Texas State Aordable Housing Corporation
6701 Shirley Ave
Austin, TX 78752
Guidelines for Down Payment Assistance
(Bond and Non-Bond) and Mortgage
Credit Certicates
Revised: October 31, 2023
website: tsahc.org
toll-free phone: 888-638-3555
social media: @TSAHC
TSAHC Program Guidelines for Homeownership Programs
Texas State Aordable Housing Corporation
Page 2 of 37Revised 10.31.2023
Revisions Table.
Section Page Description of Revisions Date
Various -
Revised to reect Lakeview Loan Servicing, LLC (“Lakeview”), as
master servicer for the Programs.
3/20/2017
7.2 22-25
Claried process for requesting rate lock extensions and fees for
same
3/30/2017
7.2 22-25 Post-Closing package due within ve (5) calendar days of closing 4/06/2017
5.1 19-20 FHA Manual Underwrite – 640 FICO Minimum 4/19/2017
2.1 5-8
Added active military to veteran denition in reference to Homes
for Texas Heroes
1/15/2018
2.3 9-10
Revised rental history requirement for rst-time home buyers
using MCC
1/15/2018
2.5 10-11
Clarication of Texas resident requirement for the Homes for Texas
Heroes program
1/15/2018
5.2 20
Clarication of cosigner and non-occupying co-borrower
requirements
1/15/2018
7.1 22 Revised down payment assistance funding process 1/15/2018
4.2, 5.1
14-17,
19-20
Addition of manufactured housing to eligible condos 5/01/2018
2.3 9-10 Clarication for using TSAHC assistance multiple times 5/01/2018
2.1, 2.3 5-8, 9-10
Claried veteran denition in reference to waiving rst-time home
buyer requirement for Mortgage Credit Certicate
5/01/2018
2.6 11
Revised completion by at least one borrower of home buyer
education course
5/05/2018
3.3, 5.1, 7.2
12-14, 19-
20, 22-25
Introducing TSAHC’s new soft second lien down payment
assistance
8/20/2018
3.3 12-14 Claried soft second lien repayment requirement 8/29/2018
3.3 12-14 Revised MCC credit rate from 40% to 30% 2/04/2019
3.4 14 Claried usage of additional subsidy 2/04/2019
3.3 12-14
Revised MCC credit rate from 30% to 20% and removed $2,000
max credit
2/27/2019
Various - Added Bond DPA-related provisions 4/03/2019
Various -
Added HFA Preferred PLUS product including additional second
lien options
4/03/2019
Various - Claried changes to the HFA Preferred PLUS product 9/05/2019
Disclaimer: The Texas State Aordable Housing Corporation (TSAHC) provides these Program
Guidelines (these “Guidelines”) as a service to its participating lenders (“Lenders”). While TSAHC
strives to make the information in these Guidelines as accurate as possible, we make no claims,
promises, or guarantees about the accuracy, completeness, or adequacy of these Guidelines. TSAHC
expressly disclaims liability for errors and omissions in the contents of these Guidelines related to
the eligibility and underwriting requirements of Lakeview Loan Servicing, LLC, Fannie Mae, Freddie
Mac, FHA, USDA-RHS, and/or VA. For those requirements, Lenders should rely on their agreements
with, and guidelines published by, the relevant entity.
TSAHC Program Guidelines for Homeownership Programs
Texas State Aordable Housing Corporation
Page 3 of 37Revised 10.31.2023
3.1 11-12
Added back the option to combine the MCC to the HFA Preferred
Conventional DPA
9/05/2019
2.3 9-10 Revised rental history requirement for rst-time home buyers 10/01/2019
Various -
Eliminated TSAHC’s grant and soft second lien for use with
conventional loan types
11/29/2019
3.3, 5.1, 7.2
12-14, 19-
20, 22-25
Introducing TSAHC’s new 3-year Deferred Forgivable Second Lien
for all loan types
12/02/2019
5.1 19-20
Now accepting Freddie Mac HFA Advantage with LPA AUS up to
115% AMFI
12/02/2019
5.1 19-20 Fannie Mae HFA Preferred Conventional limited to < 80% AMFI 12/02/2019
5.2 20
Cosigners or non-occupying co-borrowers are now permitted on
all government loans
12/02/2019
5.2 20
Claried cosigners or non-occupying co-borrowers are not
permitted on conventional
2/03/2020
2.3 9-10 Changed IRS printouts to read IRS transcripts 2/03/2020
5.1 19-20
Now accepting Fannie Mae HFA Preferred Conventional up to
115% AMFI
2/03/2020
5.1 19-20
In response to the COVID-19 pandemic, the following interim
guidance will be eective with all locks on or after May 4,2020, the
minimum FICO score for FHA, VA and USDA products is 700 when
the DTI is >45%.
5/04/2020
3.3 12-14 Claried that the DPA is based on TOTAL loan amount 9/2/2020
3.3 12-14 Claried that a principal reduction is acceptable use of DPA 9/2/2020
5.2 20
Claried only occupying borrowers and non-purchasing spouses
(NPS) may have an ownership interest in the subject property
4/15/2021
7,2 24 Update to reservation extension fees 4/15/2021
5.1 19
Removed the minimum 700 FICO score when the DTI is >45% for
FHA, VA and USDA products eective with new reservations April
29, 2021.
4/29/2021
4.3 17
Eliminating purchase price limits for Non-Bond DPA when used by
itself (no MCC).
10/01/2021
7.2 22
Update to extension fees eective with new reservations May 20,
2022
5/20/2022
3.3 12-13
Addition of 2% DPA for all products with new reservations April 20,
2022
4/20/2022
4.2 14-15
Removed specic FNMA 2-4 unit requirements since FHLMC is
aligned
8/26/2022
3.3 12-13 Added link to DPA 3-year Deferred Forgivable Second Lien FAQ 8/26/2022
7.2 22-24
Correction by deleting extension request language that incorrectly
limited extensions to 90-days
8/26/2022
5.2 20
Cosigners or non-occupying co-borrowers are now allowed with
all loan types
8/26/2022
6.2 21-22
Reduced lender compensation Servicing Released Premium from
2.50% to 1.50% and now allowing lenders to charge a 1.00%
origination charge
12/5/2022
TSAHC Program Guidelines for Homeownership Programs
Texas State Aordable Housing Corporation
Page 4 of 37Revised 10.31.2023
Appendix 31
Clarifying a married couples total gross income of both persons
must be counted in household income for MCC and Bond loan
eligibility purposes
12/15/2022
6.1 21 MCC Fee mailing address updated to correct address 12/15/2022
3.3 13
Included 3-year Deferred Forgivable Second Lien option with Bond
DPA
2/1/2023
7.2 25 Update to reservation extension fees 5/15/2023
3.3 14 Claried 3-year forgivable second lien repayment terms 6/12/2023
3.3 14 Claried language about second lien assistance amounts 8/22/2023
The MCC only program (standalone MCC) has been discontinued indenitely. 11/1/2023
TSAHC Program Guidelines for Homeownership Programs
Texas State Aordable Housing Corporation
Page 5 of 37Revised 10.31.2023
Table of ConTenTs.
Revisions Table
SECTION 1 - INTRODUCTION TO THE TSAHC HOMEOWNERSHIP PROGRAMS
1.1 General
SECTION 2 – MORTGAGOR ELIGIBILITY
2.1 Eligible Borrowers
2.2 Income Limitation
2.3 First-Time Home Buyer Requirement
2.4 New Mortgage Requirement/No Renancing
2.5 Principal Residence Requirement
2.6 Residency Requirements
2.7 Home Buyer Education
SECTION 3 – LOAN ELIGIBILITY
3.1 Types of Loans
3.2 Purpose of Loan
3.3 Assistance Options – Non-Bond DPA (with or without MCC), Bond DPA or MCC Only
3.4 Using Additional Subsidy Programs
3.5 Mortgage Subsidy Recapture Tax
SECTION 4 – PROPERTY ELIGIBILITY
4.1 Eligible Loan Area
4.2 Qualifying Residences and Mortgage Loans
4.3 Purchase Price Limitation
4.4 Targeted Areas
SECTION 5 – MORTGAGE LOAN UNDERWRITING AND PURCHASE
5.1 General Mortgage Underwriting
5.2 Cosigners and Non-Occupant Co-Borrowers
SECTION 6 – PROGRAM FEES AND CHARGES
6.1 Program Fees
6.2 Lender Compensation
6.3 Fees and Charges on the Closing Disclosure
SECTION 7 – LOAN RESERVATION, COMPLIANCE & FUNDING PROCEDURES
7.1 Lender Portal
7.2 Reservation, Compliance and Closing Steps
7.3 Electronic Submission of Required Documents
SECTION 8 – MODIFICATIONS
8.1 Changes in Current Income
8.2 Change in Purchase Price
8.3 Changes in Property Address
8.4 Change in Loan Amount
8.5 Lender’s Obligation to Notify TSAHC of Material Changes
SECTION 9 – ADDITIONAL PROVISIONS
9.1 Cancellation and Commitment Expirations
9.2 Delinquent Closing Documentation
9.3 Penalties for Borrower Misrepresentation
9.4 Revocations of MCC
9.5 Reissued MCCs
9.6 Replacement MCCs
SECTION 10 – MCC REPORTING
10.1 Lender Record Keeping and Federal Report Filing
10.2 TSAHC Reports
APPENDIX: INCOME GUIDELINES FOR BORROWERS RECEIVING BOND DPA OR MCCs
TSAHC Program Guidelines for Homeownership Programs
Texas State Aordable Housing Corporation
Page 6 of 37Revised 10.31.2023
seCTion 1 - inTRoduCTion To The TsahC homeowneRship pRogRams.
1.1 General
The Texas State Aordable Housing Corporation (TSAHC) provides (1) xed-rate mortgage
loans with down payment assistance (DPA) to qualied mortgagors, and (2) mortgage credit
certicates (MCCs) to qualied mortgagors.
