source:
  type: guide
  id: hud-4000-1-ii-d-asset-requirements-total
  authority: FHA Single Family Housing Policy Handbook 4000.1, Part II — d. Asset
    Requirements (TOTAL) (08/19/2024)
  description: FHA Single Family Housing Policy Handbook 4000.1, Part II — d. Asset
    Requirements (TOTAL) (08/19/2024).
  coverage_tier: operative
obligations:
- id: hud-4000-1-ii-d-asset-requirements-total-full
  canonical_id: hud-4000-1-ii-d-asset-requirements-total-full
  section: FHA Single Family Housing Policy Handbook 4000.1, Part II — d. Asset Requirements
    (TOTAL) (08/19/2024)
  type: do
  tags:
  - regulator-direct
  - fha
  - hud-handbook
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: FHA Single Family Housing Policy Handbook 4000.1, Part II — d. Asset
      Requirements (TOTAL) (08/19/2024)
    source_class: hud-handbook
    source_url: https://www.hud.gov/hud-partners/single-family-handbook-4000-1
    snapshot_id: 8c03836f77f317e1
    fetched_at: '2026-05-23T00:28:40Z'
    content_hash: sha256:411430f29b13f9b54a2ebb0e6f6e7087ecd2b90d0da22eb0c8c792eaa2d7d0df
    paragraph_quote: 'd. Asset Requirements (TOTAL) (08/19/2024) i. General Asset
      Requirements (TOTAL) The Mortgagee 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 MRI. (A) Earnest
      Money Deposit (TOTAL) The Mortgagee 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; II. ORIGINATION
      THROUGH POST-CLOSING/ENDORSEMENT A. Title II Insured Housing Programs Forward
      Mortgages 4. Underwriting the Borrower Using the TOTAL Mortgage Scorecard (TOTAL)
      Handbook 4000.1 251 Last Revised: 11/26/2025 • 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. If the source of the earnest money
      deposit was a Gift, the Mortgagee must verify that the Gift is in compliance
      with Gifts (Personal and Equity) (TOTAL). (B) Cash to Close (TOTAL) The Mortgagee
      must document all funds that are used for the purpose of qualifying for or closing
      a Mortgage, including those to satisfy debt or pay costs outside of closing.
      The Mortgagee must verify and document that the Borrower has sufficient funds
      from an acceptable source to facilitate the closing. (1) Determining the Amount
      Needed for Closing For a purchase transaction, the amount of cash needed by
      the Borrower to close an FHA-insured Mortgage is the difference between the
      total cost to acquire the Property and the total mortgage amount. For a refinance
      transaction, the amount of cash needed by the Borrower to close an FHA-insured
      Mortgage is the difference between the total payoff requirements of the Mortgage
      being refinanced and the total mortgage amount. (2) Mortgagee Responsibility
      for Estimating Settlement Requirements In addition to the MRI, additional Borrower
      expenses must be included in the total amount of cash that the Borrower must
      provide at mortgage settlement. (a) Origination Fees and Other Closing Costs
      The Mortgagee or sponsored TPO may charge a reasonable origination fee. The
      Mortgagee or sponsored TPO may charge and collect from Borrowers those customary
      and reasonable closing costs and prepaid items necessary to close the Mortgage.
      Charges may not exceed the actual costs. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT
      A. Title II Insured Housing Programs Forward Mortgages 4. Underwriting the Borrower
      Using the TOTAL Mortgage Scorecard (TOTAL) Handbook 4000.1 252 Last Revised:
      11/26/2025 The Mortgagee must comply with HUD’s Qualified Mortgage Rule at 24
      CFR § 203.19. (b) Discount Points Discount Points refer to a charge from the
      Mortgagee for the interest rate chosen. They can be paid by the Borrower and
      become part of the total cash required to close. (c) Types of Prepaid Items
      (Including Per Diem Interest) Prepaid items may include flood and hazard insurance
      premiums, MIPs, real estate taxes, and per diem interest. They must comply with
      the requirements of the CFPB. (d) Non-realty or Personal Property Non-realty
      or Personal Property items (chattel) that the Borrower agrees to pay for separately,
      including the amount subtracted from the sales price when determining the maximum
      Mortgage, are included in the total cash requirements for the Mortgage. (e)
      Upfront Mortgage Insurance Premium Amounts Any UFMIP amounts paid in cash are
      added to the total cash settlement requirements. The UFMIP must be entirely
      financed into the Mortgage or paid entirely in cash. However, if the UFMIP is
      financed into the Mortgage, the entire amount is to be financed except for any
      amount less than $1.00. (f) Real Estate Agent Fees If a Borrower is represented
      by a real estate agent and must pay any fee directly to the agent, that expense
      must be included in the total of the Borrower’s settlement requirements. (g)
      Repairs and Improvements Repairs and improvements, or any portion paid by the
      Borrower that cannot be financed into the Mortgage, are part of the Borrower’s
      total cash requirements. (h) Premium Pricing on FHA-Insured Mortgages Premium
      Pricing refers to the aggregate credits from a Mortgagee or TPO at the interest
      rate chosen. Premium Pricing may be used to pay a Borrower’s actual closing
      costs and prepaid items. Premium Pricing is not included as part of the Interested
      Party II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT A. Title II Insured Housing
      Programs Forward Mortgages 4. Underwriting the Borrower Using the TOTAL Mortgage
      Scorecard (TOTAL) Handbook 4000.1 253 Last Revised: 11/26/2025 limitation unless
      the Mortgagee or TPO is the property seller, real estate agent, builder or developer.
