FHA Single Family Housing Policy Handbook 4000.1, Part II — d. Underwriting the Borrower (05/08/2025)

FHA Single Family Housing Policy Handbook 4000.1, Part II — d. Underwriting the Borrower (05/08/2025)

d. Underwriting the Borrower (05/08/2025) The Lender must evaluate the Borrower’s ability and willingness to repay a Loan for the purchase or refinance of a Title I Manufactured Home Loan product. The Lender must exercise prudent underwriting practices when evaluating the creditworthiness of the Borrower and the value of the Property being offered as collateral, in order to limit the risk of Default. Title I Loans are not eligible for automated underwriting through the Technology Open To Approved Lenders (TOTAL) Scorecard. Once it is determined that the Borrower and the Property are eligible, analysis of the Borrower’s credit must be performed for final loan approval, including review and documentation of the following: • downpayment and other required funds • credit history • employment history II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1046 Last Revised: 11/26/2025 • income • assets • liabilities • debt ratios • compensating factors If the Loan involves a HUD employee, the Lender must underwrite the transaction in accordance with the guidance in this section. The Lender must submit the underwritten loan application package to the Director of the Financial Operations Center (FOC) for final underwriting approval. i. Credit Requirements (A) General Credit Requirements FHA’s general credit policy requires Lenders to analyze the Borrower’s credit history, liabilities, and debts to determine creditworthiness. The Lender must obtain a merged credit report from an independent consumer reporting agency. The Lender must obtain a credit report for each Borrower who will be obligated on the loan Note. The Lender may obtain a joint report for individuals with joint accounts. Before making a determination on the creditworthiness of an applicant, a Lender must conduct an interview to resolve any material discrepancies between the information on the loan application and information on the credit report to determine accurate and complete information. The Lender is not required to obtain a credit report for non-credit qualifying Streamline Refinance transactions. (B) Types of Credit History (1) Traditional Credit Lenders must pull a credit report that draws and merges information from three national credit bureaus. Lenders are prohibited from developing non-traditional credit history to use in place of a traditional credit report. If the credit report generates a credit score, the Lender must utilize traditional credit history. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1047 Last Revised: 11/26/2025 (a) Requirements for the Credit Report Credit reports must obtain all information from three credit repositories pertaining to credit, residence history, and public records information; be in an easy to read and understandable format; and not require code translations. The credit report may not contain whiteouts, erasures, or alterations. The Lender must retain copies of all credit reports. The credit report must include: • the name of the Lender ordering the report; • the name, address, and telephone number of the consumer reporting agency; • the name and SSN of each Borrower; and • the primary repository from which any particular information was pulled, for each account listed. A truncated SSN is acceptable for FHA loan insurance purposes provided that the loan application captures the full nine-digit SSN. The credit report must also include: • all inquiries made within the last 90 Days; • all credit and legal information not considered obsolete under the FCRA, including information for the last seven years regarding: o bankruptcies; o Judgments; o lawsuits; o foreclosures; and o tax liens; and • for each Borrower debt listed: o the date the account was opened; o high credit amount; o required monthly payment amount; o unpaid balance; and o payment history. (b) Updated Credit Report or Supplement to the Credit Report The Lender must obtain an updated credit report or supplement if the underwriter identifies material inconsistencies between any information in the case binder and the original credit report. (2) Non-traditional Credit For Borrowers without a credit score, the Lender must independently develop the Borrower’s credit history using the requirements outlined below. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1048 Last Revised: 11/26/2025 (a) Independent Verification of Non-traditional Credit Providers The Lender may independently verify the Borrower’s credit references by documenting the existence of the credit provider and that the provider extended credit to the Borrower. To verify the existence of each credit provider, the Lender must review public records from the state, county, or city or other documents providing a similar level of objective information. To verify credit information, the Lender must: • use a published address or telephone number for the credit provider and not rely solely on information provided by the applicant; and • obtain the most recent 12 months of canceled checks, or equivalent proof of payment, demonstrating the timing of payment to the credit provider. To verify the Borrower’s rental payment history, the Lender must obtain a rental reference from the appropriate rental management company or landlord, demonstrating the timing of payment for the most recent 12 months in lieu of 12 months of canceled checks or equivalent proof of payment. (b) Sufficiency of Non-traditional Credit References To be sufficient to establish the Borrower’s credit, the non-traditional credit history must include three credit references, including at least one of the following: • rental housing payments (subject to independent verification if the Borrower is a renter); • telephone service; or • utility company reference (if not included in the rental housing payment), including: o gas; o electricity; o water; o television service; or o Internet service. If the Lender cannot obtain all three credit references from the list above, the Lender may use the following sources of unreported recurring debt: • insurance premiums not payroll deducted (e.g., medical, auto, life, renter’s insurance); • payment to child care providers made to businesses that provide such services; • school tuition; II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1049 Last Revised: 11/26/2025 • retail store credit cards (e.g., from department, furniture, or appliance stores, or specialty stores); • rent-to-own (e.g., furniture, appliances); • payment of that part of medical bills not covered by insurance; • a documented 12-month history of savings evidenced by regular deposits resulting in an increased balance to the account that: o were made at least quarterly; o were not payroll deducted; and o caused no Insufficient Funds (NSF) checks; • an automobile lease; • a personal loan from an individual with repayment terms in writing and supported by canceled checks to document the payments; or • a documented 12-month history of payment by the Borrower on an account for which the Borrower is an authorized user. (3) Minimum Decision Credit Score (a) Definition The Minimum Decision Credit Score (MDCS) refers to the credit score reported on the Borrower’s credit report when all reported scores are the same. Where three differing scores are reported, the middle score is the MDCS. Where two differing scores are reported, the MDCS is the lowest score. Where only one score is reported, that score is the MDCS. An MDCS is determined for each Borrower. (b) Standard The Lender must determine the MDCS. An MDCS has not been established for Title I Manufactured Home Loans that would replace the credit underwriting requirements for this program. The credit score will only affect the amount of downpayment required. (c) Required Documentation/Data Entry When credit scores are available, the Lender must report all scores in FHAC for each Borrower. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1050 Last Revised: 11/26/2025 (C) Evaluating Credit History (1) General Credit The underwriter must examine the Borrower’s overall pattern of credit behavior, not just isolated unsatisfactory or slow payments, to determine the Borrower’s creditworthiness. (2) Types of Payment Histories The underwriter must evaluate the Borrower’s payment histories in the following order: (1) previous housing expenses and related expenses, including utilities; (2) installment debts; and (3) revolving accounts. (a) Satisfactory Credit The underwriter may consider a Borrower to have an acceptable payment history if the Borrower has made all housing and installment debt payments on time for the previous 12 months and has no more than two 30-Day late Loan Payments or installment payments in the previous 24 months. The underwriter may approve the Borrower with an acceptable payment history if the Borrower has no major derogatory credit on revolving accounts in the previous 12 months. Major derogatory credit excludes medical collections. On revolving accounts, major derogatory credit must include any payments made more than 90 Days after the due date, or three or more payments more than 60 Days after the due date. (b) Payment History Requiring Additional Analysis If a Borrower’s credit history does not reflect satisfactory credit as stated above, the Borrower’s payment history requires additional analysis. The Lender must analyze the Borrower’s delinquent accounts to determine whether late payments were based on a disregard for financial obligations, an inability to manage debt, or extenuating circumstances. The Lender must document this analysis in the case binder. Any explanation or documentation of delinquent accounts must be consistent with other information in the file. The underwriter may only approve a Borrower with a credit history not meeting the satisfactory credit history above if the underwriter has documented the delinquency was related to extenuating circumstances. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1051 Last Revised: 11/26/2025 (3) Payment History on Housing Obligations The Lender must determine the Borrower’s housing obligation payment history through: • the credit report; • verification of rent received directly from the landlord (for landlords with no Identity of Interest with the Borrower); • verification of Loan Payments received directly from the loan Servicer; or • a review of canceled checks that cover the most recent 12-month period. The Lender must verify and document the previous 12 months of housing history. For Borrowers who indicate they are living rent-free, the Lender must obtain verification from the property owner where they are residing that the Borrower has been living rent-free and the amount of time the Borrower has been living rent-free. A Loan that has been modified must utilize the payment history in accordance with the modification agreement for the time period of modification in determining late housing payments. (4) Collection Accounts (a) Definition A Collection Account is a Borrower’s loan or debt that has been submitted to a collection agency through a creditor. (b) Standard The Lender must determine if collection accounts were a result of: • the Borrower’s disregard for financial obligations; • the Borrower’s inability to manage debt; or • extenuating circumstances. The Lender may disregard collections occurring more than two years prior to the date of loan application. (c) Required Documentation The Lender must document reasons for approving a Loan when the Borrower has any collection accounts. The Borrower must provide a letter of explanation, which is supported by documentation, for each outstanding collection account. The explanation and supporting documentation must be consistent with other credit information in the file. Collections occurring more than two years ago do not require explanation. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1052 Last Revised: 11/26/2025 (5) Charge Off Accounts (a) Definition Charge Off Account refers to a Borrower’s loan or debt that has been written off by the creditor. (b) Standard The Lender must determine if Charge Off Accounts in the past 24 months were a result of: • the Borrower’s disregard for financial obligations; • the Borrower’s inability to manage debt; or • extenuating circumstances. (c) Required Documentation The Lender must document reasons for approving a Loan when the Borrower has any Charge Off Accounts in the past 24 months. The Borrower must provide a letter of explanation, which is supported by documentation, for each outstanding Charge Off Account. The explanation and supporting documentation must be consistent with other credit information in the file. (6) Disputed Derogatory Credit Accounts (a) Definition Disputed Derogatory Credit Account refers to disputed Charge Off Accounts, disputed collection accounts, and disputed accounts with late payments in the last 24 months. (b) Standard The Lender must analyze the documentation provided for consistency with other credit information to determine if the derogatory credit account should be considered in the underwriting analysis. The following items may be excluded from consideration in the underwriting analysis: • disputed medical accounts; and • disputed derogatory credit resulting from identity theft, credit card theft or unauthorized use provided the Lender includes a copy of the police report or other documentation from the creditor to support the status of the account in the case binder. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1053 Last Revised: 11/26/2025 (c) Required Documentation If the credit report indicates that the Borrower is disputing derogatory credit accounts, the Borrower must provide a letter of explanation and documentation supporting the basis of the dispute. If the disputed derogatory credit resulted from identity theft, credit card theft or unauthorized use balances, the Lender must obtain a copy of the police report or other documentation from the creditor to support the status of the accounts. (7) Judgments (a) Definition Judgment refers to any debt or monetary liability of the Borrower, and the Borrower’s spouse in a community property state unless excluded by state law, created by a court, or other adjudicating body. (b) Standard The Lender must verify that court-ordered Judgments are resolved or paid off prior to or at closing. Regardless of the amount of outstanding Judgments, the Lender must determine if the Judgment was a result of: • the Borrower’s disregard for financial obligations; • the Borrower’s inability to manage debt; or • extenuating circumstances. Exception A Judgment is considered resolved if the Borrower has entered into a valid agreement with the creditor to make regular payments on the debt, the Borrower has made timely payments for at least three months of scheduled payments and the Judgment will not supersede the FHA-insured Loan lien. The Borrower cannot prepay scheduled payments in order to meet the required minimum of three months of payments. The Lender must include the payment amount in the agreement in the calculation of the Borrower’s DTI ratio. The Lender must obtain a copy of the agreement and evidence that payments were made on time in accordance with the agreement. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1054 Last Revised: 11/26/2025 (c) Required Documentation The Lender must provide the following documentation: • evidence of payment in full, if paid prior to settlement; • the payoff statement, if paid at settlement; or • the payment arrangement with the creditor, if not paid prior to or at settlement, and a subordination agreement for any liens existing on title. (8) Bankruptcy (a) Standard: Chapter 7 A Chapter 7 bankruptcy (liquidation) does not disqualify a Borrower from obtaining an FHA-insured Loan if, at the time of case number assignment, at least two years have elapsed since the date of the bankruptcy discharge. During the most recent two years, the Borrower must have: • re-established good credit; or • chosen not to incur new credit obligations. An elapsed period of less than two years, but not less than 12 months, may be acceptable, if the Borrower: • can show that the bankruptcy was caused by extenuating circumstances beyond the Borrower’s control; and • has since exhibited a documented ability to manage their financial affairs in a responsible manner. (b) Standard: Chapter 13 A Chapter 13 bankruptcy does not disqualify a Borrower from obtaining an FHA-insured Loan, if at the time of case number assignment at least 12 months of the payout period under the bankruptcy has elapsed. The Lender must determine that during the most recent 12 months, the Borrower’s payment performance has been satisfactory and all required payments have been made on time, and the Borrower has received written permission from bankruptcy court to enter into the loan transaction. (c) Required Documentation If the credit report does not verify the discharge date or additional documentation is necessary to determine if any liabilities were discharged in the bankruptcy, the Lender must obtain the bankruptcy and discharge documents. The Lender must also document that the Borrower’s current situation indicates that the events which led to the bankruptcy are not likely to recur. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1055 Last Revised: 11/26/2025 (9) Foreclosure and Deed-in-Lieu of Foreclosure (a) Standard A Borrower is generally not eligible for a new FHA-insured Loan if the Borrower had a foreclosure or a Deed-in-Lieu (DIL) of Foreclosure in the three-year period prior to the date of case number assignment. This three-year period begins on the date of the DIL or the date that the Borrower transferred ownership of the Property to the foreclosing entity/designee. Exception The Lender may grant an exception to the three-year requirement if the foreclosure was the result of documented extenuating circumstances that were beyond the control of the Borrower, such as a serious illness or death of a wage earner, and the Borrower has re-established good credit since the foreclosure. Divorce is not considered an extenuating circumstance. An exception may, however, be granted where a Borrower’s Mortgage was current at the time of the Borrower’s divorce, the ex-spouse received the Property, and the Mortgage was later foreclosed. The inability to sell the Property due to a job transfer or relocation to another area does not qualify as an extenuating circumstance. (b) Required Documentation If the credit report does not indicate the date of the foreclosure or DIL of Foreclosure, the Lender must obtain the Settlement Statement, deed or other legal documents evidencing the date of property transfer. If the foreclosure or DIL of Foreclosure was the result of a circumstance beyond the Borrower’s control, the Lender must obtain an explanation of the circumstance and document that the circumstance was beyond the Borrower’s control. (10) Pre-Foreclosure Sales (Short Sales) (a) Definition Pre-Foreclosure Sales, also known as Short Sales, refer to the sales of real estate that generate proceeds that are less than the amount owed on the Property and the lien holders agree to release their liens and forgive the deficiency balance on the real estate. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1056 Last Revised: 11/26/2025 (b) Standard A Borrower is generally not eligible for a new FHA-insured Loan if they relinquished a Property through a Short Sale within three years from the date of case number assignment. This three-year period begins on the date of transfer of title by Short Sale. (i) Exception for Borrower Current at the Time of Short Sale A Borrower is considered eligible for a new FHA-insured Loan if, from the date of case number assignment for the new Loan: • all Mortgage Payments on the prior Mortgage were made within the month due for the 12-month period preceding the Short Sale; and • installment debt payments for the same time period were also made within the month due. (ii) Exception for Extenuating Circumstances The Lender may grant an exception to the three-year requirement if the Short Sale was the result of documented extenuating circumstances that were beyond the control of the Borrower, such as a serious illness or death of a wage earner, and the Borrower has re-established good credit since the Short Sale. Divorce is not considered an extenuating circumstance. An exception may, however, be granted where a Borrower’s Mortgage was current at the time the Borrower’s divorce, the ex-spouse received the Property, and there was a subsequent Short Sale. The inability to sell the Property due to a job transfer or relocation to another area does not qualify as an extenuating circumstance. (c) Required Documentation If the credit report does not indicate the date of the Short Sale, the Lender must obtain the Settlement Statement, deed or other legal documents evidencing the date of property transfer. If the Short Sale was the result of a circumstance beyond the Borrower’s control, the Lender must obtain an explanation of the circumstance and document that the circumstance was beyond the Borrower’s control. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1057 Last Revised: 11/26/2025 (11) Credit Counseling/Payment Plan Participating in a consumer credit counseling program does not disqualify a Borrower from obtaining an FHA-insured Loan, provided the Lender documents that: • one year of the payout period has elapsed under the plan; • the Borrower’s payment performance has been satisfactory and all required payments have been made on time; and • the Borrower has received written permission from the counseling agency to enter into the loan transaction. (D) Evaluating Liabilities and Debt (1) General Liabilities and Debt (a) Standard The Lender must determine the Borrower’s monthly liabilities by reviewing all debts listed on the credit report, the URLA (Fannie Mae Form 1003/Freddie Mac Form 65), and required documentation. All applicable monthly liabilities must be included in the qualifying ratio. Closed- end debts do not have to be included if they will be paid off within six months and the cumulative payments of all such debts are less than or equal to 5 percent of the Borrower’s gross monthly income. The Borrower may not pay down the balance in order to meet the six-month requirement. Accounts for which the Borrower is an authorized user must be included in a Borrower’s DTI ratio unless the Borrower provides written certification that they do not make payments, and are not expected by the account owner to make any payments. Negative income must be subtracted from the Borrower’s gross monthly income, and not treated as a recurring monthly liability unless otherwise noted. Loans secured against deposited funds, where repayment may be obtained through extinguishing the asset and these funds are not included in calculating the Borrower’s assets, do not require consideration of repayment for qualifying purposes. (b) Required Documentation The Lender must document that the funds used to pay off debts prior to closing came from an acceptable source, and the Borrower did not incur new debts that were not included in the DTI ratio. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1058 Last Revised: 11/26/2025 (2) Undisclosed Debt and Inquiries (a) Standard When a debt or obligation is revealed during the application process or the interview with the Borrower that was not listed on the loan application and/or credit report, the Lender must: • verify the actual monthly payment amount; • include the monthly payment amount in the Borrower’s DTI; • ensure that the Borrower did not incur the indebtedness in connection with the FHA-insured transaction; and • determine that any unsecured funds borrowed will not be used for the Borrower’s MCI. The Lender must obtain a written explanation from the Borrower for all material inquiries shown on the credit report that were made in the last 90 Days. Material Inquiries refer to inquires which may potentially result in obligations incurred by the Borrowers for other Mortgages, auto loans, leases, or other Installment Loans. Inquiries from department stores, credit bureaus, and insurance companies are not considered material inquiries. (b) Required Documentation The Lender must document all undisclosed debt and support for its analysis of the Borrower’s debt. (3) Federal Debt (a) Definition Federal Debt refers to debt owed to the federal government for which regular payments are being made. (b) Standard The Lender must include the debt. The amount of the required payment must be included in the calculation of the Borrower’s total DTI. (c) Required Documentation The Lender must include documentation from the federal agency evidencing the repayment agreement and verification of payments made, if applicable. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1059 Last Revised: 11/26/2025 (4) Alimony, Child Support, and Other Maintenance (a) Definition Alimony, Child Support, and Other Maintenance are court-ordered or otherwise agreed upon payments. (b) Standard For alimony, if the Borrower’s income was not reduced by the amount of the monthly alimony obligation in the Lender’s calculation of the Borrower’s gross income, the Lender must verify and include the monthly obligation in its calculation of the Borrower’s debt. Child support and other maintenance are to be treated as a recurring liability and the Lender must include the monthly obligation in the Borrower’s liabilities and debt. (c) Required Documentation The Lender must obtain the official signed divorce decree, separation agreement, maintenance agreement, or other legal order. The Lender must also obtain the Borrower’s pay stubs covering no less than 28 Days to verify whether the Borrower is subject to any order of garnishment relating to the alimony, child support, or other maintenance. (d) Calculation of Monthly Obligation The Lender must calculate the Borrower’s monthly obligation from the greater of: • the amount shown on the most recent decree or agreement establishing the Borrower’s payment obligation; or • the monthly amount of the garnishment. (5) Deferred Obligations (a) Definition Deferred Obligations (excluding Student Loans) refer to liabilities that have been incurred but where payment is deferred or has not yet commenced, including accounts in forbearance. (b) Standard The Lender must include deferred obligations in the calculation of the Borrower’s liabilities. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1060 Last Revised: 11/26/2025 (c) Required Documentation The Lender must obtain written documentation of the deferral of the liability from the creditor and evidence of the outstanding balance and terms of the deferred liability. The Lender must obtain evidence of the actual monthly payment obligation, if available. (d) Calculation of Monthly Obligation The Lender must use the actual monthly payment to be paid on a deferred liability, whenever available. If the actual monthly payment is not available for installment debt, the Lender must utilize the terms of the debt or 5 percent of the outstanding balance to establish the monthly payment. (6) Student Loans (a) Definition Student Loan refers to liabilities incurred for educational purposes. (b) Standard The Lender must include all Student Loans in the Borrower’s liabilities, regardless of the payment type or status of payments. (c) Required Documentation If the payment used for the monthly obligation is less than the monthly payment reported on the Borrower’s credit report, the Mortgagee must obtain written documentation of the actual monthly payment, the payment status, and evidence of the outstanding balance and terms from the creditor or student loan servicer. The Mortgagee may exclude the payment from the Borrower’s monthly debt calculation where written documentation from the student loan program, creditor, or student loan servicer indicates that the loan balance has been forgiven, canceled, discharged, or otherwise paid in full. (d) Calculation of Monthly Obligation For outstanding Student Loans, regardless of the payment status, the Mortgagee must use: • the payment amount reported on the credit report or the actual documented payment, when the payment amount is above zero; or II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1061 Last Revised: 11/26/2025 • 0.5 percent of the outstanding loan balance, when the monthly payment reported on the Borrower’s credit report is zero. Exception Where a student loan payment has been suspended in accordance with COVID-19 emergency relief, the Mortgagee may use the payment amount reported on the credit report or the actual documented payment prior to suspension, when that payment amount is above $0. (7) Installment Loans (a) Definition Installment Loans (excluding Student Loans) refer to Loans, not secured by real estate, that require the periodic payment of Principal and Interest (P&I). A Loan secured by an interest in a timeshare must be considered an Installment Loan. (b) Standard The Lender must include the monthly payment shown on the credit report to calculate the Borrower’s liabilities. If the credit report does not include a monthly payment for the Installment Loan, the Lender must use the amount of the monthly payment shown in the loan agreement or payment statement to calculate the monthly payment to be included in the Borrower’s debt. (c) Required Documentation If the monthly payment shown on the credit report is utilized to calculate the monthly debts, no further documentation is required. If the credit report does not include a monthly payment for the Installment Loan, or the payment reported on the credit report is greater than the payment on the loan agreement or payment statement, the Lender must use the loan agreement or payment statement to document the amount of the monthly payment. If the credit report, loan agreement or payment statement shows a deferred payment arrangement for an Installment Loan, refer to the Deferred Obligations section. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1062 Last Revised: 11/26/2025 (8) Revolving Charge Accounts (a) Definition Revolving Charge Accounts refer to a credit arrangement that requires the Borrower to make periodic payments but does not require full repayment by a specified point of time. (b) Standard The Lender must verify and include payments on Revolving Charge Accounts in the Borrower’s debts. (c) Required Documentation The Lender must use the credit report to document the terms, balance and payment amount on the account, if available. Where the credit report does not reflect the necessary information on the charge account, the Lender must obtain a copy of the most recent charge account statement or use 5 percent of the outstanding balance to document the monthly payment. (d) Calculation of Monthly Obligation The Lender must include the monthly payment shown on the credit report for the Revolving Charge Account. Where the credit report does not include a monthly payment for the account, the Lender must use 5 percent of the outstanding balance shown on the current account statement. (9) 30-Day Accounts (a) Definition 30-Day Accounts refer to a credit arrangement that requires the Borrower to pay off the outstanding balance on the account every month. (b) Standard The Lender must verify the Borrower paid the outstanding balance in full on every 30-Day Account each month for the past 12 months. 