The DPA is provided from two dierent sources: (i) “Non-Bond DPA” which is nanced through
non-bond, market sales of mortgage-backed securities backed by the loans, and (ii) “Bond DPA”
which is provided from the proceeds of tax-exempt single family mortgage revenue bonds
issued under Section 143 of the Internal Revenue Code.
MCCs, which are issued under Section 25 of the Internal Revenue Code, provide a tax credit to
the borrower based on the amount of the loan interest paid. MCCs may be issued with respect
to (1) loans with Non-Bond DPA (but not Bond DPA) and (2) loans which are made by lenders
which do not have Non-Bond or Bond DPA.
Non-Bond DPA, Bond DPA and MCCs are available to teachers, veterans, police ocers,
corrections ocers, re ghters, and low- to moderate-income home buyers through our
Homes for Texas Heroes Program and Home Sweet Texas Loan Program (each a “Program” and
together the “Programs”).
TSAHC provides an online reservation and compliance system (Lender Portal) at www.tsm-
online.org where interest rates are locked and funds are reserved. TSAHC also provides these
Program Guidelines (also referred to below as these “Guidelines”) and applicable forms and
adavits, and reviews compliance packages to ensure TSAHC’s eligibility requirements are met.
The Program Guidelines describe the current rules and requirements, outline the role of TSAHC,
and set forth the requirements for Lenders to participate. TSAHC may revise the Program
Guidelines from time to time. The most current version can be found on TSAHC’s website at
www.tsahc.org and on the Lender Portal at www.tsm-online.org.
TSAHC’s master servicer for loans with DPA is Lakeview Loan Servicing, LLC (“Lakeview”). All
loans with Non-Bond DPA, whether with or without an MCC, and all loans with Bond DPA, will
be sold to and serviced by Lakeview. Loans with DPA must also follow the Lakeview Selling
Guide and product matrices found on www.tsm-online.org.
seCTion 2– moRTgagoR eligibiliTy.
2.1 Eligible Borrowers
A “Home Sweet Texas” eligible borrower is a person who at the time of loan application and
loan closing has income no greater than the applicable maximum income for the Home Sweet
Texas Program found on TSAHC’s website at www.tsahc.org or the Lender Portal at www.tsm-
online.org.
A “Texas Hero” eligible borrower is a person who at the time of loan application and loan closing
(i) has income no greater than the applicable maximum income for the Homes for Texas Heroes
Program found on TSAHC’s website at www.tsahc.org or the Lender Portal at www.tsm-online.
org, and (ii) is employed full-time as a(n):
TSAHC Program Guidelines for Homeownership Programs
Texas State Aordable Housing Corporation
Page 7 of 37Revised 10.31.2023
Allied Health Faculty Member – a full-time member of the faculty of an undergraduate
or graduate allied health program of a public or private institution of higher education
in the state.
Corrections Ocer – a full-time employee of the Texas Department of Criminal Justice
(TDCJ) who receives hazardous duty pay.
County Jailer – a person employed full-time as a county jail guard under Section 85.005,
Local Government Code. County jailers are licensed through the Texas Commission on
Law Enforcement (TCOLE).
Emergency Medical Services Personnel – per Section 773.003, Health and Safety Code,
emergency medical services personnel are full-time:
• emergency care attendants;
• emergency medical technicians;
• emergency medical technicians-intermediate;
• emergency medical technicians-paramedic; or
• licensed paramedics.
Fire Fighter – a member of a re department who performs a function listed in Section
419.021(3)(c), Government Code. Permanent, full-time re department employees
who are not secretaries, stenographers, clerks, budget analysts, or similar support sta
persons or other administrative employees and who are assigned duties in one or more
of the following categories:
• re suppression;
• re inspection;
• re and arson investigation;
• marine reghting;
• aircraft rescue and reghting;
• re training;
• re education;
• re administration; and
• any other position necessarily or customarily related to re prevention or
suppression.
Juvenile Corrections Ocer – a full-time employee of the Texas Juvenile Justice
Department (TJJD) who receives hazardous duty pay. Juvenile corrections ocers must
have a VOE through TJJD.
Nursing Faculty Member – a full-time member of the faculty of either an undergraduate
or graduate professional nursing program.
Peace Ocer – a person elected, employed, or appointed as a full-time peace ocer
TSAHC Program Guidelines for Homeownership Programs
Texas State Aordable Housing Corporation
Page 8 of 37Revised 10.31.2023
under Article 2.12, Code of Criminal Procedure; Section 51.212 or 51.214, Education
Code; or other law. Peace ocers are licensed through the Texas Commission on Law
Enforcement (TCOLE).
Professional Educator – a full-time, public K-12:
• classroom teacher,
• teacher aide,
• school librarian,
• school counselor, or
• school nurse.
Public Security Ocer - a person employed or appointed full-time as an armed security
ocer by this state or a political subdivision of this state. The term does not include a
security ocer employed by a private security company that contracts with this state
or a political subdivision of this state to provide security services for the entity. Public
security ocers are licensed through the Texas Commission on Law Enforcement
(TCOLE).
Veteran – a person who:
A. is serving on active duty, at the time of application, assigned to a military base
or facility in Texas, and has ocially designated Texas as the applicant’s home
of record. (note: this denition of “Veteran” is dierent from the denition of
“Qualied Veteran” (see section 2.3 below) used to determine if the rst-time
home buyer requirement can be waived for Bond DPA or an MCC); or
B. meets each of the following 3 requirements:
1. meets at least one of the following:
i. served not less than 90 days, unless sooner discharged by reason
of a service-connected disability, on active duty in the Army,
Navy, Air Force, Coast Guard, United States Public Health Service
(as constituted under 42 U.S.C. Section 201 et seq.), or Marine
Corps of the United States after September 16, 1940, and who on
the date of ling an application under the program has not been
dishonorably discharged from the branch of the service in which
the person served; or
ii. has at least 20 years of active or reserve military service as
computed when determining the person’s eligibility to receive
retired pay under applicable federal law; or
iii. has enlisted or received an appointment in the Texas National
Guard, who has completed all initial active duty training required
as a condition of the enlistment or appointment, and who on the
date of ling the person’s application has not been dishonorably
discharged from the Texas National Guard; or
TSAHC Program Guidelines for Homeownership Programs
Texas State Aordable Housing Corporation
Page 9 of 37Revised 10.31.2023
iv. served in the armed forces of the Republic of Vietnam between
February 28, 1961 and May 7, 1975;
2. at the time of the person’s enlistment, induction, commissioning,
appointment, or drafting was a bona de resident of this state or has
resided in this state at least one year immediately before the date of ling
an application under this chapter; and
3. at the time of the person’s application under this chapter is a bona de
resident of this state. The term includes the unmarried surviving spouse
of a veteran who died or who is identied as missing in action if the
deceased or missing veteran meets the requirements of this section, with
the exception that the deceased or missing veteran need not have served
90 days under Paragraph (A)(i) of this subdivision, and if the deceased
or missing veteran was a bona de resident of this state at the time of
enlistment, induction, commissioning, appointment, or drafting.
2.2 Income Limitation
Please refer to the Appendix for more information about calculating income for MCC
qualication purposes.
The income of the eligible borrower(s) must be less than or equal to the applicable
Program maximum income limit. Note that the Program maximum income limits
are signicantly higher for homes located in Targeted Areas. The Maximum Family
Income limits and the list of Targeted Areas are set forth on TSAHC’s website at
https://www.tsahc.org/lenders/resources-for-lenders#Income_and_Guidelines and the Lender
Portal at www.tsm-online.org.
For Non-Bond DPA (No MCC): For purposes of meeting the eligibility criteria, only the income
of the mortgagor(s) will be considered. The income of a non-purchasing spouse (NPS) will not
be included in the calculation. For example, only the income used to qualify the mortgagor
for repayment of the mortgage loan (from the 1003 loan application and/or the applicable
underwriting worksheet) will be compared against the program limits.
For Non-Bond DPA (with MCC), Bond DPA or MCC Only: For purposes of meeting the income
eligibility criteria, income from all family members living in the home with an ownership interest
is considered. Family income is calculated by taking the borrower’s current gross monthly
income from all sources, as well as that of anyone else who is expected to live in the residence
and become liable on the deed of trust (including a non-purchasing spouse) and multiplying
that amount by 12.
The Lender uses one of two methods of computation depending on whether the borrower is
employed or self-employed. Generally, family income for an employed person is computed by
multiplying the current gross monthly income gure by twelve. Sporadic income should be
averaged and added to that base gure for a total. Family income for a self-employed person
is computed by annualizing the year-to-date total on a current prot and loss statement and
averaging that amount with the net income gures from the two most recent years’ federal
income tax returns (with depreciation added back in).
A. Sources of Income. The IRS requires that every source of income, taxed or untaxed, be
TSAHC Program Guidelines for Homeownership Programs
Texas State Aordable Housing Corporation
Page 10 of 37Revised 10.31.2023
included in the calculation of family income.
B. Prior Year Earnings. On some pay stubs the year-to-date earnings include pay from the
last part of the prior year. In such circumstances, the borrower should request that the
employer provide a signed statement of verication. Otherwise, the borrower may be
deemed to exceed the maximum family income limits, due to an inated average, and
be disqualied.
2.3 First-Time Home Buyer Requirement
For Non-Bond DPA (No MCC): Borrowers are not required to be rst-time home buyers.
Borrowers may have previously owned or may currently own a home, provided that the home
being purchased becomes the borrower’s principal residence upon loan closing. If the borrower
purchased their current home using TSAHC’s DPA program, they must sell their current home
in order to be able to use the DPA program to purchase the new principal residence.
For MCC Only, Non-Bond DPA (with MCC), or Bond DPA: Mortgagor(s) applying for Bond DPA
or an MCC cannot have had an ownership interest in a principal residence at any time during
the preceding three years ending on the date the mortgage is executed. The mortgagor and
spouse, and any other adult who will be named on the deed of trust, must meet this rst-
time home buyer requirement. The rst-time home buyer requirement does not apply to
acquisitions of homes in Targeted Areas or if a mortgagor is a “Qualied Veteran” as dened in
the next paragraph.