      The funds derived from a premium priced Mortgage: • must be disclosed in accordance
      with RESPA; • must be used to reduce the principal balance if the credit amount
      exceeds the actual dollar amount for closing costs and prepaid items; and •
      may not be used for payment of debts, collection accounts, escrow shortages
      or missed Mortgage Payments, or Judgments. (i) Interested Party Contributions
      on the Closing Disclosure The Mortgagee may apply Interested Party credits toward
      the Borrower’s origination fees, other closing costs including any items Paid
      Outside Closing (POC), prepaid items, and Discount Points. The refund of the
      Borrower’s POCs may be used toward the Borrower’s MRI if the Mortgagee documents
      that the POCs were paid with the Borrower’s own funds. The Mortgagee must identify
      the total Interested Party credits on the front page of the Closing Disclosure
      or similar legal document or in an addendum. The Mortgagee must identify each
      item paid by Interested Party Contributions. (j) Real Estate Tax Credits Where
      real estate taxes are paid in arrears, the seller’s real estate tax credit may
      be used to meet the MRI, if the Mortgagee documents that the Borrower had sufficient
      assets to meet the MRI and the Borrower paid closing costs and other prepaid
      items at the time of underwriting, without consideration of the real estate
      tax credit. This permits the Borrower to bring a portion of their MRI to the
      closing and combine that portion with the real estate tax credit for their total
      MRI. (C) Reserves (TOTAL) The Mortgagee must verify and document all assets
      submitted to the AUS. 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. Reserves do not include: • the amount of cash taken at settlement
      in cash-out transactions; • incidental cash received at settlement in other
      loan transactions; II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT A. Title
      II Insured Housing Programs Forward Mortgages 4. Underwriting the Borrower Using
      the TOTAL Mortgage Scorecard (TOTAL) Handbook 4000.1 254 Last Revised: 11/26/2025
      • equity in another Property; or • borrowed funds from any source. (1) Required
      Reserves for One-Unit with an Accessory Dwelling Unit Properties If Rental Income
      is being used as Effective Income to qualify the Borrower, the Mortgagee must
      verify and document Reserves equivalent to two months’ PITI after closing for
      one-unit with an ADU Properties. (2) Required Reserves for Three- to Four-Unit
      Properties The Mortgagee must verify and document Reserves equivalent to three
      months’ PITI after closing for three- to four-unit Properties. ii. Source Requirements
      for the Borrower’s Minimum Required Investment (TOTAL) (A) Definition Minimum
      Required Investment (MRI) refers to the Borrower’s contribution in cash or its
      equivalent required by Section 203(b)(9) of the National Housing Act, which
      represents at least 3.5 percent of the Adjusted Value of the Property. (B) Standard
      The Mortgagee may only permit the Borrower’s MRI to be provided by a source
      permissible under Section 203(b)(9)(C) of the National Housing Act, which means
      the funds for the Borrower’s MRI must not come from: (1) the seller of the Property;
      (2) any other person or entity who financially benefits from the transaction
      (directly or indirectly); or (3) anyone who is or will be reimbursed, directly
      or indirectly, by any party included in (1) or (2) above. While additional funds
      to close may be provided by one of these sources if permitted under the relevant
      requirements above, none of the Borrower’s MRI may come from these sources.
      The Mortgagee must document permissible sources for the full MRI in accordance
      with special requirements noted above. Additionally, in accordance with Prohibited
      Sources of Minimum Cash Investment Under the National Housing Act – Interpretive
      Rule, HUD does not interpret Section 203(b)(9)(C) of the National Housing Act
      to prohibit Governmental Entities, when acting in their governmental capacity,
      from providing the Borrower’s MRI where the Governmental Entity is originating
      the insured Mortgage through one of its homeownership programs. II. ORIGINATION
      THROUGH POST-CLOSING/ENDORSEMENT A. Title II Insured Housing Programs Forward
      Mortgages 4. Underwriting the Borrower Using the TOTAL Mortgage Scorecard (TOTAL)
      Handbook 4000.1 255 Last Revised: 11/26/2025 (C) Required Documentation Where
      the Borrower’s MRI is provided by someone other than the Borrower, the Mortgagee
      must also obtain documentation to support the permissible nature of the source
      of those funds. To establish that the Governmental Entity provided the Borrower’s
      MRI in a manner consistent with HUD’s Interpretive Rule, the Mortgagee must
      document that the Governmental Entity incurred prior to or at closing an enforceable
      legal liability or obligation to fund the Borrower’s MRI. It is not sufficient
      to document that the Governmental Entity has agreed to reimburse the Mortgagee
      for the use of funds legally belonging to the Mortgagee to fund the Borrower’s
      MRI. The Mortgagee must obtain: • a canceled check, evidence of wire transfer
      or other draw request showing that prior to or at the time of closing the Governmental
      Entity had authorized a draw of the funds provided toward the Borrower’s MRI
      from the Governmental Entity’s account; or • a letter from the Governmental
      Entity, signed by an authorized official, establishing that the funds provided
      toward the Borrower’s MRI were funds legally belonging to the Governmental Entity,
      when acting in their governmental capacity, at or before closing. Where a letter
      from the Governmental Entity is submitted, the precise language of the letter
      may vary, but must demonstrate that the funds provided for the Borrower’s MRI
      legally belonged to the Governmental Entity at or before closing, by stating,
      for example: • the Governmental Entity has, at or before closing, incurred a
      legally enforceable liability as a result of its agreement to provide the funds
      toward the Borrower’s MRI; • the Governmental Entity has, at or before closing,
      incurred a legally enforceable obligation to provide the funds toward the Borrower’s
      MRI; or • the Governmental Entity has, at or before closing, authorized a draw
      on its account to provide the funds toward the Borrower’s MRI. While the Mortgagee
      is not required to document the actual transfer of funds in satisfaction of
      the obligation or liability, the failure of the Governmental Entity to satisfy
      the obligation or liability may result in a determination that the funds were
      provided by a prohibited source. iii. Sources of Funds (TOTAL) The Mortgagee
      must verify liquid assets for cash to close and Reserves as indicated. II. ORIGINATION
      THROUGH POST-CLOSING/ENDORSEMENT A. Title II Insured Housing Programs Forward
      Mortgages 4. Underwriting the Borrower Using the TOTAL Mortgage Scorecard (TOTAL)
      Handbook 4000.1 256 Last Revised: 11/26/2025 (A) Checking and Savings Accounts
      (TOTAL) (1) Definition Checking and Savings Accounts refer to funds from Borrower-held
      accounts in a financial institution that allows for withdrawals and deposits.
