Category: charge offs

What is the minimum credit score I need to qualify for a Kentucky FHA, VA, USDA and KHC Conventional mortgage loan?


What is the minimum credit score I need to qualify for a Kentucky mortgage currently?

Question:
What is the current minimum credit scores needed to qualify for a Kentucky mortgage Loan?
Answer:
The minimum credit score needed to qualify for a Kentucky mortgage depends on the type of loan program you are looking to obtain, this could be the reason that you have received conflicting answers.
The most common types of mortgage are Conventional, FHA, USDA, VA, and KHC mortgage loans in Kentucky. I’ll explain each briefly below and the minimum credit score needed to qualify for each loan program. Keep in mind these are continuously changing and can vary by lender do to credit overlays.
Kentucky Conventional or Fannie Mae  
Conventional loans make up the majority of mortgages in the US. They are also known as conforming loans, because they conform to specific guidelines set by Fannie Mae and Freddie Mac.
  • Minimum Credit Score is 620
  • What Are the Conforming Loan Limits for 2024?
    Property Type Minimum Conforming Loan Limit Maximum Conforming Loan Limit
    One-unit $766,550 $1,149,825
    Two-unit $981,500 $1,472,250
    Three-unit $1,186,350 $1,779,525
    Four-unit $1,474,400 $2,211,600

  • You can use a conventional loan to buy a primary residence, second home, or rental property
  • Conventional loans are available in fixed rates, adjustable rates (ARMs), and offer many loan terms usually from 10 to 30 years
  • Down payments as low as 3% and 5% depending on Home Ready or straight conventional loan.
  • No monthly mortgage insurance with a down payment of at least 20%
  • Max Debt to Income Ratio of 50%
KENTUCKY FHA MORTGAGE
An FHA loan is a mortgage issued by federally qualified lenders and insured by the Federal Housing Administration (FHA). FHA loans are designed for low-to-moderate income borrowers who are unable to make a large down payment.
  • Minimum Credit Score is 500 with at least 10% down
  • Minimum Credit Score is 580 if you put less than 10% down
  • The maximum loan amount varies by Geographical Area, for 2024 is  $498,257
  • Upfront and Monthly Mortgage Insurance is required regardless of the Loan to Value
  • FHA Loans are only available for financing primary residences
  • Maximum Debt to Income Ratio of 50% (unless mitigating factors justify allowing a higher DTI) up to 57% in some instances with strong compensating factors.
KENTUCKY USDA RURAL HOUSING LOAN 
    • 100% Financing
    • Cities and towns located outside metro areas-see link (https://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do?pageAction=sfp
    • Do NOT have to be a Kentucky First Time Home Buyer
    • No Down Payment
    • 30 year low fixed rate loans
    • No Prepayment Penalty
    • Great Low FIXED Interest Rates
    • No max loan limits, just income limits
    • Possible to Roll Closing Costs into Loan if Appraises Higher
    • No Cash Reserves Required
    • UNLIMITED Seller Contribution toward Closing Costs
    • 100% Gifted Closing Costs allowed
    • Primary Residents only (no rentals/investment properties)
    • Debt to income ratios no more than 45% with GUS approval and 29 and 41% with a manual underwrite.
    • Only Need a 580 Credit Score to Apply*** Most USDA loans need a 620 or score higher to get approved through their automated underwriting system called GUS. 640 usually required for an automated approval upfront.
    • No bankruptcies (Chapter 7) last 3 years and no foreclosure last 3 years. If Chapter 13 bankruptcy possible to go on after 1 year
     
  • KENTUCKY VA Mortgage
  • 100% Financing Available up to qualifying income and entitlement
  • Must be eligible veteran with Certificate of Eligibility. We can help get this for veterans or active duty personnel.
  • No Down Payment Required
  • Seller Can Pay ALL Your Closing Costs
  • No Monthly Mortgage Insurance
  • Minimum 580 typically Credit Score to Apply–VA does not have a minimum credit score but lenders will create credit overlays to protect their interest.
  • Active Duty, Reserves, National Guard, & Retired Veterans Can Apply
  • No bankruptcies or foreclosures in last 2 years and a clear CAVIRS
  • Debt to income ratios vary, but usually 55% back-end ratio with a fico score over 620 will get it done on qualifying income and if it is a manual underwrite, 29% and 41% respectively
  • Can use your VA loan guaranty more than once, and in some cases, can have two existing VA loans out at they same time. Call or email for more info on this scenario.
  • Cost of VA loan appraisal in Kentucky now costs a  minimum $605 with a termite report needed on all purchase and refinance transactions unless a condo.
  • 2 year work history needed on VA loans unless you can show a legitimate excuse, ie. off work due to injury, schooling, education etc.
  • You cannot use your GI Bill for income qualifying for the mortgage payment.
KENTUCKY HOUSING DOWN PAYMENT ASSISTANCE 100 FINANCING 

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Down Payment:  There are still housing programs that exist for Kentucky home buyers whereas you can purchase a home with no down payment. You will need a 620 mid credit score to purchase a home using the KHC loan programs for their no down payment credit requirements.