“Qualied Veteran” means a person who is a “veteran” (as dened in 38 U.S.C. Section 101) who
has not previously obtained a loan nanced by single family mortgage revenue bonds utilizing
the Qualied Veteran’s exception to the rst-time homebuyer requirement (as set forth in
Section 143(d)(2)(D) of the Code). Under this denition of “veteran” (unlike the denition of
“Veteran” under section 2.1 above), active duty military do not qualify as a Qualied Veteran.)
This requirement must be veried by the Lender’s examination of the borrower’s federal tax
returns for the preceding 3 years (or by the other permitted documents described below) to
determine whether the borrower has claimed a deduction for mortgage interest or taxes on
real property claimed as a principal residence.
For purposes of the rst-time home buyer requirement, a person is treated as having an
ownership interest if such person is living in the home as his or her principal residence and is
listed on the deed of trust, even if he or she does not take a mortgage interest deduction on his
or her federal tax returns. For married couples, each spouse is treated as holding an ownership
interest, even if not listed on the deed of trust. For a person who is not a spouse (for example,
a parent of a mortgagor) who is a co-signor under, or a guarantor of, a promissory note secured
by the mortgage, but who does not occupy the property and has no present ownership interest
in the residence, is not required to satisfy the rst-time home buyer requirement.
Each borrower is required to submit acceptable documentation with his or her MCC or Bond
Loan application to demonstrate that he or she meets the rst-time home buyer requirement.
The following documentation options are acceptable:
a. Signed and dated Form 1040, 1040A or 1040EZ federal income tax returns for the past
3 years with all schedules that show no deductions for mortgage interest or real estate
taxes for a Principal Residence. Please note: For any loan closing after February 15 of a
TSAHC Program Guidelines for Homeownership Programs
Texas State Aordable Housing Corporation
Page 11 of 37Revised 10.31.2023
calendar year, the tax return for the prior calendar year MUST be included.
b. For borrowers who do not have copies of the actual tax returns submitted to the IRS,
the borrower may submit transcripts from the IRS that reect his or her 3 most recent
federal tax returns. The transcripts from the IRS do not have to be signed. The transcripts
can be submitted in lieu of the tax return copies, provided that the transcripts show that
no mortgage interest deduction was taken.
c. For borrowers who are unable to obtain a computer printout from the IRS, as described
above, the borrower can request instead IRS Letter 1722, which summarizes pertinent
data from the Borrower’s tax returns for the requested years. However, the Borrower
must also obtain on the Letter 1722 a statement from the IRS that no mortgage interest
deduction was taken during the 3-year period for each year the borrower led a Form
1040 during the 3-year period.
d. For borrowers who cannot locate copies of their actual tax returns submitted to the IRS,
the borrower may request copies of the returns from the IRS using Form 4506.
e. In the event the borrower was not obligated to le federal income tax returns for any of
the preceding 3 years, this must be indicated on the Bond Program Adavit or the MCC
Program Adavit, as applicable. A borrower who cannot provide tax returns because
he/she did not le them when required to do so (and failed to le for any applicable
permitted extension), are not eligible for Bond DPA or an MCC.
If one or more of a borrower’s tax returns reect that the borrower took a deduction for
mortgage interest or real estate taxes on property claimed not to be the principal residence,
documentation (rent receipts or canceled checks) of the rental history is required beginning
with the period of said tax return through the Bond DPA or MCC application date.
An ownership interest in a mobile home will be considered a prior ownership interest in a
principal residence if the mobile home was (1) permanently attached or anchored to land and
had the wheels and other components used in transportation removed, and (2) taxed as real
property.
Remember, except for cases involving a self-employed borrower, the borrower submits copies
of 3 years’ tax returns NOT to verify income, but to verify rst-time home buyer status.
2.4 New Mortgage Requirement/No Renancing
The proceeds of the new mortgage loan (whether in conjunction with Non-Bond DPA, Bond
DPA or MCCs) cannot be used to acquire or replace an existing mortgage, i.e., each mortgage
loan must be made to a person who did not have a mortgage (whether or not paid o) on the
residence securing such mortgage loan at any time prior to the execution of the mortgage loan,
except for certain temporary initial nancing for a mortgage securing a construction period
loan, a construction bridge loan, or similar temporary initial construction nancing initially
incurred for the sole purpose of acquiring the Residence and initially incurred within twenty
four (24) months of the loan closing date, having an original term of twenty four (24) months or
less, and not providing for scheduled payments of principal during such term
2.5 Principal Residence Requirement
TSAHC Program Guidelines for Homeownership Programs
Texas State Aordable Housing Corporation
Page 12 of 37Revised 10.31.2023
The nanced residence must become the principal residence of the borrower within 60 days of
loan closing. A residence that is a vacation home is not a principal residence. Additionally, no
more than 15% of a qualifying residence may be used for trade or business purposes.
2.6 Residency Requirements
Homes for Texas Heroes Program: Borrowers must currently be a Texas resident or demonstrate
intent to be a resident of Texas. Individuals who are currently not living in Texas but have
accepted a job in one of the eligible professions listed under the Homes for Texas Heroes
Program are eligible. Please follow Lakeview, FHA, VA, USDA-RHS, Fannie Mae or Freddie Mac
guidelines related to non-U.S. citizen borrowers.
Home Sweet Texas Program: No residency requirements apply. Please follow Lakeview, FHA,
VA, USDA-RHS, Fannie Mae or Freddie Mac guidelines related to non-U.S. citizen borrowers.
2.7 Home Buyer Education
At least one borrower must complete a home buyer education course prior to closing. This
requirement can be met by attending an in-person or online counseling course listed at
www.texasnancialtoolbox.com.
seCTion 3 – loan eligibiliTy.
3.1 Types of Loans
For Non-Bond Loans or Bond Loans: Only 30-year, xed-rate mortgage loans are allowed.
Furthermore, the only loan types allowed are:
FHA Loans
• Must be originated and guaranteed in accordance with FHA guidelines and Lakeview
guidelines.
• 30-year xed and limited 203(k) only.
• Temporary buydowns are not permitted.
VA Loans
• Must be originated and guaranteed in accordance with VA guidelines and Lakeview
guidelines.
• 30-year xed only.
• Temporary buydowns are not permitted.
USDA Rural Housing Service (RHS) Loans
• Must be originated and guaranteed in accordance with USDA-RHS guidelines and
Lakeview guidelines.
• 30-year xed only.
• Temporary buydowns are not permitted.
TSAHC Program Guidelines for Homeownership Programs
Texas State Aordable Housing Corporation
Page 13 of 37Revised 10.31.2023
HFA Conventional Loans
• Must be originated and guaranteed in accordance with Lakeview guidelines and Fannie
Mae for the HFA Preferred loan product or Freddie Mac for the HFA Advantage loan
product.
• 30-year xed only.
• Temporary buydowns are not permitted.
For MCC Only (No DPA): There are no restrictions on the mortgage nancing with regard to
loan type (eligible with traditional conventional loan type), term or rate. However, only xed-
rate rst lien mortgages (as opposed to second mortgages) qualify. In addition, mortgage
loans funded with qualied mortgage bonds or qualied veteran’s mortgage bonds are not
eligible.
3.2 Purpose of Loans
Only rst lien mortgage loans for the purchase of a residence are eligible. No renancing of
existing mortgage loans is permitted.
3.3 Assistance Options – Non-Bond DPA (with or without MCC), Bond DPA or MCC Only
DPA: TSAHC oers down payment assistance (DPA) in the form of a non-repayable grant or a
3-year Deferred Forgivable Second Lien loan, as follows:
• For Non-Bond DPA Conventional Loans –3-year Deferred Forgivable Second Lien
• For Non-Bond DPA FHA/VA/RHS Loans – Grant and 3-year Deferred Forgivable Second
Lien
• For Bond DPA FHA/VA/RHS Loans – Grant and 3-year Deferred Forgivable Second Lien
The 3-year deferred forgivable second lien and grant is funded by the Lender at mortgage
closing. DPA may be used to fund the borrower’s cash requirement to close, including the
down payment, closing costs, pre-paid items, principal reduction and other related mortgage
loan fees and expenses. No portion of the DPA can be used to pay down debts or paid to
the borrower unless the borrower is being reimbursed for an overage of deposits for earnest
money and/or items paid outside of closing, to the extent the minimum borrower contribution
has been satised.
DPA Grant
• Grant assistance does not need to be repaid after six months from the rst lien mortgage
loan closing date originated in conjunction with the down payment assistance grant
• No second lien
• Minimum 620 credit score
• Borrower has the option to choose from four assistance levels: 2%, 3%, 4%, or 5% of the
total loan amount
• Available only with government loan types, the grant is not available for the HFA
conventional loan options
TSAHC Program Guidelines for Homeownership Programs
Texas State Aordable Housing Corporation
Page 14 of 37Revised 10.31.2023
DPA 3-year Deferred Forgivable Second Lien
• 0% interest with deferred principal payments (no monthly payments due)
• Forgiven, in full, upon maturity (third anniversary of the date of the Note)
• Repayable, in full, during 3-year term upon sale, transfer, renance, or if the rst lien
mortgage is paid in full for any reason or failure to occupy property as principal residence
or other event of default
• Second lien
• Minimum 620 credit score for government loans and 640 for HFA Conventional loans
• No additional fees on 3-year Deferred Forgivable Second Lien
• The borrower has the option to choose from four assistance levels: 2%, 3%, 4%, or 5% of
the total loan amount
• Available with all loan types
• Link to DPA 3-year Deferred Forgivable Second Lien FAQ
MCC: With an MCC, the qualied home buyer is eligible to apply a portion of the annual interest
paid on the mortgage as a federal tax credit, during each year that the mortgagors occupy
the home as their principal residence. The portion or amount of the tax credit is equal to the
mortgage credit rate on the MCC (20%) multiplied by the annual interest paid.