      (2) Standard The Mortgagee must verify and document the existence of and amounts
      in the Borrower’s checking and savings accounts. For individual deposits of
      more than 50 percent of the total monthly Effective Income, the Mortgagee must
      obtain documentation of the deposits. The Mortgagee must also verify that the
      deposits are commensurate with the Borrower’s income and savings history and
      no debts were incurred to obtain part, or all, of the MRI. (3) Required Documentation
      (a) Traditional Documentation The Mortgagee must obtain: • a written VOD and
      the Borrower’s most recent statement for each account; or • direct verification
      by a TPV vendor of the Borrower’s account covering activity for a minimum of
      the most recent available month, subject to the following requirements: o the
      Borrower has authorized the Mortgagee to use a TPV vendor to verify assets;
      and o the date of the data contained in the completed verification is current
      within 30 days of the date of the verification. (b) Alternative Documentation
      If a VOD is not obtained, a statement showing the previous month’s ending balance
      for the most recent month is required. If the previous month’s balance is not
      shown, the Mortgagee must obtain statement(s) for the most recent two months.
      (B) Cash on Hand (TOTAL) (1) Definition Cash on Hand refers to cash held by
      the Borrower outside of a financial institution. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT
      A. Title II Insured Housing Programs Forward Mortgages 4. Underwriting the Borrower
      Using the TOTAL Mortgage Scorecard (TOTAL) Handbook 4000.1 257 Last Revised:
      11/26/2025 (2) Standard The Mortgagee must verify that the Borrower’s Cash on
      Hand is deposited in a financial institution or held by the escrow/title company.
      (3) Required Documentation The Mortgagee 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 Mortgagee 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 (TOTAL) (1) Definition Retirement Accounts
      refer to assets accumulated by the Borrower for the purpose of retirement. (2)
      Standard The Mortgagee 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) plan, 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. (3) Required Documentation The Mortgagee 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. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT
      A. Title II Insured Housing Programs Forward Mortgages 4. Underwriting the Borrower
      Using the TOTAL Mortgage Scorecard (TOTAL) Handbook 4000.1 258 Last Revised:
      11/26/2025 (D) Stocks and Bonds (TOTAL) (1) Definition Stocks and Bonds are
      investment assets accumulated by the Borrower. (2) Standard The Mortgagee 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 Mortgagee must determine the current value of the stocks and bonds through
      TPV. Government- issued savings bonds are valued at the original purchase price,
      unless the Mortgagee verifies and documents that the bonds are eligible for
      redemption when cash to close is calculated. (3) Required Documentation The
      Mortgagee 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 Mortgagee must obtain a copy of each stock or
      bond certificate. (E) Private Savings Clubs (TOTAL) (1) Definition Private Savings
      Club refers to a non-traditional method of saving by making deposits into a
      member-managed resource pool. (2) Standard The Mortgagee may consider Private
      Savings Club funds that are distributed to and received by the Borrower as an
      acceptable source of funds. The Mortgagee must verify and document the establishment
      and duration of the club, and the Borrower’s receipt of funds from the club.
      The Mortgagee must also determine that the received funds were reasonably accumulated,
      and not borrowed. (3) Required Documentation The Mortgagee must obtain the club’s
      account ledgers and receipts, and a verification from the club treasurer that
      the club is still active. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT A.
