Friday, September 25, 2015

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

Kentucky FHA, VA, KHC, Conventional, Fannie Mae, Freddie Mac, USDA Mortgage Loans

4 Things Every Borrower Needs to know to Get Approved for a Loan!!!!

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 


Thursday, September 24, 2015

Louisville Kentucky First Time Home Buyer Programs and Resources

Louisville Ky First Time Home Buyers Kentucky First Time Home Buyer Programs and Resources

If you are a potential Louisville Kentucky First Time home buyerfirst time home buyer in Louisville Kentucky, we welcome you! It is our utmost desire to assist you in reaching the goal of buying your first home. We've gathered the most helpful, beneficial resources together on this page to make things as easy as possible for you.

We have access to all the Louisville Kentucky First Time home Buyers programs including, FHA, VA, KHC, and USDA, Rural Housing Zero Down home loans--Our site is updated daily for Louisville Kentucky first time home buyers with the best programs and rates available.

What is available for first time home buyer financial programs in Kentucky?The first place to start in that search is the Kentucky Housing Corporation. They provide generous assistance to first time home buyers in the form of grants to help with the down payment as well as closing costs.

The Kentucky Housing Corporation has a down payment assistance program for eligible homebuyers who meet specific moderate income limits to help with downpayment and/or closing costs. Check and see what is available and if you qualify....

To visit the website of the Kentucky Housing Corporation Zero Down Home Loans for Ky Home Buyers First Time. In certain situations they will provide loans for the down payment for first time home buyers in Louisville Kentucky and Jefferson County Kentucky. . It is a great program for first time home buyers and is worth investigating. Simply go to their website above for complete information.

There are other Louisville, Kentucky first time homeownership programs available through the Kentucky Housing Corporation. You can visit the website by clicking here. You'll find information on income limits in order to qualify for the first time home buyer program, program descriptions, a list of approved lenders, an interest rate lock program, and a host of other first time home buyer resources.

In addition to the state programs, there are federal funds and grants available to residents and first time home buyers in Kentucky through the Homes and Communities program of the US Department of Housing and Urban Development. On their website you'll find complete grant information, application forms, description of available funds, as well as many other helpful tools.

Every potential first time home buyer should investigate what they have to offer. You can visit the website by clicking on US Dept. of Housing and Urban Development. Finally, there is a website that lists all grant programs available through the federal government, Louisville, Kentucky First time home buyers should plan to spend the required time investigating to determine how many specific grants they may qualify for. You can visit the website by clicking here.

We will be adding more resources to this page as we discover them and/or they become available to first time home buyers in Kentucky, so please do bookmark this site and check back often! In the meantime, please do look around and get the most of the information that is here.

Kentucky First Time Home Buyer Grants and Loan Programs

Joel Lobb (NMLS#57916)
Senior  Loan Officer
502-905-3708 cell


How much income do I need qualify for Kentucky Home

Kentucky Lender's Criteria: Debt-to-Income Ratios 

From a Kentucky Mortgage lender's perspective, your ability to purchase a home depends largely on the following factors: 

Front-End Ratio 

The front-end ratio is the percentage of your yearly gross income dedicated toward paying your mortgage each month. Your mortgage payment consists of four components: principal, interest, taxes and insurance (often collectively referred to as PITI)  A good rule of thumb is that PITI should not exceed 31% of your gross income. If you make $100,000 a year, then your max house payment to include escrows for home insurance, mortgage insurance, property taxes would be $2583.00

Back-End Ratio 

The back-end ratio, also known as the debt-to-income ratio, calculates the percentage of your gross income required to cover your debts. Debts include your mortgage, credit-card payments, child support and other loan payments. Most lenders recommend that your debt-to-income ratio does not exceed 45% of your gross income. To calculate your maximum monthly debt based on this ratio, multiply your gross income by 0..45 and divide by 12. For example, if you earn $100,000 per year, your maximum monthly debt expenses should not exceed $3,750 with new mortgage payment. Utility bills, car insurance,  cell phone bills, insurance payments does not factor into this ratio. Only bills listed on credit report and 401k loan and child support payments.

There are compensating factors that will allow for higher debt to income ratios for both front and back if you have a large down payment of over 20% or more, credit scores over 740+, and large reserves after loan is made, i.e. 12 months reserves or more money saved up in 401k, retirement account, or savings account. 

