Showing posts with label Documents needed for Kentucky Mortgage Loan Approval. Show all posts
Showing posts with label Documents needed for Kentucky Mortgage Loan Approval. Show all posts

General Requirements for Getting A Mortgage Loan Approval in Kentucky

Getting a mortgage in Kentucky involves meeting certain criteria set by lenders


General Requirements:


Credit Score:
A minimum credit score of 620 is generally required, but higher scores (around 720+) can unlock better interest rates and loan options. Lower credit scores are allowed on FHA, VA, and USDA loans. USDA and VA have no minimum credit score requirement but most lenders will want a 580 credit score or higher and FHA will go down to a 500 credit score with 10% down. 

Debt-to-Income (DTI) Ratio: This compares your monthly debt payments to your gross monthly income. Aim for a DTI ratio below 40%, with some lenders allowing up to 50% depending on the loan type.

Down Payment: While 20% is traditional, Kentucky has programs allowing 3% down with assistance.

Employment and Income: Steady employment history and sufficient verifiable income are crucial.
Savings: Lenders prefer to see reserves covering several months of mortgage payments.

Additional factors:


Loan Type: Different loan types (FHA, VA, USDA) have specific eligibility requirements.

First-Time Homebuyer Status: Kentucky offers programs with relaxed criteria for first-time buyers.
Area Median Income (AMI): Income limits apply to some Kentucky assistance programs.
Tips for Qualifying:

Check your credit score and report for errors.
Pay down debt to lower your DTI ratio and improve your credit utilization to increase your score .
Save consistently for your down payment and closing costs. Get a gift lined up for down payment
Consider down payment assistance programs.
Get pre-approved for a mortgage to understand your budget and cash to close along with out of pocket expenses before closing. 

Resources:

Kentucky Housing Corporation: https://www.kyhousing.org/

5 Things to Know about buying a house and getting a Mortgage Loan approval in Kentucky for 2023

 

5 Things to Know about buying a house and getting a Mortgage Loan approval in Kentucky for 2023


1. Do Mortgage Rates Change Daily?


Just like the gas prices at the pump, mortgage rates can change daily or throughout the day. Typically mortgage rates are published at 10-11 am daily by most lenders and you can lock up through the close of business which is usually around 6-7 PM. Mortgage rates can change up or down throughout the day based on various financial, economics, and geopolitical news in the US Financial markets and World markets. Generally speaking, good economic news is bad for rates and vice versa, bad economic news is good for mortgage rates.

The good news is this: Once you find a home and get it under contract, you can lock your mortgage loan rate. Typically it takes about 30-45 days to close a mortgage loan in Kentucky, so the typical lock is for 30-60 days. If rates get better you may be able to negotiate a better rate with your lender, but they usually have to improve by at least 25 basis points (.25) to do that. Not all lenders offer this option. The longer you lock the loan, the greater the costs. It is usually free to lock in a loan for up to 90 days without having to pay a fee.

What a lot of lenders are experiencing now is that some loans don't close on time for various reasons. You can always extend the lock on the loan but it will costs you usually .125 basis points to do so. If you let the lock expire on the loan, then you have to take worse case pricing on that day when you go to relock. It is usually best to extend the lock on your loan.

2. What kind of Credit Score Do I need to qualify?

When applying for a mortgage loan, lenders will pull what they call a "tri-merge" credit report which will show three different fico scores from Trans union, Equifax, and Experian. The lenders will throw out the high and low score and take the "middle score" For example, if you had a 614, 610, and 629 score from the three main credit bureaus, your qualifying score would be 614. Most lenders will want at least two scores. So if you only have one score, you may not qualify. Lenders will have to pull their own credit report and scores so if you had it ran somewhere else or saw it on a website or credit card you may own, it will not matter to the lender, because they have to use their own credit report and scores.
Most lenders will pull your credit report for free nowadays so this should not be a big deal as long as your scores are high enough.
The Secondary Market of Mortgage loans offered by FHA, VA, USDA, Fannie Mae, and KHC all have their minimum fico score requirements and lenders will create overlays in addition to what the Government agencies will accept, so even if on paper FHA says they will go down to 580 or 500 in some cases on fico scores, very few lenders will go below the 620 threshold.
If you have low fico scores it may make sense to check around with different lenders to see what their minimum fico scores are for loans.
The lenders I currently deal with have the following fico cutoffs for credit scores:
FHA--580 minimum score
VA----580 minimum score
Fannie Mae--620 minimum score
USDA--620 minimum score
KHC with Down Payment Assistance --620 minimum score.

As you can see, 580-620 is the minimum score with most lenders for a FHA, VA, or Fannie Mae loan, is required for the no down payment programs offered by USDA for Kentucky for First Time Home Buyers wanting to go no money down.

3. What are the down payment requirements?



The most popular programs for Kentucky First Time Home Buyers usually involves one of the following housing programs outlined in bold below:
FHA:

FHA will allow a home buyer to purchase a house with as little as 3.5% down. If your credit scores are low, say 680 and below, a lot of times it makes sense to go FHA because everyone pays the same mortgage insurance premiums no matter what your score is, and the down payment can be gifted to you. Meaning you really don't have to have any skin into the game when it comes to down payment.