      Title II Insured Housing Programs Forward Mortgages 4. Underwriting the Borrower
      Using the TOTAL Mortgage Scorecard (TOTAL) Handbook 4000.1 259 Last Revised:
      11/26/2025 (F) Gifts (Personal and Equity) (TOTAL) (1) Definition Gifts refer
      to the contributions of cash or equity with no expectation of repayment. (2)
      Standards for Gifts (a) 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; • 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 MRI must also comply
      with the additional requirements set forth in Source Requirements for the Borrower’s
      Minimum Required Investment (TOTAL). (b) Donor’s Source of Funds Cash on Hand
      is not an acceptable source of donor gift funds. (3) Required Documentation
      The Mortgagee 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 Mortgagee 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 Mortgagee 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; II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT
      A. Title II Insured Housing Programs Forward Mortgages 4. Underwriting the Borrower
      Using the TOTAL Mortgage Scorecard (TOTAL) Handbook 4000.1 260 Last Revised:
      11/26/2025 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 Mortgagee 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. • For Gifts of land, the Mortgagee must obtain:
      o proof of ownership by the donor; and o evidence of the transfer of title to
      the Borrower. Regardless of when gift funds are made available to a Borrower
      or settlement agent, the Mortgagee must be able to make a reasonable determination
      that the gift funds were not provided by an unacceptable source. (4) Standards
      for Gifts of Equity (a) Who May Provide Gifts of Equity Only Family Members
      may provide equity credit as a Gift on Property being sold to other Family Members.
      (b) Required Documentation The Mortgagee 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 (TOTAL) (1) Definition Interested Parties
      refer to sellers, real estate agents, builders, developers, Mortgagees, Third-Party
      Originators (TPO), or other parties with an interest in the transaction. Interested
      Party Contribution refers to a payment by an Interested Party, or combination
      of parties, toward the Borrower’s origination fees, other closing costs including
      any items POC, prepaid items, and Discount Points. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT
      A. Title II Insured Housing Programs Forward Mortgages 4. Underwriting the Borrower
      Using the TOTAL Mortgage Scorecard (TOTAL) Handbook 4000.1 261 Last Revised:
      11/26/2025 (2) Standard Interested Parties may contribute up to 6 percent of
      the sales price toward the Borrower’s origination fees, other closing costs,
      prepaid items, and Discount Points. The 6 percent limit also includes: • Interested
      Party payment for permanent and temporary interest rate buydowns, and other
      payment supplements; • payments of mortgage interest for fixed rate Mortgages;
      • Mortgage Payment protection insurance; and • payment of the UFMIP. Interested
      Party Contributions that exceed actual origination fees, other closing costs,
      prepaid items, and Discount Points are considered an inducement to purchase.
      Interested Party Contributions exceeding 6 percent are considered an inducement
      to purchase. Interested Party Contributions may not be used for the Borrower’s
      MRI. Exceptions Premium Pricing credits from the Mortgagee or TPO are excluded
      from the 6 percent limit, provided the Mortgagee or TPO is not the seller, real
      estate agent, builder, or developer. 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. The satisfaction of a PACE
      lien or obligation against the Property by the property owner is not considered
      an Interested Party Contribution. (3) Required Documentation The Mortgagee must
      document the total Interested Party Contributions on the sales contract or applicable
      legally binding document, form HUD-92900-LT, and Closing Disclosure or similar
      legal document. When a legally binding document other than the sales contract
      is used to document the Interested Party Contributions, the Mortgagee must provide
      a copy of this document to the assigned Appraiser. (H) Inducements to Purchase
      (TOTAL) 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 purchase price when computing the Adjusted Value of the Property
      before applying the appropriate Loan-to-Value (LTV) percentage. These inducements
      include, but are not limited to: • contributions exceeding 6 percent of the
      purchase price; II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT A. Title II
      Insured Housing Programs Forward Mortgages 4. Underwriting the Borrower Using
      the TOTAL Mortgage Scorecard (TOTAL) Handbook 4000.1 262 Last Revised: 11/26/2025
      • contributions exceeding the origination fees, other closing costs, prepaid
      items, and Discount Points; • 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. (1) Personal Property (TOTAL) 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 •
      window treatment • other items determined appropriate by FHA (2) Sales Commission
      (TOTAL) 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, and the same real estate broker or agent is involved in both transactions,
      and the seller is paying a real estate commission on the Property being purchased
      by the Borrower that exceeds what is typical for the area. (3) Rent Below Fair
      Market (TOTAL) A reduced rent is an inducement to purchase when the sales contract
      includes terms permitting the Borrower to live in the Property rent-free or
      has an agreement to occupy the Property at a rental amount greater than 10 percent
      II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT A. Title II Insured Housing
      Programs Forward Mortgages 4. Underwriting the Borrower Using the TOTAL Mortgage
      Scorecard (TOTAL) Handbook 4000.1 263 Last Revised: 11/26/2025 below the Appraiser’s
      estimate of fair market rent. When such an inducement exists, the amount of
      inducement is the difference between the rent charged and the Appraiser’s estimate
      of fair market rent pro-rated over the period between execution of the sales
      contract and execution of the Property sale. Rent below fair market 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 (TOTAL) 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 Mortgagee must ensure that a Gift provided
      by a charitable organization meets the appropriate FHA requirements, and that
      the transfer of funds is properly documented. (1) 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. (2) Mortgagee Responsibility
      for Ensuring that Downpayment Assistance Provider is a Charitable Organization
      The Mortgagee 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.
      II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT A. Title II Insured Housing
      Programs Forward Mortgages 4. Underwriting the Borrower Using the TOTAL Mortgage
      Scorecard (TOTAL) Handbook 4000.1 264 Last Revised: 11/26/2025 One resource
      for this information is the Tax Exempt Organization Search, which contains a
      list of organizations eligible to receive tax-deductible charitable contributions.
