Kentucky Mortgage Loan Info in regards to Credit Score, Down payments and debt to income ratios.

Loan Info in regards to Credit Score, Down payments and debt to income ratios.

 

Here are a few Kentucky mortgage misconceptions in regards to qualifying for a Mortgage loan in 2020

Credit Score Myth For Kentucky Mortgage Loans

53% of people surveyed believe they need a minimum credit score of 650 to qualify for a mortgage.

 

Credit Score Facts For Kentucky Mortgage Loans

There are many loan programs available for credit scores as low as 580 for government backed loans like FHA, VA, and USDA.

Down Payment Myths for Kentucky Mortgage Loans

The minimum down payment required is 3% (or even 20%).

 

Down Payment Fact

Many loan programs, including conventional loans, are available with down payments as low as 3%. USDA, VA, and Kentucky Housing Corp with their down payment assistance offer zero down payment options. 

Debt-to-Income Myths for Kentucky Mortgage Loans

Most people think 40 to 45%% (percent of your monthly income that goes to debt payments) is the max.

 

Debt-to-Income Fact

Lenders may accept higher ratios depending on things like credit score and down payment amount. FHA and VA will allow over 50% debt to income ratios on the back-end, but Conventional and USDA restrict their back-end debt to income ratios to 45% or less.

 

Think back to the last time you financed a purchase — be it a home, automobile, or what have you… You may remember having heard the term “debt-to-income ratio.” Today I want to spend some time going over exactly what this ratio is, and to also touch on how it can effect your personal finances.

What is your debt-to-income ratio?

Commonly referred to as your “DTI,” your debt-to-income ratio is a personal finance benchmark that relates your monthly debt payments to your monthly gross income.

As an example… Let’s say that your gross monthly salary is $5,000 and you are spending $2,800 of it toward monthly debt payments. In that case, your DTI would be an unhealthy 56%.

This version of your DTI is sometimes referred to as your “back-end” DTI. This is often broken down further to give a front-end debt-to-income ratio, which is a component of your back-end DTI.

How to calculate your front-end DTI for a Kentucky Mortgage Loan Approval

Your front-end DTI is calculated by dividing your monthly housing costs by your monthly gross income. Front-end DTI for renters is simply the amount paid in rent, whereas for homeowners it is the sum of mortgage principal, interest, property taxes, and home insurance (i.e., your PITI) divided by gross monthly income.

From above, if that $2,800 in debt payments is attributable to $1,500 in housing costs and $1,300 in non-housing costs, then your front-end DTI is $1,500/$5,000 = 30% (and your back-end ratio is still 56%, as calculated above).

How lenders use your DTI for a Kentucky Mortgage Loan Approval

Kentucky Mortgage lenders typically use DTI (along with other variables) to determine whether or not you qualify for a loan, and to help determine your Kentucky mortgage rate. A high front-end DTI raises red flags with lenders because it is commonly associated with borrower default. In fact, reducing front-end DTI to reduce the risk of homeowner default was one of the main objectives of the loan modification programs introduced by the government in 2009.

There are specific limits for DTI that are used as cut-off points when evaluating borrowers. Current DTI limits for conventional conforming mortgage loans are typically 28% on the front end and 36% on the back end, though these limits are slightly higher for government subsidized Kentucky FHA loans.

While there are certainly other factors to consider

Acceptable Ratios
	Housing	Debt to Income
Conventional	28%	41-50%
FHA	29%	41-56.5%
VA USDA/RHS KHC	29% 29% 40%	41-65% 41-45% 50%
Higher ratios may be accepted with compensating factors: low loan value, large cash reserves after closing, high credit scores, etc,

 

The bottom line: When it comes to home loans, one size definitely does not fit all, and it can be hard to determine what’s best for your situation on your own. Speaking to a mortgage professional about your unique circumstances is usually your best bet.

Ready to get started? Contact us at 502-905-3708.

 

 

 

How Does Student Loans Affect A Mortgage Loan Approval in Kentucky ?

As more Kentuckians go back to school to further their education, this usually involved for some people student loans to finance their post-secondary high school education. Below I did a summary for the different types of loans for Kentucky Home Buyers and owners for:, FHA, VA, USDA, Fannie Mae and how each loan program effects the borrower and their status of getting a loan approval.

Bottom line is this: They have made it tougher to qualify for a Kentucky Mortgage Loan.