Joel Lobb
Senior  Loan Officer

American Mortgage Solutions, Inc.
10602 Timberwood Circle, Suite 3
Louisville, KY 40223

 phone: (502) 905-3708
 Fax:     (502) 327-9119

 Company ID #1364 | MB73346

Friday, September 11, 2015

Kentucky FHA Mortgage Changes to take effect September 14, 2015

Kentucky FHA Mortgage Major Changes:

Effective September September 14, 2015 FHA has instituted new Kentucky FHA Mortgage Underwriting guidelines. I have highlighted the ones in yellow that are considered major and could adversely effect a FHA Mortgage loan approval in Kentucky  going forward with the new changes.

    • The Borrower has $1,000 or more collectively in Disputed Derogatory Credit Accounts
    • The date of the Borrower's bankruptcy discharge as reflected on bankruptcy documents is within two years from the date of case number assignment (both Chapter 7 and Chapter 13)
    • The case number assignment date is within three years of the date of the transfer of title through a Pre-Foreclosure Sale (Short Sale), a foreclosure sale, or a Deed-in-Lieu of foreclosure (NOTE: these are only eligible under Manual Underwrite if the borrower meets previous FHA Back to Work standards)
    • The Mortgage Payment history within the last 12 months meets any of the following
      • 3 x 30 late payments
      • 1 x 60 and 1 x 30 late payments
      • 1 x 90 late payment
      • Any delinquency on a cash-out
    • Business income shows a greater than 20 percent decline over the analysis period

  • Student loans are now classified as either Deferred Obligations or Installment Loans. If deferred and the actual payment is $0 or not available, 2% of the outstanding balance will be used to calculate payment.
  • Borrower does not have to explain and reestablish employment after a Gap in Employment unless it was at least 6 months in length.
  • Expected income (i.e. new job, performance raise, retirement, etc.) can be used for qualifying if it is guaranteed in writing to begin within 60 days of closing.
  • Financing of unrecorded Land Contracts will be treated as a purchase transaction, whereas recorded Land Contracts can still be refinanced.
  • When grossing-up Non-Taxable Income, the amount added cannot exceed the greater of 15% or the appropriate tax rate based on the previous year's income. If no tax returns are filed for the previous year, 15% is used.
  • 30-Day Accounts, those where the borrower pays off the outstanding balance each month, do not have to be included in the DTI as long as the below requirements are met. Otherwise 5% of the outstanding balance must be used.
    • The account has a 12 month history of being paid off with no late payments; AND
    • The borrower has excess assets available to pay off the balance once all require loan funds and reserves are taken into account
  • Borrowers currently on short-term disability or other temporary leave will be able to use pre-leave income if they can document that they will return to work before the loan closes. Otherwise current income will be used, though it can be supplemented by surplus liquid assets.
  • Earnest money deposits must be sourced if they exceed 1% of the sales price or are deemed excessive by the underwriter based on the borrower's history of savings.
  • Appraisers will be required to note all appliances present in the home at the time of inspection and indicate whether each appliance is Personal or Real property. All conveyed appliances must be tested, with any inoperable appliances being reported as a deficiency.
  • Appraisers must verify that any existing sump pump is in working order

Overtime and Bonus Income

 A two year average using Federal Tax Returns/VOE/W2s must be used for qualifying unless
the income decreases by 20 percent or more from the previous year – then the mortgagee
must use current year’s income.

Commission Income

 Commission income may be considered effective income if received for at least one year in
the same or similar line of work (job) and it is documented that it is likely to continue. See
full guidelines for specific calculation and documentation requirements.
Part Time/Second Job Income
 Part-Time employment refers to employment that is NOT the borrower’s primary
employment and generally is less than 40 hours per week. It may be considered effective if
the borrower has worked a part-time job uninterrupted for the prior two years and
continuance is likely. Calculation: Income must be averaged over the previous 2 years. If an
increase in pay rate can be documented a 12 month average of hours at the current pay rate
may be used.

Seasonal Employment Income

 Seasonal employment refers to employment that is not year round and is not dependent on
the number of hours per week the borrower works on the job. In order to be considered
effective, the seasonal income must have been received for the prior 2 years and
continuance is likely. Calculation: Income must be averaged over the previous 2 full years. 

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Wednesday, August 26, 2015


THROUGH 9/30/2015
All Transactions
The new fee structure is applicable to all Conditional Commitments issued by Kentucky Rural Development Offices  on or after October 1, 2015. Kentucky USDA Mortgage Loan guarantee requests submitted to KY Rural Development (RD) on which a conditional commitment has not been issued by September 30, 2015, will be subject to the new, higher guarantee fee structure.

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