Guidelines

APEX (Alt Doc) MONTAGE (Full Doc) SPECTRUM (DSCR) GUIDELINES

Effective 01-01-2026 | V1.0

Table of Contents

Table of Contents .................................................................................................................................... i

1.0 OVERVIEW

1.1 Broker Responsibilities

2.0 DOCUMENTATION TYPES

2.1 Full Documentation Program (MONTAGE)

2.2 Alternative Documentation Program (APEX)

2.3 Debt Service Coverage Ratio (SPECTRUM)

3.0 ELIGIBILITY

3.1 Eligible Borrowers

3.2 Ineligible Borrowers

3.3 Borrower Types

3.4 Eligible Occupancy

3.5 Eligible Transactions

3.5.1 Purchase Money

3.5.2 Rate/Term Refinance

3.5.3 Cash-out Refinance Transactions

3.5.4 Delayed Financing

3.5.5 Continuity of Obligation

3.5.6 Listing Seasoning

3.5.7 Texas Home Equity Loans 50(a)(6)

3.6 Ineligible Transactions

4.0 CREDIT

4.1 Analysis of Credit

4.2 General Requirements

4.2.1 Credit Scores

4.2.2 Tradeline Requirements

4.2.3 Credit Reporting Data Included in DTI Ratios

4.2.4 Credit Reporting for Business Debt

4.2.5 Housing History Greater Than 12 Months

4.2.6 No Housing History or Less Than 12 Months Verified

4.2.7 Past Due Balloon Payment on Existing Mortgage

4.2.8 Other Credit and Credit Reporting Requirements

4.2.9 Mortgage Forbearance, Deferral, Modification

4.2.10 Significant Adverse Credit

5.0 FULL DOCUMENTATION

5.1 Overview

5.2 Documentation Requirements

5.3 Unscheduled Income

5.4 Declining/Increasing Income

5.5 Determining Income for Self-Employed Borrowers

5.6 Requirements for Corporate Structures

6.0 Alt Doc

6.1 Bank Statements

6.1.1 Personal Bank Statements

6.1.2 Business Bank Statements

6.2 Rental Income- Alt Doc

6.3 P&L Only

6.4 Written Verification of Employment (WVOE)

6.5 1099 Reduced Doc Income

6.6 Asset Allowance

7.0 Short Term Rental Income

7.1 Full Doc:

7.2 Alt Doc and DSCR:

8.0 Departing Residence

9.0 Monthly Debt

9.1 Borrower ATR Certification

9.2 Subordinate Financing

9.3 Adjustable Rate and Interest Only Qualifying

10.0 Assets

10.1 Allowed Assets

10.2 Verification of Assets

10.3 Seasoning:

10.4 Gift Funds:

10.5 Reserves

10.6 Seller Concessions

11.0 Debt Service Coverage Ratio (Spectrum)

11.1 Experienced Investors

11.2 First Time Investors

11.3 Occupancy and Documentation Requirements

11.4 Housing History Greater than 12 months

11.5 No Housing History or Less Than 12 Months Verified

11.6 Debt Service Coverage Calculation

11.7 Foreign National (DSCR Program Only)

12.0 Collateral

12.1 Eligible Property Types

12.2 Ineligible Property Types

12.3 ADU (Accessory Dwelling Unit)

12.4 Declining Markets

12.5 Flips

12.6 Transferred Appraisals

12.7 Condo Project Review Warrantable

12.8 Condo Project Review Non-Warrantable

13.0 Appraisal

13.1 Valuation Overview

13.2 Appraiser Independence

13.3 Appraisal Review Requirements

14.0 Title Insurance

14.1 Requirements

14.2 Title Policy Requirements

14.3 Title Vesting

15.0 Hazard Insurance Requirements

16.0 Specialty Programs

16.1 Super Jumbo 60
16.2 Assets Only 60
16.3 Assisted Living Facilities 62
16.4 Multiple ADU 62

17.0 Miscellaneous

17.1 Fraud Reviews

17.2 OFAC and Watchlist Search Parties

17.3 Closing Documentation

17.4 Age of Documents

17.5 Property Taxes

17.6 Escrows

17.7 Maximum Financed Properties

17.8 Maximum Exposure

17.9 Disaster Policy

18.0 Exceptions

19.0 Appendix

Borrower Ability to Repay Attestation

Business Purpose and Occupancy Affidavit

Condo Questionnaire (Limited Review)

Condo Questionnaire (Full Review)

Personal Guaranty Agreement

Exhibit A

Prepayment Penalty Reference Guide

20.0 Version History

1.0 OVERVIEW

FundLoans guidelines are structured to assist Brokers by making common-sense lending decisions on loans to their borrowers who may have limited access to credit. These borrower's situations generally require us to consider alternative forms of documenting income and/or compensating factors which can offset repayment risk indicated by a recent credit event or elevated debt-to-income ratio.

Loans eligible for sale to a Government Sponsored Entity ("FNMA" or "FHLMC") are not eligible.

If a topic is not addressed within these guidelines, FundLoans will align with Fannie Mae (FNMA) Manual Underwriting guidelines.

These Guidelines provide detailed requirements for eligibility but FundLoans is not obligated to fund a loan even if it satisfies these requirements. Compliance with these guides does not create a commitment by FundLoans to fund, as FundLoans has sole discretion to fund any loan.

State and Federal specific regulatory requirements supersede all underwriting guidelines herein.

1.1 Broker Responsibilities

FundLoans Credit Guidelines must be interpreted and applied in a manner that complies with the laws and regulations established by the Consumer Financial Protection Bureau (CFPB), any other applicable laws and regulations, and underwriting practices common to the industry.

FundLoans has a no-tolerance policy as it relates to fraud. Brokers/Originators should have and continue to follow their own established fraud and identity procedures for every loan to prevent and detect fraud (including, but not limited to, Social Security Number Verification, verbal verifications of employment, processing of tax transcripts, USPS, OFAC, AML and any other Exclusionary Lists). Loans containing fraudulent documentation or information will not be funded by FundLoans and will trigger clawback provisions as applicable in the Broker Agreement. Any determination of Broker/Originator involvement and/or knowledge of misrepresentation will result in the dissolution of any relationship. The appropriate agencies will be notified as required under applicable law.

2.0 DOCUMENTATION TYPES

2.1 Full Documentation Program (MONTAGE)

2.2 Alternative Documentation Program (APEX)

Alternative Documentation may be used to determine qualifying income both alone and in conjunction with other documentation options. When more than one documentation option is utilized for qualifying, i.e., bank statements together with 1099, the documentation option yielding the highest borrower income will be used to determine pricing. When Alt Doc programs are used in conjunction with full doc income qualification, Alt Doc pricing and qualification will be used. Please see the applicable Apex Matrix for restrictions.

The following programs are considered Alt Doc from a credit and pricing standpoint:

2.3 Debt Service Coverage Ratio (SPECTRUM)

3.0 ELIGIBILITY

3.1 Eligible Borrowers

All borrowers on loans funded by FundLoans will be individual, natural persons.

Documentation Requirements

Visa:

EAD Card:

The EAD Card must be unexpired at closing (date the Note is signed).

Non-permanent resident borrowers must document legal residency status by meeting the documentation requirements below. Borrowers who cannot meet the requirements below are not eligible.

VISA ELIGIBILITY MATRIX
Visa Category Visa Type Brief Description Documentation Required EAD Code
Trade Treaty Work Visa E-1 Treaty trader - employee, spouse, and/or child Visa and EAD C02
E-2 Treaty investor - employee, spouse, and/or child Visa
E-3 Specialty occupation
E-1, E-2, or E-3D Spouse of E-1, E-2 or E-3 Visa and EAD A17/C12
Temporary Employment Visa H-1B Specialty Occupation Visa
H-1B1 Specialty Occupation
H-1B2 Specialty Occupation - U.S. Department of Defense
H-1B3 Fashion model of distinguished merit and ability
H-1C Registered nurse - U.S. Department of Labor
H-4 Spouse or child of H-1B Visa and EAD C26
Media Work Visa I Foreign media outlet (press, radio, film, or other) Visa
Non immigrant Visa for Fiancé(e) K-1 Fiancé(e) - purpose of marriage Visa and EAD A06
Nonimmigrant Visa for Spouse K-3 Spouse of a U.S. citizen Visa and EAD A09
Temporary Employment Visa L-1A Intracompany transfer - managerial or executive Visa
L-1B Intracompany transfer - specialized knowledge
L-2 Spouse or child of L-1A or L-1B Visa and EAD A18
Temporary Employment Visa O-1A/B Extraordinary ability in analysis, business, education, entertainment Visa
O-2 Assistant to O-1
P-1A Internationally recognized athlete
NAFTA Professional Workers Visa TN Professional under NAFTA Visa
Spouse / Child of Permanent Resident Alien V-1 Spouse of a Legal Permanent Resident (LPR) who is the principal beneficiary of a family-based petition (Form I-130) which was filed prior to December 21, 2000,and has beenpendingfor at least threeyears. Visa and EAD A15
V-2 Child of a Lawful Permanent Resident (LPR) who is the principal beneficiary of a family-based visa petition (Form I-130) that was filed prior to December 21, 2000, and has been pending for at least threeyears.
V-3 The derivative child of a V-1 or V-2.