      (J) Secondary Financing (TOTAL) Secondary Financing is any financing other than
      the first Mortgage 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. (1) Secondary Financing Provided by Governmental Entities and HOPE
      Grantees (TOTAL) (a) Definitions A Governmental Entity refers to any federal,
      state, or local government agency or instrumentality. To be considered an Instrumentality
      of Government, the entity must be established by a governmental body or with
      governmental approval or under special law to serve a particular public purpose
      or designated by law (statute or court opinion) and does not have 501(c)(3)
      status. HUD deems Section 115 entities to be Instrumentalities of Government
      for the purpose of providing secondary financing. Homeownership and Opportunity
      for People Everywhere (HOPE) Grantee refers to an entity designated in the homeownership
      plan submitted by an applicant for an implementation grant under the HOPE program.
      (b) Standard FHA will insure a first Mortgage on a Property that has a second
      Mortgage or lien made or held by a Governmental Entity, provided that: • the
      secondary financing is disclosed at the time of application; • no costs associated
      with the secondary financing are financed into the FHA-insured first Mortgage;
      • the insured first Mortgage does not exceed the FHA Nationwide Mortgage Limit
      for the area in which the Property is located; • the secondary financing payments
      are included in the total Mortgage Payment; • any secondary financing of the
      Borrower’s MRI fully complies with the additional requirements set forth in
      Source Requirements for the Borrower’s Minimum Required Investment (TOTAL);
      II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT A. Title II Insured Housing
      Programs Forward Mortgages 4. Underwriting the Borrower Using the TOTAL Mortgage
      Scorecard (TOTAL) Handbook 4000.1 265 Last Revised: 11/26/2025 • the secondary
      financing does not result in cash back to the Borrower except for refund of
      earnest money deposit or other Borrower costs paid outside of closing; and •
      the second lien does not provide for a balloon payment within 10 years from
      the date of execution. Nonprofits assisting a Governmental Entity in the operation
      of its secondary financing programs must have HUD approval and placement on
      the Nonprofit Organization Roster unless there is a documented agreement that:
      • specifies the functions performed are within the Governmental Entity’s secondary
      financing program; and • names the Governmental Entity as the Mortgagee in the
      secondary financing legal documents (Note and Deed of Trust). Secondary financing
      that will close in the name of the nonprofit and be held by a Governmental Entity
      must be made by a HUD-approved Nonprofit. The Mortgagee must enter information
      on HUD-approved Nonprofits into FHA Connection (FHAC), as applicable. Secondary
      financing provided by Governmental Entities or HOPE grantees may be used to
      meet the Borrower’s MRI. Any loan of the Borrower’s MRI must also comply with
      the additional requirements set forth in Source Requirements for the Borrower’s
      Minimum Required Investment (TOTAL). There is no maximum Combined Loan-to-Value
      (CLTV) for secondary financing loans provided by Governmental Entities or HOPE
      grantees. Any secondary financing meeting this standard is deemed to have prior
      approval in accordance with 24 CFR § 203.32. (c) Required Documentation The
      Mortgagee must obtain from the provider of any secondary financing: • documentation
      showing the amount of funds provided to the Borrower for each transaction; •
      copies of the Mortgage and Note; and • a letter from the Governmental Entity
      on their letterhead evidencing the relationship between them and the nonprofit
      for each FHA-insured Mortgage, signed by an authorized official and containing
      the following information: o the FHA case number for the first Mortgage; o the
      complete property address; o the name, address and Tax ID for the nonprofit;
      o the name of the Borrower(s) to whom the nonprofit is providing secondary financing;
      II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT A. Title II Insured Housing
      Programs Forward Mortgages 4. Underwriting the Borrower Using the TOTAL Mortgage
      Scorecard (TOTAL) Handbook 4000.1 266 Last Revised: 11/26/2025 o the amount
      and purpose for the secondary financing provided to the Borrower; and o a statement
      indicating whether the secondary financing: ▪ will close in the name of the
      Governmental Entity; or ▪ will be closed in the name of the nonprofit and held
      by the Governmental Entity. Nonprofits assisting a Governmental Entity in the
      operation of its secondary financing programs must have HUD approval and placement
      on the Nonprofit Organization Roster unless there is a documented agreement
      that: • specifies the functions performed are within the Governmental Entity’s
      secondary financing program; and • names the Governmental Entity as the Mortgagee
      in the secondary financing legal documents (Note and Deed of Trust). Where a
      nonprofit meets the criteria identified in Section 115 of the IRC for exclusion
      of taxation, the nonprofit must provide one of the following: • a letter from
      the organization’s auditor; • a written statement from the organization’s General
      Counsel, as an official of the organization; • a determination or ruling letter
      issued by the IRS; or • an equivalent document evidencing Section 115 status.