How the Down Payment Assistance Program (DAP) Works

 Down payment assistance loans are available up to $10,000 and is paid back over a period of ten years at a current rate of 3.75%.

Regular DAP

  • Purchase price up to $481,176 with Secondary Market​ or Mortgage Revenue Bond (MRB) income limits.
  • Assistance in the form of a loan up to $10,000 in $100 increments.
  • Repayable over a 10-year term at 3.75 percent.
  • Available to all KHC first-mortgage loan recipients
If you have questions about qualifying as first time home buyer in Kentucky, please call, text, email or fill out free prequalification below for your next mortgage loan pre-approval.

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 views of my employer. Not all products or services mentioned on this site may fit all people

Repossession on a credit report for FHA Loan

How to handle a Repossession on a credit report for FHA Loan Approval?


How to handle a Repossession on a credit report for FHA Loan Approval?

Q: How should evidence of a previous repossession being on a Borrower’s credit report for an FHA loan be handled?

A: A Borrower can still owe money after a car or other property has been repossessed by a lender. The loan should be documented with evidence that any outstanding debt that may have resulted from the repossession is included in the qualifying DTI.

Documentation must be included in the loan file by either the borrower or from a credit supplement verifying whether or not any debt was left outstanding after the repossession.

If there is any debt outstanding after the repossession the terms of repayment must be provided and the debt must be included in the DTI.
If the remaining debt has gone into collections or been charged off ensure all FHA collection and/or charge-off requirements are met.

Does FHA require collections to be paid off for a borrower to be eligible for FHA financing?
A Collection Account refers to a Borrower’s loan or debt that has been submitted to a collection agency by a creditor.

If the credit reports used in the analysis show cumulative outstanding collection account balances of $2,000 or greater, the lender must:

•     verify that the debt is paid in full at the time of or prior to settlement using an acceptable source of funds;
•     verify that the Borrower has made payment arrangements with the creditor and include the monthly payment in the Borrower’s Debt-to-Income ratio (DTI); or
•      if a payment arrangement is not available, calculate the monthly payment using 5 percent of the outstanding balance of each collection and include the monthly payment in the Borrower’s DTI.

Collection accounts of a non-borrowing spouse in a community property state must be included in the $2,000 cumulative balance and analyzed as part of the Borrower’s ability to pay all collection accounts, unless excluded by state law.

Unless the lender uses 5 percent of the outstanding balance, the lender must provide the following documentation:

•     evidence of payment in full, if paid prior to settlement;
•     the payoff statement, if paid at settlement; or
•     the payment arrangement with creditor, if not paid prior to or at settlement.

For manually underwritten loans, the lender must determine if collection accounts were a result of:

•     the Borrower’s disregard for financial obligations;
•     the Borrower’s inability to manage debt; or
•     extenuating circumstances.

The lender must document reasons for approving a mortgage when the Borrower has any collection accounts. The Borrower must provide a letter of explanation, which is supported by documentation, for each outstanding collection account. The explanation and supporting documentation must be consistent with other credit information in the file.

For additional information see Handbook 4000.1 II.A.4.b.iv(M); II.A.5.a.iii(D), II.A.5.a.iv(O)  at https://www.hud.gov/program_offices/administration/hudclips/handbooks/hsgh

All policy information contained in this knowledge base article is based upon the referenced HUD policy document. Any lending or insuring decisions should adhere to the specific information contained in that underlying policy document.
Joel Lobb
Mortgage Loan Officer
Individual NMLS ID #57916
 
American Mortgage Solutions, Inc.
 

Text/call:      502-905-3708

fax:            502-327-9119
email:          kentuckyloan@gmail.com

Kentucky Mortgage Terms to Know


Glossary of Mortgage Terms to Know For A Kentucky Mortgage Loan.

