Monday, February 8, 2016

Condo Requirements for a Kentucky FHA Mortgage Loan Approval in 2016

How Do Changes to the FHA Condo Loan Rules Help You?
FHA has recently provided new guidance on its rules for certifying condo buildings. Watch this video to learn why the FHA made these changes.
Posted by Home Ownership Matters on Wednesday, February 3, 2016
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Sunday, February 7, 2016

Tuesday, January 26, 2016

4 Things Every Borrower Needs to Get Approved for a Mortgage or Home Loan In Kentucky

There are 4 basic things that a borrower needs to show a lender in order to get approved for a mortgage. Each category has so many what ifs and sub plots that each box can read as it’s own novel. In other words, each category has so many variables that can affect what it takes to get approved, but without further adieu here are the four categories in no particular order as each without any of these items, you're pretty much dead in the water:

1. Income

You need income. You need to be able to afford the home.  But what is acceptable income? Let’s just say that there are two ratios mortgage underwriters look at to qualify you for mortgage payment:

First Ratio – The first ratio, top ratio or housing ratio. Basically that means out of all the gross monthly income you make, that no more that X percent of it can go to your housing payment. The housing payment consists of Principle, Interest, Taxes and Insurance. Whether you escrow or not every one of these items are factored into your ratio. There are a lot of exceptions to how high you can go, but let’s just say that if your ratio is 33% or less, generally, across the board, you’re safe.

Second Ratio- The second ratio, bottom ratio or debt ratio includes the housing payment, but also adds all of the monthly debts that the borrower has. So, it includes housing payment as well as every other debt that a borrower may have. This would include, Auto loans, credit cards, student loans, personal loans, child support, alimony….basically any consistent outgoing debt that you’re paying on. Again, if you’re paying less than 45% of your gross monthly income to all of the debts, plus your proposed housing payment, then……generally, you’re safe. You can go a lot higher in this area, but there are a lot of caveats when increasing your back ratio.

What qualifies as income? Basically, it’s income that has at least a proven, two year history of being received and pretty high assurances that the income is likely to continue for at least three years. What’s not acceptable? Unverifiable cash income, short term income and income that’s not likely to continue like unemployment income, student loan aid,  VA education benefits,or short term disability are not allowed for a  mortgage loan.

2. Assets

What the mortgage underwriter is looking for here is how much can you put down and secondly, how much will you have in reserves after the loan is made to help offset any financial emergencies in the future.

Do you have enough assets to put the money forth to qualify for the down payment that the particular program asks for. The only 100% financing or no money down loans still available in Kentucky for  home buyers are available through USDA, VA, and KHC or Kentucky Housing Loans. Most other home buyers that don't qualify for the no money down home loans mentioned above, will turn to the FHA program. FHA loans currently requires a 3.5% down payment.

Kentucky Home buyers that have access to putting down at least 5% or more, will usually  turn to Fannie Mae or Freddie Mac mortgage programs  so they can get better pricing when it comes to mortgage insurance.

These assets need to be validated through bank accounts, 401k or retirements account and sometimes gifts from relatives or employer.. Can you borrower the down payment? Sometimes. Generally if you’re borrowing a secured loan against a secured asset you can use that. But rarely can cash be used as an asset. FHA will allow for gifts from relatives  for down payments with little as 3.5% down but Fannie Mae will require a 20% down payment when a gift is being used for the down payment on the home.

The down payment scenarios listed above are for Kentucky Primary Residences only. There are stricter  down payment requirements for investment homes made in Kentucky.

 3. Credit

 640 is the bottom score (again with few exceptions) that lenders will permit. Below a 640, then you're in a world of hurt. Even at 640, people consider you a higher risk that other folks and are going to penalize you or your borrower with a more expensive loan. 720 is when you really start to get in the “as a lender we love you” credit score. 740 is even better. Watch your credit scores carefully. You have three credit scores and the lender will take your middle score.

Kentucky  FHA Mortgage Loans currently requires 3 years removal from a foreclosure or short sale  and 2 years on a bankruptcy with good reestablished credit.

Kentucky Fannie Mae Mortgage Loans currently requires 4 years removal from a bankruptcy, and 7 years on a foreclosure.

Kentucky VA Mortgage Loans currently requires 2 years removal from a bankruptcy or foreclosure with good reestablished credit.

Kentucky USDA loans require 3 years removal from bankruptcy and foreclosure with good reestablished credit.

4. Appraisal

Generally, there’s nothing you can do to affect this. Bottom line here is…..”is the value of the house at least the value of what you’re paying for it?” If not, then not good things start to happen. Generally you’ll find less issues with values on purchase transactions, because, in theory, the realtor has done an accurate job of valuing the house prior to taking the listing. The big issue comes in refinancing. In purchase transactions, the value is determined as the

Lower of the value or the contract price!!!

That means that if you buy a $1,000,000 home for $100,000, the value is established at $100,000. Conversely, if you buy a $200,000 home and the value comes in at $180,000 during the appraisal, then the value is established at $180,000. Big issues….Talk to your loan officer.

