At Iowa Bankers Mortgage Corporation, we take underwriting seriously. When lenders work with IBMC, they can rest assured that underwriting will be completed in a timely manner to keep your mortgage loans moving in the most efficient way possible. 

IBMC’s efforts have not gone unnoticed. Last month, IBMC was recognized for its quality underwriting with a second-place award from the U.S. Department of Agriculture in the Underwriting Quality Champion category during the USDA’s 2023 National Lender of the Year Awards Ceremony. The awards recognize the work of the USDA’s top national lending partners that helped rural families and individuals buy homes nationwide last year through USDA Rural Development’s Single Family Housing Guaranteed Loan Program.

In addition to providing quality underwriting, through the Underwriting Help Desk, our experts at IBMC are also available to answer questions that may aid you in determining your borrower's ability to qualify. Following are some of the top conventional loan questions they’ve seen recently.

In addition to the six-month title requirement, how long must a loan be seasoned before it can be refinanced as a cash-out transaction?

The existing first mortgage being paid off through the transaction must be at least 12 months old at the time of refinance, as measured from the note date of the current loan to the note date of the new loan. This change is in addition to the requirement that at least one borrower be on title to the subject property for at least six months prior to the disbursement date of the new loan, unless subject to one of the ownership exceptions permitted in the Selling Guide. For additional guidance please refer to the guide here: B2-1.3-03, Cash-Out Refinance Transactions (02/01/2023)

For debts paid by others, if only a portion of the debt is paid by another party, can that portion be excluded in the DTI ratio?

In order for non-mortgage and mortgage debt to be excluded from the debt-to-income (DTI) ratio, the other party cannot be an interested party to the subject transaction and must provide documentation of the most recent 12-month payment history with no delinquent payments.

For mortgage debt, the following additional requirements must be met:

• The party making the payments is obligated on the mortgage debt;
• There are no delinquencies in the most recent 12 months; and
• The borrower is not using rental income from the applicable property to qualify.

All other requirements of “Debts Paid by Others” in the Fannie Mae Selling Guide must be met and can be reviewed here: B3-6-05, Monthly Debt Obligations. 

If a student loan is in deferment or forbearance, can the payment amount be excluded for qualifying?

No, payments in deferment or forbearance may not be excluded for qualifying. If the student loan is in deferment or forbearance and the credit report payment amount is missing (or $0), lenders must calculate a qualifying payment by either using 1% of the outstanding student loan balance or a fully amortizing payment using the documented loan repayment terms. Additionally, if the student loan is in deferment or forbearance and the credit report reflects a monthly payment (even if this payment is an estimated payment amount), lenders may use this payment to qualify the borrower. 

For additional guidance on monthly obligations, please refer to B3-6-05, Monthly Debt Obligations of the Fannie Mae Selling Guide. 

Are collections and charge-offs required to be paid off at closing?

Specifically, medical collection accounts are no longer required to be paid off at or prior to closing for both DU and manually underwritten loans, regardless of the amount. Conversely, non-medical collection accounts and non-mortgage charge-off accounts requirements will vary based upon the underwriting method. When a file receives an “Approval/Eligible” via DO/DU, the requirements for the specific loan and property type will be outlined in the findings. When manual underwriting is required, any non-medical collection accounts and non-mortgage charge off accounts that exceed $250 individually or $1,000 in aggregate must be paid in full at or prior to closing. For further guidance please refer to the Fannie Mae Selling Guide: B3-6-07, Debts Paid Off At or Prior to Closing (04/05/2023) and B3-5.3-09, DU Credit Report Analysis (04/05/2023).

Name: Jeanne Hagan

Job title: Loan processor

Years of mortgage experience: 30 years

Favorite part of the job: Every loan is a little story and puzzle to put together and an important piece of our customers’ lives. It is great to complete the story and puzzle!