3.2 Ineligible Borrowers

Note: Business entities of any kind cannot be the borrower but may hold title

3.3 Borrower Types

Borrower Types Description
Primary The occupying borrower who earns the greater of the qualifying income.
Co-Borrower Any borrower (other than the Primary) who is jointly responsible for repayment of the loan with the Primary Borrower. All Co-Borrowers must be on title.
First-Time Homebuyer (FTHB) An individual who: (i) is purchasing the security property (ii) will reside (owner-occupied) in the security property as a principal residence; and (iii) had no ownership interest (sole or joint) in a residential property during the three-year period preceding the date of the purchase of the security property
Non-Borrowing Occupant Any individual residing in the security property who is not considered during the loan qualifying process. A Non-Borrowing Occupant on title will be required to execute applicable documents to create a valid lien.
Non-Occupant Co- borrower ("Co- signer") An individual who: (i) May or may not have any ownership interest in the property as indicated on title. (ii) Signs the mortgage or deed of trust note. (iii) Has joint liability for the note along with the Primary Borrower. (iv) Does not have a vested interest in the property sales transaction, i.e. is not a seller of the property, is not an existing tenant, is not the builder or the real estate broker. (Will NOT require occupant ratios) Allowed as follows: • Primary Residence Only • Cash-Out not permitted • Blended ratios allowed up to 80% max LTV/CLTV • Occupying borrower's DTI cannot exceed 60% DTI when LTV >80% **Note (a): **A family relationship is not required provided the transaction is considered an arm's length transaction. **Note (b): **The continuity of obligation requirement on a refinance transaction is considered met if one of the current owners is on the loan application.

3.4 Eligible Occupancy

Borrower Types Description
Primary Residence A Primary Residence is a property that the borrower will occupy or currently occupies as their primary residence. If there are multiple borrowers only one needs to occupy the property and take title. FTHBs are allowed. (See FNMA Guides for Primary Residence)
Second Home A Second Home is a property that is located a reasonable distance from the borrower's primary residence and is occupied by the borrower for some portion of the year. The property must be suitable for year-round occupancy and cannot be used as a rental property. FTHBs are allowed. Second homes are limited to the following: ● One Dwelling Unit ● Condominium ● PUD ● Townhouse
Investment Property An Investment Property is defined as a 1 to 4-unit residential property that the borrower (nor any relative of the borrower) does not occupy. "Business Purpose" is any loan that is not primarily for personal, family, or household use. Non-owner occupied properties are assumed business purpose unless any funds are used for personal, family, or household use by the borrower. Requirements: ● First Time Investors are allowed. See below guidelines for requirements. ● A signed Business Purpose & Occupancy Affidavit is required on all investment property transactions that are closing as Business Purpose. The broker/originator must provide a personal use occupancy certification if loan is not closing as a business purpose transaction. ● All investment properties that are vested in the name of an entity (e.g. LLC, Partnership, S-Corp) require a signed Business Purpose and Occupancy Affidavit

3.5 Eligible Transactions

3.5.1 Purchase Money

Purchase money mortgages are mortgage transactions in which the loan proceeds are used to purchase the subject property. This is evidenced by a sales or purchase agreement that has been executed by the applicant (buyer who is a party to the transaction) and the seller. Assignment of the purchase contract to the applicant is not allowed unless (i) the buyer assignor is the spouse or registered domestic partner of the borrower; or (ii) applicant is the original named buyer and assigning to an allowed entity that is 100% controlled by the applicant(s).

Additional requirements:

First-time Home Buyers (FTHB)- FTHB are allowed- must be primary residence or second home or meet the First Time Investor guidelines for the program.

Non-Arm's Length Transaction (NAL)- A Non-Arm's Length transaction is a transaction between family members, co-workers, friends, or anyone associated with the transaction such as the listing agent, mortgage lender or broker (Interested Party). For Sale By Owner (FSBO) must be arm's length (not

applicable to documented family sales). The following are required if the purchase of the subject property is a non-arm's length transaction:

Letter of Explanation regarding the relationship between the parties may be required.

Gift of Equity is eligible: a Gift of Equity occurs when equity in a property is gifted from the owner to the borrower when the borrower and owner are related and is permitted:

The acceptable donor and minimum borrower contribution requirements of Fannie Mae Seller Guide Section B3-4.3-04 apply to gifts of equity. When a gift of equity is provided by an acceptable donor, the donor is not considered to be an interested party and the gift of equity is not subject to interested party contribution requirements.

Examples of Non-Arm's Length Transactions:

The following transactions not allowed:

The following are allowed:

3.5.2 Rate/Term Refinance

A Rate/Term Refinance transaction is when the new loan amount is limited to the payoff of the present first lien mortgage, any seasoned non-first lien mortgages, closing costs and prepays, or buying out a co-owner/partner pursuant to an agreement.

A seasoned non-first lien mortgage is a purchase money mortgage or a closed end or HELOC mortgage that has been in place for more than 12 months (with no draws greater than $2,000 in the past 12 months). Withdrawal activity must be documented with a transaction history from the HELOC account. The above classification may differ from the way loans are classified under Texas law, please refer to Fannie Mae B5-4.1-02

Refinance of a previous cash-out loan seasoned < 1 year will be considered a cash-out refinance. The property's current appraised value may be used to determine LTV at any time after initial acquisition provided that cashout is limited to rate/term standards and the loan amount (inclusive of closing costs and prepaids) does not exceed the original acquisition cost.

At least one borrower on the new loan must be an owner (on title) of the subject property at the time of loan application and must meet applicable seasoning requirements. Exceptions are allowed in the following cases:

Cash-out Limit - Cash-out to the borrower limited to the greater of $5,000 or 2% of the loan amount. Use current appraised value for LTV calculation purposes.

The new Rate/Term Refinance Loan amount is defined and limited by the following:

Rate / Term Refinance Transaction

Current first lien mortgage payoff amount

3.5.3 Cash-out Refinance Transactions

Proceeds from the transaction used for any refinance that does not meet the definition of a rate/term transaction. A mortgage secured by a property currently owned free and clear is considered cash-out. The payoff of delinquent real estate taxes (60-days or more past due) is considered cash-out. All excess proceeds eligible for distribution to the borrower are net of customary fees, prepayment fees and other related closing costs. Additional requirements are:

Cash-Out Seasoning is defined as the difference between the note date of the existing loan to the note date of the new loan. Below seasoning requirements are acceptable for cash-out transactions:

Cash back as it relates to the maximum limits is defined as "cash in hand" to the borrower. Net proceeds from a cash-out transaction may be used to meet reserve requirements. See program matrices for maximum cash-out limits. A letter explaining the use of loan proceeds is required when the cash-out exceeds $250,000.

3.5.4 Delayed Financing

Borrowers who have purchased a subject property within the last six months preceding the disbursement date of the new mortgage are eligible to receive cash back with the loan being priced and treated as a cash-out refinance if the following requirements are met (See FNMA Guides for additional information):

Settlement Statement for the refinance transaction must reflect the above

Any payments on the balance remaining from the original loan must be included in the DSCR/DTI ratio calculation for the refinance transaction.

Funds received as gifts and used to purchase the property may not be reimbursed with proceeds of the new mortgage loan.

Source of funds must be documented. Examples of proper documentation include bank statements, personal loan documents, 401(k) withdrawal statements, or evidence of a HELOC on another property.

3.5.5 Continuity of Obligation

At least one of the applicant(s) (or member(s) of a vested entity) on the existing mortgage must also be an applicant on the new refinance transaction secured by the subject property. The following requirements must be met:

Continuity is not required if at least one applicant on the proposed refinance inherited or was legally awarded the subject property by a court in the case of a divorce, separation, or dissolution of a domestic partnership.

3.5.6 Listing Seasoning

Properties previously listed for sale must be seasoned at least 6 months from the listing contract expiration date to the application date.

On case-by-case basis, shorter seasoning may be allowed and not subject to the above requirements if:

3.5.7 Texas Home Equity Loans 50(a)(6)

Allowable based on FNMA Guides B5-4.1 must adhere to Article XVI, Section 50(a)(6) statue.