They even allow down payment assistance for down payment requirements of 3.5% through eligible parties like Kentucky Housing, Welcome Home Grants and Louisville KY and Covington Kentucky Down Payment Grants.

Lastly, FHA will allow for higher debt to income ratios with sometimes getting loan pre-approvals up to 55% of your total gross monthly income. So if you have a debt to income ratio of over 50%, Fannie Mae will not do the loan and USDA usually likes their debt to income ratios no more than 45%.


Think back to the last time you financed a purchase — be it a home, automobile, or what have you… You may remember having heard the term “debt-to-income ratio.” Today I want to spend some time going over exactly what this ratio is, and to also touch on how it can effect your personal finances.

4. What is your debt-to-income ratio?

Commonly referred to as your “DTI,” your debt-to-income ratio is a personal finance benchmark that relates your monthly debt payments to your monthly gross income.
As an example… Let’s say that your gross monthly salary is $5,000 and you are spending $2,800 of it toward monthly debt payments. In that case, your DTI would be an unhealthy 56%.
This version of your DTI is sometimes referred to as your “back-end” DTI. This is often broken down further to give a front-end debt-to-income ratio, which is a component of your back-end DTI.

How to calculate your front-end DTI for a Kentucky Mortgage Loan Approval

Your front-end DTI is calculated by dividing your monthly housing costs by your monthly gross income. Front-end DTI for renters is simply the amount paid in rent, whereas for homeowners it is the sum of mortgage principal, interest, property taxes, and home insurance (i.e., your PITI) divided by gross monthly income.


From above, if that $2,800 in debt payments is attributable to $1,500 in housing costs and $1,300 in non-housing costs, then your front-end DTI is $1,500/$5,000 = 30% (and your back-end ratio is still 56%, as calculated above).
Fannie Mae:
Fannie Mae requires just 3% down with their new Home Possible Program, but if you use their traditional mortgage loan, then 5% is the Fannie Mae Standard. Fannie Mae will go down 620 score, but if your scores are below 680, I would look seriously at the FHA loan program because Fannie Mae has steep increases to the interest rate and the mortgage insurance premiums if your scores are low.
A couple of good things about Fannie Mae is that you can buy a larger priced home and have a large loan amount due to FHA only allowing most Kentucky Home Buyers a maximum mortgage loan amount of $356,000 for a max FHA loan and $545,000 for Fannie Mae Conventional loans in Kentucky for 2020.
Lastly when it comes to mortgage insurance, FHA mortgage insurance premiums are for life of loan while Fannie Mae mortgage insurance premiums drop off when you develop 80% equity position in your house.
But as a tell most people, nobody has a loan for 30 years, and the average mortgage is either refinanced or home sold within the first 5-7 years.
VA Loans-

VA loans offer eligible Veterans and Active Duty Personnel to buy a home going no money down with no monthly mortgage insurance. This is probably the best no money down loan out there since the rates are traditionally very low on comparison to other government insured mortgages and no monthly mortgage insurance. The VA loan can be used anywhere in the state of Kentucky with the maximum VA loan limit being removed for 2021
USDA Loans-

USDA loans offer people buying a home in rural areas (typically towns of $20k or less) to buy a home going zero down. You cannot currently own another home and there is household income limits of $90,200 for a household family of four, and up to $119,300 for a household of five or more. You search USDA website for eligible areas and household income limits below at the yellow highlighted link :

KHC or Kentucky Housing-
Kentucky First Time Home Buyers typically use KHC for their down payment assistance. KHC currently offers $10,000 for down payment assistance and sometimes throughout the year they will offer low mortgage rates on their mortgage revenue bond program.

The down payment assistance usually never runs out because you have to pay it back in the form of a second mortgage. It helps a lot of home buyers that want to buy in urban areas that cannot utilizer the USDA program in rural areas. Most of the time the first mortgage is a FHA loan tied with the 2nd mortgage fore down payment assistance. All KHC programs require a 620 score and rates are locked for 45 days.

5. What if I have had a bankruptcy or foreclosure in the past?




FHA and VA are the easiest on previous bankruptcies. FHA and VA both require 2 years removed from the discharge date on a Chapter 7. If you are in the middle of a Chapter 13, FHA will allow for financing with a 12 month clean history payment to the Chapter 13 courts, and with trustee permission.

VA requires 2 years removed from a foreclosure (sheriff sale date of home) and FHA requires 3 years.

USDA requires 3 years removed from both a foreclosure and bankruptcy, but on the foreclosure they do not go off the sale date. This may save you a little time if you had a previous foreclosure.

Fannie Mae (Conventional Loan)

Fannie Mae is by far the strictest. They require 4-7 years out of a foreclosure or bankruptcy


If you have questions about qualifying as first time home buyer in Kentucky, please call, text, email or fill out free prequalification below for your next mortgage loan pre-approval.