      (2) Secondary Financing Provided by HUD-Approved Nonprofits (TOTAL) (a) Definition
      A HUD-approved Nonprofit is a nonprofit agency approved by HUD to act as a mortgagor
      using FHA mortgage insurance, purchase the Department’s Real Estate Owned (REO)
      Properties (HUD Homes) at a discount, and provide secondary financing. HUD-approved
      Nonprofits appear on the HUD Nonprofit Roster. (b) Standard FHA will insure
      a first Mortgage on a Property that has a second Mortgage or lien held by a
      HUD-approved Nonprofit, provided that: • the secondary financing is disclosed
      at the time of application; • no costs associated with the secondary financing
      are financed into the FHA-insured first Mortgage; • the secondary financing
      payments must be included in the total Mortgage Payment; • the secondary financing
      must not result in cash back to the Borrower except for refund of earnest money
      deposit or other Borrower costs paid outside of closing; II. ORIGINATION THROUGH
      POST-CLOSING/ENDORSEMENT A. Title II Insured Housing Programs Forward Mortgages
      4. Underwriting the Borrower Using the TOTAL Mortgage Scorecard (TOTAL) Handbook
      4000.1 267 Last Revised: 11/26/2025 • the secondary financing may not be used
      to meet the Borrower’s MRI; • there is no maximum CLTV for secondary financing
      loans provided by HUD-approved Nonprofits; and • the second lien may not provide
      for a balloon payment within 10 years from the date of execution. Secondary
      financing provided by Section 115 entities must follow the guidance in Secondary
      Financing Provided by Governmental Entities and HOPE Grantees (TOTAL). Any secondary
      financing meeting this standard is deemed to have prior approval in accordance
      with 24 CFR § 203.32. (c) Required Documentation The Mortgagee must obtain from
      the provider of any secondary financing: • documentation showing the amount
      of funds provided to the Borrower for each transaction; and • copies of the
      Mortgage and Note. The Mortgagee must enter information into FHAC on the nonprofit
      and the Governmental Entity as applicable. If there is more than one nonprofit,
      enter information on all nonprofits. (3) Family Members (TOTAL) (a) Standard
      FHA will insure a first Mortgage on a Property that has a second Mortgage or
      lien held by a Family Member, provided that: • the secondary financing is disclosed
      at the time of application; • no costs associated with the secondary financing
      are financed into the FHA-insured first Mortgage; • the secondary financing
      payments must be included in the total Mortgage Payment; • the secondary financing
      must not result in cash back to the Borrower except for refund of earnest money
      deposit or other Borrower costs paid outside of closing; • the secondary financing
      may be used to meet the Borrower’s MRI; • the CLTV ratio of the Base Loan Amount
      and secondary financing amount must not exceed 100 percent of the Adjusted Value;
      • the second lien may not provide for a balloon payment within 10 years from
      the date of execution; • any periodic payments are level and monthly; • there
      is no prepayment penalty; II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT A.
      Title II Insured Housing Programs Forward Mortgages 4. Underwriting the Borrower
      Using the TOTAL Mortgage Scorecard (TOTAL) Handbook 4000.1 268 Last Revised:
      11/26/2025 • if the Family Member providing the secondary financing borrows
      the funds, the lending source may not be an entity with an Identity of Interest
      in the sale of the Property, such as the: o seller; o builder; o loan originator;
      or o real estate agent; • mortgage companies with retail banking Affiliates
      may have the Affiliate lend the funds to the Family Member. However, the terms
      and conditions of the loan to the Family Member cannot be more favorable than
      they would be for any other Borrowers; • if funds loaned by the Family Member
      are borrowed from an acceptable source, the Borrower may not be a co-Obligor
      on the Note; • if the loan from the Family Member is secured by the subject
      Property, only the Family Member provider may be the Note holder; and • the
      secondary financing provided by the Family Member must not be transferred to
      another entity at or subsequent to closing. Any secondary financing meeting
      this standard is deemed to have prior approval in accordance with 24 CFR § 203.32.
      (b) Required Documentation The Mortgagee must obtain from the provider of any
      secondary financing: • documentation showing the amount of funds provided to
      the Borrower for each transaction and source of funds; and • copies of the Mortgage
      and Note. If the secondary financing funds are being borrowed by the Family
      Member and documentation from the bank or other savings account is not available,
      the Mortgagee must have the Family Member provide written evidence that the
      funds were borrowed from an acceptable source, not from a party to the transaction,
      including the Mortgagee. (4) Private Individuals and Other Organizations (TOTAL)
      (a) Definition Private Individuals and Other Organizations refer to any individuals
      or entities providing secondary financing which are not covered elsewhere in
      this Secondary Financing section. (b) Standard FHA will insure a first Mortgage
      on a Property that has a second Mortgage or lien held by private individuals
      and other organizations, provided that: II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT
      A. Title II Insured Housing Programs Forward Mortgages 4. Underwriting the Borrower
      Using the TOTAL Mortgage Scorecard (TOTAL) Handbook 4000.1 269 Last Revised:
      11/26/2025 • the secondary financing is disclosed at the time of application;
      • no costs associated with the secondary financing are financed into the FHA-insured
      first Mortgage; • the secondary financing payments must be included in the total
      Mortgage Payment; • the secondary financing must not result in cash back to
      the Borrower except for refund of earnest money deposit or other Borrower costs
      paid outside of closing; • the secondary financing may not be used to meet the
      Borrower’s MRI; • the CLTV ratio of the Base Loan Amount and secondary financing
      amount must not exceed the applicable FHA LTV limit; • the Base Loan Amount
      and secondary financing amount must not exceed the Nationwide Mortgage Limits;
      • the second lien may not provide for a balloon payment within 10 years from
      the date of execution; • any periodic payments are level and monthly; and •
      there is no prepayment penalty, after giving the Mortgagee 30 Days advance notice.