ACCRUED INTEREST: Accumulated interest since the principal investment that has
not yet been paid.
AMORTIZATION: Paying off debt, principal and interest, with a fixed repayment schedule
in regular installments over a fixed period of time.
ANNUAL PERCENTAGE RATE (APR): The annual rate charged for borrowing money
expressed as a percentage. APR takes into account interest, discount points, lender fees
and mortgage insurance.
APPLICATION FEE: A fee charged by a lender to cover the initial costs of processing a
loan application.
APPRAISAL: A written estimate of a property’s current market value, based on the current
condition of the property and recent sales information from similar properties in the same
area.
APPRAISAL FEE: The cost to have a licensed, certified appraiser estimate the market value
of a property as of a specific date.
BORROWER: An individual who receives a loan from a lender with the intention of repaying
the loan in full over the agreed upon time-frame.
CAP: A limit on the amount the interest rate can increase or decrease for an ARM, either in
an adjustment period or over the life of the loan.
CERTIFICATE OF ELIGIBILITY: A document given to qualified veterans entitling them to a
VA loan. Obtained by sending DD-214 (Separation Paper) to the local VA office with VA
form 1880 (request for Certificate of Eligibility).
CERTIFICATE OF REASONABLE VALUE (CRV): An appraisal issued by the VA.
CLOSING: Also called “settlement,” is when all parties in a mortgage loan transaction sign
the necessary documents to legally transfer property and funds.
CLOSING COSTS: Expenses incurred during the home purchase or refinance process that
are paid at closing, including the loan origination fee, discount points, attorney’s fees, title
insurance, appraisals, etc.
CLOSING DISCLOSURE (CD): A five-page document listing final details about the mortgage
such as loan terms, projected monthly payments and total closing costs.
COMMITMENT LETTER: A legal document issued to a loan applicant from the lender to
provide them with a mortgage under certain terms and conditions.
COMPARABLES: An abbreviation for “comparable properties;” recently sold properties
with similar characteristics and location to the subject property that help the appraiser
determine the fair market value of the subject property.
CONVENTIONAL LOAN: A loan not secured by the U.S. government, such as FHA,
VA, or USDA.
DEBT-TO-INCOME RATIO (DTI): A percentage of an individual’s debt, measured by dividing
total monthly recurring debt payments by gross monthly income.
DEED: A written legal document showing who owns a particular property. This must be
signed to transfer a property’s ownership rights to a new homeowner.
DEPARTMENT OF VETERANS AFFAIRS (VA): A government agency that manages
benefits and other services for eligible veterans of the military.
DOWN PAYMENT: The upfront money paid to purchase a home. It is deducted from the
total amount of a mortgage and represents the beginning equity.

EARNEST MONEY: A security deposit made by a buyer to a seller to demonstrate that
the buyer is serious and willing to purchase the property.
EQUAL CREDIT OPPORTUNITY ACT (ECOA): Federal law enacted in 1974 making it
unlawful for any creditor to discriminate based on race, color, religion, national origin,
age, sex, marital status or receipt of income from public assistance programs.
EQUITY: The portion of a property that homeowner owns. Equity is the difference between
the home’s fair market value and the outstanding balance of the mortgage on the property.
ESCROW: A third party that holds money to ensure pay property taxes, homeowner’s
insurance or mortgage insurance is paid on time.
HAZARD INSURANCE (HOMEOWNER’S INSURANCE): Protects a homeowner against
loss due to fire or other natural disasters in exchange for a premium paid to the insurer.
HOMEOWNERS ASSOCIATION (HOA): An organized group of owners, usually found in
condominiums or closed communities, who manage the common areas and enforce rules.
INTEREST RATE: The amount charged to borrow money from a lender, expressed as a
percentage of the principal loan.
LOAN ESTIMATE (LE): A three-page document that explains the important details
about a borrower’s loan, including the estimated interest rate, monthly payment and
total closing costs for the loan. The LE will be provided within three business days of
the lender receiving the loan application.
LOAN-TO-VALUE RATIO (LTV): The percentage of the loan amount to the appraised
value of the property.
LOCK-IN RATE: An offer by a lender to guarantee an interest rate for a set period of time.
MARKET VALUE: Also called “home value;” the amount for which a house will likely sell.
MORTGAGE INSURANCE (MI): Insurance that protects the lender if a borrower defaults
on their mortgage loan. MI is usually required if the down payment is less than 20% of
the purchase price.
ORIGINATION FEE: A fee charged by a lender to cover the administrative costs of
processing a loan.
PREPAYMENT: An advanced principal payment prior to the due date, thus saving money
on interest.
PREPAYMENT PENALTY: A fee charged to borrowers for paying ahead on their mortgage.
PRINCIPAL: Outstanding loan balance still owed to the lender, not including interest.
REALTOR: A licensed real estate professional who represents a buyer or seller in a real estate
transaction in exchange for a commission; a member of the National Association of Realtors.
REAL ESTATE SETTLEMENT PROCEDURES ACT (RESPA): A federal law requiring lenders
to provide disclosures to borrowers informing them of loan settlement costs. These guidelines
provide acceptable practices and fees in real estate transactions.
SECOND MORTGAGE: An additional mortgage, or lien, placed on a property with subordinate
rights to the first mortgage.
TERM: The period of time that covers the life of the loan, usually in years.
TITLE: A document that indicates ownership of a property, as well as rights of ownership
and possession of the property.
TITLE INSURANCE: Insurance that protects the lender (lender’s policy) or the buyer
(owner’s policy) against loss due to disputes over property ownership.

