Fannie Mae Kentucky Conforming Guideline Changes
The following guideline changes are effective immediately for all Kentucky Fannie MaeF Conventional loans; however DU will not be updated to reflect these changes until August 15th 2015
Conversion of Currently Primary Residence
Requirements for conversion of a borrower’s current primary residence to secondary or investment have been removed. The converted residence will be treated like a normal second home or investment part with regards to Reserve requirements and use of Rental Income.
This removes all requirements related to the requirement of 30% equity in the converted property.
Stocks, Bonds, & Mutual Funds
- 100% of the value can now be used. No reduction in value is required.
- Documentation that the funds have been liquidated is no longer required when the value of the asset is at least 20% greater than the required borrower funds for down payment and closing costs.
Unreimbursed Employee Expenses
If a borrower qualifies using commission income which accounts for less than 25% of borrower’s annual income, base pay, bonus income, or overtime income:
- Unreimbursed expenses do not have to be analyzed, deducted from qualifying income, or added to monthly liabilities
- Voluntary deductions (e.g. union dues) do not have to be deducted from income or treated as a liability
If a borrower qualifies using commission income which accounts for 25% or more of their annual income, general unreimbursed business expenses must be deducted from the gross commission income.
If the borrower reports an automobile allowance as part of monthly income, the related expense must always be considered. The underwriter will determine whether automobile expenses will be deducted from income or included in the debt calculation.
In cases where a borrower reports additional “Unreported Tip Income” to the IRS beyond what is reported by their employer, this higher amount of tip income can be used as long as it can be verified with the last 2 years tax returns and filed Forms 4137 (Social Security and Medicare Tax on Unreported Tip Income).
Senior Loan Officer