      Any secondary financing meeting this standard is deemed to have prior approval
      in accordance with 24 CFR § 203.32. (c) Required Documentation The Mortgagee
      must obtain from the provider of any secondary financing: • documentation showing
      the amount of funds provided to the Borrower for each transaction; and • copies
      of the Mortgage and Note. (K) Loans (TOTAL) A Loan refers to an arrangement
      in which a lender gives money or Property to a Borrower and the Borrower agrees
      to return the Property or repay the money. (1) Collateralized Loans (TOTAL)
      (a) 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. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT
      A. Title II Insured Housing Programs Forward Mortgages 4. Underwriting the Borrower
      Using the TOTAL Mortgage Scorecard (TOTAL) Handbook 4000.1 270 Last Revised:
      11/26/2025 (b) Standard Loans secured against deposited funds, where repayment
      may be obtained through extinguishing the asset, do not require consideration
      of repayment for qualifying purposes. The Mortgagee must reduce the amount of
      the corresponding asset by the amount of the collateralized loan. (c) Who May
      Provide Collateralized Loans Only an independent third party may provide the
      borrowed funds for collateralized loans. The seller, real estate agent or broker,
      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 MRI must also comply with the additional
      requirements set forth in Source Requirements for the Borrower’s Minimum Required
      Investment (TOTAL). (d) Required Documentation The Mortgagee 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. (2) Retirement
      Account Loans (TOTAL) (a) Definition A Retirement Account Loan is a loan that
      is secured by the Borrower’s retirement assets. (b) Standard The Mortgagee must
      reduce the amount of the retirement account asset by the amount of the outstanding
      balance of the retirement account loan. (c) Required Documentation The Mortgagee
      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
      A. Title II Insured Housing Programs Forward Mortgages 4. Underwriting the Borrower
      Using the TOTAL Mortgage Scorecard (TOTAL) Handbook 4000.1 271 Last Revised:
      11/26/2025 (3) Disaster Relief Loans (TOTAL) (a) Definition Disaster Relief
      Loans refer to loans from a Governmental Entity that provide immediate housing
      assistance to individuals displaced due to a natural disaster. (b) Standard
      Secured or unsecured disaster relief loans administered by the Small Business
      Administration (SBA) may also be used. If the SBA loan will be secured by the
      Property being purchased, it must be clearly subordinate to the FHA- insured
      Mortgage, and meet the requirements for Secondary Financing Provided by Governmental
      Entities and HOPE Grantees (TOTAL). Any loan of the Borrower’s MRI must also
      comply with the additional requirements set forth in Source Requirements for
      the Borrower’s Minimum Required Investment (TOTAL). Any monthly payment arising
      from this type of loan must be included in the qualifying ratios. (c) Required
      Documentation The Mortgagee must verify and document the promissory Note. (L)
      Grants (TOTAL) (1) Disaster Relief Grants (TOTAL) (a) 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 MRI. (b) Required Documentation The Mortgagee
      must verify and document the Borrower’s receipt of the grant and terms of use.
      Any grant of the Borrower’s MRI must also comply with the additional requirements
      set forth in Source Requirements for the Borrower’s Minimum Required Investment
      (TOTAL). II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT A. Title II Insured
      Housing Programs Forward Mortgages 4. Underwriting the Borrower Using the TOTAL
      Mortgage Scorecard (TOTAL) Handbook 4000.1 272 Last Revised: 11/26/2025 (2)
      Federal Home Loan Bank Homeownership Set-Aside Grant Program (TOTAL) (a) Definition
      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.
      (b) Standard Any AHP Set-Aside funds used for the Borrower’s MRI must also comply
      with the additional requirements set forth in Source Requirements for the Borrower’s
      Minimum Required Investment (TOTAL). (c) Required Documentation The Mortgagee
      must verify and document the Borrower’s receipt of the grant and terms of use.
      The Mortgagee 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 (TOTAL) (1) 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, MIP, or any portion of the
      MRI. 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 A. Title II Insured Housing
      Programs Forward Mortgages 4. Underwriting the Borrower Using the TOTAL Mortgage
      Scorecard (TOTAL) Handbook 4000.1 273 Last Revised: 11/26/2025 (2) Standard
      (a) Relocation Guaranteed Purchase The Mortgagee may allow the net proceeds
      (relocation guaranteed purchase price minus the outstanding liens and expenses)
      to be used as cash to close. (b) Employer Assistance Plans The amount received
      under Employer Assistance Plans may be used as cash to close. (3) Required Documentation
      (a) Relocation Guaranteed Purchase If the Borrower is being transferred by their
      company under a guaranteed sales plan, the Mortgagee must obtain an executed
      buyout agreement signed by all parties and receipt of funds indicating that
      the employer or relocation service takes responsibility for the outstanding
      mortgage debt. The Mortgagee must verify and document the agreement guaranteeing
      employer purchase of the Borrower’s previous residence and the net proceeds
      from sale. (b) Employer Assistance Plans The Mortgagee must verify and document
      the Borrower’s receipt of assistance. If the employer provides this benefit
      after settlement, the Mortgagee must verify and document that the Borrower has
      sufficient cash for closing. (N) Sale of Personal Property (TOTAL) (1) Definition
      Personal Property refers to tangible property, other than Real Property, such
      as cars, recreational vehicles, stamps, coins, or other collectibles. (2) Standard
      The Mortgagee must use the lesser of the estimated value or actual sales price
      when determining the sufficiency of assets to close. (3) Required Documentation
      Borrowers may sell Personal Property to obtain cash for closing. II. ORIGINATION
      THROUGH POST-CLOSING/ENDORSEMENT A. Title II Insured Housing Programs Forward
      Mortgages 4. Underwriting the Borrower Using the TOTAL Mortgage Scorecard (TOTAL)
      Handbook 4000.1 274 Last Revised: 11/26/2025 The Mortgagee 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 mortgage transaction. (O) Trade-In of Manufactured
      Home (TOTAL) (1) Definition Trade-In of Manufactured Home refers to the Borrower’s
      sale or trade-in of another Manufactured Home that is not considered real estate
      to a Manufactured Housing dealer or an independent third party. (2) Standard
      The net proceeds from the Trade-In of a Manufactured Home may be utilized as
      the Borrower’s source of funds. Trade-ins cannot result in cash back to the
      Borrower from the dealer or independent third party. (3) Required Documentation
      The Mortgagee must verify and document the installment sales contract or other
      agreement evidencing a transaction and value of the trade-in or sale. The Mortgagee
      must obtain documentation to support the Trade Equity. (P) Sale of Real Property
      (TOTAL) (1) Definition The Sale of Real Property refers to the sale of Property
      currently owned by the Borrower. (2) Standard Net proceeds from the Sale of
      Real Property may be used as an acceptable source of funds. (3) Required Documentation
      The Mortgagee must verify and document the actual sale and the Net Sale Proceeds
      by obtaining a fully executed Closing Disclosure or similar legal document.