For each one of these boxes, there are over 1,000 things that can effect if a borrower has reached the threshold to complete that box. Soooooooooooo… to a great loan officer. There are so many loan officers that don’t know what they’re doing. But, conversely, there’s a lot of great ones as well. Your loan is so important! Get a great lender so that you know, for sure, that the loan you want, can be closed on!

I can answer your questions and usually get you pre-approved the same day.

Joel Lobb (NMLS#57916)
Senior  Loan Officer

American Mortgage Solutions, Inc.
 800 Stone Creek Pkwy, Ste 7,
Louisville, KY 40223
((502) 905-3708 | 7 Fax: (502) 327-9119|
 Company ID #1364 MB73346 


Sunday, January 17, 2016

What is minimum credit score for a FHA Loan in Kentucky?

What is minimum credit score for a FHA Loan in Kentucky?

The FHA is introducing new guidelines on loan to value ratios and the minimum credit score required for FHA borrowers in Kentucky. As detailed in a Mortgagee Letter from the Department of Housing and Urban Development (HUD), the following credit requirements will apply for FHA borrowers, effective October 4, 2010.

To be eligible for maximum financing, borrowers will need a minimum credit score of 580 or higher.

Kentucky FHA Borrowers with a credit score between 500 and 579 will be limited to a loan to value of 90%. A sub 580 FICO credit score borrower will henceforth need to make a 10% minimum down payment on a purchase transaction.

All Kentucky FHA borrowers with a credit score below 500 will not be eligible for FHA-insured mortgage financing in Kentucky.

HUD’s newly introduced minimum credit score and loan to value requirements will apply to all single family loan programs, except for Reverse Mortgages (Home Equity Conversion Mortgages) and Hope for Homeowners.

The new credit requirements are not expected to dramatically change the number of Kentucky  FHA mortgage approvals. Most lenders had already imposed a minimum credit score requirement of 640 or higher for Kentucky FHA borrowers. In limited cases, borrowers with scores between 620 and 639 could still obtain mortgage approval.

Many potential Kentucky FHA borrowers with scores below 640 who cannot obtain mortgage approval may be left wondering why this is the case if the FHA has established a minimum score of only 580. The explanation for this is that the FHA does not make mortgage loans but rather insures FHA loans made by lenders. Despite the FHA insurance, banks do not have an iron clad protection from loss.

free mortgage pre-approval on FHA loans in Kentucky!

Friday, January 8, 2016

$15,000 Down payment Assistance Grant for Kentucky First Time Homebuyers in 2016

$15,000 Down payment Assistance Grant for Kentucky First Time Homebuyers in 2016


There are three main down payment assistance programs for Kentucky First Time Home Buyers. KHC recognizes that down payments, closing costs, and prepaids are stumbling blocks for many potential home buyers. Here are several loan programs to help. Your KHC-approved lender can help you apply for the program that meets your need.

1. Regular DAP ( available now)

  • Purchase price up to $294,000 with Secondary Market or $258,690 with MRB.
  • Assistance in the form of a loan up to $6,000 in $100 increments.
  • Repayable over a ten-year term at 5.50 percent.  A DAP of $6,000 over ten years at 5.50 percent interest would equal a payment of $65.12.
  • Available to all KHC first-mortgage loan recipients.

2. Affordable DAP (available now)

  • Purchase price up to $294,000 with Secondary Market or $258,690 with MRB.
  • Assistance up to $4,500.
  • Repayable over a ten-year term at 1.00 percent.
  • Borrowers must meet Affordable DAP household income limits.

3. HHF DAP (Available January 20,2016)

  • Zero percent interest rate.
  • A non-repayable second mortgage up to $15,000.
  • Forgiven after five years.
  • Home purchase must be located in Christian, Hardin, Jefferson, or Kenton counties.
  • Applicants must meet secondary market income and buying limits..
• Borrower must be a first-time home buyer (no ownership interest in the last three years).
• Pre-purchase home buyer education required.

Minimum 640 credit score.
Maximum ratios of 40/45 


Applicant Income Limit for the following counties is $97, 650

Adair, Allen, Ballard, Barren, Bath, Bell, Boyd, Boyle, Breathitt, Breckinridge, Butler, Caldwell,
Carlisle, Carroll, Carter, Casey, Christian, Clay, Clinton, Crittenden, Cumberland, Elliott, Estill,
Fleming, Floyd, Fulton, Garrard, Grant, Graves, Grayson, Green, Greenup, Harlan, Harrison, Hart,
Hopkins, Jackson, Johnson, Knott, Knox, Laurel, Lawrence, Lee, Leslie, Letcher, Lewis, Lincoln,
Livingston, Logan, Lyon, Magoffin, Marion, Martin, Mason, McCreary, Meade, Menifee, Metcalfe,
Monroe, Montgomery, Morgan, Muhlenberg, Nelson, Nicholas, Ohio, Owsley, Perry, Pike, Powell,
Pulaski, Robertson, Rockcastle, Rowan, Russell, Simpson, Taylor, Todd, Trigg, Union, Washington,
Wayne, Whitley, Wolfe