NOTE: Primary Residences only. Interest Only is prohibited on a Texas Section 50(a)(6) Equity Cash Out loan. Loans must be fully amortized.

3.6 Ineligible Transactions

4.0 CREDIT

4.1 Analysis of Credit

Credit must meet FundLoans eligibility requirements described in this section. For any scenario or guideline not addressed or contained herein, FNMA credit guidelines will apply.

4.2 General Requirements

Underwriting must document that the borrower does not qualify for a GSE loan or has chosen a non-GSE loan program.

4.2.1 Credit Scores

The middle score when 3 agency scores are provided and the lower score when only 2 agency scores

are provided of the primary income earner is the representative credit score of the loan. If Borrowers are 50/50 owners of a business and income is equal, the higher Representative Credit score is used for qualifying.

Married (or registered domestic partners) borrowers need only one borrower to meet the FICO and tradeline requirements.

Unmarried joint applicants who meet at least two of the three below criteria may be treated as spouses for determining compliance with the trade line requirements:

Methodology of which FICO score to use is as follows:
# of Borrowers # of Scores per Borrower Methodology
1 Borrower 2 or 3 •
Lower of 2 or the Middle of 3 FICO Scores
2 or more-
Borrowers
Non DSCR		 2 or 3 •
Primary Wage Earner's Lower of 2 or Middle of 3 FICO
Scores
•
If borrowers are 50/50 owners of a business and
income is equal, the higher representative score is
used for qualification
•
If 2 of the 3 credit scores are identical, the identical
score isyour mid score
Assets Only 2 or 3 •
Assets owned 50/50: use the lowest borrower's
Lower of 2 or Middle of 3 FICO Scores
•
75% of assets owned one borrower (including funds
to close and all post-closing asset requirements) use
that borrower's Lower of 2 or Middle of 3 FICO Scores
DSCR
Loans		 2 or 3 •
The Representative Credit Score for a borrower is the
middle score of 3 FICO scores, or the lower score of 2
FICO scores when only 2 FICO scores are provided.
•
When more than one borrower qualifies for the loan,
the qualifying credit score is the lower Representative
Credit Score of all borrowers

4.2.2 Tradeline Requirements

All borrowers should have an established credit history that is partially based on tradeline history. All borrowers must meet the minimum tradeline requirements. Authorized User accounts cannot be used to meet minimum tradeline requirements.

If a Borrower has 3 credit scores reporting, then the minimum tradeline requirement for that borrower has been met, unless the only tradelines present are Unacceptable Tradelines listed below.

Standard Tradelines - Each borrower must have:

OR

Valid tradelines have the below characteristics:

Limited Tradelines: If Standard Tradelines requirements are not met but have 2 credit scores reporting the following restrictions apply:

Unacceptable Tradelines:

4.2.3 Credit Reporting Data Included in DTI Ratios

For all programs that require a DTI for qualification purposes, the following credit data must be included in the ratios:

the DTI. Supporting documentation such as a credit supplement or verification from the creditor is required. Funds used for the payoff must be sourced if account balance is paid prior to closing.

Open-end accounts do not have to be included in the monthly debt payment if the borrower has sufficient funds to pay off the outstanding account balance. The funds must be verified in addition to any funds required for closing and reserves.

If the borrower paid off the account balance prior to closing or at closing, proof of payoff may be provided in lieu of verifying funds to cover the account balance.

4.2.4 Credit Reporting for Business Debt

Business debt is typically a financial obligation of a business. However, business owners can sometimes be personally responsible for that debt as well. If business debt is reflected on a personal credit report and the business debt is less than 6 months old, then the debt must be included in the DTI. If the business debt is greater than or equal to 6-months old, the debt may be omitted from the DTI if the borrower provides documentation that the borrower's business is making the payments on the debt. Acceptable documentation includes the most recent 6 months of cancelled checks or bank statements showing the debt as paid from the business account. Undisclosed business debt found in MERS or Fraud Report may also require documenting payment history or be included in DTI at underwriter's discretion.

4.2.5 Housing History Greater Than 12 Months

Acceptable housing history requires evidence one borrower (not a non-occupant co-borrower) has made a primary housing payment for at least the last 12 months (24 months required for WVOE loans) whereby that payment history meets the requirements of the Program Credit Matrix, to include all personally liable mortgage loans on all real estate owned (except DSCR which only requires history for the subject property (refinance) and primary) All mortgage history reported on the credit report must meet the payment history requirements per the applicable matrix.

A combination of mortgage and rent verification may be provided to complete a 12-month housing payment history. When the borrower moved from rental to ownership a gap month is acceptable from the end of the rental period to the first payment mortgage due date, if applicable.

Fully documented, recent, consecutive 12 or 24-month mortgage history, as required by program guidelines, on a personally held investment property meets the requirements herein, if the borrower cannot document the required history on a primary residence.

A Verification of Mortgage (VOM) must be obtained for all outstanding mortgages that are not reported to the borrower's credit report, including private mortgages. If the credit report does not reflect pay history, following are acceptable methods of verification:

For mortgage payments (any of the following)

For rental payments

NOTE: Any properties owned free and clear by a borrower is considered as a 0x30 housing history for grading purposes for each month the property has been owned free and clear (e.g. a property owned free and clear for the last 12 months satisfies the housing history requirement). Documentation verifying free and clear is required such as property detail report, data verify report, title search, etc.

4.2.6 No Housing History or Less Than 12 Months Verified

This section applies to any borrower who has not made at least 12 months of housing payments on any property

(or as a tenant in a rental situation) in the most recent 12 months.

NOTE: If loan application/1003 shows a property rented or owned in the prior 12 months, a fully executed VOR/VOM must be obtained for these months reflecting paid as agreed. *Excluding address history that is documented as rent-free.

Once the above documentation requirements have been met the loan must adhere to the following restrictions:

4.2.7 Past Due Balloon Payment on Existing Mortgage

Balloon mortgages with an expired maturity date can be considered as follows:

4.2.8 Other Credit and Credit Reporting Requirements

Collection and charge-off account balances remaining after the exclusions listed above may remain open when one of the following is met:

A combination of the two options above is allowed. A portion of the unpaid collection balance can be included in the DTI while the remainder is covered by excess reserves. Collections and charge-offs that cannot be factored into DTI or reserves must be paid off.

4.2.9 Mortgage Forbearance, Deferral, Modification

date and having 0x30x12 Housing History is allowed. Examples include:

4.2.10 Significant Adverse Credit

The waiting period commences on the completion, discharge, dismissal date, or settlement date (as applicable) of the derogatory credit event and ends on the note date of the new loan unless otherwise noted.

Multiple adverse credit and/or housing events in the last seven (7) years are not allowed.

Bankruptcy (all chapters), Short Sale, Deed-in-Lieu, Notice of Default, Notice of Trustee Sale and/or Foreclosure must be seasoned for the period listed on the applicable program matrix and subject to any additional CLTV/LTV maximums as listed on the matrix.

5.0 FULL DOCUMENTATION

5.1 Overview

FundLoans will accept Full Documentation (Full Doc) for the following Wage Earner types. All Wage Earner loans require an executed 4506-C or 8821 and income will be calculated in accordance with the most recent FNMA Guides. 2 years of employment history must be verified for all documentation types.

5.2 Documentation Requirements

The following table summarizes the required documentation for our Full Doc Wage Income Earner types:

Wage / Income Earner Type Wage / Income Earner Type Wage / Income Earner Type Wage / Income Earner Type
Required 24 Month Full Doc 12 Month Full Doc 24 Month Full Doc 12 Month Full Doc
Documentation Wage Earner Wage Earner Self-employed Self- employed
Paystubs Current paystub dated within 30 days of
application date that includes all year-to-date
earnings		 N/A N/A
W-2 Forms Most recent 2 years Most recent 1 year N/A N/A
VVOE 10 business days prior to note date 20 business days prior to note date
Third Party
Verification of
Business		 N/A N/A Verification Business has been established
for a minimum of 2 years:
• from a third party, such as a CPA,
regulatory agency, or the applicable
licensing bureau, if possible; or
• by verifying a phone listing and address
for the borrower's business using a
telephone book, the internet, or directory
assistance.
The lender must document the source of the
information obtained and the name and title
of the lender's employee who completed
the verification.		 Verification Business has been established
for a minimum of 2 years:
• from a third party, such as a CPA,
regulatory agency, or the applicable
licensing bureau, if possible; or
• by verifying a phone listing and address
for the borrower's business using a
telephone book, the internet, or directory
assistance.
The lender must document the source of the
information obtained and the name and title
of the lender's employee who completed
the verification.
Personal Tax
Returns		 Most recent 2 years
1040's including all
schedules when
qualifying other
income sources in
addition to wage
income where tax
returns are required
(e.g. rental income,
self-employment)		 Most recent 1 year
1040's including all
schedules when
qualifying other
income sources in
addition to wage
income where tax
returns are required
(e.g. rental income,
self-employment)		 Most recent 2 years
Form 1040 including
all schedules and
YTD P&L.		 Most recent 1 year
Form 1040 including
all schedules and
YTD P&L.
Partnership Returns N/A N/A Most recent 2 years
Form 1065
(Partnership) or
Form 1120S (S-Corp)
including Schedule
K-1's and YTD P&L.		 Most recent 1 year
Form 1065
(Partnership) or
Form 1120S (S-Corp)
including Schedule
K-1's and YTD P&L.
K-1s
(if applicable)		 N/A N/A Most recent 2 years
PLUS YTD P&L		 Most recent 1 year
PLUS YTD P&L
Corporate Tax
Returns		 N/A N/A Most recent 2 years
Form 1120 and YTD
P&L		 Most recent 1 year
Form 1120 and YTD
P&L