This credit reduces the federal income tax liability of the home buyer dollar-for-dollar, resulting
in an increase in the home buyer’s net earnings. Increased home buyer income results in
increased home buyer capacity to qualify for the mortgage loan.
In the example below, the credit amount is equal to the mortgage credit rate multiplied by the
annual interest paid on the mortgage Loan in that given year. For example:
Mortgage Loan Amount: $200,000
Interest Rate: 5.50%
Mortgage Credit Rate: 20%
$200,000 x 5.50% = $11,000 (approximate interest paid in the rst year)
$11,000 x 20% = $2,200 (Calculated Mortgage Credit Amount)
Please note: The annual benet to the borrower will be the lesser of the credit amount or
the amount of federal taxes owed after all other credits and deductions have been taken.
The benet cannot exceed the borrower’s federal income tax liability for the year. However,
if the Borrower is unable to use all the maximum available MCC tax credit in any year,
the unused portion of the tax credit can be carried forward three tax years or until used,
whichever comes rst.
A home buyer receiving an MCC can still take the normal tax deduction for interest paid on the
mortgage. However, the home buyer must deduct the claimed credit from the annual interest
TSAHC Program Guidelines for Homeownership Programs
Texas State Aordable Housing Corporation
Page 15 of 37Revised 10.31.2023
paid ($11,000 - $2,200 = $8,800) before claiming a deduction for the balance.
The mortgagor(s) may receive the full MCC tax credit annually at the time they le their tax
return or monthly by adjusting his or her federal income tax withholding by ling a revised
Form W-4 with his or her employer.
MCCs with Non-Bond DPA: Borrowers who are rst-time home buyers (and meet all applicable
MCC and Non-Bond DPA requirements) may receive both Non-Bond DPA and an MCC, taking
advantage of both forms of assistance. Borrowers must meet all the requirements relating to
MCCs (and Non-Bond DPA) to qualify. MCCs may not be used in conjunction with a Bond DPA.
3.4 Using Additional Subsidy Programs
Additional subsidy programs may be used in conjunction with TSAHC’s Programs provided
they meet the applicable FHA, VA, RHS, Ginnie Mae, Fannie Mae, Freddie Mac and Lakeview
guidelines, and provided that the subsidy funds are not attached to the rst lien mortgage,
either as a gift or as a second lien. Please contact TSAHC if you have questions about combining
another subsidy program with TSAHC’s down payment assistance. Remember, if using TSAHC’s
down payment assistance (whether Bond DPA or Non-Bond DPA) provided in the form of a
grant (and not in the form of a second lien loan), then second lien assistance from other sources
may be permitted in certain cases.
3.5 Mortgage Subsidy Recapture Tax
A borrower who receives Bond DPA or an MCC (with or without Non-Bond DPA) may be subject
to a federally imposed mortgage subsidy recapture tax (“Recapture Tax”) if the mortgagor sells
his or her residence within nine years of settlement. The tax, if any, will always be the lesser
of: (a) 50% of the gain from the sale of the home, and (b) an amount based on a formula
which takes into consideration: (1) the original principal amount of the rst mortgage loan;
(2) the number of complete years that pass before the home is sold; (3) the applicable median
family income for the home buyer’s area at the time he/she bought the home, and (4) the home
buyer’s adjusted gross income at the time the home is sold.
There are several conditions that can exempt a borrower from Recapture Tax. These include: (a)
no net gain on the sale of the property, (b) insucient increase in the income of the borrower
between the time of purchase and the time of sale, (c) sale of the home after the ninth year, and
(d) a sale due to death or divorce.
seCTion 4 – pRopeRTy eligibiliTy.
4.1 Eligible Loan Area
The home being purchased must be located in the State of Texas. The Lender should verify the
property’s location by reviewing the property appraisal and location where the property taxes
are paid.
4.2 Qualifying Residences and Mortgage Loans
Set forth below are tables showing the types of residences and rst lien mortgage loans that
qualify for such assistance. Denitions of certain terms are set forth below the tables.
TSAHC Program Guidelines for Homeownership Programs
Texas State Aordable Housing Corporation
Page 16 of 37Revised 10.31.2023
Non-Bond DPA (with or without MCCs)
Type of Residence
Government Loans
(FHA/VA/USDA-RHS)
HFA Conventional
Loans
Traditional
Conventional Loans
New or existing detached single
family home
ü ü O
New or existing condominium,
townhouse, or unit in a PUD or de
minimus PUD
ü
(Condo: FHA/VA
approved)
ü
(Condo: Fannie
Mae or Freddie Mac
approved)
O
Existing 2, 3 or 4-unit property,
provided that one of the units will
be occupied by the borrower and
the property has been occupied for
residential purposes for at least 5
years
ü ü O
New or existing manufactured
homes that meet HUD guidelines
(doublewide or greater)
ü O O
Bond DPA
Type of Residence
Government Loans
(FHA/VA/USDA-RHS)
HFA Conventional
Loans
Traditional
Conventional Loans
New or existing detached single
family home
ü O O
New or existing condominium,
townhouse, or unit in a PUD or de
minimus PUD
ü O O
Existing 2, 3 or 4-unit property,
provided that one of the units will
be occupied by the borrower and
the property has been occupied for
residential purposes for at least 5
years
ü O O
New or existing manufactured
homes that meet HUD guidelines
(doublewide or greater)
ü O O
TSAHC Program Guidelines for Homeownership Programs
Texas State Aordable Housing Corporation
Page 17 of 37Revised 10.31.2023
MCC Only (no DPA)
Type of Residence
Government Loans
(FHA/VA/USDA-RHS)
HFA Conventional
Loans
Traditional
Conventional Loans
New or existing detached single
family home
ü ü ü
New or existing condominium,
townhouse, or unit in a PUD or de
minimus PUD
ü ü ü
Existing 2, 3 or 4-unit property,
provided that one of the units will
be occupied by the borrower and
the property has been occupied for
residential purposes for at least 5
years
ü ü ü
New or existing manufactured
homes that meet HUD guidelines
(doublewide or greater)
ü ü ü
Note: In addition to the foregoing requirements, all manufactured homes must (i) be axed
to land and constitute “real property” under Texas law, and (ii) have at least 400 square feet of
living space and a minimum width in excess of 102 inches and which is customarily used at a
xed location.
The following types of residences are not eligible, regardless of loan type:
• Mobile homes (whether or not permanently axed to land)
• Rental homes
• Cooperative housing
• Homes used as investment properties
• Recreational, vacation or second homes
• Motor homes, campers and similar vehicles
The following denitions apply to terms used in the tables above:
• “Condominium” means a unit in a “Condominium Development” which is a real estate
development: (i) formed pursuant to the condominium statutes of the State of Texas and
a recorded declaration and other constituent documents; (ii) the unit owners of which
have title to a unit in a development, and may have the right to the exclusive use of
certain limited common areas; and (iii) the common areas of which are administered and
maintained by, but not owned by, an owners association, which may levy assessments
against each unit estate.
• “PUD” (planned unit development) means a real estate development of separately
owned lots, other than a de minimus PUD, with: (i) contiguous or noncontiguous areas
or facilities normally owned by an owners association in which the owners of the lots
have a stock or membership interest; (ii) title to the real estate under the dwelling
units being held by the individual lot owners and not by the owners association; (iii)
TSAHC Program Guidelines for Homeownership Programs
Texas State Aordable Housing Corporation
Page 18 of 37Revised 10.31.2023
the association having title to and responsibility for the administering of the common
areas, and levying monthly charges against the lot owners for common areas expenses;
and (iv) membership in the owners association not being severed from the ownership
of an individual unit.
• “de minimus PUD” means: (i) a planned unit development that meets the denition of a
“de minimus PUD,” as dened in the Fannie Mae Conventional Home Mortgage Selling
Contract Supplement or any applicable Freddie Mac document; or (ii) a planned unit
development (a) whose organizational or other relevant documents provide that the
lien for any homeowner assessment or charge is subordinate to the lien of any purchase
money mortgage, and (b) the maximum permissible annual homeowner assessments
and/or charges with respect to the property being nanced, as of the closing date of the
mortgage loan, is no greater than the lesser of $600.00 or 1% of the Sales Price. “Sales
Price” means the price of a residence as indicated in the contract of sale, including any
collateral agreements attached to or made a part of the sales contract between the
borrower and the seller of the residence, exclusive of any closing costs.
4.3 Purchase Price Limitation
The purchase price of the residence cannot exceed the applicable maximum purchase price
limit. The applicable maximum purchase price limits are set forth on TSAHC’s website at https://
www.tsahc.org/lenders/resources-for-lenders#Income_and_Guidelines and the Lender Portal
at www.tsm-online.org.
For Non-Bond DPA (no MCC), there are no purchase price limits when using the Non-Bond DPA
by itself.
For Bond DPA and MCCs, “purchase price” may be the sales price on the sales contract, but
under the applicable federal tax regulations, the purchase price calculation must consider
specic federal tax rules.
Under these rules, purchase price includes the following amounts:
a. all amounts paid, either in cash or in kind, by the mortgagor (or a related party or for the
benet of the mortgagor) to the seller (or a related party or for the benet of the seller)
as consideration for the residence. A residence includes property such as light xtures
or wall-to-wall carpeting, so long as such property is considered to be a xture under
state law. If the mortgagor separately purchases such xtures, the cost of those xtures
must be included in the purchase price. Property such as furniture or appliances is not
considered part of a residence so long as such property is not considered to be a xture
under State of Texas law and the cost of acquiring such items is not included in the
purchase price (unless the cost of acquiring such items is in excess of fair market value,
in which case the amount of the excess must be included in the purchase price). Thus,
if the mortgagor agrees to purchase the refrigerator, washer, and dryer from the Seller
for $1,000 more than the fair market value of such items, the additional $1,000 must be
included in the purchase price.
b. If in connection with the purchase of a Residence the Mortgagor agrees to pay or
assume liability for a debt of the seller, the amount of such debt must be included as
part of the purchase price;
TSAHC Program Guidelines for Homeownership Programs
Texas State Aordable Housing Corporation
Page 19 of 37Revised 10.31.2023
c. If a residence is incomplete or in need of rehabilitation, the reasonable cost of completing
or rehabilitating the residence, whether or not such cost is nanced with the proceeds
of the mortgage loan, must be included in the purchase price.
d. If the Residence is purchased subject to a ground lease, the capitalized value of the
ground rent using a discount rate equal to the Bond Yield must be included in the
purchase price. The Lender must contact TSAHC for the applicable Bond Yield.