Secondary Market Purchase Price Limit -- $294,000

County Income Limits 

Anderson 120,050     Jessamine 119,350
Boone 124,600         Kenton 124,600
Bourbon 119,350     Larue 105,175
Bracken 124,600       Madison 99,925
Bullitt 112,175         Marshall 104,125
Calloway 102,725    McCracken 105,875
Campbell 124,600     Mclean 100,625
Clark 119,350           Mercer 103,425
Daviess 100,625       Oldham 112,175
Edmonson 106,400   Owen 109,200
Fayette 119,350        Pendleton 124,600
Franklin 108,850     Scott 119,350
Gallatin 124,600       Shelby 127,575
Hancock 100,625     Spencer 112,175
Hardin 105,175        Trimble 112,175
Henderson 110,950  Warren 106,400
Henry 112,175          Webster 110,950
Hickman 101,325     Woodford 119,350
Jefferson 112,175

The income limitations listed above are imposed by state law.

Beginning January 20th, Kentucky Housing will have available a $15,000 GRANT (aka FREE MONEY) that can be used for your closing costs and down payment to purchase your first home. This money does not have to be paid back on a monthly basis and forgiven each year that you own the home. You must meet income guidelines - very liberal - over $100,000 per year - and not owned a home in the last three years.

This is truly a once in a lifetime gift and the money is first come first serve. You must have an accepted contract by January 20th to have the best chance at receiving the funds!

Questions and Answers below about the HHF DAP $15,000 Down payment assistance:

I have a buyer wanting to participate in the upcoming HHF DAP program. How do they register or apply? Have to wait until January 20, 2016 to register with KHC for first and DAP

Can we apply for it now or do we have to wait until January 20, 2016? WAIT

Do we register the loan like a regular dap loan? YES-but wont have the option to reserve until January 20, 2016

Lastly, do they have to have a house under contract? YES.  Contract and application date can be before the loan reservation.
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Wednesday, December 23, 2015

Mortgage Insurance Tax Deductibility is Back for 2016 Kentucky Homebuyers

Mortgage Insurance Tax Deductibility is Back for 2016

Last week, legislation was signed to renew the mortgage insurance premium tax deductibility for qualified Kentucky home mortgage borrowers for 2016. This means great news for our Kentucky Home borrowers! A few quick hit points:
  • The tax deduction is applicable for purchases and refinances closed after 12/31/2014.

  • The mortgage insurance premiums paid after 12/31/2014 through 12/31/2016 can qualify for the tax deduction on borrowers' federal tax returns with details including:

  • Borrowers with adjusted gross incomes below $100,000 can deduct 100% of their mortgage insurance premiums. For borrowers with adjusted gross incomes from $100,000.01 to $110,000 deductions are phased out at 10% increments for each additional $1,000 of adjusted gross household income.

To learn more, contact me today. Thanks!


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Saturday, December 19, 2015

Kentucky FHA Mortgage Guidelines Changes Effective September 14, 2015

Louisville Kentucky FHA Mortgage Changes for 2015:

Eligibility Requirements  for a Kentucky  FHA Loan after September 15, 2015

When applying for eligibility for A Kentucky  FHA Loans, There are some factors taken into account:
  • Credit score 580 and above with the mortgage investors we work with, even though FHA will insured lower credit scores, most mortgage lenders will create overlays
  • No bankruptcies (Chapter 7) in last 2 years with clean credit afterwards and 3 years after a foreclosure or short sale
  • 3.5% Down payment. Can be gifted or money saved-up or money taken out of 401k or retirement account. No cash gifts or unsourced deposits are allowed for down payment on a FHA loan. 
  • Debt to income ratios can be up to 55% on an Approved Eligible Files but restricted on manual underwrites to 31% and 43% respectively. 
  • Overtime or bonus income needs to show a 2 year history for it be eligble for income qualifying on a FHA loan. FHA underwriters typically will take a 2 year average. 
  • FHA appraisals with the new changes now call for the FHA appraiser to check and review the home more thoroughly, hence the typical costs of a FHA appraisal has gone from $325 to $425 due to more legwork involved on a FHA appraisal. 
  • Any disputes on credit bureau will need to be taken out of dispute status typically for your credit scores to be validated, so please be aware of this. 
  • Rent references are usually not called for unless your file get downgraded to a manual 
  • FHA mortgage insurance the upfront and annual mi monthly fee is for life of loan. 
  • A lender may approve a borrower if:  acceptable payment history and  no major derogatory credit on revolving accounts in the last 12 months. “Acceptable payment history” means:  the borrower made all housing and installment debt payments on time for the previous 12 months, and  there are no more than two 30‐day late mortgage or installment payments in the last 24 months. “Major derogatory credit” means:  payments made more than 90 days after the due date, or  3 or more payments made more than 60 days after the due date.
  •  Child support income is Allowed If using a voluntary payment agreement, the lender:  obtains 12 months canceled checks, deposit slips, or tax returns.  For divorce decree, legal separation agreement, or court order if there is evidence of receipt for the most recent 6 months, may use the current payment to calculate income, &  if there are not 6 months of consistent payments, may average the income received over the prior 2 years, or less if the income has not been received that long  4000.1 II.A

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