5.3 Unscheduled Income

Borrowers can receive income from many different sources and different pay structures. The following details describe methods used in determining a borrower's average monthly income based on these income source variations. Applicants with unscheduled income are eligible borrowers according to the following guidelines and requirements:

Bonus, Commission and Overtime Income

Seasonal Employment/Unemployment

Rental Income- Full Doc- All properties except departing residence

Properties defined as a one-unit property with an accessory unit (ADU) may use rental income from the accessory unit subject to the following:

NOTE: In all rental income instances (including an ADU), qualifying rental income will be gross rents x 75% to account for vacancy losses and ongoing maintenance expenses.

Housing and Automobile Allowance:

RSU Income – Restricted Stock:

- 1) Current stock price, or
- 2) The two-year stock price average

Interest and Dividend Income:

Capital Gains/Losses, Royalties, Notes Receivable, Trust, Lottery Winnings, Employee Contracts, Alimony and Child Support:

Non-Taxable Income:

NOTE: At certain levels Non-Taxable Income could be subject to taxation and some income types may contain both taxable and non-taxable income. Federal Tax Returns may be required to accurately determine the non-taxable portion. Refer to FNMA Guides.

5.4 Declining/Increasing Income

If income is declining year-over-year, then the lowest income year will be used to qualify the borrower. A letter of explanation detailing the reason for the decline and the possibility of further income deterioration is required.

If a borrower's income has grown at a pace greater than 20% per annum, then an average of the last two years' income will be used. The lender is responsible for ensuring that the borrower has the capacity to repay the loan and meets ATR requirements.

5.5 Determining Income for Self-Employed Borrowers

Business Verification

General Requirements for Self Employed Income (Full Doc)

Cash Flow Analysis (Full Doc)

5.6 Requirements for Corporate Structures

The legal structure of a business determines how income/loss is reported to the IRS, how its taxes are paid and how it accumulates capital. Legal structures also determine the extent of each owner's liability. The five principal business structures are:

Sole Proprietorship:

A Partnership (General or Limited):

Is when two or more owners are joined by contract to conduct business and will share profits and losses according to the partnership agreement. Income taxes are paid by the individuals since the partnership itself is not required to pay taxes. Partnership documentation required:

Limited Liability Company (LLC):

An LLC is a business structure that blends the tax efficiencies of a partnership and the limited liability of a corporation. LLCs report profit or loss on IRS Form 1065 and each member-owner's share of that profit/loss is reported on Schedule K-1. An LLC pays no tax on its income. Each member-owner uses the information on the K-1 to report their share of the LLC's net profit or loss on their individual IRS Form 1040 (regardless of whether the member-owner receives a cash distribution from the LLC). LLC documentation required:

S Corporation:

An S Corp is a legal entity that has a limited number of stockholders that elect not to be taxed as a regular corporation. Business gains and losses are divided among and passed through to stockholders. The stockholders are taxed at their individual tax rate for their proportionate share of ordinary income, capital gains and other taxable items. An S Corp provides many of the benefits of partnership taxation and at the same time provides the owners with limited liability protection.

The ordinary income from an S Corporation's business is reported on IRS Form 1120S with each shareholder's share of income reported on Form 1120S's Schedule K-1. Cash distributions from an S- Corp to a borrower will be reviewed and considered when evaluating the cash flow of the S-Corp. S- Corp documentation required:

C Corporation:

A C-Corp is a legal tax paying entity with its own rights privileges and liabilities separate from those of its owners. A C-Corp can sue, be sued, hold, convey, or receive property, enter contracts under its own name and doesn't dissolve when ownership changes. C-Corp documentation required:

Each tax return must be signed by the borrower unless one of the following signature alternatives has been obtained:

NOTE: YTD financials from other entities (whose income is not needed to qualify) are not required if the previous two years' tax returns show positive income.

6.0 Alt Doc

For all loan programs and/or income options, any decline or large fluctuation in income that is documented in the file requires an explanation from the borrower regarding the decline/fluctuation.

NOTE: Form 4506-C or 8821 is not required for any Alt Doc program unless there is a co-borrower (not married to borrower) who is qualifying with full income documentation.

6.1 Bank Statements

The following are required for both the Personal Bank Statement option and the Business Bank Statement option:

6.1.1 Personal Bank Statements

The following documentation is required:

The following applies when analyzing personal bank statements:

personal account can be qualified. Total deposits are not reduced by an expense factor.

Income Qualification: Qualifying income is 100% of the total business-related deposits divided by 12 or 24 months (or net business-related deposits reduced by applicable expense ratio when account is commingled).

1003 Initial Disclosed Income: Income disclosed on the initial signed application should be reviewed. If income calculated is significantly different than income stated on the 1003, the underwriter should request an explanation from the borrower to determine acceptability of the income. The letter of explanation can come from the Loan Officer or Underwriter.

6.1.2 Business Bank Statements

The following documentation is required:

The following apply when analyzing business bank statements:

Income Qualification:

Variable Expense Ratio (Method 1): Total deposits multiplied by the borrower's ownership percentage in the

business and then reduced by a fixed expense factor as follows:

Service Business: 0 employees: 20% Ratio 1-5 employees: 40% Ratio 6+ employees: 50% Ratio Product Business: 50% Ratio (regardless of # of employees)

If there is a discrepancy or ambiguity, underwriters may, at their discretion, default to 50% Ratio.

OR

CPA Expense Ratio (Method 2): Total deposits multiplied by the borrower's ownership percentage in the business and then reduced by an expense factor as provided by a Certified Public Accountant, Enrolled Agent, or CTEC in a properly drafted letter (PTIN tax preparers not allowed). Divide by 12 or 24 months. The CPA/Licensed Tax Preparer must attest that they have audited the business financial statements or reviewed working papers provided by the borrower. Bank statements will be analyzed to assure that recurring withdrawals are appropriately accounted for in the expense ratio.

OR

P&L (Method 3): 12 or 24 Month CPA (or Enrolled Agent or CTEC if license can be verified) P&L plus 12 or 24 months business bank statements. Total allowable deposits from the business bank statements must be no more or no less than 10% of the average monthly gross revenues reflected on the P & L's. (NOTE: in the event that the 10% tolerance is not met for a given month, additional consecutive banks statements can be added to the analysis until the tolerance is met)

Deposits Less Withdrawals (Method 4): Underwriting may review the business' deposits less withdrawals to determine an applicant's income. Sum the net income over the 12-month period provided, multiply by the applicant's pro-rata ownership percentage, and divide by 12. Transfers to an applicant's personal account do not need to be considered a deduction for calculation purposes. The resulting income should be reasonable for the applicant's line of work.

1003 Initial Disclosed Income: Income disclosed on the initial signed application should be reviewed. If income calculated is significantly different than income stated on the 1003, the underwriter should request an explanation from the borrower to determine acceptability of the income. The letter of explanation can come from the Loan Officer or Underwriter.

6.2 Rental Income- Alt Doc

The rental income analysis described in this section can be utilized on the following loan programs:

In all instances when utilizing rental income, qualifying rental income will be gross rents x 75% to account for vacancy losses and ongoing maintenance expenses. For non-subject investment properties rental income from investment properties not associated with the borrower's business may do so by providing a current active lease together with proof of rent payments received for the most recent 2 months. If there is a newly executed lease for new tenants, provide proof of receipt for deposit and 1[st] month's rent.