Kentucky Home Buyers. Purchase a Home No Money Down.



I can answer your questions and usually get you pre-approved the same day. 
Call or Text me at 502-905-3708 with your mortgage questions.
Joel Lobb
Mortgage Loan Officer
Individual NMLS ID #57916
American Mortgage Solutions, Inc.
10602 Timberwood Circle 
Louisville, KY 40223
Company NMLS ID #1364

Text/call:      502-905-3708

fax:            502-327-9119

FHA eases mortgage rules for some credit-impaired applicants for collections and charge offs


Wholesale-Mortgage-Source-Home-Purchase

FHA Collection Accounts
• A Collection Account refers to a Borrower’s loan or debt that
has been submitted to a collection agency by a creditor.
• Medical Collections are not required to be paid and satisfied.
• Collection accounts of a non-borrowing spouse in a
community property state must be included in the $2,000
cumulative balance and analyzed as part of the Borrower’s
ability to pay all collection accounts, unless specifically
excluded by state law.

If the credit reports used in the analysis show a cumulative
outstanding collection account balances of $2,000 or greater,
the Mortgagee must:
• Verify that the debt is paid in full at the time of or prior to
settlement using an acceptable source of funds;
• Verify that the Borrower has made payment arrangements with the
creditor and include the monthly payment in the Borrower’s DTI; or
• If a payment arrangement is not available, calculate the monthly
payment using 5 percent of the outstanding balance of each
collection and include the monthly payment in the Borrower’s DTI
ratio.

Collection Accounts: Documentation
• The Mortgagee must provide the following documentation:
– Evidence of payment in full, if paid prior to settlement; or
– The payoff statement, if paid at settlement; or
– The payment arrangement with creditor, if not paid prior to or
at settlement.
• If the collection account is to be paid off, the Mortgagee must
document that the funds being used for the pay off come
from an acceptable source.
• If the Mortgagee uses 5 percent of the outstanding balance,
no documentation is required.

Charge Off Accounts
• A Charge Off Account refers to a Borrower’s loan or debt that
has been written off by the creditor.
• Charge off accounts do not need to be included in the
Borrower’s liabilities or debt.

Additional Required Documentation for
Collection and Charge Off Accounts
• Mortgagee must determine if collection account was due to:
– The Borrower’s disregard for financial obligations;
– The Borrower’s inability to manage debt; or
– Extenuating circumstances.
• Mortgagee must document reasons for approving a mortgage
when the Borrower has any outstanding collection accounts.
This includes medical collections.
• Borrower must provide a letter of explanation, which is
supported by documentation, for each outstanding collection
account. This includes medical collections.

http://www.emailmeform.com/builder/form/0bfJs9b6bK8TGoc6mQk9hIu
 
Joel Lobb (NMLS#57916)
Senior  Loan Officer
 
American Mortgage Solutions, Inc.
Company ID #1364 | MB73346
 


Text/call 502-905-3708
kentuckyloan@gmail.com

http://www.nmlsconsumeraccess.org/
Disclaimer: No statement on this site is a commitment to make a loan. Loans are subject to borrower qualifications, including income, property evaluation, sufficient equity in the home to meet Loan-to-Value requirements, and final credit approval. Approvals are subject to underwriting guidelines, interest rates, and program guidelines and are subject to change without notice based on applicant’s eligibility and market conditions. Refinancing an existing loan may result in total finance charges being higher over the life of a loan. Reduction in payments may reflect a longer loan term. Terms of any loan may be subject to payment of points and fees by the applicant  Equal Opportunity Lender. NMLS#57916 http://www.nmlsconsumeraccess.org/
 
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