DU vs. LP

Which one to use?

FREDDIE / LP Loans FANNIE / DU Loans
If the gift is less than 20% of the sales price, borrower must contribute own funds equal to at least 5% of the purchase price Min borrower contribution from the borrower’s own funds is not required – all funds needed to complete the transaction can come from a gift (1 unit)
Allows blended ratios on non-occupant co-borrowers Occupying borrower(s) must qualify for mortgage pmnt (will not blend ratios)
Appraisal over 120 days old – Exterior only 2055 allowed to extend beyond 120 days – max date is 240 days Appraisal over 120 days old – 1004D allowed to extend the validity period – max date is 240 days
No PIW – Freddie offers an “HVE” on Open Access HARP only Property Inspection Waiver (PIW) may be offered in DU Findings
Condo Streamline review to 90% Condo Limited Review to 80%
Max 4 financed properties when subject is a 2nd home or investment prop Multiple Property Program for purchase or R/T of 2nd home or investment property for borrowers with 4-10 financed properties
Accept responses w/ disputed accounts don’t require confirmation of the accuracy of the disputed tradelines – already included in LP assessment If tradeline disputed and delinquency in last 2 years from credit report date, follow instructions on findings
Cash out Freddie only requires 6 months before the new Note date Cash out requires 6 months seasoning before application date
Requires 2 years landlord experience to use rental income No landlord experience required to use rental income
Funds received from a wedding allowed as borrower’s own funds Funds received from a wedding are still considered a “gift”
May require rent loss insurance when using rental income to qualify Typically does not require rent loss insurance when using rental income (unless DU requires, which is rare)
Up to 50% DTI in most cases Up to 45 % DTI unless major compensating factors; good reserves
Employment Contracts; start work within 90 days Employment Contracts; start work prior to close w/VOE from new employer
Gift letters must list the property address being purchased Gift letters do not have to list the property address
95% LTV Max on Arms 90% LTV Max on Arms
Refinance of a restructured mortgage is not eligible Restructured loans can be refinanced (restrictions apply)
75% LTV on cash out O/O on Super Conf up to $625k Max cash out on Fannie High Balance is 60% LTV