For purchase transaction of an investment property, copies of the current lease agreement(s) transferred to the borrower are required. Current lease amount would be used for rental income calculation. If property is not currently rented (i.e. vacant per appraiser), or if the existing lease is not being transferred to the borrower, then lease agreements are not required and appraisal Form 1007 or 1025 (as applicable) will be used to determine gross market rent.

Properties with an accessory unit (ADU) may use rental income from the accessory unit subject to the following:

6.3 P&L Only

Required Documentation if utilizing a Profit and Loss Statement for income validation:

month P&L program)

P&L statements not meeting the requirements of this section, or which are suspicious in nature, may require additional verification.

NOTE: Supplemental income such as W2 or SSI may be included with this loan program provided it is not the dominant income type or conflicts with primary income calculation. Supplemental income should be documented in accordance with full doc income requirements.

6.4 Written Verification of Employment (WVOE)

Borrowers who have a 2-year history of employment with the same employer may utilize this program subject to the following:

The following apply when using WVOE only:

6.5 1099 Reduced Doc Income

Borrowers who have a two-year history of receiving 1099 only or have recently converted from W2 to 1099 and have at least one year of receiving 1099 in the same line of work may utilize this program.

Borrower must provide the following:

NOTE: If WVOE cannot be obtained for any employers in 2-year history, an LOE is required regarding the extenuating reason why it cannot be obtained as well as both a year end and a year-to-date paystub from all contract employers to support the income calculation.

NOTE: Supplemental income such as W2 or SSI may be included with this loan program provided it is not the dominant income type or conflicts with primary income calculation. Supplemental income should be documented in accordance with full doc income requirements.

6.6 Asset Allowance

Asset Allowance may be used to determine qualifying income both alone and in conjunction with other documentation options. Asset Allowance is considered to conform to the Apex Program from a credit and pricing standpoint. Please see the applicable FundLoans Matrix for restrictions.

Asset Allowance is permitted on primary residences and second homes only. Gift funds or funds held in trust are not permitted.

All individuals listed on the asset account(s) must be on the Note and Mortgage. Non-occupant borrower(s) not allowed.

If a portion of the Qualified Assets is being used for down payment, closing costs or reserves, those amounts must be excluded from the balance before analyzing a portfolio for income determination.

Supplemental Income Use:

Standalone Income Use (and all loans over $3.5MM):

The following assets are considered Qualified Assets and may be utilized to calculate income:

Assets not allowed:

7.0 Short Term Rental Income

Short term rental income is allowed if Borrower is an Experienced Investor as defined in these guidelines (applicable to all doc types). DSCR doc type requires a minimum 1.0 ratio.

Third-party vendor documentation must be provided (such as Property Guard, Vrolio or equivalent), validating that the governing municipality where the subject STR is located allows properties to be rented as a STRs.

License or appropriate municipal/governmental registration of the property or unit(s) must be provided for refinance transactions (all doc types) or confirmation from appraiser that no such license or registration is required.

Documentation must also be provided that the property is actively marketed as a short-term rental.

Long term rents on form 1007/1025 may always be used to document income.

7.1 Full Doc:

If not otherwise addressed below, follow FNMA guidelines for rental income.

Purchase:

STR rents are not allowed for purchase transactions. Gross rents are determined by long term rents from Form 1007/1025 (or lease in place if buyer is assuming) and subject to 75% vacancy factor.

Refinance:

STR rents determined by most recent 2 years Schedule E and subject to 75% vacancy factor.

7.2 Alt Doc and DSCR:

In all scenarios below, gross rents are reduced by 20% to reflect extraordinary costs (i.e., advertising, furnishings, cleaning) associated with operating short-term rental property compared to non-short-term property. If the rental documentation referenced below includes expenses, actual expenses should be compared to the 20% expense factor. If actual expenses are less than 20%, a minimum 20% expense factor is required to be utilized. If actual expense exceeds 20%, the actual expense factor should be used.

Purchase:

Form 1007/1025 (or equivalent AMC developed report e.g. STR Pro) indicating STR rents provided the following are included:

Refinance:

Can use one or the lesser of the following to establish rents:

Properties that have been newly constructed within the last 120 days of the application, less than 12-months history, or properties previously used as long-term rentals that are being converted to STRs may be allowed on an exception basis only and, if allowed, must document rents using the purchase methods above.

8.0 Departing Residence

9.0 Monthly Debt

- Rent obligation on a primary residence when the subject transaction is for a second home or investment property.

- Recurring installment debts.

- Lease payments.

- Revolving and open-ended account payments, regardless of the balance.

- Child support or separate maintenance payments and alimony.

- Other continuing obligations.

9.1 Borrower ATR Certification

Loans subject to Reg Z. Ability to Repay must include a borrower(s) certification attesting to the following:

NOTE: An underwriter's detailed attestation regarding borrowers ability to repay is acceptable in lieu of signed borrower disclosure for all loan programs except Asset Allowance or Assets Only.

(See Appendix Section for sample Borrower Attestation verbiage)

9.2 Subordinate Financing

Subordinate Financing is not allowed on DSCR loans. For all other loans, FundLoans allows subordinate financing provided the following conditions are met:

Required Documentation for subordinate financing:

9.3 Adjustable Rate and Interest Only Qualifying

For all ARM loan transactions, the greater of the note rate or the fully indexed rate is used to determine the qualifying PITIA.

Interest-only ARM loans are qualified using the greater of the note rate or the fully indexed rate using the fully amortized payment over the fully amortized term of the loan.

Interest only loans locked as fixed rate are calculated using the fully amortized payment over the fully amortized term of the loan using the Note rate.

DSCR loans qualify using ITIA. All DSCR Interest Only loans whether they are fixed or ARM, allow the use of the ITIA for qualification.

All ARM Notes and Riders should contain ARCC fallback language consistent with FNMA requirements.

10.0 Assets

10.1 Allowed Assets

The following is a list of assets that can be used to determine a borrower's liquidity. Next to each asset is the value that FundLoans assigns based on its liquidity.

payment and closing costs only and are subject to the requirements outlined in Verification of Assets guideline herein. Accounts held solely in the name of a non-borrowing spouse may not be used to meet reserve requirements.

10.2 Verification of Assets

The lender may use any of the following types of documentation for verification.

10.3 Seasoning

Assets must be seasoned for 60 days, and any large deposits as determined by the underwriter must be sourced.

10.4 Gift Funds

100% of gift funds are allowed on owner-occupied transactions

For second homes and investment properties, the borrower must demonstrate they have a minimum of

10% of their own funds for the down payment.

Gifts must be from a family member. Gifts can be used to pay off debt

Gift funds cannot be counted towards reserves.

Purchase transactions only

Gifts of Equity are not allowed on Investment Properties.

Unsecured loans, sweat equity, and gifts that require repayment are not eligible for sources of down payment

10.5 Reserves

||| |Reserve Requirements|| ||| ||| |Loan Amount|Months PITIA Required| ||| |≤ $500,000|3 Months*| |>$500,000 - $1,500,000|6 Months*| |> $1,500,000|9 Months*| |First Time Investor|12 Months| |DSCR|6 months subject property only| |Foreign National|12 Months + additional 2 months for each
additional property owned| |*****|Additional 2 months to above
requirements for each additional financed
property owned, max 12 months
required.|

10.6 Seller Concessions

Occupancy LTV Max Percentage
Primary and 2nd Homes
Primary and 2nd Homes		 ≤75 9%
75.01 – 90.00 6%

|Investment|All|3%|

Seller Concessions include:

11.0 Debt Service Coverage Ratio (Spectrum)

For DSCR loans, borrowers are not required to disclose employment information on the application (Form 1003). Income derived from regular employment, retirement or other investments should not be disclosed and tax returns are not required. The application should otherwise be fully completed including the Schedule of Real Estate Owned listing all properties owned and reflective of any associated mortgages (including private mortgages).

11.1 Experienced Investors

An experienced investor is defined as a borrower with proof of ownership and/or management of residential and/or commercial rental real estate for at least 12 months in the most recent 36-month period (from note date). The following documentation must be provided demonstrating the borrower's experience:

11.2 First Time Investors

First Time Investors are borrowers who do not meet the definition of an experienced investor. First Time Investors are permitted as follows:

11.3 Occupancy and Documentation Requirements

Only 1 to 4-unit residential investment properties are eligible for the Spectrum DSCR Product. Neither the

borrower nor any relative of the borrower (direct or through marriage) can occupy the subject property.

All loans require a borrower executed Business Purpose and Occupancy Affidavit. The borrower(s) must acknowledge that the loan is a business purpose loan by completing and signing the appropriate sections of the Borrower Certification of Business Purpose Affidavit (sample document included in the 8.0 Appendix Section of this guide).

