Debt to Income Ratios for A Kentucky Mortgage Loan

Debt to Income Ratios for A Kentucky Mortgage Loan

580. 720, 680, 600, 620 credit score for a Kentucky Mortgage Loan FHA, VA, KHC, USDA
580. 720, 680, 600, 620 credit score for a Kentucky Mortgage Loan FHA, VA, KHC, USDA

There are two debt-to-income (DTI) ratios on every loan: housing or front-end ratio and total or back-end ratio. The housing ratio tells us what percentage of the borrower’s monthly gross income is allocated toward the monthly principal, interest, tax, and insurance (PITI) payment. The total ratio includes the monthly PITI and all other monthly debts including auto loans, credit cards, child support expenses, student loans and more.

PITI / Total Qualifying Monthly Income = Front-end %

(PITI + All other Debts) / Monthly Income = Back-end %

The DTI ratios are one of the cornerstones of mortgage lending. They help us determine the borrower’s ability to repay the mortgage loan. Historically, borrowers with a higher DTI have had a higher default rate, making them a higher risk for lending. As a result, Fannie Mae, Freddie Mac, FHA, private mortgage insurance (PMI) companies, and investors have all set DTI limits based on program, product, property, and loan purpose.


As an underwriter or processor, it is our duty to insure the DTI on our automated underwriting system (AUS) findings is correct and matching the Underwriting Transmittal (1008). We should be performing a manual DTI calculation to double check our loan origination systems’ (LOS) calculation.


There are times when data is entered incorrectly into the LOS and the ratios are inaccurate. The most common factor that creates a DTI error is when the borrower owns multiple properties. When entering the housing expenses for these properties, you must learn how to properly manipulate your LOS to yield the correct DTI. Performing the manual calculation is the way to “back into” the correct DTI.



I specialize in First Time Home Buyers and move-up buyers. I have helped over 500 families buy their first home or second home and I would like to help your family. FHA, Rural Housing, KHC( Zero down loans ), VA, Conventional loans. Free credit report and Free pre-approvals within 1 hour..Call me today at 502-905-3708 or email me at (NMLS# 57916)


Kentucky FHA HUD Back to Work Program for FHA Borrowers in Kentucky

Kentucky FHA HUD Back to Work Program for FHA Borrowers in Kentucky 


What is Back to Work?
FHA is continuing its commitment to fully evaluate borrowers who have experienced periods of financial difficulty due to extenuating circumstances.
Many borrowers experienced periods of recession related financial difficulty and/or credit impairment resulting from unemployment or a severe reduction in income. FHA recognizes the hardships faced by these borrowers, and that their credit histories may not fully reflect their true ability or propensity to repay a mortgage.
For Purchase transactions with case numbers assigned on or after August 15, 2013 

Are borrowers with a foreclosure, short sale, or bankruptcy eligible for Back to Work?

The alternative guidance in Mortgagee Letter 2013-26 is effective for purchase applications with
case numbers assigned on or after August 15, 2013 through September 30, 2016.
All delinquent accounts and indications of derogatory credit, including collections and judgments,
bankruptcies, foreclosures, deeds-in-lieu, short sales, and other credit problems must be analyzed.
The lender must review the credit report and determine whether derogatory credit was the result of
an Economic
• The borrower exhibited Satisfactory Credit prior to the Economic Event Onset;
• The borrower’s derogatory credit occurred after the Economic Event Onset, and
• The borrower has re-established Satisfactory Credit for a minimum of twelve (12) months.
Foreclosure, Short Sale, Deed in Lieu, Bankruptcy
In all cases, the lender must verify that the derogatory credit was the result of an Economic Event
and document that a minimum of 12 months has elapsed since the date of the:
• foreclosure
• deed in lieu
• short sale
• discharge of Chapter 7 bankruptcy
Chapter 13 Bankruptcy
The lender must verify and document that
• the Chapter 13 bankruptcy was discharged prior to loan application and all required bankruptcy
payments were made
on-time, or
• a minimum of 12 months of the pay-out period under the bankruptcy has elapsed and all required
bankruptcy payments were made on time, and
• the bankruptcy was the result of an Economic Event
If the bankruptcy was not discharged prior to loan application, the borrower must receive written
permission from the
Bankruptcy Court to enter into the mortgage transaction.

Important Back to Work Definitions

HUD announced several key terms that must be reviewed in accordance with this program.
  • Economic Event: an occurrence beyond the borrowers control that resulted in a Loss of Employment, Loss of Income or a combination of both which resulted in a loss of Household Income of 20% or more for a period of six or more months.
  • Onset of Economic Event: the month of the start of or loss of income.
  • Recovery from an Economic Event: the re-establishment of acceptable or satisfactory credit. Satisfactory Credit equates to no derogatory credit for any mortgaged or leased property in the 12 months preceding the mortgage application. This also includes any installment or revolving debt for the same period.
  • Borrower: “Borrower” includes all parties including primary and/or co-borrower as listed on the loan application.
  • Borrower Household Income: the income of all parties on the application or Household Members as listed from the previous Economic Event and derogatory credit.
  • Housing Counseling: Counseling from a HUD-approved housing counseling agency related to home ownership and meets acceptable requirements.
Joel Lobb (NMLS#57916)Senior  Loan Officer
502-905-3708 cell
502-813-2795 fax

Key Financial Mortgage Co. (NMLS #1800)*
107 South Hurstbourne Parkway*
Louisville, KY 40222*