Under these rules, “purchase price” does not include (i) usual and reasonable settlement costs
or nancing costs; (ii) the value of services performed by the mortgagor or members of the
mortgagor’s family in completing the residence; (iii) the cost of land that has been owned by
the mortgagor for at least two years prior to the date on which construction of the residence
begins; (iv) amounts paid by the mortgagor (or a related party for the benet of the mortgagor)
for non-xtured personal property; (v) amounts paid for painting, minor repairs, oor renishing
or other x-up expenses; and (vi) the amount of nancing provided under a “qualied program”
under section 143(k)(10) of the Internal Revenue Code (Code), but only if the residence is
located in a high housing cost area, as dened in section 143(f)(5) of the Code.
Settlement costs” include titling and transfer costs, title insurance, survey fees, or other similar
costs. Financing costs include credit reference fees, legal fees, appraisal expenses, “points” that
are paid by the mortgagor (but not the seller, even though borne by the mortgagor through
a higher purchase price) or other costs of nancing the residence. However, such amounts
will be excluded in determining purchase price only to the extent that the amounts do not
exceed the usual and reasonable costs which would be paid by a buyer where nancing is not
provided through a qualied mortgage bond program. For example, if the Mortgagor agrees
to pay to the seller more than a pro rata share of property taxes, such excess shall be treated as
part of the purchase price.
For purposes of determining the value of services performed by the mortgagor’s family in
completing the residence, the family of an individual shall include only the individual’s brothers
and sisters (whether by the whole or half-blood), spouse, ancestors, and lineal descendants. For
example, where the mortgagor builds a residence alone or with the help of family members, the
purchase price includes the cost of materials provided and work performed by subcontractors
(whether or not related to the mortgagor) but does not include the imputed cost of any labor
actually performed by the mortgagor or a member of the mortgagor’s family in constructing
the residence. Similarly, where the mortgagor purchases an incomplete residence the purchase
price includes the cost of material and labor paid by the mortgagor to complete the residence
but does not include the imputed value of the mortgagor’s labor or the labor of the mortgagor’s
family in completing the residence.
4.4 Targeted Areas
Targeted Areas are areas identied by the IRS as “qualied census tracts” or “areas of chronic
economic distress”. The benets of originating a mortgage loan in a Targeted Area are
signicantly higher income limits and signicantly higher purchase price limits. Additionally,
for borrowers utilizing Bond DPA or receiving an MCC, the rst-time home buyer requirement
is waived. Targeted Areas in the State of Texas are listed on TSAHC’s website at https://www.
tsahc.org/lenders/resources-for-lenders#Income_and_Guidelines and the Lender Portal at
www.tsm-online.org.
TSAHC Program Guidelines for Homeownership Programs
Texas State Aordable Housing Corporation
Page 20 of 37Revised 10.31.2023
seCTion 5 – moRTgage loan undeRwRiTing and puRChase.
5.1 General Mortgage Underwriting
For Mortgage Loans with Non-Bond DPA or Bond DPA:
a. Mortgage loans must be underwritten to the standards of the applicable loan type. In the
case of conicting guidelines, the Lender must follow the more restrictive to meet the
credit, income limits, total debt-to-income ratio and loan and property requirements of
TSAHC, Fannie Mae, Freddie Mac, FHA, VA, RHS or private mortgage insurer, the Lender
or Lakeview Loan Servicing.
b. The following overlays apply:
For FHA Loans:
• Borrowers must have a minimum representative credit score of 620 or greater.
A minimum representative credit score of 640 or greater is required for
manufactured homes.
Ĕ Loans with representative FICO credit scores of 620-639 are subject to a
0.50% origination charge.
• Loans must be submitted through FHA Total Scorecard (DU or LPA) and receive
an Accept/Eligible recommendation.
• Loans may be manually underwritten in cases of an Accept/Eligible that requires
a manual downgrade or if the loan receives a Refer/Eligible recommendation.
Ĕ Maximum DTI for manually underwritten loans is 43.00%
Ĕ Minimum FICO credit score of 640
Ĕ Non-traditional credit is allowed
Ĕ Manual underwriting is not permitted for manufactured homes
For VA or USDA-RHS Loans:
• Borrowers must have a minimum representative FICO credit score of 620 or
greater. A minimum representative credit score of 640 or greater is required for
manufactured homes (eligible for USDA-RHS loans only).
Ĕ Loans with representative FICO credit scores of 620-639 are subject to a
0.50% origination charge
• Fannie Mae’s Desktop Underwriter (DU) or Freddie Mac’s Loan Product Advisor
(LPA) are allowed for VA loans. GUS must be used for USDA-RHS loans.
• Manual underwriting is not allowed for either VA or USDA-RHS loans. However,
the existing manufactured home pilot program requires a USDA manual
underwrite and is allowed.
• Non-traditional credit is not allowed.
TSAHC Program Guidelines for Homeownership Programs
Texas State Aordable Housing Corporation
Page 21 of 37Revised 10.31.2023
For HFA Conventional Loans:
• Borrowers must have a minimum representative FICO credit score of 640 or
higher.
Ĕ A borrower with no FICO credit score may be eligible if an occupant
borrower(s) has a credit score that meets the minimum 640, subject to
AUS and Mortgage Insurance approval
• Fannie Mae’s Desktop Underwriter (DU) for HFA Preferred and Freddie Mac’s
Loan Product Advisor (LPA) for HFA Advantage are allowed.
• Manual underwriting is not allowed.
• Non-traditional credit is not allowed.
• Manufactured homes are not permitted with conventional loans.
For MCCs Only:
• The related mortgage loan must be a xed-rate rst lien. Otherwise, there are no
credit overlays and lenders may underwrite, sell, and/or retain mortgage loans
as they choose.
5.2 Cosigners and Non-Occupant Co-Borrowers
Only cosigners or non-occupying co-borrowers who DO NOT sign the deed of trust and
will not take any ownership interest in the property are eligible for use. Cosigners or non-
occupying co-borrowers that WILL have ownership interest are not eligible for use under
any circumstance. Only occupying borrowers and non-purchasing spouses (NPS) may have an
ownership interest in the subject property.
Cosigners or non-occupying co-borrowers (who DO NOT sign the deed of trust) are permitted
on all loan types. Please follow agency guidelines. In addition, they must meet the following
conditions:
• Must not take any ownership interest in the property being nanced with the mortgage
loan, must not be on the title and must not sign the deed of trust.
• Must not occupy the property being nanced with the mortgage loan and should not
execute any of the program documents or adavits.
• The cosigner’s or non-occupying co-borrower’s income should not be considered when
calculating the income for comparison against the maximum family income limits
established for the program.
seCTion 6 – pRogRam fees and ChaRges.
6.1 Program Fees
For Non-Bond DPA (no MCC) and Bond DPA: The following fees will be deducted from the
mortgage loan purchase price by Lakeview:
• $250 Funding Fee
TSAHC Program Guidelines for Homeownership Programs
Texas State Aordable Housing Corporation
Page 22 of 37Revised 10.31.2023
• $75 Tax Service Fee
• $10 Flood Transfer Fee
• $200 Compliance Review Fee
• For loans with representative FICO scores of 620-639, an origination charge of:
Ĕ 0.50% of the loan amount for FHA, VA or USDA-RHS loans
For Non-Bond DPA (with MCC): The following fees will be deducted from the mortgage loan
purchase price by Lakeview:
• $250 Funding Fee
• $75 Tax Service Fee
• $10 Flood Transfer Fee
• $200 Compliance Review Fee
• For loans with representative FICO scores of 620-639, an origination charge of:
Ĕ 0.50% of the loan amount for FHA, VA or USDA-RHS loans
• $500 MCC Issuance Fee*
*The $500 MCC Issuance Fee will not be charged to borrowers in the Homes for Texas
Heroes program who are receiving non-bond government down payment assistance
in combination with the MCC. The$500 MCC Issuance Fee will be charged to borrowers
under the Home Sweet Texas program.
For MCCs Only (No DPA): The following fees will be due to the Texas State Aordable Housing
Corporation:
• $200 Compliance Review Fee
• $500 MCC Issuance Fee
These fees must be remitted to TSAHC through an ACH transfer of funds. If an ACH transfer is
not available, a corporate check for the fees may be sent to the following address:
Texas State Aordable Housing Corporation
6701 Shirley Ave
Austin, TX 78752
Attn: MCC Compliance
6.2 Lender Compensation
For Loans with Non-Bond DPA or Bond DPA: Mortgage loans originated with Non-Bond
DPA (including loans with MCCs) or Bond DPA will be delivered to Lakeview. Lenders will be
compensated by Lakeview upon loan purchase. Eective for new reservations on or after
December 5, 2022, Lender compensation will be in the form of a Servicing Released Premium
equal to 1.50%. Lenders may now charge a 1% origination or discount point in addition to the
fee for FICO scores of 620-639 as provided in Section 6.1.
However, Lenders may collect all reasonable and customary fees and closing costs, provided
TSAHC Program Guidelines for Homeownership Programs
Texas State Aordable Housing Corporation
Page 23 of 37Revised 10.31.2023
all fees are fully disclosed in accordance with federal, state and local regulations. For the Bond
Program, such fees may not exceed reasonable and customary fees and closing costs that do
not exceed fees and costs that would be charged for a mortgage loan that is not nanced with
the proceed of tax-exempt mortgage revenue bonds (such as the Bonds).
For MCC-Only Loans (no DPA): Loans using only TSAHC’s MCC assistance (no DPA) will not be
delivered to Lakeview. The Lender may retain or sell such loans. TSAHC and Lakeview are not
involved in Lender compensation for MCC-only loans.