Any loan whereby the proceeds are used for personal, family, or household purposes is considered a consumer transaction and is ineligible for the DSCR Program. This includes cash-out on investment properties where the loan proceeds are used for any personal use (i.e. paying off consumer debt).

11.4 Housing History Greater than 12 months

Acceptable housing history requires evidence that a borrower has made a housing payment for at least the last 12 months whereby that payment history meets the requirements of the Spectrum Program Credit Matrix. Housing history for the DSCR Doc type is limited to verifying the borrower's primary residence and the subject property if a refinance transaction. For these properties, VOMs are required for any outstanding mortgages including private mortgages. No additional documentation is required to support the VOM if from an institutional party. Private entity VOM requires cancelled checks (or equivalent electronic debit) to support. Verifications dated within 30 days of application do not require to be updated unless more than 60 days at time of Note date. If a borrower is renting their primary residence, a VOR from an institutional entity or verified professional property management company the landlord is required with no additional documentation. VOR from private parties requires cancelled checks (or equivalent electronic debit).

11.5 No Housing History or Less Than 12 Months Verified

This section applies to any borrower who has not made at least 12 months of housing payments on any property (or as a tenant in a rental situation) in the most recent 12 months. Borrowers who live rent free at their primary residence are not considered ineligible if they are an Experienced Investor that owns other REO that meets the 12-month housing history requirement as documented by acceptable mortgage payment history or free and clear ownership. A "rent-free" letter of explanation from the homeowner is required. Borrowers who do not have a complete 12-month housing history are ineligible for the program.

11.6 Debt Service Coverage Calculation

Borrowers financing non-owner-occupied investment properties qualify based on their ability to service the debt over the life of the loan. For Debt Service Coverage, rental income is used to qualify for the transaction. Debt Service Coverage is available to Experienced Investors and First Time Investors based on the requirements in this Selling Guide.

The Debt Service Coverage Ratio (DSCR) is calculated as follows:

DSCR = Gross Rental Income ÷ PITIA of the proposed new loan. If the subject transaction is an Interest Only loan, divide the Gross Rental Income by the ITIA (i.e. Interest only payment plus taxes, insurance, and HOA dues). PITIA or ITIA is based on the Note Rate of the loan for Fixed Rate loans. For ARM loans, see Section 9.3

Rounding up of the DSCR value is permissible from the 3rd decimal for determining eligibility. Interest Only loans require a minimum FICO score as per the Spectrum Program Credit Matrix.

On DSCR purchase transactions, the qualifying Gross Rental Income figure is the higher of the market rent on Form 1007/1025 or the current lease (if assumed through the purchase). The amount that may be used for qualifying is based on the following:

On DSCR refinance transactions, the qualifying Gross Rental Income figure is the higher of the market rent on Form 1007/1025 or the current lease. The amount that may be used for qualifying is based on the following:

Vacant one-unit properties or more than 1 vacant unit in a 2+ unit property are not allowed unless:

Use the market rent from Form 1007/1025 with no vacancy factor.

For properties defined as a one-unit property with an accessory unit (ADU), rental income may be qualified from

the accessory unit subject to the following:

The Debt Service Coverage Ratio (DSCR) must be greater than or equal to the published minimum as referenced on the Spectrum Program Credit Matrix to be eligible for funding by FundLoans. The underwriter must supply their DSCR calculated ratio/score result, i.e., the ratio result is notated on the loan approval/1008, or underwriter's DSCR Calculation Worksheet.

11.7 Foreign National (DSCR Program Only)

A Foreign National is a citizen of a country other than the United States who resides outside of the U.S., who has not become a naturalized U.S. Citizen. Foreign National Borrowers are eligible only under the DSCR program.

Eligibility

Foreign Nationals, as defined by U.S Citizenship and Immigration Services (USCIS), are eligible borrowers when the borrower resides from one of the following countries/continents:

Canada

Caribbean (Except Cuba)

China (Except Hong Kong)

Europe (Except Balkan Region, Belarus, Russia, and the Crimea, Donetsk, Luhansk, Kherson, and Zaporizhzhia regions of Ukraine)

Latin America (Except Nicaragua)

South America (Except Venezuela)

Foreign Nationals from any other country not listed above or from any Country comprehensively sanctioned by OFAC (currently Cuba, Iran, North Korea, Syria, and the Crimea, Donetsk, and Luhansk regions of Ukraine) are ineligible.

Verification of Residency Status

Exclusionary List/OFAC/Diplomatic Immunity

Income Eligibility

DSCR Only

Credit Requirements Foreign National Program

Foreign National Borrowers without qualifying U.S. Credit (including borrowers without a valid Social Security Number and borrowers with or without an Individual Tax Identification Number) must provide evidence of three (3) active credit trade lines with a 2-year history from their country of origin. If a housing / mortgage trade line is provided - No derogatory mortgage history is permitted in the last 24 months. ANY combination of the following is acceptable to arrive at the trade line requirement. Satisfactory credit reference letters will assume a Foreign Credit distinction for locking and qualifying purposes.

- The letter must mention the borrower by name
- Name, title & contact information of the person signing the letter must be included
- Currency must be converted to U.S. Dollars and signed and dated by certified translator

Assets- Foreign National Program

Cash-Out

Gift Funds

Maximum Loan Exposure to One Borrower

Occupancy

Vesting

12.0 Collateral

12.1 Eligible Property Types

Non-rural properties must be ≤20 acres. Rural properties must be ≤10 acres unless DSCR in which case ≤5 acres.

12.2 Ineligible Property Types

|2.2 Ineligible Property Types|| |Assisted Living (case-by-case see section below)|Builder bailout or financing builder inventory| |Agricultural properties|Padsplits| |Barndominiums|Properties with less than 400 sq. ft. total living space| |Boarding houses (or properties with individual room
leases)|Properties Under Construction| |C5 or C6 property condition grades|Rural properties greater than 10 acres or 5 acres if DSCR| |Commercial properties|Tenancy in Common properties (vesting ok)| |Geodesic domes|Time-shares| |Leasehold Properties on Tribal Land|Unique Properties| |Log Homes|Working Farms| |Manufactured housing or Manufactured Homes|Vacant lots| |Mixed Use|Escrow holdbacks are not permitted| |Model Home Leasebacks|Cooperative Housing (Co-op)|

NOTE: A property's zoning by itself does not make the property ineligible. In addition to other items such as having similar comparable sales that support the subject's value and marketability, the highest and best use of the property must be residential use whereby the residential use represents a legal and permissible use of the land per the zoning requirements. Furthermore, the zoning must allow the property to be rebuilt based on its current residential use to current density if destroyed.

12.3 ADU (Accessory Dwelling Unit)

One-unit properties with a single ADU are eligible if meeting FNMA guidelines. Rents from a single ADU are also allowed.

12.4 Declining Markets

The appraiser determines if a property is located in a declining market. Within the Neighborhood section of the appraisal, the Housing Trends subsection provides information on Property Values, Demand/Supply and Marketing Time. When the appraiser marks the Declining box for Property Values, the property is considered to be located in a declining market. For any property located in a declining market where the LTV is > 65%, a 5%

LTV reduction is required.

12.5 Flips

When the subject property is being resold within 90 days of its acquisition by the seller and the sales price has increased more than 10%, or being resold within 91-180 days of its acquisition and the sales price increased by more than 20% the transaction is considered a "flip." To determine the applicable sales period, the acquisition date (the day the seller became the legal owner of the property) and the purchase date (the day both parties executed the purchase agreement) are required to be used.

Flip transactions are subject to the following requirements:

12.6 Transferred Appraisals

Appraisal transfers are allowed when an appraisal was completed prior to the loan being closed. Appraisal transfers are subject to the following requirements:

If the original Lender will not transfer the appraisal or provide the transfer letter, then a new appraisal is required.

NOTE: Subject to FIRREA Requirements; if corrections are required, it is the Broker/Originator's responsibility to work with the previous lender to obtain them and FundLoans will not review.

12.7 Condo Project Review Warrantable

NOTE: UW Attestation and/or documentation clearly stating whether the property is a warrantable or nonwarrantable condo must be delivered with the file. Lender to provide CPM approval or Condo Questionnaire as applicable.

