements to two VHDA loan programs. These changes will reduce the funds necessary for loan closing and increase affordability through the financing of a portion of the closing costs. Details for both programs are provided below.
Conventional Insured - First time homebuyer Bond Program
103% Loan to Value
VHDA will now offer financing up to 103% of the lesser of sales price or appraised value for our 30 year fixed rate conventional insured - First time homebuyer bond program. (Flex Alt loans are not allowed). This will allow eligible borrowers to finance closing costs, discount points, origination fee and pre-paid items in an amount up to 3% of the sales price.
VHDA's standard underwriting guidelines will apply, however, private mortgage insurer guidelines for this program result in additional requirements. Each lender should discuss program guidelines with their insurer to confirm their willingness to insure this product and to clarify the guidelines. Key features of the program are identified below. These include VHDA's guidelines as well as several guidelines that have been identified as consistent with most mortgage insurers. A combination of loan funds or seller paid costs may not result in cash back to the borrower (in excess of verified P.O.C. items). Loans approved through any A Minus insurance programs are not eligible.
Mortgage Insurance Coverage: 30%
Qualifying Ratios/ maximum: 32% payment to income/38-40% debt to income
Credit Score - minimum: 680 - 700 (mortgage insurer requirement)
Seller Concession - maximum: 3%(mortgage insurer requirement)
Cash Reserves- minimum: 2 months PITI (mortgage insurer requirement)
Loan Terms: 30 year fixed only - no step or buydowns
Automated Underwriting: LP/DU and other systems not allowed
Rate and Points: Standard VHDA Conventional(and SPARC)
VHDA - FHA Plus Program
Increase of Allowable Second Mortgage Amount
In response to current market conditions and increased housing costs, VHDA has increased the maximum second mortgage amount of the FHA plus loan from the current limit of 3% of the lesser of sales price or appraised value to 5% of the lesser of sales price or appraised value. This increase will provide adequate funds for eligible borrowers to finance their down payment and a portion of their closing costs. This will assist FHA qualified applicants with minimal cash when seller paid closing costs are not available.
Other current VHDA FHA Plus programs remain in effect. A brief overview of FHA Plus guidelines are highlighted below:
- Qualifying: Standard FHA Borrower qualifications (LP & DU approvals accepted)
- Sales Price/Loan Limits: The combination of the first and second mortgages may not exceed VHDA's maximum sales price limit
- Minimum borrower funds: Borrower must have a minimum of 1% of their own funds(not gift or retirement) either contributed toward the transaction or in reserves after closing. These can also be verified P.O.C. funds.
- Maximum loan funds: A combination of loan funds or seller paid costs may not result in cash back to the borrower (in excess of P.O.C items).
- Homeownership Education: Required
Lenders may change the maximum 3% to 5% in the FHA Plus Program section of the Exhibit E - Program Disclosure and Affidavit of Borrower. This is the only change required to existing documents.
Effective Date of Program Changes
All program changes are effective on Wednesday, January 22, 2003. Please contact VHDA Single Family Development department at 1-800-227-8432 with questions regarding these program changes.