6.3 Fees and Charges on the Closing Disclosure
All fees and charges must be properly listed on the Closing Disclosure.
seCTion 7 – loan ReseRvaTion, ComplianCe & funding pRoCeduRes.
7.1 Lender Portal
The Lender Portal is an interactive, web-based application that Lenders use to reserve funds
and submit Pre- and Post-Closing Compliance Packages. In addition, the Lender Portal
allows Lenders to check the status of loans in their pipeline, view compliance conditions,
print compliance approval (commitment) letters, run reports, view program guidelines and
marketing materials, and keep up to date on other important information associated with the
programs.
Each Lender will choose one sta member to manage the company’s access to the Lender
Portal. This “Administrator” will determine who within the company will have access to the
Lender Portal and will determine which level of access each employee will have. Access levels
range from “Read Only” to “Administrator” with other levels between.
7.2 Reservation, Compliance and Closing Steps
Step 1: Reserving Funds
At the time the Lender reserves a mortgage loan in the Lender Portal, the Lender must have
a mortgage loan application from a borrower, and the Lender must have made a preliminary
determination that the borrower qualies for the program(s). In addition, the borrower must
have furnished the Lender with a property sales contract or construction contract executed by
the borrower and the seller or builder of a residence.
The reservation window is open Monday through Friday between 9:00 a.m. and 7:00 p.m.
Central Time and will not be available on Saturdays, Sundays, certain holidays, and days when
the nancial markets are closed.
• Login to the TSAHC Lender Portal at www.tsm-online.org.
• Select the “New Reservation” tab in the upper left corner.
• Select the appropriate program from the list.
• Complete those elds marked with a red asterisk in the reservation form and click
“Submit” at the bottom of the form.
TSAHC Program Guidelines for Homeownership Programs
Texas State Aordable Housing Corporation
Page 24 of 37Revised 10.31.2023
• Once the loan is reserved, you will have the option to view or print your reservation
conrmation.
• The reservation conrmation will include the TSAHC loan number, the date reserved
and the commitment expiration date (60 days from the reservation date).
Step 2: Underwrite the Mortgage Loan
The Lender underwrites the loan in-house following the relevant agency guidelines on FHA, VA,
USDA-RHS, or Conventional (Freddie Mac or Fannie Mae), including TSAHC overlays provided in
these Guidelines and any overlays provided by Lakeview.
Step 3: Pre-Closing Compliance Package Submission
• The next step is to complete and submit the Pre-Closing Compliance Package via the
Lender Portal at least 5 calendar days prior to the anticipated closing date of your loan.
• Login to the Lender Portal at www.tsm-online.org.
• Click on the “Loan Status” tab and use the search engine to locate the applicable loan.
• Once the correct loan is identied, click on the “PDF Forms” tab associated with the
selected loan.
• Select and download the applicable DPA Pre-Closing Checklist. Ensure all documents
listed on the checklist are uploaded AND submitted via the Lender Portal.
• Once the Pre-Closing Compliance Package has been approved/committed, the Lender
may re-enter the Lender Portal and print out a Commitment Letter from the “PDF Forms”
tab associated with the loan under the “Loan Status” tab.
• To prepare for closing, select and download the DPA Post-Closing Checklist to ensure all
documents listed on the checklist are executed at closing.
Step 4: Funding of Down Payment Assistance (DPA)
• This step is for Non-Bond DPA Loans (with or without an MCC) and Bond DPA Loans.
Loans utilizing only an MCC can skip to Step 5.
• Provided the Pre-Closing Compliance Package is approved by TSAHC, the Lender will
advance the down payment assistance funds at loan closing. Lenders will be reimbursed
by Lakeview for the funds advanced when the mortgage loan is purchased by Lakeview.
• If a prepayment of a newly originated mortgage loan is received by the originating
Lender prior to the sale of such mortgage loan to Lakeview, TSAHC will reimburse the
Lender directly for the original funding of the down payment assistance, but only after
the Lender pays a non-delivery fee to TSAHC equal to the amount of the down payment
assistance.
• If the mortgage loan is prepaid after Lakeview purchases such mortgage loan from the
Lender and before Lakeview sells the related mortgage-backed security (i.e., a security
backed in part by such mortgage loan), TSAHC will reimburse Lakeview for the down
payment assistance, but prior to such reimbursement, the Lender shall pay to TSAHC a
TSAHC Program Guidelines for Homeownership Programs
Texas State Aordable Housing Corporation
Page 25 of 37Revised 10.31.2023
non-delivery fee equal to the amount of the down payment assistance.
Step 5: Post-Closing Compliance Package Submission
• Upon closing, the Lender must submit the Post-Closing Compliance Package for
TSAHC’s review and approval NO LATER than 5 days following loan closing. Those who
repeatedly turn in late les may be ned or suspended.
• Login to the Lender Portal at www.tsm-online.org.
• Click on the “Loan Status” tab and use the search engine to locate the applicable loan.
• Once the correct loan is identied, click on the “PDF Forms” tab associated with the
selected loan.
• Select and download the Post-Closing Checklist. Ensure all documents listed on the
checklist are uploaded AND submitted via the Lender Portal.
• The loan will not be purchased by Lakeview, and/or the MCC will not be issued to the
borrower, until the Post- Closing Compliance Package has been approved by TSAHC.
Step 6: Loan Purchase
• This step is only for Loans with Non-Bond DPA (with or without an MCC) or Bond DPA.
• Upon closing, the Lender will deliver the closing package to Lakeview for purchase.
Delivery and funding information for the mortgage loan le may be found on the
Lakeview Seller Portal at www.lakeviewcorrespondent.com.
• The closing package must be delivered to Lakeview promptly after closing and must be
purchased by Lakeview within 60 calendar days of loan reservation.
• If the loan is not eligible for purchase within the 60-day purchase period, the Lender
may request a 15, 30 or 45-day extension at a cost of 12.5 bps per 15-day increment
(0.125, 0.250 or 0.375, respectively).
Ĕ This fee will be deducted from the Lender’s proceeds at the time the loan is
purchased by Lakeview.
Ĕ The Extension Request Form can be found under the “Loan Status” tab on the
Lender Portal (click on the “PDF Forms” tab associated with the specic loan).
• In the event a loan is not purchased by the later of the 60th day after initial loan
reservation or the last day of any extension that was granted, TSAHC will reimburse the
Lender for the down payment assistance funds advanced by the lender at loan closing,
but only after the payment by the Lender to TSAHC of a non-delivery fee equal to such
down payment assistance.
• Once all TSAHC and Lakeview conditions have been met, the loan will be purchased by
Lakeview.
• Lenders will be reimbursed by Lakeview the amount of down payment assistance
advanced when the mortgage loan is purchased by Lakeview.
TSAHC Program Guidelines for Homeownership Programs
Texas State Aordable Housing Corporation
Page 26 of 37Revised 10.31.2023
7.3 Electronic Submission of Required Documents
The Lender Portal allows Lenders to submit electronic documents from our list of “PDF Forms”
or from your in-house loan le. Paper documents will not be accepted. All documents must be
uploaded electronically through the Lender Portal.
• Under the Loan Status tab, click on the “PDF Forms” tab associated with the loan you are
processing.
• Select the desired form and ensure all required elds are completed. The system will
auto-ll the elds that were input at loan reservation.
• If the applicable form requires no signature, it will have an “Upload Package” button at
the bottom of the document. Simply click the button after completing the form and it
will automatically upload to the “eDocs” module of the Lender Portal.
• If the applicable form requires a signature, the form must be completed, printed and
scanned to create a PDF document. The PDF document may then be uploaded to the
system using the “eDocs” function associated with your loan under the “Loan Status” tab.
Ĕ Simply click the “eDocs” tab and follow the instructions to upload the required
documents.
Ĕ Click the “Add New” button to upload a form. Click the “Click Here” button to
access your computer les and select the document you wish to upload.
Ĕ The next step is to name the document you are uploading. Choose an option
from the drop-down list under “Select a document from the predened list”. The
drop-down will list all of the required documents for the applicable package. If
you don’t see your document on the list, use the “Enter a customized document
name” eld to name the document you are uploading.
• Once all required documents (from the Pre-Closing Compliance Package Checklist or
the Post-Closing Compliance Package Checklist) have been uploaded to the Lender
Portal, click on the “Submit” button associated with the applicable package and TSAHC
will be notied that your package has been delivered.
seCTion 8 – modifiCaTions.
8.1 Changes in Current Income
Income eligibility is based upon the current family income of the borrower(s). The commitment
is issued based on veried income as of the date the commitment is issued.
Increases in income from sources already reported (i.e., salary increase) will not aect the
validity of a commitment if the loan closes within 30 days from the time the commitment was
issued. If the loan does not close within 30 days, the “Rearmation of Borrower Form” (available
in the “PDF Forms” tab in the Lender Portal) must be completed and uploaded to the Lender
Portal.
If a borrower’s income increases between the execution of the related Program Adavit and
the closing date of the mortgage loan (and if more than 30 calendar days has elapsed since
execution of the Program Adavit), and the “Rearmation of Borrower” cannot be executed
TSAHC Program Guidelines for Homeownership Programs
Texas State Aordable Housing Corporation
Page 27 of 37Revised 10.31.2023
due to the changes, the Lender must submit a corrected Program Adavit through the Lender
Portal for additional review. If the changes in income make the loan ineligible for purchase, the
reservation will be cancelled by TSAHC.
8.2 Change in Purchase Price
For a change in purchase price after the commitment and prior to closing which does not exceed
the maximum purchase price limit, the Lender will be required to submit a corrected Program
Adavit, re-executed by the borrower, through the Lender Portal for additional review. If the
purchase price of the applicable residence increases so as to exceed the maximum purchase
price limit, the commitment shall be revoked and the reservation cancelled.