30-Day Accounts that are paid monthly are not included in the Borrower’s debt ratio. If the credit report reflects any late payments in the last 12 months, the Lender must utilize 5 percent of the outstanding balance as the Borrower’s monthly debt to be included in the debt ratio. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1063 Last Revised: 11/26/2025 (c) Required Documentation The Lender must use the credit report to document that the Borrower has paid the balance on the account monthly for the previous 12 months. The Lender must use the credit report to document the balance, and must document sufficient funds are available to pay off the balance after loan closing. (10) Business Debt in Borrower’s Name (a) Definition Business debt in the Borrower’s name refers to liabilities reported on the Borrower’s personal credit report, but payment for the debt is attributed to the Borrower’s business. (b) Standard When business debt is reported on the Borrower’s personal credit report, the debt must be included in the DTI calculation, unless the Lender can document that the debt is being paid by the Borrower’s business. (c) Required Documentation When a self-employed Borrower states debt appearing on their personal credit report is being paid by their business, the Lender must obtain documentation that the debt is paid out of company funds, and the debt was considered in the cash-flow analysis of the Borrower’s business. (11) Non-derogatory Disputed Accounts and Disputed Accounts Not Indicated on the Credit Report (a) Definition Non-Derogatory Disputed Accounts include the following types of accounts: • disputed accounts with zero balance; • disputed accounts with late payments aged 24 months or greater; or • disputed accounts that are current and paid as agreed. (b) Standard If a Borrower is disputing non-derogatory accounts, or is disputing accounts which are not indicated on the credit report as being disputed, the Lender must analyze the effect of the disputed accounts on the Borrower’s ability to repay the Loan. If the dispute results in the Borrower’s monthly debt payments utilized in computing the DTI ratio being less than the amount indicated on the credit report, the Borrower must provide documentation of the lower payments. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1064 Last Revised: 11/26/2025 (12) Contingent Liabilities (a) Definition A Contingent Liability is a liability that may result in the obligation to repay only where a specific event occurs. For example, a contingent liability exists when an individual can be held responsible for the repayment of a debt if another party defaults on the payment. Contingent liabilities may include Co- signer liabilities and liabilities resulting from a loan assumption without release of liability. (b) Standard The Lender must include monthly payments on contingent liabilities in the calculation of the Borrower’s monthly obligations unless the Lender verifies that there is no possibility that the debt holder will pursue debt collection against the Borrower, should the other party default, or the other party has made 12 months of timely payments. (c) Required Documentation (i) Loan Assumptions The Lender must obtain the agreement creating the contingent liability or assumption agreement, and the deed showing transfer of title out of the Borrower’s name. (ii) Cosigned Liabilities The Lender does not need to include cosigned liabilities if the other party to the debt has been making regular on-time payments during the previous 12 months. (iii)Court-Ordered Divorce Decree The Lender must obtain a copy of the divorce decree ordering the spouse to make payments. (d) Calculation of Monthly Obligation The Lender must calculate the monthly payment on the contingent liability based on the terms of the agreement creating the contingent liability. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1065 Last Revised: 11/26/2025 (13) Collection Accounts (a) Definition A Collection Account is a Borrower’s Loan or debt that has been submitted to a collection agency through a creditor. (b) Standard If the credit reports used in the analysis show any outstanding collection accounts, the Lender must: • verify that the debt is paid in full at the time of or prior to settlement using an acceptable source of funds; or • verify that the Borrower has made payment arrangements with the creditor and has successfully made at least one payment under that arrangement. If the monthly payment is unknown, the Lender must use 5 percent of the outstanding balance. Medical collections may be excluded from the payoff or payment requirement above if the Borrower meets the satisfactory credit history requirements for a traditional credit report, and combination references. Accounts are designated as medical when clearly shown on the credit report as related to a medical service provider (e.g., Dr., MD, Hospital) or when the Borrower can provide documentation that the collection is related to a medical expense. (c) Required Documentation The Borrower must provide a letter of explanation, which is supported by documentation, for each outstanding collection account. The explanation and supporting documentation must be consistent with other credit information in the file. The Lender must provide the following documentation: • evidence of payment in full, if paid prior to settlement; • the payoff statement, if paid at settlement; or • the payment arrangement with the creditor, if not paid prior to or at settlement. (14) Private Savings Clubs (a) Definition Private Savings Clubs refer to non-traditional methods of saving by making deposits into a member-managed resource pool. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1066 Last Revised: 11/26/2025 (b) Standard If the Borrower is obligated to continue making ongoing contributions under the pooled savings agreement, this obligation must be counted in the Borrowers’ total debt. (c) Required Documentation The Lender must verify and document the establishment and duration of the Borrower’s membership in the club and the amount of the Borrower’s required contribution to the club. The Lender must also obtain the club’s account ledgers and receipts, and verification from the club treasurer that the club is still active. (15) Obligations Not Considered Debt Obligations not considered debt include: • medical collections; • federal, state, and local taxes, if not delinquent and no payments required; • automatic deductions from savings, when not associated with another type of obligation; • Federal Insurance Contributions Act (FICA) and other retirement contributions, such as 401(k) accounts; • a collateralized loan that secures cash, stock, or bond assets; • utilities; • child care; • commuting costs; • union dues; • insurance, other than property insurance; • open accounts with zero balances; and • voluntary deductions, when not associated with another type of obligation. ii. Income Requirements (A) Definition of Effective Income Effective Income refers to income that may be used to qualify a Borrower for a Loan. (B) General Income Requirements The Lender must document the Borrower’s income and employment history, verify the accuracy of the amounts of income being reported, and determine if the income can be considered as Effective Income in accordance with the requirements listed below. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1067 Last Revised: 11/26/2025 The Lender may only consider income if it is legally derived and, when required, properly reported as income on the Borrower’s Tax Returns. Effective Income must be stable, have been received for the previous two years, be reasonably likely to continue through at least the first three years of the Loan, and meet the specific requirements described below. Negative income must be subtracted from the Borrower’s gross monthly income, and not treated as a recurring monthly liability unless otherwise noted. If FHA requires Tax Returns as required documentation for any type of Effective Income, the Lender must also analyze the Tax Returns in accordance with Appendix 2.0 – Analyzing IRS Forms. If the income documents are not received in English, the Lender must provide a complete and accurate translation for each document. (C) Employment Related Income (1) Definition Employment Income refers to income received as an employee of a business that is reported on IRS Form W-2. (2) Standard The Lender may use employment related income as Effective Income in accordance with the standards provided for each type of employment related income. (3) Required Documentation For all employment related income, the Lender must verify the Borrower’s most recent two years of employment and income, and document it using one of the following methods. (a) Traditional Current Employment Documentation The Lender must obtain the most recent pay stubs covering a minimum of 30 Days (if paid weekly or biweekly, pay stubs must cover a minimum of 28 Days) that show the Borrower’s year-to-date earnings, and one of the following to verify current employment: • a written Verification of Employment (VOE) covering two years; • direct verification by a TPV vendor covering two years, subject to the following requirements: o the Borrower has authorized the Lender to verify income and employment; and II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1068 Last Revised: 11/26/2025 o the date of the data contained in the completed verification conforms with FHA requirements in Maximum Age of Mortgage Documents; or • an electronic verification acceptable to FHA. Reverification of employment must be completed within 10 Days prior to loan Disbursement. Verbal reverification of employment is acceptable. (b) Alternative Current Employment Documentation If using alternative documentation, the Lender must: • obtain copies of the pay stub(s) covering the most recent 30-Day period (if paid weekly or biweekly, pay stubs must cover a minimum of 28 Days); • obtain copies of the original IRS Form W-2 from the previous two years; and • document current employment by telephone, sign and date the verification documentation, and note the name, title, and telephone number of the person with whom employment was verified. Reverification of employment must be completed within 10 Days prior to loan Disbursement. Verbal reverification of employment is acceptable. (c) Past Employment Documentation Direct verification of the Borrower’s employment history for the previous two years is not required if all of the following conditions are met: • the current employer confirms a two-year employment history, or a paystub reflects a hiring date; • only base pay is used to qualify (no overtime or bonuses); and • the Borrower executes IRS Form 4506, Request for Copy of Tax Return, or IRS Form 8821, Tax Information Authorization, for the previous two tax years. If the applicant has not been employed with the same employer for the previous two years and/or not all conditions immediately above can be met, then the Lender must obtain one or a combination of the following for the most recent two years to verify the applicant’s employment history: • IRS Form W-2(s); • verbal or written VOE(s); • electronic verification acceptable to FHA; or • evidence supporting enrollment in school or the military during the most recent two full years. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1069 Last Revised: 11/26/2025 (D) Primary Employment (1) Definition Primary Employment is the Borrower’s principal employment, unless the income falls within a specific category identified below. Primary employment is generally full-time employment and may be either salaried or hourly. (2) Standard The Lender may use primary income as Effective Income. (3) Calculation of Effective Income (a) Salary For employees who are salaried and whose income has been and will likely be consistently earned, the Lender must use the current salary to calculate Effective Income. (b) Hourly For employees who are paid hourly and whose hours do not vary, the Lender must consider the Borrower’s current hourly rate to calculate Effective Income. For employees who are paid hourly and whose hours vary, the Lender must average the income over the previous two years. If the Lender can document an increase in pay rate the Lender may use the most recent 12-month average of hours at the current pay rate. (E) Part-Time/Secondary Employment (1) Definition Part-Time Employment refers to employment that is not the Borrower’s primary employment and is generally performed for less than 40 hours per week. (2) Standard The Lender may use part-time income as Effective Income if the Borrower has worked a part-time job uninterrupted for the past two years and the current position is reasonably likely to continue. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1070 Last Revised: 11/26/2025 (3) Calculation of Effective Income The Lender must average the income over the previous two years. If the Lender can document an increase in pay rate the Lender may use a 12-month average of hours at the current pay rate. (F) Overtime, Bonus, or Tip Income (1) Definition Overtime, Bonus, or Tip Income refers to income that the Borrower receives in addition to the Borrower’s normal salary. (2) Standard The Lender may use Overtime, Bonus, or Tip Income as Effective Income if the Borrower has received this income for the past two years and it is reasonably likely to continue. Periods of Overtime, Bonus, or Tip Income less than two years may be considered Effective Income if the Lender documents that the Overtime, Bonus, or Tip Income has been consistently earned over a period of not less than one year and is reasonably likely to continue. (3) Calculation of Effective Income For employees with Overtime, Bonus, and Tip Income, the Lender must average the income earned over the previous two years to calculate Effective Income. However, if the Overtime, Bonus, or Tip Income from the current year decreases by 20 percent or more from the previous year, the Lender must use the current year’s income. (G) Seasonal Employment (1) Definition Seasonal Employment refers to employment that is not year round, regardless of the number of hours per week the Borrower works on the job. (2) Standard The Lender may consider Seasonal Employment as Effective Income if the Borrower has worked the same line of work for the past two years and is reasonably likely to be rehired for the next season. The Lender may consider unemployment income as Effective Income for those with effective seasonal employment income. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1071 Last Revised: 11/26/2025 (3) Calculation of Effective Income For employees with seasonal income, the Lender must average the income earned over the previous two full years to calculate Effective Income. For seasonal employees with unemployment income, the Lender must document the unemployment income for two full years and there must be reasonable assurance that this income will continue. (H) Employer Housing Subsidy (1) Definition Employer Housing Subsidy refers to employer-provided loan assistance. (2) Standard The Loan may utilize the Employer Housing Subsidy as Effective Income. (3) Required Documentation The Lender must verify and document the existence and the amount of the housing subsidy. (4) Calculation of Effective Income For employees receiving an Employer Housing Subsidy, the Lender may add the Employer Housing Subsidy to the total Effective Income, but may not use it to offset the Loan Payment. (I) Employed by Family-Owned Business (1) Definition Family-Owned Business Income refers to income earned from a business owned by the Borrower’s family, but in which the Borrower is not an owner. (2) Standard The Lender may consider Family-Owned Business Income as Effective Income if the Borrower is not an owner in the family-owned business. (3) Required Documentation The Lender must verify and document that the Borrower is not an owner in the family-owned business by using official business documents showing the ownership percentage. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1072 Last Revised: 11/26/2025 Official business documents include corporate resolutions or other business organizational documents, business Tax Returns or Schedule K-1 (IRS Form 1065), U.S. Return of Partnership Income, or an official letter from a certified public accountant on their business letterhead. In addition to traditional or alternative documentation requirements, the Lender must obtain copies of signed personal Tax Returns or tax transcripts. (4) Calculation of Effective Income (a) Salary For employees who are salaried and whose income has been and will likely continue to be consistently earned, the Lender must use the current salary to calculate Effective Income. (b) Hourly For employees who are paid hourly and whose hours do not vary, the Lender must consider the Borrower’s current hourly rate to calculate Effective Income. For employees who are paid hourly and whose hours vary, the Lender must average the income over the previous two years. If the Lender can document an increase in pay rate the Lender may use the most recent 12-month average of hours at the current pay rate. (J) Commission Income (1) Definition Commission Income refers to income that is paid contingent upon the conducting of a business transaction or the performance of a service. (2) Standard The Lender may use Commission Income as Effective Income if the Borrower earned the income for at least one year in the same or similar line of work and it is reasonably likely to continue. (3) Required Documentation For Commission Income, the Lender must obtain signed Tax Returns, including all applicable schedules, for the last two years. In lieu of signed Tax Returns from the Borrower, the Lender may obtain a signed IRS Form 4506, IRS Form 4506-C, IVES Request for Transcript of Tax Return, or IRS Form 8821 and tax transcripts directly from the IRS. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1073 Last Revised: 11/26/2025 (4) Calculation of Effective Income The Lender must calculate Effective Income for commission by using the lesser of (a) the average net Commission Income earned over the previous two years, or the length of time Commission Income has been earned if less than two years; or (b) the average net Commission Income earned over the previous one year. The Lender must calculate net Commission Income by subtracting the unreimbursed business expenses from the gross Commission Income. (K) Self-Employment Income (1) Definition Self-Employment Income refers to income generated by a business in which the Borrower has a 25 percent or greater ownership interest. There are four basic types of business structures. They include: • sole proprietorships; • corporations; • limited liability or “S” corporations; and • partnerships. (2) Standard (a) Minimum Length of Self-Employment The Lender may consider self-employed borrower income if the Borrower has been self-employed for at least two years. If the Borrower has been self-employed between one and two years, the Lender may only consider the income as Effective Income if the Borrower was previously employed in the same line of work in which the Borrower is self-employed or in a related occupation for at least two years. (b) Stability of Self-Employment Income Income obtained from businesses with annual earnings that are stable or increasing is acceptable. If the income from businesses shows a greater than 20 percent decline in Effective Income over the analysis period, the Lender must document that the business income is now stable. A Lender may consider income as stable after a 20 percent reduction if the Lender can document the reduction in income was the result of an extenuating circumstance, the Borrower can demonstrate the income has been stable or increasing for a minimum of 12 months, and the Borrower qualifies for the Loan utilizing the reduced income. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1074 Last Revised: 11/26/2025 (3) Required Documentation (a) Individual and Business Tax Returns The Lender must obtain complete individual and business Tax Returns for the most recent two years, including all schedules. In lieu of signed individual or business Tax Returns from the Borrower, the Lender may obtain a signed IRS Form 4506, IRS Form 4506-C, or IRS Form 8821 and tax transcripts directly from the IRS. (b) Profit and Loss Statements and Balance Sheets The Lender must obtain a year-to-date Profit and Loss (P&L) statement and balance sheet if more than a calendar quarter has elapsed since the date of the most recent calendar or fiscal year-end Tax Return was filed by the Borrower. A balance sheet is not required for self-employed Borrowers filing Schedule C income. If income used to qualify the Borrower exceeds the two-year average of Tax Returns, an audited P&L or signed quarterly Tax Return must be obtained from the IRS. (c) Business Credit Reports The Lender must obtain a business credit report for all corporations and “S” corporations. (4) Calculation of Effective Income The Lender must analyze the Borrower’s Tax Returns to determine gross Self- Employment Income. Requirements for analyzing self-employment documentation are found in Appendix 2.0 – Analyzing IRS Forms. The Lender must calculate gross Self-Employment Income by using the lesser of: • the average gross Self-Employment Income earned over the previous two years; or • the average gross Self-Employment Income earned over the previous one year. (L) Additional Required Analysis of Stability of Employment Income (1) Frequent Changes in Employment If the Borrower has frequently changed jobs more than three times in the prior 12- month period, or has changed lines of work, the Lender must take additional steps II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1075 Last Revised: 11/26/2025 to verify and document the stability of the Borrower’s Employment Income. The Lender must obtain: • transcripts of training and education demonstrating qualification for a new position; or • employment documentation evidencing continual increases in income and/or benefits. (2) Addressing Gaps in Employment For Borrowers with gaps in employment of six months or more (an extended absence), the Lender may consider the Borrower’s current income as Effective Income if they can verify and document that: • the Borrower has been employed in the current job for at least six months at the time of case number assignment; and • the Borrower has a two-year work history prior to the absence from employment using standard or alternative employment verification. (3) Addressing Temporary Reduction in Income (a) Standard For Borrowers with a temporary reduction of income due to a short-term disability or similar temporary leave, the Lender may consider the Borrower’s current income as Effective Income, if it can verify and document that: • the Borrower intends to return to work; • the Borrower has the right to return to work; and • the Borrower qualifies for the Loan, taking into account any reduction of income due to the circumstance. For Borrowers returning to work before or at the time of the first Loan Payment due date, the Lender may use the Borrower’s pre-leave income. For Borrowers returning to work after the first Loan Payment due date, the Lender may use the Borrower’s current income plus available surplus liquid asset Reserves, above and beyond any required Reserves, as an income supplement, up to the amount of the Borrower’s pre-leave income. The amount of the monthly income supplement is the total amount of surplus Reserves divided by the number of months between the first payment due date and the Borrower’s intended date of return to work. (b) Required Documentation The Lender must provide the following documentation for Borrowers on temporary leave: • a written statement from the Borrower confirming the Borrower’s intent to return to work, and the intended date of return; II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1076 Last Revised: 11/26/2025 • documentation generated by current employer confirming the Borrower’s eligibility to return to current employer after temporary leave; and • documentation of sufficient liquid assets, in accordance with Sources of Funds, used to supplement the Borrower’s income through the intended date of return to work with the current employer. (M) Other Sources of Effective Income (1) Disability Benefits (a) Definition Disability Benefits are benefits received from the Social Security Administration (SSA), Department of Veterans Affairs (VA), or a private disability insurance provider. (b) Required Documentation The Lender must verify and document the Borrower’s receipt of benefits from the SSA, VA, or private disability insurance provider. The Lender must obtain: • a copy of the last Notice of Award letter which states the SSA’s or private disability insurer’s determination on the Borrower’s eligibility for disability benefits; or • equivalent documentation that establishes the award of benefits to the Borrower. If any disability income is due to expire within three years from the date of loan application, the Lender should treat that income as a temporary reduction in income. If the Notice of Award or equivalent document does not have a defined expiration date, the Lender may consider the income effective and reasonably likely to continue. The Lender may not rely upon a pending or current re- evaluation of medical eligibility for benefit payments as evidence that the benefit payment is not reasonably likely to continue. Under no circumstance may the Lender inquire into or request documentation concerning the nature of the disability or the medical condition of the Borrower. (i) Social Security Disability For Social Security disability income, including Supplemental Security Income (SSI), the Lender must obtain one of the following documents: • Tax Returns; II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1077 Last Revised: 11/26/2025 • the most recent bank statement evidencing receipt of income from the SSA; • a Proof of Income Letter, also known as a “Budget Letter” or “Benefits Letter” that evidences income from the SSA; or • a copy of the Borrower’s form SSA-1099/1042S, Social Security Benefit Statement. (ii) Department of Veterans Affairs Disability For VA disability benefits, the Lender must obtain from the Borrower a copy of the veteran’s last Benefits Letter showing the amount of the assistance, and one of the following documents: • Tax Returns; or • the most recent bank statement evidencing receipt of income from the VA. If the Benefits Letter does not have a defined expiration date, the Lender may consider the income effective and reasonably likely to continue for at least three years. (iii)Private Disability For private disability benefits, the Lender must obtain documentation from the private disability insurance provider showing the amount of the assistance and the expiration date of the benefits, if any. (c) Calculation of Effective Income The Lender must use the most recent amount of benefits received to calculate Effective Income. (2) Alimony, Child Support, and/or Maintenance Income (a) Definition Alimony, Child Support, and/or Maintenance Income refers to income received from a former spouse or partner or from a noncustodial parent of the Borrower’s minor dependent. (b) Required Documentation The Lender must obtain a copy of the Borrower’s final divorce decree, legal separation agreement, court order, or voluntary payment agreement with documented receipt. When using a final divorce decree, legal separation agreement or court order, the Lender must obtain evidence of receipt using deposits on bank statements, II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1078 Last Revised: 11/26/2025 canceled checks, or documentation from the child support agency for the most recent three months that supports the amount used in qualifying. The Lender must document the voluntary payment agreement with 12 months of canceled checks, deposit slips, or Tax Returns. The Lender must provide evidence that the claimed income will continue for at least three years. Use the front and pertinent pages of the divorce decree/ settlement agreement and/or court order showing the financial details. (c) Calculation of Effective Income When using a final divorce decree, legal separation agreement or court order, if the Borrower has received consistent Alimony, Child Support, and/or Maintenance Income for the most recent three months, the Lender may use the current payment to calculate Effective Income. When using evidence of voluntary payments, if the Borrower has received consistent Alimony, Child Support, and/or Maintenance Income for the most recent six months, the Lender may use the current payment to calculate Effective Income. If Alimony, Child Support, and/or Maintenance Income has been received for less than two years, the Lender must use the average over the time of receipt. If the alimony, child support, or other maintenance payments have not been consistently received for the most recent six months, the Lender must use the average of the income received over the previous two years to calculate Effective Income. (3) Military Income (a) Definition Military Income refers to income received by military personnel during their period of active, Reserve, or National Guard service, including: • base pay • Basic Allowance for Housing • clothing allowances • flight or hazard pay • Basic Allowance for Subsistence • proficiency pay The Lender may not use education benefits as Effective Income. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1079 Last Revised: 11/26/2025 (b) Required Documentation The Lender must obtain a copy of the Borrower’s military Leave and Earnings Statement (LES). The Lender must verify the Expiration Term of Service date on the LES. If the Expiration Term of Service date is within the first 12 months of the Loan, Military Income may only be considered Effective Income if the Borrower represents their intent to continue military service. (c) Calculation of Effective Income The Lender must use the current amount of Military Income received to calculate Effective Income. (4) Loan Credit Certificates (a) Definition Loan Credit Certificates refer to government loan payment subsidies other than Section 8 Housing Choice Vouchers. (b) Required Documentation The Lender must verify and document that the Governmental Entity subsidizes the Borrower’s Loan Payments either through direct payments or tax rebates. (c) Calculating Effective Income Loan Credit Certificate income that is not used to directly offset the Loan Payment before calculating the qualifying ratios may be included as Effective Income. The Lender must use the current subsidy rate to calculate the Effective Income. (5) Section 8 Housing Choice Vouchers (a) Definition Section 8 Housing Choice Vouchers refer to housing subsidies received under the Housing Choice Voucher homeownership option from a Public Housing Agency (PHA). (b) Required Documentation The Lender must verify and document the Borrower’s receipt of the Housing Choice Voucher homeownership subsidies. The Lender may consider that this income is reasonably likely to continue for three years. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1080 Last Revised: 11/26/2025 (c) Calculation of Effective Income The Lender may only use Section 8 Housing Choice Voucher subsidies as Effective Income if it is not used as an offset to the monthly Loan Payment. The Lender must use the current subsidy rate to calculate the Effective Income. (6) Other Public Assistance (a) Definition Public Assistance refers to income received from government assistance programs. (b) Required Documentation Lenders must verify and document the income received from the government agency and that the income is reasonably likely to continue for three years. (c) Calculation of Effective Income The Lender must use the current rate of Public Assistance received to calculate Effective Income. (7) Automobile Allowance (a) Definition Automobile Allowance refers to the funds provided by the Borrower’s employer for automobile related expenses. (b) Required Documentation The Lender must verify and document the Automobile Allowance received from the employer for the previous two years. The Lender must also obtain IRS Form 2106, Employee Business Expenses, for the previous two years. (c) Calculation of Effective Income The Lender must determine the portion of the allowance that can be considered Effective Income. The Lender must subtract automobile expenses as shown on IRS Form 2106 from the Automobile Allowance before calculating Effective Income based on the current amount of the allowance received. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1081 Last Revised: 11/26/2025 If the Borrower uses the standard per-mile rate in calculating automobile expenses, as opposed to the actual cost method, the portion that the IRS considers depreciation may be added back to income. Expenses that must be treated as recurring debt include: • the Borrower’s monthly car payment; and • any loss resulting from the calculation of the difference between the actual expenditures and the expense account allowance. Automobile Allowance refers to the amount of the Automobile Allowance that exceeds the Borrower’s actual automobile expenditures. (8) Retirement Income Retirement Income refers to income received from Pensions, 401(k) distributions, and Social Security. (a) Social Security Income (i) Definition Social Security Income or Supplemental Security Income (SSI) refers to income received from the SSA other than disability income. (ii) Required Documentation The Lender must verify and document the Borrower’s receipt of income from the SSA and that it is likely to continue for at least a three-year period from the date of case number assignment. For SSI, the Lender must obtain any one of the following documents: • Tax Returns (minimum one year); • the most recent bank statement evidencing receipt of income from the SSA; • a Proof of Income Letter, also known as a “Budget Letter” or “Benefits Letter” that evidences income from the SSA; or • a copy of the Borrower’s form SSA-1099/1042S. In addition to verification of income, the Lender must document the continuance of this income by obtaining from the Borrower (1) a copy of the last Notice of Award letter which states the SSA’s determination on the Borrower’s eligibility for SSA income, or (2) an equivalent document that establishes award benefits to the Borrower (equivalent document). If any income from the SSA is due to expire within three years from the date of case number assignment, that income may not be used for qualifying. If the Notice of Award or equivalent document does not have a defined expiration date, the Lender must consider the income effective and II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1082 Last Revised: 11/26/2025 reasonably likely to continue. The Lender should not request additional documentation from the Borrower to demonstrate continuance of SSA income. If the Notice of Award letter or equivalent document specifies a future start date for receipt of income, this income may only be considered effective on the specified start date. (iii)Calculation of Effective Income The Lender must use the current amount of Social Security Income received to calculate Effective Income. (b) Pension (i) Definition Pension refers to income received from the Borrower’s former employer(s). (ii) Required Documentation The Lender must verify and document the Borrower’s receipt of periodic payments from the Borrower’s Pension and that the payments are likely to continue for at least three years. The Lender must obtain any one of the following documents: • Tax Returns (minimum one year); • the most recent bank statement evidencing receipt of income from the former employer; or • a copy of the Borrower’s pension/retirement letter from the former employer. (iii)Calculation of Effective Income The Lender must use the current amount of Pension income received to calculate Effective Income. (c) Individual Retirement Account and 401(k) (i) Definition Individual Retirement Account (IRA)/401(k) Income refers to income received from an IRA. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1083 Last Revised: 11/26/2025 (ii) Required Documentation The Lender must verify and document the Borrower’s receipt of recurring IRA/401(k) Income and that it is reasonably likely to continue for three years. The Lender must obtain the most recent IRA/401(k) statement and any one of the following documents: • Tax Returns; or • the most recent bank statement evidencing receipt of income. (iii)Calculation of Effective Income For Borrowers with IRA/401(k) Income that has been and will be consistently received, the Lender must use the current amount of IRA Income received to calculate Effective Income. For Borrowers with fluctuating IRA/401(k) Income, the Lender must use the average of the IRA/401(k) Income received over the previous two years to calculate Effective Income. If IRA/401(k) Income has been received for less than two years, the Lender must use the average over the time of receipt. (9) Rental Income (a) Definition Rental Income refers to income received or to be received from the subject Property or other real estate holdings. (b) Rental Income from Other Real Estate Holdings (i) Standard Rental Income from other real estate holdings may be considered Effective Income if the documentation requirements listed below are met. If Rental Income is being derived from the Property being vacated by the Borrower, the Borrower must be relocating to an area more than 100 miles from the Borrower’s current Principal Residence. (ii) Required Documentation The Lender must obtain the Borrower’s last two years’ Tax Returns with Schedule E. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1084 Last Revised: 11/26/2025 (iii)Calculation of Effective Net Rental Income The Lender must calculate the net Rental Income by averaging the amount shown on Schedule E, provided the Borrower continues to own all Properties included on Schedule E. Depreciation, mortgage interest, taxes, insurance, and any HOA dues shown on Schedule E may be added back to the net income or loss. If the Property has been owned for less than two years, the Lender must annualize the Rental Income for the length of time the Property has been owned. For Properties with less than two years of Rental Income history, the Lender must document the date of acquisition by providing the deed, Settlement Statement or similar legal document. Positive net Rental Income must be added to the Borrower’s Effective Income. Negative net Rental Income must be included as a debt/liability. (c) Boarders of the Subject Property (i) Definition Boarder refers to an individual renting space inside the Borrower’s Dwelling Unit. (ii) Standard Rental Income from Boarders is only acceptable if the Borrower has a two-year history of receiving income from Boarders that is shown on the Tax Return and the Borrower is currently receiving boarder income. (iii)Required Documentation The Lender must obtain two years of the Borrower’s Tax Returns evidencing income from Boarders and the current lease. For purchase transactions, the Lender must obtain a copy of the executed written agreement documenting their intent to continue boarding with the Borrower. (iv) Calculation of Effective Income The Lender must calculate the Effective Income by using the lesser of the two-year average or the current lease. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1085 Last Revised: 11/26/2025 (10) Investment Income (a) Definition Investment Income refers to interest and dividend income received from assets such as certificates of deposits, mutual funds, stocks, bonds, money markets, and savings and checking accounts. (b) Required Documentation The Lender must verify and document the Borrower’s Investment Income by obtaining Tax Returns for the previous two years and the most recent account statement. (c) Calculation of Effective Income The Lender must calculate Investment Income by using the lesser of: • the average Investment Income earned over the previous two years; or • the average Investment Income earned over the previous one year. The Lender must subtract any of the assets used for the MCI to purchase the subject Property from the Borrower’s liquid assets prior to calculating any interest or dividend income. (11) Expected Income (a) Definition Expected Income refers to income from cost-of-living adjustments, performance raises, a new job, or retirement that has not been, but will be received within 60 Days of loan closing. (b) Required Documentation The Lender must verify and document the existence and amount of Expected Income with the employer in writing and that it is guaranteed to begin within 60 Days of loan closing. For expected Retirement Income, the Lender must verify the amount and that it is guaranteed to begin within 60 Days of the loan closing. (c) Calculation of Effective Income Income is calculated in accordance with the standards for the type of income being received. The Lender must also verify that the Borrower will have sufficient income or Cash Reserves to support the Loan Payment and any other obligations between loan closing and the beginning of the receipt of the income. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1086 Last Revised: 11/26/2025 (12) Trust Accounts (a) Definition Trust Income refers to income that is regularly distributed to a Borrower from a trust. (b) Required Documentation The Lender must verify and document the existence of the Trust Agreement or other trustee statement. The Lender must also verify and document the frequency, duration, and amount of the distribution by obtaining a bank statement or transaction history from the bank. The Lender must verify that regular payments will continue for at least the first three years of the loan term. (c) Calculation of Effective Income The Lender must use the income based on the terms and conditions in the Trust Agreement or other trustee statement to calculate Effective Income. (13) Annuities or Similar (a) Definition Annuity Income refers to a fixed sum of money periodically paid to the Borrower from a source other than employment. (b) Required Documentation The Lender must verify and document the legal agreement establishing the annuity and guaranteeing the continuation of the annuity for the first three years of the Loan. The Lender must also obtain a bank statement or a transaction history from a bank evidencing receipt of the annuity. (c) Calculation of Effective Income The Lender must use the current rate of the annuity to calculate Effective Income. The Lender must subtract any of the assets used for the MCI to purchase the subject Property from the Borrower’s liquid assets prior to calculating any Annuity Income. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1087 Last Revised: 11/26/2025 (14) Notes Receivable Income (a) Definition Notes Receivable Income refers to income received by the Borrower as payee or holder in due course of a promissory Note or other similar credit instrument. (b) Required Documentation The Lender must verify and document the existence of the Note. The Lender must also verify and document that payments have been consistently received for the previous 12 months by obtaining Tax Returns, deposit slips or canceled checks and that such payments are guaranteed to continue for the first three years of the Loan. (c) Calculation of Effective Income For Borrowers who have been and will be receiving a consistent amount of Notes Receivable Income, the Lender must use the current rate of income to calculate Effective Income. For Borrowers whose Notes Receivable Income fluctuates, the Lender must use the average of the Notes Receivable Income received over the previous year to calculate Effective Income. (15) Nontaxable Income (Grossing Up) (a) Definition Nontaxable Income refers to types of income not subject to federal taxes, which includes, but is not limited to: • some portion of Social Security Income; • some federal government employee Retirement Income; • Railroad Retirement benefits; • some state government Retirement Income; • certain types of disability and public assistance payments; • child support; • Section 8 Housing Choice Vouchers • military allowances; and • other income that is documented as being exempt from federal income taxes. (b) Required Documentation The Lender must document and support the amount of income to be Grossed Up for any Nontaxable Income source and the current tax rate applicable to the Borrower’s income that is being Grossed Up. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1088 Last Revised: 11/26/2025 (c) Calculation of Effective Income The amount of continuing tax savings attributed to Nontaxable Income may be added to the Borrower’s gross income. The percentage of Nontaxable Income that may be added cannot exceed the greater of 15 percent or the appropriate tax rate for the income amount, based on the Borrower’s tax rate for the previous year. If the Borrower was not required to file a Tax Return for the previous tax reporting period, the Lender may Gross Up the Nontaxable Income by 15 percent. The Lender may not make any additional adjustments or allowances based on the number of the Borrower’s dependents. iii. Asset Requirements (A) General Asset Requirements The Lender must verify that the Borrower has sufficient funds to cover the required downpayment and other costs to be paid in cash at closing. The Lender may only consider assets derived from acceptable sources in accordance with the requirements outlined below. Closing costs, prepaid items, and other fees may not be applied toward the Borrower’s minimum downpayment requirement. (B) Earnest Money Deposit The Lender must verify and document the deposit amount and source of funds if the amount of the earnest money deposit exceeds 1 percent of the sales price or is excessive based on the Borrower’s history of accumulating savings, by obtaining: • a copy of the Borrower’s canceled check; • certification from the deposit-holder acknowledging receipt of funds; • a Verification of Deposit (VOD) or bank statement showing that the average balance was sufficient to cover the amount of the earnest money deposit at the time of the deposit; or • direct electronic verification by a TPV vendor, subject to the following requirements: o the Borrower has authorized the Mortgagee to verify assets; o the date of the completed verification conforms with FHA requirements in Maximum Age of Mortgage Documents; and o the information shows that the average balance was sufficient to cover the amount of the earnest money deposit at the time of the deposit. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1089 Last Revised: 11/26/2025 (C) Cash to Close and Reserves The Lender must document all funds that are used for the purpose of qualifying for or closing the Loan, including those to satisfy debt or pay costs outside of closing. (1) Cash to Close The Lender must verify and document that the Borrower has sufficient funds from an acceptable source to facilitate the closing. (a) Determining the Amount Needed for Closing For a purchase transaction, the amount of cash needed by the Borrower to close an FHA-insured Loan is the difference between the total cost to acquire the Property and the Total Loan Amount. For a refinance transaction, the amount of cash needed by the Borrower to close an FHA-insured Loan is the difference between the total payoff requirements of the Loan being refinanced and the Total Loan Amount. (b) Lender Responsibility for Estimating Settlement Requirements In addition to the minimum downpayment, additional Borrower expenses must be included in the total amount of cash that the Borrower must provide at loan settlement. Refer to Fees and Charges below for details on which fees are allowed to be financed and which fees must be collected in cash from the Borrower. (2) Fees and Charges The Lender or sponsored TPO may charge and collect from Borrowers those customary and reasonable closing costs necessary to close the Loan, in compliance with permissible fees and charges described in this section. Fees and charges must not exceed the actual costs. In addition to the minimum downpayment, additional Borrower expenses must be included in the total amount of cash that the Borrower must provide at loan settlement. Fees and charges may be levied to the Borrower in amounts that are reasonable and customary for the area, and where permissible as described below. (a) Financeable Fees and Charges (i) General The fees and charges listed below incurred in connection with a Manufactured Home Loan may be included in the loan amount: II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1090 Last Revised: 11/26/2025 • origination fees (payable to the Lender or sponsored TPO), not to exceed the greater of 2 percent of the Base Loan Amount or $2000, before adding the UFIP. The origination fee includes other Lender costs of doing business. Related expenses are not permitted in addition to the origination fee, such as document preparation, copying, processing, underwriting, and courier fees; • state and local sales taxes; • premiums paid for hazard insurance for the first year of the loan term, including premiums for Flood Insurance where applicable; • credit report costs; • a fee for the services of a qualified third-party closing agent to act on behalf of a Lender in closing a Direct Loan transaction; • appraisal fees in connection with the purchase or refinancing of an Existing Manufactured Home; • fees for determining whether the Property is in an SFHA; • recording fees, recording taxes, filing fees, and documentary stamp taxes; • a fee for inspection of the Property by the Lender or its agent, not to exceed a maximum set by HUD; and • such other items as may be specified by HUD. Their inclusion must not increase the total principal loan balance beyond the Nationwide Loan Limits permitted. The Dealer may advance the funds for the fees and charges and be reimbursed by the Lender from the loan proceeds. Alternatively, a Lender may pay these fees and charges and deduct them from the loan proceeds paid to the Dealer. In either case, there must be full disclosure to the Borrower. (ii) Upfront Insurance Premium Any portion of this UFIP may be financed into the Loan provided that the final loan amount does not exceed the Nationwide Loan Limits. For Loans originated by a Dealer, the Upfront Insurance Premium Rider must be included in the case binder. Any UFIP amounts paid in cash are added to the total cash settlement requirements. (b) Allowable Fees and Charges That May Not be Financed The following fees and charges incurred by a Lender in connection with a Manufactured Home Loan may be collected from a Borrower, but may not be included in the loan amount or otherwise financed or advanced by a Dealer, a manufacturer, or any other party to the loan transaction: II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1091 Last Revised: 11/26/2025 • Discount Points to be paid by the Borrower to the Lender, in compliance with Fees and Charges that May be Collected, but May Not be Financed; • a fee for the services of a qualified Closing Agent to act on behalf of the Lender in closing a Direct Loan transaction. The fee for a Closing Agent includes, and is not in addition to, the document signing fee; • premiums for credit life insurance or credit disability insurance; • payments into an insurance escrow account; • other fees necessary to establish the validity of a lien. This fee category includes preparation of the lien instrument by a third party that is unaffiliated with the Lender. Preparation of the lien instrument by the Lender or its Affiliate is represented by the allowed origination fee; • title insurance costs (applicable only for lot/real estate); • survey costs (applicable only for lot/real estate); • payments into a tax escrow account for the current year (applicable only for lot/real estate); and • such other items as may be specified by HUD. (c) Fee for Third-Party Originator The Lender may pay a reasonable fee to the sponsored TPO, but the fee must not be charged to the Borrower. (3) Seller Payments When described in a standard real estate contract for a Manufactured Home Lot or Combination Loan, the seller may pay costs that are normally paid by a real estate seller, such as preparing and recording the deed that transfers title to the buyer. (4) Other Costs In addition to the minimum downpayment, the following are additional borrower expenses that must not be financed, and must be included in the total amount of cash that the Borrower must provide at loan settlement. (a) Prepaid Items (Including Per Diem Interest) Prepaid items may include annual insurance premiums, property taxes, and per diem interest. (b) Ineligible Contract Options and Accessories Items listed in the sales contract that may not be financed into the Loan must be included in the total cash requirements for the Loan. These items include furniture and small appliances. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1092 Last Revised: 11/26/2025 (c) Repairs and Improvements The cost of repairs and improvements may not be financed into the Loan. (d) Premium Pricing on FHA-Insured Loans Premium Pricing refers to a credit from a Lender for the interest rate chosen. Premium Pricing may be used to pay a Borrower’s actual closing costs and/or prepaid items. Closing costs paid in this manner do not need to be included as part of the interested party limitation. The funds derived from a premium priced Loan: • must be disclosed as required, and in accordance with RESPA where applicable; • must be used to reduce the principal balance if the credit amount exceeds the actual dollar amount for closing costs and prepaid expenses; and • may not be used for payment of debts, collection accounts, escrow shortages or missed Loan Payments, or Judgments. (e) Referral Fees Neither the Lender nor the Borrower may pay a referral fee to any Dealer, home manufacturer, contractor, supplier, real estate broker, loan broker, or any other party in connection with the origination of a Loan insured under Title I. (f) Third Party Origination Fees Lenders may negotiate payment with third parties for their origination of Title I Loans. Lenders engaged with sponsored TPOs must comply with the Sponsor/Sponsored Third-Party Originator Relationship requirements. (g) Interested Party Contributions on the Settlement Statement The Lender may apply interested party credits to the closing costs and prepaid items, including any items Paid Outside Closing (POC). The refund of the Borrower’s POC may be used toward the Borrower’s downpayment, if the Lender documents that the POC was paid with the Borrower’s own funds. The Lender must identify the total interested party credits on the Settlement Statement or similar legal document or in an addendum. The Lender must identify each item paid by Interested Party Contributions. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1093 Last Revised: 11/26/2025 (5) Minimum Verified and Documented Cash Reserves (a) Definition Reserves refer to the sum of the Borrower’s verified and documented liquid assets minus the total funds the Borrower is required to pay at closing. (b) Standard Borrowers must have a minimum of two months of Cash Reserves following loan settlement from their own funds when the Borrower’s credit does not meet Sufficiency of Non-traditional Credit References. (6) Sources of Funds The Lender must verify liquid assets for cash to close and Reserves as indicated. (a) Checking and Savings Accounts (i) Definition Checking and Savings Accounts refer to funds from Borrower-held accounts in a financial institution that allows for withdrawals and deposits. (ii) Standard The Lender must verify and document the existence of and amounts in the Borrower’s checking and savings accounts. For recently opened accounts and recent individual deposits of more than 1 percent of the loan amount, the Lender must obtain documentation of the deposits. The Lender must also verify that no debts were incurred to obtain part, or all, of the downpayment. (iii)Required Documentation Documentation must show that at least one Borrower is an owner of the account. Traditional Documentation The Lender must obtain a written VOD and the Borrower’s most recent statement for each account. Alternative Documentation If a VOD is not obtained, a statement provided by the financial institution showing the previous month’s ending balance for the most recent month is II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1094 Last Revised: 11/26/2025 required. If the previous month’s balance is not shown, the Lender must obtain statement(s) for the most recent two months. (b) Cash on Hand (i) Definition Cash on Hand refers to cash held by the Borrower outside of a financial institution. (ii) Standard The Lender must verify that the Borrower’s Cash on Hand is deposited in a financial institution or held by the Lender or retailer. (iii)Required Documentation The Lender must verify and document the Borrower’s Cash on Hand by obtaining an explanation from the Borrower describing how the funds were accumulated and the amount of time it took to accumulate the funds. The Lender must also determine the reasonableness of the accumulation based on the time period during which the funds were saved and the Borrower’s: • income stream; • spending habits; • documented expenses; and • history of using financial institutions. (c) Retirement Accounts (i) Definition Retirement Accounts refer to assets accumulated by the Borrower for the purpose of retirement. (ii) Standard The Lender may include up to 60 percent of the value of assets, less any existing Loans, from the Borrower’s retirement accounts, such as IRAs, thrift savings plans, 401(k) plans, and Keogh accounts, unless the Borrower provides conclusive evidence that a higher percentage may be withdrawn after subtracting any federal income tax and withdrawal penalties. The portion of the assets not used to meet closing requirements, after adjusting for taxes and penalties, may be counted as Reserves. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1095 Last Revised: 11/26/2025 (iii)Required Documentation The Lender must obtain the most recent monthly or quarterly statement to verify and document the existence and amounts in the Borrower’s retirement accounts, the Borrower’s eligibility for withdrawals, and the terms and conditions for withdrawal from any retirement account. If any portion of the asset is required for funds to close, evidence of liquidation is required. (d) Stocks and Bonds (i) Definition Stocks and Bonds are investment assets accumulated by the Borrower. (ii) Standard The Lender must determine the value of the stocks and bonds from the most recent monthly or quarterly statement. If the stocks and bonds are not held in a brokerage account, the Lender must determine the current value of the stocks and bonds through third- party verification. Government-issued savings bonds are valued at the original purchase price, unless the Lender verifies and documents that the bonds are eligible for redemption when cash to close is calculated. (iii)Required Documentation The Lender must verify and document the existence of the Borrower’s stocks and bonds by obtaining brokerage statement(s) for each account for the most recent two months. Evidence of liquidation is not required. For stocks and bonds not held in a brokerage account the Lender must obtain a copy of each stock or bond certificate. (e) Private Savings Clubs (i) Definition Private Savings Club refers to a non-traditional method of saving by making deposits into a member-managed resource pool. (ii) Standard The Lender may consider Private Savings Club funds that are distributed to and received by the Borrower as an acceptable source of funds. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1096 Last Revised: 11/26/2025 The Lender must verify and document the establishment and duration of the club, and the Borrower’s receipt of funds from the club. The Lender must also determine that the received funds were reasonably accumulated, and not borrowed. (iii)Required Documentation The Lender must obtain the club’s account ledgers and receipts, and verification from the club treasurer that the club is still active. (f) Gifts (Personal and Equity) (i) Definition Gifts refer to contributions of cash or equity with no expectation of repayment. (ii) Standards for Gifts Acceptable Sources of Gifts Funds Gifts may be provided by: • the Borrower’s Family Member; • the Borrower’s employer or labor union; • a close friend with a clearly defined and documented interest in the Borrower; • a charitable organization; or • a governmental agency or public entity that has a program providing homeownership assistance to: o low- or moderate-income families; or o first-time homebuyers. Any Gift of the Borrower’s downpayment must also comply with the additional requirements set forth in Sources of Funds for the Borrower’s downpayment. The gift donor may not be a person or entity with an interest in the sale of the Property, such as the seller, Dealer, manufacturer, real estate broker, or any person or any other affiliated entity. Gifts from these sources are not permitted on Title I Manufactured Home Loans. Reserves Gift funds in excess of funds needed to close may not be considered as Cash Reserves. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1097 Last Revised: 11/26/2025 Donor’s Source of Funds Cash on Hand is not an acceptable source of donor gift funds. Required Documentation The Lender must obtain a gift letter signed and dated by the donor and Borrower that includes the following: • the donor’s name, address, and telephone number; • the donor’s relationship to the Borrower; • the dollar amount of the Gift; and • a statement that no repayment is required. Documenting the Transfer of Gifts The Lender must verify and document the transfer of Gifts from the donor to the Borrower in accordance with the requirements below: • For Gifts that will be verified prior to settlement, the Lender must obtain one of the following: o the donor’s bank statement showing the withdrawal and evidence of the deposit into the Borrower’s account; o a copy of the donor’s canceled check and evidence of deposit into the Borrower’s account; o a copy of the donor’s withdrawal receipt and evidence of deposit into the Borrower’s account; or o evidence of the electronic transfer of funds from the donor’s account to the Borrower’s account. • For Gifts that will be verified at settlement, the Lender must obtain one of the following evidencing payment to the settlement agent: o evidence of electronic transfer of funds from the donor’s account; o bank certified check; o cashier’s check; or o other official bank check. Who May Provide Gifts of Land Only Family Members may provide equity credit as a Gift on Property being sold to other Family Members. For Gifts of land, the Lender must obtain: • proof of ownership by the donor; and • evidence of the transfer of title to the Borrower. Regardless of when gift funds are made available to a Borrower or settlement agent, the Lender must be able to make a reasonable II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1098 Last Revised: 11/26/2025 determination that the gift funds were not provided by an unacceptable source. (iii)Standards for Gifts of Equity Who May Provide Gifts of Equity Only Family Members may provide equity credit as a Gift on Property being sold to other Family Members. Required Documentation The Lender must obtain a gift letter signed and dated by the donor and Borrower that includes the following: • the donor’s name, address, and telephone number; • the donor’s relationship to the Borrower; • the dollar amount of the Gift; and • a statement that no repayment is required. (g) Interested Party Contributions (i) Definitions Interested Parties refer to sellers, real estate agents, builders, developers, lenders, Third-Party Originators (TPO), or other parties with an interest in the transaction. (ii) Standard Interested Parties are not permitted to contribute toward the Borrower’s origination fees, other closing costs and Discount Points. Interested Parties are also not permitted to contribute toward: • payment for permanent and temporary interest rate buydowns, and other payment supplements; • payments of loan interest for fixed rate Loans; • Loan Payment protection insurance; and • payment of the UFMIP. Payment of real estate agent commissions or fees, typically paid by the seller under local or state law, or local custom, is not considered an Interested Party Contribution. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1099 Last Revised: 11/26/2025 (h) Inducements to Purchase (i) Definition Inducements to Purchase refer to certain expenses paid by the seller and/or another Interested Party on behalf of the Borrower and result in a dollar- for-dollar reduction to the Adjusted Value of the Property before applying the appropriate LTV percentage. These inducements include, but are not limited to: • decorating allowances; • repair allowances; • excess rent credit; • moving costs; • paying off consumer debt; • Personal Property; • sales commission on the Borrower’s present residence; and • below market rent, except for Borrowers who meet the Identity-of- Interest exception for Family Members. (ii) Personal Property Replacement of existing Personal Property items listed below are not considered an inducement to purchase, provided the replacement is made prior to settlement and no cash allowance is given to the Borrower. The inclusion of the items below in the sales agreement is also not considered an inducement to purchase if inclusion of the item is customary for the area: • range • refrigerator • dishwasher • washer • dryer • carpeting (iii)Sales Commission An inducement to purchase exists when the seller and/or Interested Party agrees to pay any portion of the Borrower’s sales commission on the sale of the Borrower’s present residence. An inducement to purchase also exists when a Borrower is not paying a Real Estate Commission on the Sale of their present residence, the same real estate broker or agent is involved in both transactions, and the seller is paying a Real Estate Commission on the Sale of the Property being purchased by the Borrower that exceeds what is typical for the area. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1100 Last Revised: 11/26/2025 (iv) Rent Below Fair Market Rent may be an inducement to purchase when the sales agreement reveals that the Borrower has been living in the Property rent-free or has an agreement to occupy the Property at a rental amount greater than 10 percent below fair market rent. When such an inducement exists, the amount of inducement is the difference between the rent charged and the fair market rent pro-rated over the period between execution of the sales contract and execution of the Title I Loan. Rent below FMV is not considered an inducement to purchase when a builder fails to deliver a Property at an agreed-upon time, and permits the Borrower to occupy an existing or other unit for less than market rent until construction is complete. (i) Downpayment Assistance Programs FHA does not “approve” downpayment assistance programs administered by charitable organizations, such as nonprofits. FHA also does not allow nonprofit entities to provide Gifts to pay off: • Installment Loans • credit cards • collections • Judgments • liens • similar debts The Lender must ensure that a Gift provided by a charitable organization meets the appropriate FHA requirements, and that the transfer of funds is properly documented. (i) Gifts from Charitable Organizations that Lose or Give Up Their Federal Tax-Exempt Status If a charitable organization makes a Gift that is to be used for all, or part, of a Borrower’s downpayment, and the organization providing the Gift loses or gives up its federal tax-exempt status, FHA will recognize the Gift as an acceptable source of the downpayment, provided that: • the Gift is made to the Borrower; • the Gift is properly documented; and • the Borrower has entered into a contract of sale (including any amendments to purchase price) on or before the date the IRS officially announces that the charitable organization’s tax-exempt status is terminated. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1101 Last Revised: 11/26/2025 (ii) Lender Responsibility for Ensuring that Downpayment Assistance Provider is a Charitable Organization The Lender is responsible for ensuring that an entity providing downpayment assistance is a charitable organization as defined by Section 501(a) of the Internal Revenue Code (IRC) of 1986 pursuant to Section 501(c) (3) of the IRC. One resource for this information is the IRS Exempt Organization Select Check, which contains a list of organizations eligible to receive tax- deductible charitable contributions. (j) Secondary Financing Secondary Financing is any financing other than the first Loan that creates a lien against the Property. Any such financing that does create a lien against the Property is not considered a Gift or a grant even if it does not require regular payments or has other features forgiving the debt. Secondary Financing is not permitted under the Manufactured Home Loan program. (k) Loans Loan means a Disbursement of proceeds (funds) or an advance of credit to or for the benefit of a Borrower who promises to repay the principal amount of such Disbursement or advance, plus interest, if any, at a stated annual rate over time, with the Borrower’s obligation evidenced by the Borrower’s execution of a Note. Loan also means a purchase by a Lender of a Note evidencing such obligation, or a refinancing of an existing obligation with or without an additional Disbursement of proceeds or advance of credit. (i) Collateralized Loans Definition A Collateralized Loan is a loan that is fully secured by a financial asset of the Borrower, such as deposit accounts, certificates of deposit, investment accounts, or Real Property. These assets may include stocks, bonds, and real estate other than the Property being purchased. Standard The minimum investment and funds to close may be derived from a collateralized loan, provided that the funds are secured by other property II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1102 Last Revised: 11/26/2025 that the applicant owns. The security must not be against the home being purchased. Loans secured against deposited funds, where repayment may be obtained through extinguishing the asset, do not require consideration of repayment for qualifying purposes. The Lender must reduce the amount of the corresponding asset by the amount of the collateralized loan. Who May Provide Collateralized Loans Only an independent third party may provide the borrowed funds for collateralized loans. The seller, Lender, or other Interested Party may not provide such funds. Unacceptable borrowed funds include: • unsecured signature loans; • cash advances on credit cards; • borrowing against household goods and furniture; and • other similar unsecured financing. Any loan of the Borrower’s MCI must also comply with the additional requirements set forth in Sources of Funds for the Borrower’s downpayment. Required Documentation The Lender must verify and document the existence of the Borrower’s assets used to collateralize the Loan, the promissory Note securing the asset, and the loan proceeds. (ii) Retirement Account Loans Definition A Retirement Account Loan is a loan that is secured by the Borrower’s retirement assets. Standard The Lender must reduce the amount of the retirement account asset by the amount of the outstanding balance of the retirement account loan. Required Documentation The Lender must verify and document the existence and amounts in the Borrower’s retirement accounts and the outstanding loan balance. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1103 Last Revised: 11/26/2025 (iii)Disaster Relief Loans Definition Disaster Relief Loans refer to loans from a Governmental Entity that provide immediate housing assistance to individuals displaced due to a natural disaster. Standard Secured or unsecured disaster relief loans administered by the Small Business Administration (SBA) may be used. If the SBA loan will be secured by the Property being purchased, it must be clearly subordinate to the FHA-insured Loan, and meet the requirements for Secondary Financing. Any loan of the Borrower’s MCI must also comply with the additional requirements set forth in Sources of Funds for the Borrower’s MCI. Any monthly payment arising from this type of loan must be included in the qualifying ratios. Required Documentation The Lender must verify and document the promissory Note. (l) Grants (i) Disaster Relief Grants Definition Disaster Relief Grants refer to grants from a Governmental Entity that provide immediate housing assistance to individuals displaced due to a natural disaster. Disaster relief grants may be used for the Borrower’s downpayment. Required Documentation The Lender must verify and document the Borrower’s receipt of the grant and terms of use. Any grant of the Borrower’s MCI must also comply with the additional requirements set forth in Sources of Funds for the Borrower’s downpayment. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1104 Last Revised: 11/26/2025 (ii) Federal Home Loan Bank Homeownership Set-Aside Grant Program Standard The Federal Home Loan Bank’s (FHLB) Affordable Housing Program (AHP) Homeownership Set-Aside Grant Program is an acceptable source of downpayment assistance and may be used in conjunction with FHA- insured financing. Secondary financing that creates a lien against the Property is not considered a Gift or grant even if it does not require regular payments or has other features forgiving the debt. Any AHP Set-Aside funds used for the Borrower’s MCI must also comply with the additional requirements set forth in Sources of Funds for the Borrower’s MCI. Required Documentation The Lender must verify and document the Borrower’s receipt of the grant and terms of use. The Lender must also verify and document that the Retention Agreement required by the FHLB is recorded against the Property and results in a Deed Restriction, and not a second lien. The Retention Agreement must: • provide that the FHLB will have ultimate control over the AHP grant funds if the funds are repaid by the Borrower; • include language terminating the legal restrictions on conveyance if title to the Property is transferred by foreclosure or DIL, or assigned to the Secretary of HUD; and • comply with all other FHA regulations. (m)Employer Assistance (i) Definition Employer Assistance refers to benefits provided by an employer to relocate the Borrower or assist in the Borrower’s housing purchase, including closing costs, prepaid items, insurance premiums, or any portion of the minimum cash investment. Employer Assistance does not include benefits provided by an employer through secondary financing. A salary advance cannot be considered as assets to close. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1105 Last Revised: 11/26/2025 (ii) Standard Relocation Guaranteed Purchase The Lender may allow the net proceeds (relocation guaranteed purchase price minus the outstanding liens and expenses) to be used as cash to close. Employer Assistance Plans The amount received under Employer Assistance Plans may be used as cash to close. (iii)Required Documentation Relocation Guaranteed Purchase If the Borrower is being transferred by their company under a guaranteed sales plan, the Lender must obtain an executed buyout agreement signed by all parties, and a receipt of funds indicating that the employer or relocation service takes responsibility for the outstanding loan debt. The Lender must verify and document the agreement guaranteeing employer purchase of the Borrower’s previous residence and the net proceeds from sale. Employer Assistance Plans The Lender must verify and document the Borrower’s receipt of assistance. If the employer provides this benefit after settlement, the Lender must verify and document that the Borrower has sufficient cash for closing. (n) Sale of Personal Property (i) Definition Personal Property refers to tangible property, other than Real Property, such as cars, recreational vehicles, stamps, coins, or other collectibles. (ii) Standard The Lender must use the lesser of the estimated value or actual sales price when determining the sufficiency of assets to close. (iii)Required Documentation Borrowers may sell Personal Property to obtain cash for closing. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1106 Last Revised: 11/26/2025 The Lender must obtain a satisfactory estimate of the value of the item, a copy of the bill of sale, evidence of receipt, and deposit of proceeds. A value estimate may take the form of a published value estimate issued by organizations such as automobile dealers, philatelic or numismatic associations, or a separate written appraisal by a qualified Appraiser with no financial interest in the loan transaction. (o) Trade-In of Manufactured Home (i) Definition Trade-In of Manufactured Home refers to the Borrower’s sale or trade-in of one Manufactured Home that is not considered real estate to a Dealer or an independent third party. (ii) Standard The net proceeds from the Trade-In of a Manufactured Home may be used as the Borrower’s source of funds for the purchase of another Manufactured Home. Trade-ins cannot result in cash back to the Borrower from the Dealer or independent third party. (iii)Required Documentation The Lender must verify and document the sales contract or other agreement evidencing a transaction and the value of the trade-in or sale. The Lender must obtain documentation to support the Trade Equity. (p) Sale of Real Property (i) Definition The Sale of Real Property refers to the sale of Property currently owned by the Borrower. (ii) Standard Net proceeds from the Sale of Real Property may be used as an acceptable source of funds. (iii)Required Documentation The Lender must verify and document the actual sale and the Net Sale Proceeds by obtaining a fully executed Settlement Statement or similar legal document. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1107 Last Revised: 11/26/2025 The Lender must also verify and document that it was an Arm’s Length Transaction, and that the Borrower is entitled to the Net Sale Proceeds. (q) Real Estate Commission from Sale of a Subject Property (i) Definition Real Estate Commission from Sale of Subject Property refers to the Borrower’s portion of a real estate commission earned from the sale of the Property being purchased. (ii) Standard Lenders may consider Real Estate Commissions from the Sale of the Subject Property as part of the Borrower’s acceptable source of funds if the Borrower is a licensed real estate agent. A Family Member entitled to the commission may also provide it as a Gift, in compliance with standard gift requirements. (iii)Required Documentation The Lender must verify and document that the Borrower, or Family Member giving the commission as a Gift, is a licensed real estate agent, and is entitled to a Real Estate Commission from the Sale of the Property being purchased. (r) Rent Credits (i) Definition Rent Credits refer to the amount of the rental payment that exceeds the Appraiser’s estimate of fair market rent. (ii) Standard The Lender may use the cumulative amount of rental payments that exceeds the Appraiser’s estimate of fair market rent toward the MCI. (iii)Required Documentation The Lender must obtain the rent with option to purchase agreement, the Appraiser’s estimate of market rent, and evidence of receipt of payments. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1108 Last Revised: 11/26/2025 iv. Final Underwriting Decision The Lender is ultimately responsible for making an underwriting decision on behalf of their Lender in compliance with HUD requirements. The Lender must complete the interview with the Borrower before making a final underwriting decision on the Loan. (A) Duty of Care/Due Diligence The underwriter must exercise the same level of care that would be used in underwriting a Loan entirely dependent on the Property as security. Compliance with FHA requirements is deemed to be the minimum standard of due diligence required in originating and underwriting an FHA-insured Loan. (B) Specific Underwriter Responsibilities The underwriter must review each Loan as a separate and unique transaction, recognizing that there may be multiple factors that demonstrate a Borrower’s ability and willingness to make timely Loan Payments, in order to make an underwriting decision on behalf of their Direct Endorsement (DE) Lender in compliance with HUD requirements. The underwriter must evaluate the totality of the Borrower’s circumstances and the impact of layering risks on the probability that a Borrower will be able to repay the loan obligation according to the terms of the Loan. As the responsible party, the underwriter must: • review appraisal reports, compliance inspections, and credit analyses to ensure reasonable conclusions, sound reports, and compliance with HUD requirements regardless of who prepared the documentation; • determine the acceptability of the appraisal, the inspections, the Borrower’s capacity to repay the Loan, and the overall acceptability of the Loan for FHA insurance; • identify any inconsistencies in information obtained by the Lender in the course of reviewing the Borrower’s application regardless of the materiality of such information to the origination and underwriting of a Loan; and • resolve all inconsistencies identified before approving the Borrower’s application, and document the inconsistencies and the resolutions of the inconsistencies in the file. The underwriter must identify and report any misrepresentations, violations of HUD requirements, and fraud to the appropriate party within their organization. (C) Underwriting of Credit and Debt The underwriter must determine the creditworthiness of the Borrower, which includes analyzing the Borrower’s overall pattern of credit behavior and the credit report. See Credit Requirements above. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1109 Last Revised: 11/26/2025 The underwriter must ensure that there are no other unpaid obligations incurred in connection with the loan transaction or the purchase of the Property. (D) Underwriting of Income The underwriter must review the income of a Borrower and verify that it has been supported with the proper documentation. See Income Requirements above. (E) Underwriting of Assets The underwriter must review the assets of a Borrower required to close the Loan and verify that they have been supported with the proper documentation. See Asset Requirements above. (F) Verifying Insurance Premium and Loan Amount The underwriter must review the insurance premium and loan amount and verify that they have been supported with the proper documentation. See Underwriting the Borrower. (G) Calculating Qualifying Ratios For all transactions, except non-credit qualifying Streamline Refinances, the underwriter must calculate the Borrower’s Total Housing Payment to Effective Income Ratio and the Total Fixed Payment to Effective Income ratio, or DTI, and verify compliance with the ratio requirements listed in the Approvable Qualifying Ratios chart. The Lender must exclude any obligation that is wholly secured by existing assets of the Borrower from the calculation of the Borrower’s debts, provided the assets securing the debt are also not considered in qualifying the Borrower. (H) Calculating Maximum Monthly Housing Expenses The total Loan Payment includes: • P&I; • real estate taxes; • hazard insurance; • Flood Insurance, as applicable; • insurance premium; • Homeowners’ Association (HOA) Fees or manufactured home community or park association fees or expenses; • lot rent; • special assessments; • payments for any acceptable secondary financing; and • any other escrow payments. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1110 Last Revised: 11/26/2025 (I) Estimating Real Estate Taxes The Lender must use accurate estimates of monthly tax escrows (as applicable) when calculating the total Loan Payment. Tax estimates must be based on lots that will be owned by the Borrower. (J) Temporary Interest Rate Buydowns Temporary interest rate buydowns are not permitted. Interest rate buydowns must be permanent for the duration of the loan term. (K) Calculating Total Fixed Payment The total fixed payment includes: • the total Loan Payment; and • monthly obligations on all debts and liabilities. The maximum Total Housing Payment to Effective Income Ratio and Total Fixed Payments to Effective Income (DTI) ratios applicable to manually underwritten Loans are summarized in the matrix below. The qualifying ratios for Borrowers with no credit score are computed using income only from Borrowers occupying the Property and obligated on the Loan. Non- occupant co-Borrower income may not be included. Approvable Qualifying Ratios Credit Sufficiency Requirements Maximum Qualifying Ratios (%) Acceptable Compensating Factors Credit Sufficiency Requirements Not Met 31/43 Borrowers that do not meet credit sufficiency requirements: • must not exceed 31/43 ratios; and • must have documented verification of two months Cash Reserves. Exception: Loan financing an Energy Efficient Home (EEH): • may have stretch ratios of 33/45; and • must have documented verification of two months Cash Reserves. Other compensating factors are permitted in addition to these requirements. Requirements for Sufficient Credit is Met 31/43 No compensating factors are required. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1111 Last Revised: 11/26/2025 Approvable Qualifying Ratios Credit Sufficiency Requirements Maximum Qualifying Ratios (%) Acceptable Compensating Factors Requirements for Sufficient Credit is Met 33/45 At least one compensating factor is required. (L) Required Documentation for Acceptable Compensating Factors If a DTI ratio exceeds HUD’s maximum allowable amount by 2 percent or less, a compensating factor may be considered when determining eligibility. The following describes the compensating factors and required documentation that may be used to justify approval of Loans with the credit sufficiency and qualifying ratios described above. (1) Energy Efficient Homes (a) Definition A Manufactured Home is classified as an EEH when certified as ENERGY STAR to the Quality Assurance Provider and an ENERGY STAR label is affixed inside the home, commonly near the HUD Data Plate or inside the electric panel cover of the home. (b) Standard When the Loan finances a Manufactured Home that is ENERGY STAR qualified, the Borrower’s qualifying ratios may be “stretched” two percentage points higher than the standard limits. The qualifying ratio limit for a Manufactured Home that complies with EEH standards is 33 percent for the housing-to-income ratio and 45 percent for the Debt-to-Income ratio. (c) Required Documentation The case binder must contain evidence that the home was manufactured to ENERGY STAR standards, such as: • For new homes, the Manufacturer’s Invoice must indicate that the unit is ENERGY STAR qualified. • For existing homes, the case binder must contain a photo of the ENERGY STAR label. (2) Verified and Documented Cash Reserves Verified and documented Cash Reserves may be cited as a compensating factor when the Reserves are equal to or exceed three total monthly Loan Payments. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1112 Last Revised: 11/26/2025 Reserves are calculated as the Borrower’s total assets less: • the total funds required to close the Loan; • Gifts; and • borrowed funds. (3) Equivalent or Reduced Housing Payment If the proposed monthly Loan Payment is less than or equal to the current total monthly housing payment for the previous 12 months, then that may be used as a compensating factor. The file must document a 12 month housing payment history with no late payments. The Current Total Monthly Housing Payment refers to the Borrower’s current total Loan Payment or current total monthly rent obligation. (4) Significant Additional Income Not Reflected in Effective Income Additional income or benefits not included in effective gross income that directly impacts the applicant’s ability to meet financial obligations include: • bonuses, part-time or Seasonal Employment that is not reflected in Effective Income; • employee benefits (company car, clothing allowance); and • public benefits (nutritional assistance/food stamps/seasonal unemployment). The following can also be cited as a compensating factor subject to the following requirements: • the Lender must verify and document that the Borrower has received this income, and it will likely continue; and • the income, if it were included in gross Effective Income, is sufficient to reduce the qualifying ratios to not more than 35/47. (5) Potential for Increased Future Earnings A Borrower that has potential for increased future earnings may be cited as a compensating factor with documented justification, such as job training or education in the applicant’s profession. (6) Secondary Wage Earner Potential (Employment Relocation) Potential income for a secondary wage earner may be cited as a compensating factor under the following condition: the secondary wage earner has relocated with a primary wage earner, who is purchasing a home as a result of a recent employment relocation. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1113 Last Revised: 11/26/2025 The case binder must document all of the following: • evidence that the primary wage earner relocated for a new job; • at least a 12 month work history for the secondary wage earner, prior to relocation; and • the prospects of available employment. (7) Residual Income Residual income may be cited as a compensating factor provided it can be documented and it is at least equal to the applicable amounts for household size and geographic region found in the Table of Residual Incomes By Region in the Department of Veterans Affairs (VA) Lenders Handbook - VA Pamphlet 26-7, Chapter 4.9 b and e. (a) Calculating Residual Income Residual income is calculated as total Effective Income of all occupying Borrowers less: • state income taxes; • federal income taxes; • municipal or other income taxes; • retirement or Social Security; • proposed total Loan Payment; • estimated maintenance and utilities; • job related expenses (e.g., child care); and • the amount of the Gross Up of any Nontaxable Income. If available, Lenders must use Tax Returns and where applicable, state tax returns, from the most recent tax year to document state and local taxes, retirement, Social Security and Medicare. If tax returns are not available, Lenders may rely upon current pay stubs. For estimated maintenance and utilities, Lenders must multiply the Gross Living Area (GLA) of the Property by the maintenance and utility factor found in the Lenders Handbook - VA Pamphlet 26-7. (b) Using Residual Income as a Compensating Factor To use residual income as a compensating factor, the Lender must count all members of the household of the occupying Borrower without regard to the nature of their relationship and without regard to whether they are joining on title or the Note to determine “family size.” II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT E. Title I Insured Programs 4. Manufactured Home Loan Program Handbook 4000.1 1114 Last Revised: 11/26/2025 (c) Exception The Lender may omit any individuals from “family size” who are fully supported by a source of verified income that is not included in the Effective Income in the loan analysis. These individuals must voluntarily provide sufficient documentation to verify their income to qualify for this exception. From the table provided in Lenders Handbook - VA Pamphlet 26-7, select the applicable loan amount, region and household size. If residual income equals or exceeds the corresponding amount on the table, it may be cited as a compensating factor. v. Borrower Approval or Denial (A) Re-underwriting Before closing a Title I Manufactured Home Loan, the Lender must re-underwrite a Loan when any data element of the Loan changes and/or new Borrower information becomes available. (B) Required Documentation of Final Underwriting Review Decision The underwriter must provide an underwriting worksheet to document their final underwriting decision. (C) HUD Employee Loans If the Loan involves a HUD employee, the Lender must condition the Loan on the approval of the Loan by HUD. The Lender must submit the underwritten loan application package to the Director of the FOC for final underwriting approval. (D) Responsibilities upon Denial When a Loan is denied, the Lender must comply with all requirements of the FCRA, and the ECOA, as implemented by Regulation B (12 CFR Part 1002). If the Loan has been reported in FHAC, Lenders must cancel any assigned case numbers that will not be closed as an FHA Loan.

Source: FHA Single Family Housing Policy Handbook 4000.1, Part II — d. Underwriting the Borrower (05/08/2025) · source URL · snapshot 8c03836f77f317e1