12.8 Condo Project Review Non-Warrantable

Non-warrantable condominiums are eligible based on the following characteristics. See Credit Matrix for LTV restrictions.

||NON-WARRANTABLE CONDOS| ||| |CHARACTERISTIC|EXCEPTION CONSIDERATIONS| ||| |COMMERCIAL SPACE|Subject unit 100% residential. Commercial space in building/project < 50%. Any
commercial must be "typical to the marketplace and have no negative impact
on marketability. Commercial % determined by appraiser. Commercial entity
cannot control HOA.| |COMPLETION STATUS|The project, or the subject's legal phase along with other phases, must be
complete. All common elements in the project or legal phase must be 100%
completed. At least 50% must be sold or under a bona-fide contract.| |CONDOTELS|• Min 700 FICO
• Maximum LTV/CLTV Purchase: 75%
• Maximum LTV/CLTV R/T and Cash-Out: 65%
• Max cash in hand $250,000
• Maximum Loan Amount: $1,500,000
• Max DTI 50% or Min DSCR of 1
• Primary, Second Home or Investment
• Investor concentration, within the subject project, may exceed established
project criteria, up to 100%
• Minimum square footage of 500 and at least 1 Bedroom required
• Fully functioning kitchen – define as a full-size appliance including a
refrigerator and stove/oven
• Projects with names that include the words "hotel," "motel," "resort," or
"lodge" are acceptable
• May not have mandatory rental pooling
• May not have full time registration desk, concierge, or daily cleaning
located on premises to service units in project
Project must have obtained a hotel or resort rating for its hotel, motel, or resort
operations through hotel ratings providers including, but not limited to, travel
agencies,hotel bookingwebsites,and internet search engines|

|DELINQUENT HOA DUES|No more than 35% of the total units in the project may be 60 days or more past
due on the payment of condominium/association fees.| |INVESTOR CONCENTRATION|Investor concentration in project up to 60%.| |HOA CONTROL|The developer may be in control of the condominium association provided the
Master Agreement provides for the homeowners to take control upon either a
predetermined percentage of unit sales or within a defined time period.| |HOA RESERVES|HOA Budget must include a dedicated line-item allocation to replacement
reserves of at least 8% of the budget.| |LITIGATION|Pending litigation may be accepted on an exception basis. Litigation that involves
structural issues, health and safety issues or items that will impact the
marketability of the project will not be accepted.| |NEW PROJECTS|The project or the subject's legal phase along with other phases must be
complete. All common areas in the project must be 100% complete. Minimum of
50% of units must be sold or under contract. HOA should be in control- project
under Developer or Builder control will be considered on an exception basis only.| |SINGLE ENTITY OWNERSHIP|Single entity ownership in project up to 50%.|

13.0 Appraisal

A full appraisal involves a complete inspection of the home, including the interior and exterior of the subject property. Acceptable appraisal report forms must follow FNMA and FHLMC standards which include Uniform Appraisal Data Set (UAD) Specifications and the Field Specific Standardization Requirements. Additional requirements:

Properties must be appraised within the 12 months that precede the date of the note. When the appraisal report is more than 120 days old, the appraiser must perform a recertification of value per FNMA 1004 D or FHLMC Form 442 which includes inspection of the exterior of the property and review of current market data to determine whether the property has declined in values since the date of the original appraisal. Additionally, FundLoans reserves the right to require additional appraiser re-valuation reports depending on age of documentation at time of full loan delivery.

13.1 Valuation Overview

FundLoans uses FNMA Guidelines as our minimum appraisal standards for all written appraisal reports. Reports must

include/have, at a minimum, the following:

The second appraisal may not be a transferred appraisal (except on a case-by-case basis).

The transactions "Appraised Value" will be the lower of the two appraisals.

If a second appraisal is not provided from an approved FundLoans AMC, then an AIR compliant appraisal may be accepted on a case-by-case basis. FundLoans, at its discretion, can request an additional Appraisal Product.

13.2 Appraiser Independence

FundLoans expects to receive honest, unbiased professional opinions of value.

We will not accept an appraisal from an appraiser who works for the lender, borrower or any parties affiliated with the transaction. All appraisals will be following the Appraiser Independence Requirements pursuant to the Dodd-Frank Wall Street Reform and the Consumer Protection Bureau Act of 2010. Compliance with the Appraiser- Independence Requirements will be reviewed by an independent third-party.

A LICENSED OR CERTIFIED APPRAISER MUST SIGN ANY REPORT PREPARED FOR THE LENDER IN ORDER FOR THE LOAN TO BE ELIGIBLE FOR FUNDING BY FundLoans.

13.3 Appraisal Review Requirements

Appraisal desk reviews are required for all loan amounts, except when a 2[nd] full appraisal is required.

Desk review from one of the following is required:

If a valuation from either of these companies is less than 90% of the appraised value, then the LTV will be calculated using the lower desk review value.

Underwriting is responsible for identifying areas impacted by disasters and taking the appropriate steps to ensure the subject property has not been adversely affected.

Adverse events that receive a formal disaster declaration issued by local, state or federal departments of emergency management must follow the procedures listed below. A list of all federally declared disaster areas may be found on the FEMA website at http://www.fema.gov/disasters.

Any subject property in a designated disaster area, whether it is a purchase or a refinance transaction, will require a Disaster Inspection Report. The practice of obtaining a Disaster Inspection Report should continue for a minimum of 90 days from the date of the disaster and display a completion date that doesn't exceed 15 days prior to the loan closing.

14.0 Title Insurance

14.1 Requirements

The purpose of title insurance is to provide evidence of ownership and the lawful possession of a property. It protects the owners (in the case of an owner's policy) and lenders (in the case of a mortgage loan policy) against loss if the chain of property is imperfect or against unknown encumbrance against the property.

FundLoans requires coverage provided by American Land Title Association (ALTA) or an equivalent association. Either a Standard or Short Form Policy is acceptable. Short Form Policies are provided due to a shorter turnaround time, allowing a faster delivery to the secondary market.

Eligible title insurance must reflect the following:

Unacceptable Title Defects can be, but are not limited to, the following:

14.2 Title Policy Requirements

Only accredited title companies with an acceptable rating can provide title insurance and ownership reports. A 24 Month Chain of Title is required on all title policies.

Endorsements

FundLoans requires all applicable endorsements to be present in a Title Insurance Policy. Endorsements are available for title insurance policies only and they provide affirmative language and/or protection to the lender for the specific exceptions being left on the title that typically occur due to property type. The following is a list of required endorsements:

Spousal Property Rights

Marital property law affects the ownership, control, and disposition of property during a marriage, upon divorce and upon the death of a spouse. Common law, community property and homestead rights all have an impact on how certain real property may be conveyed, encumbered, or transferred to a creditor to satisfy debt in case of a foreclosure. The initial and final CD to be signed and dated by non-borrowing spouse (refi's only).

Certain states require marital signatures on all transactions. Spouses that are not applicants should not be required to sign the promissory note. There will be times that we may require a spouse to sign necessary documents per state requirements for homestead rights.

Survey Requirements – Each loan will have:

14.3 Title Vesting

Fee Simple with Title Vesting as:

NOTE: Vesting in a life estate is not allowed.

NOTE: Power of Attorney's (POA's) are eligible except for cash out loan programs, or when closing/vesting in the name of an Entity.

For each business type, the following documentation must be provided:

- Certificate of Good Standing

- Certificate of Authorization for the person executing all documents on behalf of the Entity

- LLC Borrowing Certificate required when all members are not on the loan.

NOTE: Official documentation issued by a CPA, a Third-Party Tax Preparer (excluding PTIN tax preparers), the state or IRS should be used to satisfy documentation requirements. Fillable PDF's (i.e W9's) or emails from borrowers are not sufficient.

15.0 Hazard Insurance Requirements

Hazard insurance must protect against the loss or damage of the property from fire and other hazards covered by the standard extended coverage endorsement. FundLoans requires hazard insurance protection on all loans with an effective date on or before closing. A declaration page is required prior to closing for all loans as proof of insurance. On all refinance transactions, if the coverage termination date is within 30 days of the closing, FundLoans will require evidence of continuing coverage. A loss payable endorsement is required for all loan transactions.

The coverage must provide for claims to be settled on a replacement cost basis. Extended coverage must include, at a minimum:

The HOI Policy must be effective for at least 60 days after the date of funding. Evidence of Insurance can be provided in one of the following forms:

Evidence of Insurance Requirements:

Deductibles:

Determining the amount of required Hazard Coverage:

The coverage must provide for claims to be settled on a replacement cost basis. Extended coverage must include, at a minimum, wind, civil commotion (including riots), smoke, hail, and damages caused by aircraft vehicle or explosions.

Hazard insurance policies that limit or exclude from coverage, in whole or in part, windstorm, hurricane, hail damages, or any other perils that would normally be included under an extended coverage endorsement are not acceptable.

Borrowers may not obtain hazard insurance policies that include such exclusions or limitations unless they have obtained a separate policy or endorsement from another commercial insurer that provides adequate coverage for the limited or excluded peril.