8.3 Changes in Property Address
If a borrower has a pending reservation and changes the property he or she intends to purchase,
the Lender must submit a new signed property sales agreement and a notice to TSAHC stating
whether or not the mortgage amount has changed. If the change occurs after TSAHC has
issued the commitment, the following documents should be revised and resubmitted through
the Lender Portal to reect the new property address and any change in mortgage amount:
a. Copy of Program Adavit (rst page amended and initialed by the Borrower)
b. Property sales contract (rst and last pages and any counter oers)
8.4 Change in Loan Amount
Any change to the mortgage loan amount that occurs after the commitment is issued, but
before loan closing, must be reported to TSAHC via email. TSAHC will revise the commitment
with the new mortgage loan amount and notify the Lender when the revision is completed.
8.5 Lender’s Obligation to Notify TSAHC of Material Changes
The issuance of a commitment is based (in part) upon the Program Adavit and the Lender’s
certication that the program requirements have been met. Commitments are issued
subject to the condition that all program requirements are or will be met prior to the closing
of a mortgage loan. Thus, the Lender must immediately notify TSAHC of any change in the
circumstances upon which the commitment was issued. If any change of circumstances occurs
such that TSAHC requirements are not met, the commitment will be revoked and the mortgage
loan cancelled.
seCTion 9 – addiTional pRovisions.
9.1 Cancellation and Commitment Expirations
The Lender is responsible for cancelling all mortgage loans subject to a reservation if the
mortgage loan will not be delivered. Please note, should the Lender cancel a reservation, the
Lender will be prohibited from making another reservation for that borrower for a period of 90
days unless otherwise authorized by TSAHC.
a. In a case where the borrower cancels or withdraws his or her application, the reservation
of funds must be cancelled by contacting TSAHC.
TSAHC Program Guidelines for Homeownership Programs
Texas State Aordable Housing Corporation
Page 28 of 37Revised 10.31.2023
b. In a case where the Commitment expires, the Lender must request an extension using
the Extension Request Form available through the Lender Portal, and provide the new
estimated closing date.
In all cases, the expiration of the commitment without a cancellation or extension by the Lender
may result in the Lender being placed on “Inactive Status”, meaning the Lender may submit no
new reservations until the problem is resolved. Failure to comply with this provision may result
in the Lender’s termination from the programs.
9.2 Delinquent Closing Documentation
If the Post-Closing Compliance Package is not submitted through the Lender Portal within ten
(10) days of loan closing, TSAHC may contact the Lender to request the status of the mortgage
loan. If the Lender fails to timely provide to TSAHC the required closing documentation, the
corresponding reservation will be subject to cancellation. Such action may result in the Lender
being suspended or terminated from the program until the problem is remedied.
9.3 Penalties for Borrower Misrepresentation
Strict penalties may be imposed on any Borrower making a material misstatement,
misrepresentation or fraudulent act on an application or other document submitted to
obtain assistance from TSAHC. Further, any person making a material misstatement or
misrepresentation in any adavit or certication made in connection with the application shall
be subject to all applicable nes and penalties.
9.4 Revocations of MCC
a. Revocation of an MCC will occur when the residence for which the MCC was issued
ceases to be the MCC holder’s principal residence.
b. Revocation will occur upon discovery by TSAHC or a participating Lender of any material
misstatement, whether negligent or intentional, made in connection with the issuance
of the MCC.
c. Revocation will occur if it is later discovered that the holder did not meet the requirements
for an MCC.
d. Revocation will occur if the original (rst) mortgage loan is renanced, unless the
borrower applies for a re-issued MCC after the renancing has closed. The tax credit
may only be claimed for interest paid to the date of the recording of the renancing,
unless a re-issued MCC has been applied for and issued.
9.5 Reissued MCCs
TSAHC shall reissue an MCC for certain renance transactions if TSAHC receives to its satisfaction
evidence that:
a. The reissued MCC is issued to the holder of an existing MCC with respect to the same
property to which the existing MCC relates;
b. The reissued MCC entirely replaces the existing MCC (that is, the holder cannot retain
the existing MCC with respect to any portion of the outstanding balance of the certied
TSAHC Program Guidelines for Homeownership Programs
Texas State Aordable Housing Corporation
Page 29 of 37Revised 10.31.2023
mortgage indebtedness specied on the existing MCC);
c. The certied mortgage indebtedness specied on the reissued MCC does not exceed
the remaining outstanding balance of the certied mortgage indebtedness specied
on the existing MCC; and
d. The reissued MCC does not result in an increase in the tax credit that would otherwise
have been allowable to the holder under the existing MCC for any taxable year. The
holder of a reissued MCC determines the amount of tax credit that would otherwise
have been allowable by multiplying the interest that was scheduled to have been paid
on the renanced loan by the MCC rate of the existing MCC. In the case of a series
of renance transactions, the tax credit that would otherwise have been allowable is
determined from the amount of interest that was scheduled to have been paid on the
original loan and the MCC rate of the original MCC.
9.6 Replacement MCCs
Upon the satisfaction of TSAHC that an MCC has been mutilated, destroyed, lost or stolen,
including the surrendering of the mutilated MCC to TSAHC, and upon receipt by TSAHC of such
indemnity or security as TSAHC may require, TSAHC shall cancel the original MCC, noting in its
records that such MCC was mutilated, destroyed, lost, or stolen, and issue a replacement MCC.
TSAHC shall charge the homeowner reasonable fees and expenses in connection with issuing
a replacement MCC.
seCTion 10 – mCC RepoRTing.
10.1 Lender Record Keeping and Federal Report Filing
The Lender is required by the IRS to le a report on or before January 31 of such year for all
MCCs issued during the previous calendar year. In early January, TSAHC will send the Lender
the completed IRS Form 8329 with the MCCs issued the previous year. It is the Lender’s
responsibility to verify that the information on the form is correct and, if necessary, make any
changes or additions, and then submit the form to the IRS.
For six years after the related loan closing, the Lender must retain:
1. Name, mailing address, and tax identication (“TIN”) or social security number of the
MCC holder.
2. Name, mailing address, and TIN of the Issuer.
3. Date of issuance for each MCC (same as related loan date), the certied amount of
indebtedness and the credit rate of the MCC.
TSAHC may conduct audits of Lender records to ensure compliance with the recordkeeping
provisions.
10.2 TSAHC Reports
TSAHC must make quarterly reports on IRS Form 8330, beginning with the quarter in which the
election for the MCC program is made. The report must include:
TSAHC Program Guidelines for Homeownership Programs
Texas State Aordable Housing Corporation
Page 30 of 37Revised 10.31.2023
• Name, address, and TIN of the Issuer;
• Date of election;
• The sum of the products of the certied indebtedness amount (the mortgage amount
or the initial principal balance) and the MCC credit rate for each MCC issued; and
• Name, address, and TIN of each MCC holder for whom an MCC was revoked.
TSAHC must make an annual report to the IRS for each year beginning July 1 and ending June
30. The report will include:
• Number of MCCs issued by Income and Purchase Price; and
• Volume of MCCs issued by Income and Purchase Price.
In January following each year during which MCCs are issued, the Program Administrator will
mail an IRS Form 8396, Mortgage Interest Credit, to each MCC holder of record as a reminder to
properly declare the MCC tax credit for federal income tax purposes.
TSAHC Program Guidelines for Homeownership Programs
Texas State Aordable Housing Corporation
Page 31 of 37Revised 10.31.2023
appendix: inCome guidelines foR boRRoweRs ReCeiving bond dpa oR mCCs.
General
These income guidelines apply to borrower(s) receiving: (1) Bond DPA or (2) an MCC (with
or without Non-Bond DPA). These guidelines are required under Section 143 of the Internal
Revenue Code and related regulations and rulings. Lenders and borrowers must meet these
guidelines in order to receive the benets of Bond DPA or an MCC.
TSAHC is relying on the lenders and borrowers to provide correct information on income.
This reliance is based upon lender certications following a reasonable investigation of
the borrower’s income sources and the borrowers review, completion and execution of the
applicable Program Adavit.
In the event of false statements or fraud, substantial penalties may be levied. Therefore, TSAHC
requires the Lenders and the borrowers to provide accurate income-related information to
ensure that calculations are within the limits.
FOR BOND DPA AND MCC INCOME COMPLIANCE PURPOSES ALL SOURCES OF INCOME
MUST BE INCLUDED, WHETHER OR NOT USED TO QUALIFY BORROWERS UNDER STANDARD
UNDERWRITING GUIDELINES. Under no circumstances will the income used to determine
qualication for Bond DPA or an MCC be less than that used by the Lender when qualifying
borrowers for repayment of their mortgage loan.
In the case of complicated calculations, Lenders should contact TSAHC to ensure that
calculations meet the applicable rules.
For purposes of determining income, the gross “family income” of the borrower(s) must be
determined. The income of the following persons must be considered:
1. Any mortgagor and any co-mortgagor listed on the mortgage (deed of trust).
2. Any other person who is “secondarily liable” on the mortgage (deed of trust) and who is
expected to live in the residence.
Therefore, the income of any person listed on the deed of trust must be included, regardless of
occupancy.
In Texas, a co-signer or guarantor executes only the mortgage note, so that such person’s
income does not need to be included if such person is not an occupant. This includes a spouse
of the co-signer or guarantor that is a non-occupant of the residence.
For a married couple, the total gross income of both persons must be counted, even if a spouse
is not listed on the title to the residence.
Gross income is not reduced by the amount of child support payment a husband/wife makes for
the care of a child or children. However, a husband/wife who receives child support payments
must include this amount in gross income.
Net rental income is to be included in the gross income calculation.
With regard to income in addition to base salary, if the mortgagor has earned income during
the current period (meaning the period beginning 12 months prior to the loan application and
ending on the loan closing date) and has a history of such income, then that income will be
TSAHC Program Guidelines for Homeownership Programs
Texas State Aordable Housing Corporation
Page 32 of 37Revised 10.31.2023
included in income.
Base pay is calculated based on current income. (i.e., if someone earning a salary has received
or will receive a raise in the current period, the increased income should be used and not a
year-to-date average.)
When calculating additional or other income to include in gross income, it is important to
calculate the income on a pro-rata, monthly basis. This will assist in calculating the income
accurately.
