Introduction
This topic contains information about using the Alternative Qualification Path for the high LTV refinance option, including:
Eligibility Requirements
The following table provides criteria for using the Alternative Qualification Path.
If any of the following apply to the new loan... |
Then the loan... |
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the P&I payment increases by more than 20% from the current P&I payment |
must comply with the Alternative Qualification Path requirements. |
a borrower on the loan being refinanced is being excluded from the new loan other than due to death, and the remaining borrower(s) cannot provide evidence of making payments on their own for the prior 12 months | |
the loan is a higher-priced mortgage loan or a higher-priced covered transaction under Regulation Z |
In addition to all other requirements associated with the high LTV refinance option loans, loans originated in accordance with the Alternative Qualification Path must also meet the requirements described in the following table.
✓ |
Additional requirements for high LTV refinance loans originated using the Alternative Qualification Path |
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Minimum credit score of 620. |
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Maximum DTI ratio of 45%. |
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Verified assets needed to close, when applicable. |
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The lender is required to manually underwrite all loans subject to the Alternative Qualification Path. |
Documentation Requirements
In addition to the eligibility considerations described in this topic, the documentation requirements in the following table apply.
Income Type and Eligible Income Sources | Documentation Requirements |
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All Employment Income |
Verbal verification of employment (See B3-3.1-07, Verbal Verification of Employment, for additional requirements.) |
Base Pay (salary or hourly) Tip, Bonus, and Overtime Income |
One paystub or a completed Request for Verification of Employment (Form 1005). Applies to primary employment, secondary employment (second job and multiple jobs), and seasonal income. |
Commission Income |
One paystub or Form 1005 or one year personal tax return. |
Military Income |
A military Leave and Earnings Statement or a verification of employment. |
Self-Employment |
One year personal tax return. Applies to primary and secondary self-employment. |
Alimony, Child Support, or Separate Maintenance |
Copy of divorce decree, separation agreement, court order or equivalent documentation, and one month documentation of receipt. |
Employment-Related Assets as Qualifying Income |
Lender must obtain standard documentation for this type of income as described in B3-3.1-09, Other Sources of Income. |
Rental Income |
Lease or one year personal tax return (Form 1007 is not required). Applies to rental income from subject property or from other properties owned by the borrower. |
Retirement and Pension |
One of the following:
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Social Security |
One of the following:
|
Temporary Leave Income |
Lender must receive:
Regardless of the date of return, the amount of the “regular employment income” the borrower received prior to the temporary leave must be used to qualify. |
All Other Income Types
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Lender must determine appropriate documentation. Examples include (but are not limited to):
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Asset Type
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One recent statement (monthly, quarterly, or annual) showing asset balance. |
Recent Related Announcements
The table below provides references to recently issued Announcements that are related to this topic.
Announcements | Issue Date |
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Announcement SEL-2021-11 | December 15, 2021 |
Announcement SEL-2020-07 | December 16, 2020 |
Announcement SEL-2018-09 | December 04, 2018 |
Announcement SEL-2018-06 | August 07, 2018 |