KENTUCKY FHA MORTGAGE LOAN RULES FOR STUDENT LOANS:

Student Loans: Calculation of Monthly Obligation Regardless of the payment status(including Deferred), the Mortgagee must use either the greater of:

• 1 percent of the outstanding balance on the loan; or
• the monthly payment reported on the Borrower’s credit report; or

The actual documented payment, provided the payment will fully amortize the loan over its term.

KENTUCKY FANNIE MAE OR CONVENTIONAL LOAN GUIDELINES FOR STUDENT LOANS

For all student loans, regardless of the payment status (including Deferred), the lender must include a monthly payment in the borrower’s recurring monthly debt obligation when qualifying the borrower.

• 1% of the outstanding balance; or
• The Actual Payment that will fully amortize the loan(s) as documented in the credit report, by the student loan lender, or in documentation supplied by the borrower;

Exception: if the actual documented payment is <1% of the outstanding balance, and it will fully amortize the loan with no payment adjustments, the lender may use the lower, fully amortizing monthly payment to qualify the borrower.

KENTUCKY VA MORTGAGE LOANS FOR STUDENT LOANS 

• If student loan repayments are scheduled to begin within 12 months of the date of VA loan closing, lenders should consider the anticipated monthly obligation in the loan analysis.
• If the borrower is able to provide evidence that the debt may be deferred for a period outside that timeframe, the debt does not need to be considered in the analysis.

Policy for Income Based Repayment Plans (Student Loans)

• Lender may use the Income Based Repayment (IBR) payment if it is verified (including $0.00) when the payment is fixed for a minimum of 12 months post-closing date
• When fixed for less than 12 months post-closing the lender must use the regularly calculated payment that will be due once the IBR ends
• When no payment is reported or available, the lender must use a payment calculation using 5% of the current report balance as the monthly payment

KENTUCKY USDA MORTGAGE GUIDELINES FOR STUDENT LOANS:

 

STUDENT LOANS

Student loans. Lenders must include the greater of one percent (1%) of the outstanding loan balance or the verified fixed payment as reflected on the credit report. Income Based Repayment (IBR) plans, graduated plans, adjustable rates, interest only and deferred plans are examples of repayment plans that are subject to change. These types of repayment plans are unacceptable to represent a long term fixed payment plan.

 

 

 502-905-3708 text or call with your mortgage questions. 

kentuckyloan@gmail.com

Joel Lobb (NMLS#57916)
Senior  Loan Officer

 

American Mortgage Solutions, Inc.

10602 Timberwood Circle Suite 3

Louisville, KY 40223

Company ID #1364 | MB73346

 

The view and opinions stated on this website belong solely to the authors, and are intended for informational purposes only.  The posted information does not guarantee approval, nor does it comprise full underwriting guidelines.  This does not represent being part of a government agency. The views expressed on this post are mine and do not necessarily reflect the view of  my employer. Not all products or services mentioned on this site may fit all people.
, NMLS ID# 57916, (www.nmlsconsumeraccess.org). I lend in the following states: Kentucky

FHA Changes for Mortgage Loans in Kentucky

Minimum Credit Scores for a Kentucky FHA loan.

All Kentucky FHA loans  will soon require a 500  credit score for all Kentucky Home buyers or homeowners looking to refinance who have a debt to income ratio over 55% percent.

Kentucky FHA Loans with FICO scores under 620 will remain FHA-eligible, but you must show compensating factors or reasons to approve the loan. Compensating factors would be large down payments in excess of 10%, or a lot of money in savings or reserves after the loan is made.

Kentucky FHA loans and Foreclosure Rules

Currently,  a Kentucky homebuyer or home owners can get a  FHA-insured financed three years after a foreclosure or short-sale.  FHA will now require  that only borrowers who (1) have re-established credit, and (2) can provide a fully-documented loan application will qualify for a Kentucky FHA loan

Furthermore, the group will examine the cause of the foreclosure to determine whether it was a one-time event, such as loss of employment, which may be a predictor of future loan performance.

FHA Premiums and Kentucky FHA Loans

 

There is a very good chance that the mortgage insurance premiums for upfront mortgage insurance and monthly mortgage insurance will be going up from the current 1.75% upfront funding fee and .85 and .80 % monthly mi factor for 30 year fixed rate FHA loans

 

If you have any more questions or would like to apply for your Kentucky FHA loan, please contact me below:

• 4 Things Every Borrower Needs to Get Approved for a Mortgage Loan In Kentucky-FHA VA KHC Conventional Mortgage (kentuckyusdaloan.com