Information with respect to current gross monthly income may be obtained from available
loan documents which include but are not limited to paycheck stubs and loan applications.
1. Gross Income Shall Be Determined Without Deductions for the Following:
a. Funds paid into a tax-sheltered retirement account.
b. Child support payments made by a borrower for the benet of the borrower’s
child or children.
c. Alimony, separate maintenance, or similar periodic payments that any borrower
is required to make to a spouse or former spouse.
d. Unreimbursed employee business expenses.
2. Gross Income Shall Include, but Not be Limited to, All of the Following:
a. The gross amount, before payroll deductions, of wage and salaries, overtime
pay, commissions, fees, tips, bonuses, gambling winnings and prizes (even if a
one-time occurrence), and other compensation for personal services.
Overtime
Income earned from overtime will be included if the borrower has a history of
such income or the income was earned during the current period. Even though
overtime is not used in calculating ratios, it is always included in income.
Bonus
The gross amount of bonus earnings before any payroll deductions is to be
included in the income calculation.
Bonus Income. The bonus is to be included in the income if:
1. The bonus is part of a collective bargaining agreement and must be paid;
or
2. The bonus is included in the computation of income by the employer or
if there is a history of bonuses.
If there is a history of bonuses but the borrower does not know if a bonus is
planned, nor does the employer divulge its plans for a bonus nor the projected
bonus amount, the Lender is to use an average of the past two years’ bonuses to
calculate income.
The bonus is not to be included in the Income if:
TSAHC Program Guidelines for Homeownership Programs
Texas State Aordable Housing Corporation
Page 33 of 37Revised 10.31.2023
1. The bonus is totally discretionary by the employer and there is no
previous bonus history; and
2. The borrowers cannot anticipate with certainty whether such bonus may
be received in the future.
Seasonal/Part-Time/Temporary Income
Include part-time or seasonal employment in calculating income. For example,
if the borrower worked for three months during the summer and earned an
average of $3,600 during each of the past two years, then divide the $3,600 by
12 months which equals $300 per month. Add the $300 per month to the gross
monthly income. Multiply by 12 to determine the income.
Include short-term, part-time or seasonal employment in calculating income
if the mortgagor earned this in the last twelve months. For example, if the
mortgagor earned $1,000 during the application period by painting the
mortgagor’s parents’ house, include this income.
b. The net income from an operation of business or profession or from the rental
of real personal property. For this purpose, if this operation results in a loss, the
loss may not be used to oset income generated from other sources. For this
purpose, any shareholder that owns 10 percent or more of any outstanding
class of stock in a corporation shall also be deemed to have received income in
its proportionate share of net earnings not otherwise distributed in salaries or
dividends.
c. All dividends and interest, including otherwise tax-exempt interest. Interest
earnings from IRAs, VIPs and 401(k)s need not be included.
d. The full amount of the periodic payments received from Social Security, housing
assistance payments, annuities, insurance policies, retirement funds, pensions,
disability or death benets, and other similar types of periodic receipts including
any lump sum payment for the delayed start of a periodic payment.
e. Payments in lieu of earnings, such as unemployment and disability compensation,
workers’ compensation, and severance pay.
f. The full amount of public assistance payments.
g. Periodic and determinable allowances, such as alimony and separate maintenance
payments received, housing allowances received, and regular contributions or
gifts received from persons not residing in the dwelling, where such sums are
received on a current basis and which may be reasonably expected to continue.
h. The distributive share of partnership income.
i. Child support payments received by a borrower for the benet of the borrower’s
child or children.
j. All regular pay, special pay and allowances of a member of the Armed Forces
(whether or not living in the dwelling) who is the head of the household, spouse,
or other person whose dependents are residing in the unit.
TSAHC Program Guidelines for Homeownership Programs
Texas State Aordable Housing Corporation
Page 34 of 37Revised 10.31.2023
k. Education Grants: the portion of the income from grants that is used for living
expenses is to be added to the income.
l. Car Allowance: income received from employers for car allowance must
be included in the income calculation if the borrower has no accounting
responsibility to their company. Example: If the borrower receives $300 per
month from his employer for car allowance and is not required to le a mileage/
expense report monthly, then this income must be included in the income
calculation.
m. Capital Gains/Losses: both the taxable and non-taxable portions of capital gains
are to be included as income if a history of these incomes exists. If the two-year
average results in a gain, then it must be added to gross monthly income, and
losses are to be disregarded (losses cannot be used to reduce gross monthly
income).
n. Rental Property (not subject property): Net rental income currently being
received is to be used to calculate income; borrowers must provide leases and
applicable tax forms.
3. Gross Income Does Not Include:
a. Casual, sporadic or irregular gifts.
b. Amounts which are specically for, or in reimbursement of, medical expenses.
c. Lump sum additions to family assets, such as inheritances, re-enlistment
bonuses, insurance payments (including payments under health and accident
insurance and workers’ compensation), capital gains and settlement for personal
property losses. If the income is received in any form other than lump sum (i.e.,
monthly or annual), then it must be treated as permanent income and added to
the income calculation.
d. Amounts of educational scholarships paid directly to the student or the
educational institution, and the amount paid by the government to a veteran
for use in meeting the cost of tuition, fees, books, and equipment.
e. Special pay to a family member in the Armed Forces who is away from home and
exposed to hostile re.
f. Relocation payments under Title II of the Uniform Relocation Assistance and
Real Property Acquisition Policies Act of 1970.
g. Foster child care payments.
h. The value of coupon allotments for the purchase of food pursuant to the Food
Stamp Act of 1977, 7 U.S.C. Section 2011 and 2027, which is in excess of the
amount charged the eligible household.
i. Payments to volunteers under the Domestic Volunteer Service Act of 1973.
j. Payments of allowances made under the Department of Health and Human
Services’ Low-Income Home Energy Assistance Program.
TSAHC Program Guidelines for Homeownership Programs
Texas State Aordable Housing Corporation
Page 35 of 37Revised 10.31.2023
k. Payments received from Job Training Partnership Act.
l. Income from employment of children (including foster children) under the age
of 18 years of age and under unless executing the Deed of Trust.
m. Income from caring for one or more foster children.
Military Pay
For purposes of computing the borrower’s gross monthly income regarding military pay, the
monthly income is the “total entitlement” shown on the borrower’s most recent monthly Leave
and Earnings Statement. Non-taxed income, such as a housing allowance, is counted as income.
Certain categories of pay, which may be revised only sporadically, may need to be considered
on a case-by-case basis.
Self-Employed
The Lenders should watch for all types of self-employment (i.e., 1099 income received from
employer run through Schedule C, Form 2106, etc.).
The procedure to calculate income for self-employed borrowers is the same as under the
respective underwriting guidelines.
As in standard underwriting, depreciation, depletion and self-employment tax are to be “added
back” to determine annual income. Tax returns and a self-employed YTD Prot and Loss are
required for all self-employed borrowers.
EXAMPLES OF INCOME
The following examples are based upon standard credit underwriting guidelines. These
examples also illustrate the underwriting for MCC or Bond Loan compliance and are not
substantially dierent from your standard procedures. Please note that income earned in a
manner as illustrated by these examples must be included in the income calculation.
Example: Permanent Seasonal Income
Include part-time or seasonal employment in calculating income if borrower works every
summer. If borrower worked for 3 months and earned an average of $3,600 during each of the
past two years, then divide the $3,600 by 12 months which equals $300 per month. Add the
$300 per month to the gross monthly income. Multiply by 12 to determine the income.
Example: Seasonal/Temporary Income
Include short-term, part-term or seasonal employment in calculating income. If the borrower
earned $1,000 during the application period by painting the borrower’s parents’ house (unless
the borrower is a painter either part-time or full-time), the $1,000 must be counted as income.
This is calculated by dividing the $1,000 by 12 or $83.33 per month. This amount of $83.33 is
added to gross monthly income. Multiply by 12 to determine the income.
Example: Overtime and Bonus
When calculating other income, the rst thing that needs to be determined is base income.
TSAHC Program Guidelines for Homeownership Programs
Texas State Aordable Housing Corporation
Page 36 of 37Revised 10.31.2023
The base income is then multiplied by the number of months that has been covered by the
most current pay stub. This calculation will give the year-to-date base income or the amount of
income that would have been earned if compensation of another kind had not occurred. After
having established a year-to-date base, subtract it from the year-to-date total gross income on
the pay stub. The dierence will be the year-to-date total of other income.
The next step is to determine the other income earned in the months missing from the
12-month period. (If the pay stub covered eight months, four months is still needed.) This is
done by taking the current annual base and subtracting it from the W-2 from the previous
year. This is the other income earned for the previous year. Divide this number by twelve and
multiply by the number of months needed to complete the 12-month period.
TSAHC Program Guidelines for Homeownership Programs
Texas State Aordable Housing Corporation
Page 37 of 37Revised 10.31.2023
Once a year-to-date total of other income from the pay stub and other income from the previous
year are established, combine the two totals to get all other income earned in the previous 12
months.
Closing Date: April 27, 2018
Pay Stub Dated: March 15, 2018 (2.5 months)
Year-to-Date Gross: $4,625
Base Income: $1,800 (monthly)
W-2: $22,500 (9.5 months of other income will be taken
from this.)
Year-to-Date Base Year-to-Date Other
$1,800 x 2.5 = $4,500 $4,625 - $4,500 = $125
Other Income From Previous Year
$22,500 – ($1,800 x 12) = ($900/12) x 9.5 = $712.50
Total Other Income, i.e. Overtime, Bonus
$125 + $712.50 = $837.50*
*To be added to the current base income to determine total annual income.
Omission of Other Income, i.e. Overtime, Bonus
Omitting other income that has been earned in the last twelve months is only allowed if at least
two of the items listed below are provided:
• At least two pay stubs showing compensation for base income only.
• A letter from the employer (on company letterhead) stating that compensation for
overtime and bonus will not occur in the future.
• Documentation that employment status has changed from non-exempt to exempt.