      II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT A. Title II Insured Housing
      Programs Forward Mortgages 4. Underwriting the Borrower Using the TOTAL Mortgage
      Scorecard (TOTAL) Handbook 4000.1 275 Last Revised: 11/26/2025 The Mortgagee
      must also verify and document that it is 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 (TOTAL) (1) Definition Real Estate Commission
      from Sale of Subject Property refers to the Borrower’s (i.e., buyer’s) portion
      of a real estate commission earned from the sale of the Property being purchased.
      (2) Standard Mortgagees may consider Real Estate Commissions from the Sale of
      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.
      (3) Required Documentation The Mortgagee 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 Sale of Subject Property
      being purchased. (R) Sweat Equity (TOTAL) (1) Definition Sweat Equity refers
      to labor performed, or materials furnished, by or on behalf of the Borrower
      before closing on the Property being purchased. (2) Standard The Mortgagee may
      consider the reasonable estimated cost of the work or materials as an acceptable
      source of funds. Sweat Equity provided by anyone other than the Borrower can
      only be used as an MRI if it meets the Source Requirements for the Borrower’s
      Minimum Required Investment (TOTAL). The Mortgagee may consider any amount as
      Sweat Equity that has not already been included in the mortgage amount. The
      Mortgagee may not consider clean up, debris removal, and other general maintenance,
      and work to be performed using repair escrow as Sweat Equity. Cash back to the
      Borrower is not permitted in Sweat Equity transactions. II. ORIGINATION THROUGH
      POST-CLOSING/ENDORSEMENT A. Title II Insured Housing Programs Forward Mortgages
      4. Underwriting the Borrower Using the TOTAL Mortgage Scorecard (TOTAL) Handbook
      4000.1 276 Last Revised: 11/26/2025 (3) Required Documentation For materials
      furnished, the Mortgagee must obtain evidence of the source of funds and the
      Market Value of the materials. For labor, the Mortgagee must verify and document
      that the work will be completed in a satisfactory manner. The Mortgagee must
      also obtain evidence of Contributory Value of the labor either through an Appraiser’s
      estimate, or a cost- estimating service. • For labor on Existing Construction,
      the Mortgagee must also obtain an appraisal indicating the repairs or improvements
      to be performed. (Any work completed or materials provided before the appraisal
      are not eligible.) • For labor on New Construction, the Mortgagee must also
      obtain the sales contract indicating the tasks to be performed by the Borrower
      during construction. (S) Trade Equity (TOTAL) (1) Definition Trade Equity refers
      to when a Borrower trades their Real Property to the seller as part of the cash
      investment. (2) Standard The amount of the Borrower’s equity contribution is
      determined by: • using the lesser of the Property’s appraised value or sales
      price; and • subtracting all liens against the Property being traded, along
      with any real estate commission. If the Property being traded has an FHA-insured
      Mortgage, assumption processing requirements and restrictions apply. (3) Required
      Documentation The Mortgagee must obtain a residential appraisal report complying
      with FHA appraisal policy to determine the Property’s value. The Mortgagee must
      also obtain the Closing Disclosure or similar legal document to document the
      sale of the Property. (T) Rent Credits (TOTAL) (1) Definition Rent Credits refer
      to the amount of the rental payment that exceeds the Appraiser’s estimate of
      fair market rent. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT A. Title
      II Insured Housing Programs Forward Mortgages 4. Underwriting the Borrower Using
      the TOTAL Mortgage Scorecard (TOTAL) Handbook 4000.1 277 Last Revised: 11/26/2025
      (2) Standard The Mortgagee may use the cumulative amount of rental payments
      that exceeds the Appraiser’s estimate of fair market rent toward the MRI. (3)
      Required Documentation The Mortgagee must obtain the rent with option to purchase
      agreement, the Appraiser’s estimate of market rent, and evidence of receipt
      of payments.'
  judgment: false
