13VAC10-40-130: Underwriting

A. In general, to be eligible for authority financing, an applicant must satisfy the following underwriting criteria, which demonstrate the willingness and ability to repay the mortgage debt and adequately maintain the financed property.

1. An applicant must document the receipt of a stable current income that indicates that the applicant will receive future income that is sufficient to enable the timely repayment of the mortgage loan as well as other existing obligations and living expenses.

2. Each applicant must possess a credit history that reflects the ability to successfully meet financial obligations and a willingness to repay obligations in accordance with established credit repayment terms.

3. Applicants with prior significant mortgage events (foreclosure, deed in lieu, or short sale) must meet the applicable insurer, guarantor, or investor requirements in addition to any additional requirements imposed by the executive director. The authority has complete discretion to decline to finance a loan when a previous foreclosure is involved.

4. The applicants must document that sufficient funds will be available for required down payment and closing costs. Sweat equity, the imputed value of services performed by an eligible borrower or members of the borrower's family (siblings, spouse, ancestors, and lineal descendants) in constructing or completing the residence, generally is not an acceptable source of funds for down payment and closing costs. Any sweat equity allowance must be approved by the authority prior to loan approval.

5. Proposed monthly housing expenses compared to current monthly housing expenses will be reviewed. If there is a substantial increase in such expenses, an applicant must demonstrate his ability to pay the additional expenses.

6. All applicants are encouraged to attend a home ownership educational program to be better prepared to deal with the home buying process and the responsibilities related to homeownership. The authority may require all applicants applying for certain authority loan programs to complete an authority approved homeownership education program prior to loan approval.

B. In addition to the requirements set forth in subsection A of this section, to be eligible for authority financing, an applicant must satisfy the specific underwriting criteria of the insurer, guarantor, or investor with respect to the applicable authority loan program. However, additional or more stringent requirements may be imposed (i) by private mortgage insurance companies with respect to those loans on which private mortgage insurance is required or (ii) by the executive director, in which cases such additional or more stringent requirements will apply.

C. The authority reserves the right to obtain an independent appraisal in order to establish the fair market value of the property and to determine whether the dwelling is eligible for the mortgage loan requested.

D. The FHA mortgage insurance premium fee, the VA funding fee, and the Rural Development guarantee fee can be included in the loan amount provided the final loan amount does not exceed the authority's maximum allowable sales price.

E. For the purposes of underwriting buy-down mortgage loans, the reduced monthly payment amount may be taken into account based on the applicable insurer, guarantor, or investor guidelines then in effect.