FAQ: How is the Minimum Required Investment Calculated?

Modified on Fri, 25 Apr at 2:48 PM

Q: How does Charlie calculate the minimum required investment?

A: Charlie automates the calculation of the Minimum Required Investment (MRI) based on loan type, property characteristics, and program guidelines. The system evaluates key data inputs, such as loan type, occupancy, property units, loan-to-value (LTV) ratio, and program eligibility (e.g., HomeReady, Home Possible), to determine the borrower’s required contribution. The MRI calculation follows the specific agency rules and adapts dynamically based on Fannie Mae (FNMA), Freddie Mac (FHLMC), FHA, VA, and USDA guidelines. Here's how Charlie applies these rules:

Charlie’s MRI Guidelines by Loan Type

Fannie Mae (FNMA)

Purchase Loans (Non-HomeReady):
- Primary Residence (1-unit): 0% MRI.
- Primary Residence (2-4 units):
  - 5% MRI if LTV > 80%.
  - 0% MRI if LTV ≤ 80%.
- Second Home:
  - 0% MRI if LTV ≤ 80%.
  - 5% MRI if LTV > 80%.
- HFA Preferred Program:
  - 1-unit: 0% MRI.
  - 2-4 units: 3% MRI.
HomeReady Program:
- 1-unit: No MRI unless a lender-funded grant or sweat equity is used (then 3% applies).
- 2-4 units: 3% MRI.

Freddie Mac (FHLMC)

Home Possible Loans:
- 2-4 units with LTV/CLTV/HTLTV > 80%: 3% MRI.
5% MRI Applies to:
- Second homes with LTV > 80%.
- Shared equity plans, regardless of LTV (5% must come from the owner-occupant’s personal funds).
- Investment properties (all funds must come from borrower’s personal funds).

Federal Housing Administration (FHA)

MRI: 3.5% of the adjusted value (lesser of the sales price or appraised value).

Veterans Affairs (VA)

MRI: No borrower contribution required.

United States Department of Agriculture (USDA)

MRI: No borrower contribution required.

Details and Nuances

Charlie only applies MRI calculations for purchase loans.
MRI calculations are preliminary until certain conditions are fulfilled and supporting documentation is reviewed.

Conditions to Be Fulfilled Prior to Finalization

Condition	Required/Optional	Notes
Sales Contract	Required	Charlie can calculate MRI based on the sales price input, but finalization requires sales contract review.
Loan Amount	Required
Appraisal	Required (unless AUS allows a waiver)	MRI can be calculated using the estimated value, but finalization requires the appraisal (if required).

Data Inputs for MRI Calculation

Input	Required/Optional
Sales Price	Required
Adjusted Value	Required
Loan Type (FNMA, FHLMC, FHA, VA, USDA)	Required
Number of Units	Required
Occupancy Type (Primary, Second Home, Investment)	Required
Loan Program (HFA, HomeReady, Home Possible, etc.)	Required

Data Outputs from MRI Calculation

Output	Required/Optional
Minimum Required Investment	Required (on FHA)
Minimum Borrower Contribution	Required (on FNMA and FHLMC)