Thursday, April 28, 2016

Monday, April 18, 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…..talk 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.
10602 Timberwood Circle Suite 3
Louisville, KY 40223
((502) 905-3708 | 7 Fax: (502) 327-9119|
 Company ID #1364 MB73346


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 view of  my employer. Not all products or services mentioned on this site may fit all people.
, NMLS ID# 57916, (www.nmlsconsumeraccess.org). I lend in the following states: Kentucky



Friday, April 15, 2016

FHA Changes rule for Student Loans effective April 15, 2016.

 


FHA and HUD just came out with an updated Mortgagee Letter 16-08 in regards to Deferred Student Loans for FHA Loans for a Kentucky FHA Mortgage loan approval.

Previously had to count 2% of balance against DTI,  it is changed to 1% of balance against DTI.  See below from the Letter.  

Student Loans
(4) Calculation of Monthly Obligation
Regardless of the payment status, the Mortgagee must use either:
 the greater of:
- 1 percent of the outstanding balance on the loan; or
- the monthly payment reported on the Borrower's credit report;   or
the actual documented payment, provided the payment will fully amortize the loan over its term.













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Wednesday, April 13, 2016

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
(NMLS#57916)

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

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

 Company ID #1364 | MB73346






Bankruptcy, Foreclosure, Short-sale for Kentucky Conventional, FHA, VA, Mortgage Loan Guidelines

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Wednesday, April 6, 2016

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 620 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 eligible 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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Sunday, April 3, 2016

Student Loans underwriting guidelines for Kentucky FHA, VA, USDA, and Fannie Mae in 2016

STUDENT LOAN CLARIFICATION FOR ALL KENTUCKY LOAN PROGRAMS


 
PROGRAM
GUIDELINE
FANNIE MAE
For all student loans, whether deferred, in forbearance, or in repayment (not deferred), the lender must use the greater of the following to determine the monthly payment to be used as the borrower's recurring monthly debt obligation:
  • 1% of the outstanding balance; or
  • The actual documented payment (documented in the credit report, in documentation obtained from the student loan lender, or in documentation supplied by the borrower).
 
If the payment currently being made cannot be documented or verified, 1% of the outstanding balance must be used.
Exception: If the actual documented payment is less than 1% of the outstanding balance and it will fully amortize the loan with no payment adjustments, the lender may use the lower, fully-amortizing monthly payment to qualify the borrower.
FREDDIE MAC
Use the following:
  • The payment on the credit report
  • 1% of the outstanding balance or
  • The actual documented fully amortizing payment.
FHA LOANS
If the actual monthly payment is 0 or is not available use 2% of the outstanding balance to establish the monthly payment.
 
VA LOANS
May be excluded from the borrower's total monthly obligations with evidence of a minimum of 12 months deferment from date of closing.
 
If there is no monthly payment reflected on the credit report, a copy of the borrower's payment letter or promissory note should be used to determine what payment amount to use.
USDA LOANS
Fixed payment loans:  A fixed payment may be used in the debt ratio when the lender retains documentation to verify the payment is fixed, the interest rate is fixed, and the repayment term is fixed.  There must be no future adjustments to the terms of the student loan payments. 
 
Non-Fixed payment loans:  Payments for deferred loans, Income Based Repayment (IBR), Graduated, Adjustable, and other types of repayment agreements which are not fixed cannot be used in the total debt ratio calculation.  One percent of the loan balance reflected on the credit report must be used as the monthly payment.  No additional documentation is required.
     




-- 

Joel Lobb
Senior  Loan Officer
(NMLS#57916)

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



Fill out my form!