Loan Eligibility

Sovereign follows FNMA/FHLMC current underwriting guidelines. It is the Broker or Correspondent's responsibility to be informed of current industry guidelines. Restrictions noted on individual product descriptions will always supersede this manual and FNMA/FHLMC guidelines.

Occupancy
Sovereign purchases mortgages for owner-occupied, second homes, and investment properties. All loan products are available for owner-occupied residences. Acceptability of second home and investment occupancy will be reflected on individual product descriptions in this manual. Please note that you must contact your Account Executive to access this password-protected information.

Residency Status
US Citizens and Permanent Resident aliens are eligible for all loan products. See individual product descriptions for restrictions and eligibility for Non-permanent resident aliens, non-resident aliens, and foreign nationals. Sovereign does not lend to ITIN applicants.

ECOA
We do not discriminate based on age, sex, race, national origin, or marital status per The Equal Credit Opportunity Act (ECOA). Sovereign will not approve a loan for a "separated" borrower without a Separation/Property Settlement Agreement signed by both parties.

Compliance
All loan files must include a signed Uniform Residential Loan Application (Form 1003/65), Good Faith Estimate, Truth in Lending, Servicing, ECOA, FACTA Credit Score, Right to Copy of Appraisal, and Required Service Provider disclosures. All disclosures must be signed and dated within 3 days of borrower loan application.

Required Signatures
Any individual whose income or financial strength is required to obtain credit approval must sign the Note. All owners of the mortgaged premises and any individual whose signature is required by applicable law must sign the Security Instrument.

Title Vesting
Individual, Joint Tenants, or Tenants in Common are acceptable forms of ownership interest. Fee Simple ownership is required. Leaseholds, Trusts, corporations, partnerships and life estates are not acceptable vesting for any Sovereign loan product.

Property Types
Sovereign purchases 1-4 unit residential properties, condominiums, manufactured homes and PUDs. See individual product descriptions for specific eligibility by product.

Manufactured homes must be built in accordance with HUD's compliance standards from June, 1976. The home must also be doublewide or larger, titled as real estate and affixed to a permanent foundation with pillars below the frost line. See individual product descriptions for manufactured housing restrictions.

Sovereign offers loan products for both warrantable and non-warrantable condominium projects. See individual product descriptions for condominium eligibility. Condominium questionnaires are available in the forms section of this Website.

Ineligible property types include co-ops, condo-tels, commercial properties, working farms, and any property that is not marketable as a typical residential dwelling in its area, as demonstrated by an appraisal with similar comparable sales.

Please see individual product descriptions for acreage restrictions.

Appraisals
All appraisals must be completed on current FNMA/FHLMC forms for the applicable property type. The SFR Schedule of Comp Rents or 2-4 Unit Operating Income Statement is required for all Investment Property submissions in which rental income is being used for qualifying purposes. The Broker/Correspondent is responsible for approving appraisers. Sovereign maintains an "Appraiser Exclusionary List," and will be unable to accept reports completed by any appraiser on that list. Contact your Account Executive for more information.

See individual product descriptions for specific appraisal requirements. Sovereign does not accept 2070/2075 exterior inspections or property inspection waivers for any loan product.

Land Contracts
A land contract is a contract between the buyer and a private seller of a property, wherein the seller holds the title or deed to the property until all agreed upon payments have been made in full. With a land contract, a down payment is usually made, then equal monthly installments are paid until the property is paid for or until a balloon payment is required. A land contract transaction will be treated as a purchase with LTV based on lesser of original land contract price or appraised value unless it meets below refinance eligibility:

• Fixed Rate & Agency ARM conforming loan amount products—Loan may be structured as a refinance, and current appraised value may be used to calculate LTV/CLTV only if the recorded land contract is dated one year prior to loan application and subject transaction meets standard agency LTV/CLTV maximums.
• ALT A and all other products—Loan may be structured as a refinance and current appraised value used up to a maximum LTV/CLTV of 75% only if the recorded land contract is dated a minimum of 2 years prior to loan application. The file must include a minimum of 12 months of cancelled checks to prove satisfactory housing payment per land contract terms.

Escrow
Escrows may be waived on some loan products. Loan-to-value maximums and pricing adjustments are reflected on Sovereign daily price sheets. Escrows are required on all investment properties regardless of LTV or product. Escrow waiver policy for all loans is based from LTV, not CLTV, unless Sovereign holds secondary financing.

Credit Profile
Eligible borrowers must have sufficient credit references, defined as a minimum of four reported tradelines open for at least 24 months. The minimum acceptable credit report is a triple-repository merged in-file with three credit scores for each borrower. The credit score considered in underwriting will be the middle credit score, or the lowest of the middle scores if there are multiple borrowers. See individual product descriptions for specific credit score requirements and adverse credit restrictions such as bankruptcy and foreclosure.

Mortgage Insurance
Mortgage insurance coverage at current industry levels will be required for all loans with LTVs in excess of 80%. However, different insurance coverage may be required for certain products. Sovereign offers products with both BPMI and LPMI. See individual product descriptions for MI requirements. Sovereign will order mortgage insurance certifications for all MI loans when the file is underwritten.