Hazard Insurance coverage should be in the amount of the lesser of:

party source (i.e., CoreLogic);

If none of the above are met, then coverage that does provide the minimum required amount must be obtained.

Flood Insurance:

Flood insurance coverage is required when a loan is secured by a property located in a Special Flood Hazard Area (SFHA), or a Coastal Barrier Resources System (CBRS) or Otherwise Protected Area (OPA). FundLoans follows Fannie Mae Guidelines in regards to Flood Insurance Coverage Requirements.

The lender must determine whether the property is located in an SFHA, a CBRS, or an OPA by using the FEMA Standard Flood Hazard Determination form. All flood zones beginning with the letter "A" or "V" are considered SFHAs.

Note: If the subject property is located within a CBRS or an OPA, flood insurance is required regardless of whether the property is located in an SFHA.

The minimum amount of flood insurance required must be equal to the lesser of:

Rent Loss Insurance:

Non-owner occupied properties must have rent loss coverage equal to 6 months PITIA.

16.0 Specialty Programs

The following guidelines are generally on a case-by-case basis, subject to prior approval by FundLoans and subject to change without notice. Each below may be further defined in a separate matrix.

16.1 Super Jumbo (Apex/Montage)

Loan amounts greater than $3.5MM (primary) and greater than $3.0MM (2[nd] /NOO) are subject to a separate matrix and the following applies:

16.2 Assets Only

Assets Only may be used for borrowers who have significant verifiable assets and would benefit from alternative loan qualification. Asset Only is considered to conform to the Montage Program from a credit and pricing standpoint. Assets Only may be used with any occupancy type. Please see the applicable FundLoans Matrix for restrictions.

Total liquid assets (US based only) must meet the sum below (reserves are not required):

Qualified Assets:

The following assets are considered Qualified Assets and may be utilized for qualification:

Case-by-case subject to investor approval: Personally vested non-subject real estate using 75% of AVM from approved AMC (minus) all recorded liens. HELOCs are counted at the maximum limit regardless of amount used.

Any loans secured against financial assets being used for asset qualification will be netted against the asset's value before application of discount.

The most recent 6 months of account statements for all Qualified Assets are required. Balances of qualifying assets must be verified within 10 days of Note Date. Any deposit greater than 10% of the face value of the account of the most recent statement must be sourced and documented. Any deposits which cannot be sourced will be deducted from the end value of the account.

Ineligible Asset Types

DTI: A traditional DTI is not calculated for Assets Only. Rather, post-closing Qualified Assets must be greater than the sum of the items noted below:

including the subject property taxes, insurance, HOA dues, etc. (do not include the subject property P&I)

Residual Income: In accordance with ATR standards, a monthly residual income calculation must be completed. The formula for this calculation is:

Post-Closing Qualified Assets ÷ 60 months = Total Monthly Income

Total Monthly Income – Total Monthly Debt Obligations (Expenses) = Monthly Residual Income Minimum residual income is $1,500/month.

NOTE: Required reserves are not deducted from Post-Closing Qualified Assets when calculating residual income.

Mortgage Related Expenses: As referenced in the DTI section, property related expenses must be accounted for in the 60-month debt calculation.

Subject Property: Exclude the subject P&I from the 60-month calculation (i.e. only include taxes, insurance, HOA dues, special assessments, etc.).

Non-Subject Properties: Include the PITIA of additional REO in the 60-month calculation. Whenever an additional REO is an investment property, the PITIA for that property may be excluded from the coverage requirement provided the property has positive cash flow. If the investment property has a negative cash flow, any net negative rental amount must be included in the 60-month debt total. Leases + 2 month's most recent rent receipts are required to document the rental income received for an investment property (Form 1007 is not required). A 25% vacancy factor must be applied to the monthly rent prior to calculating positive/negative cash flow for the property. Net rent can never exceed $0.

Employment and Income: Employment and income are not required to be disclosed on the 1003. If not disclosed, enter "Not applicable to this loan" in the respective fields. A secondary contact phone number must be reflected in the business phone number section on the 1003 (for consumer contact purposes only).

Borrower Affirmation: The borrower must acknowledge their ability to repay the loan by signing a Borrower Affirmation Document at closing.

16.3 Assisted Living Facilities

On a case-by-case basis and subject to additional pricing overlays subject to the following:

Subject to floor rates and published LLPAs.

16.4 Multiple ADU

On a case-by-case basis and subject to additional pricing overlays, if any multiple ADUs is eligible under the following conditions:

Unpermitted or unconventional (e.g. manufactured or container) ADUs allowed only subject to exception and additional appraisal comparables.

+2-unit property may be considered on an exception basis only.

17.0 Miscellaneous

17.1 Fraud Reviews

Data integrity is crucial to having a quality loan file delivery and mitigation of fraud risk. All loans must be submitted to an automated fraud and data check tool (i.e. Fraud Guard, DataVerify, etc.). A copy of the findings report must be provided in the loan file along with any documentation resolving any deficiencies or red flags noted.

17.2 OFAC and Watchlist Search Parties

Watchlists verifications compare all participants names to industry and lender exclusionary lists to identify high risk participants. Provide documentation to confirm all parties to the transaction such as borrowers, entities holding title and all owners, sellers, realtors, realtor brokerages, closing attorney, lender/originator and loan officer were successfully checked and not included on these lists. For refinances, the borrowers, entities holding title and all owners, closing attorney/title agent, originator and loan officer should be included in the searches. Any high alerts or red flags must be addressed or cleared by the underwriter.

17.3 Closing Documentation

All closing documentation (i.e., Notes, Deeds of Trust, etc.) must conform to and be FNMA approved. The use of any non-FNMA documentation must receive prior approval from FundLoans.

17.4 Age of Documents

The Note date is utilized for document expiration for all funding types including escrow and non-escrow funding.

Appraisal: 365 days of note date, with a recertification of value required if report exceeds 120 days of the note date.

Credit/Income/Asset: 90 days

P&L: 60 days

17.5 Property Taxes

The lender must document the real estate taxes used to determine the monthly housing expense used to calculate the debt-to-income (DTI) ratio. The amount must be based on the value of the land and the total of all assessed improvements. The most recent real estate tax bill, tax assessment or tax certificate from title are examples of acceptable documentation.

For new construction or full renovation property we need one of the following to document the proposed property taxes based on improvements:

NOTE: FundLoans will not cannot accept previous years tax bill that does not show current improvements (i.e. land only is assessed)

17.6 Escrows

17.7 Maximum Financed Properties

17.8 Maximum Exposure

17.9 Disaster Policy

FundLoans permits loans that are secured by properties that are located within a declared disaster area or in an undeclared disaster area, either man-made or natural, subject to the following conditions:

18.0 Exceptions

Exceptions to these Guides can be made at FundLoans' discretion by submitting a FundLoans Exception Request form to FundLoans. The Underwriter should review the loan file to ensure prudent underwriting was used as well as listing compensating factors for the loan exception on the form.

FundLoans is under no obligation to fund loans that meet these guidelines or has an exception on the loan file. Compliance with these guides does not create a commitment by FundLoans to fund. Any loans that will be funded are at the sole discretion of FundLoans.

19.0 Appendix

Borrower Ability to Repay Attestation

Disclosure Date Loan Number Lender Borrower Name(s) Property Address

Before approval of your mortgage loan, we must ensure that we are making a loan that you can afford. To determine whether you could repay the mortgage loan, we will collect, verify, and analyze specific financial information regarding your current income, assets and debt obligations.

At a minimum, we will consider the following eight factors to determine your ability to repay:

In addition, we will also assess how much money you have remaining each month after paying your debts. We recommend that you also consider these same factors when determining how much you can afford to repay based on your income, expenses, and savings priorities to stay within your budget.

By signing below, I/we certify the following about the information and documentation provided with my/our request for a mortgage loan, including information about the purpose of the loan, the amount and source of the down payment, employment and income information, and assets and liabilities.

Borrower Name Borrower Signature Date

Business Purpose and Occupancy Affidavit

Condo Questionnaire (Limited Review)

Condo Questionnaire (Full Review)

Personal Guaranty Agreement

Exhibit A Prepayment Penalty Reference Guide

State Specific Acquisition Guidance

FundLoans will not fund loans with prepayment penalties in the following states:

All other loans with a prepayment penalty must be in compliance with applicable state law. The following states include specific limitations or requirements:

Allowable Types of Prepayment Structure

FundLoans will accept the following 1-to-5 year prepayment types as permitted by applicable laws and regulations on closed-end 1-to-4 unit business purpose investment properties. Prepayment penalty must be contracted for in an appropriate Note and Security Instrument or Rider.

State Specific Restrictions to Structure:

20.0 Version History

Version 1.0 Effective 01/01/2026