Bankruptcy Requriements for a FHA, VA, USDA, and Fannie Mae Loan Approval in Kentucky

click on link to apply for free mortgage quote









Joel Lobb
Senior Loan Officer

(NMLS#57916)

Text or call phone: (502) 905-3708

email me at kentuckyloan@gmail.com


http://www.mylouisvillekentuckymortgage.com/

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 views of my employer. Not all products or services mentioned on this site may fit all people



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Frequently Asked Questions for A Kentucky Mortgage Loan Approval


 

What documents do I need to prepare for my Kentucky Mortgage loan application?


Below is a list of documents that are required when you apply for a mortgage. Every situation is different so you may be required to provide less or more documentation. 


Sometimes a document you provide will promote us to ask for something additional.  This is a normal part of the process and does anything mean that anything is wrong. 


Your Property    

  

·         Copy of signed sales contract including all riders and addendums.

·         Verification of the deposit when you made your offer. 

·         Names, addresses and telephone numbers of  your realtor, builder, insurance agent and attorney (if involved).


Your Income


·         Copies of your pay-stubs for the most recent 30-day period and year-to-date.

·         Copies of your W-2 forms for the past two years. 

·         Names and addresses of all employers for the last two years. 

·         Letter explaining any gaps in employment in the past 2 years. 

·         Green card or visa (copy of front & back)


If you are self-employed or receive commission or bonus, interest/dividends, or rental income:


·        Full tax returns for the last two years including attached schedules and statements. If you have filed an extension, please supply a copy of the extension

·        Year-to-date Profit and Loss statement.

·         K-1's for all partnerships and S-Corporations for the last two years.

·         Completed and signed Federal Partnership (1065) and/or Corporate Income Tax Returns (1120) including all schedules, statements and addenda for the last two years. (Required only if your ownership position is 25% or greater.)

 

If you will use Alimony or Child Support to qualify:


·        Divorce decree or court order stating amount, as well as, proof of receipt of funds for last year.

 

If you receive Social Security income, Disability or VA benefits:


·         Award letter from that organization.


Source of Funds and Down Payment


·         Sale of your existing home - Settlement/Closing Statement. (You won't have this until you close on your current home)

·         Savings, checking or money market funds - bank statements for the last 2 months.

·         Stocks and bonds -

most recent statement. 

·         Gifts - If part of your cash to close, provide Gift Letter (ask us and we will provide one for you) 


Debt or Obligations


·         Prepare a list of all names, addresses, account numbers, balances, and monthly payments for all current debts with copies of the last three monthly statements

·         Include all names, addresses, account numbers, balances, and monthly payments for mortgage holders and/or landlords for the last two years

·         If you are paying alimony or child support, include marital settlement/court order stating the terms of the obligation


When should I refinance?


It's generally a good time to refinance when mortgage rates are 2% lower than the current rate on your loan. It may be a viable option even if the interest rate difference is only 1% or less. Any reduction can trim your monthly mortgage payments. Example: Your payment, excluding taxes and insurance, would be about $770 on a $100,000 loan at 8.5%; if the rate were lowered to 7.5%, your payment would then be $700, now you're saving $70 per month. Your savings depends on your income, budget, loan amount, and interest rate changes. Your trusted lender can help you calculate your options.


What are points?


A point is a percentage of the loan amount, or 1-point = 1% of the loan, so one point on a $100,000 loan is $1,000. Points are costs that need to be paid to a lender to get mortgage financing under specified terms. Discount points are fees used to lower the interest rate on a mortgage loan by paying some of this interest up-front. Lenders may refer to costs in terms of basic points in hundredths of a percent, 100 basis points = 1 point, or 1% of the loan amount.


Should I pay points to lower my interest rate?


Yes, if you plan to stay in the property for a least a few years. Paying discount points to lower the loan's interest rate is a good way to lower your required monthly loan payment, and possibly increase the loan amount that you can afford to borrow. However, if you plan to stay in the property for only a year or two, your monthly savings may not be enough to recoup the cost of the discount points that you paid up-front.


What is an APR?


The annual percentage rate (APR) is anot the interest rate you pay. The APR reflects the costs of obtaining a mortgage as a yearly rate. It is usually higher than the note rate, or advertised rate, because it takes into the costs. Because APR calculations are affected by the various different fees charged by lenders, a loan with a lower APR is thought to be a better deal, but that's not always true.  

 

The best way to know what is the best deal fo ryou ist to obtain a cost analysis from your lender so you can compare different options side-by-side.

Ask us for your analysis.
 

What does it mean to lock the interest rate?


Mortgage rates can change from one day to the next. If interest rates rise sharply during the application process it can increase the borrower’s mortgage payment unexpectedly. Once you "lock-in" your loan’s interest rate, that guarantees that rate for a specified time period, often 30-60 days, and then that is your rate for the entire term of your loan (assuming you have a fixed rate)

 

How is my credit judged by lenders?


Credit scoring is a system creditors use to help determine whether to give you credit. Information about you and your credit experiences, such as your bill-paying history, the number and type of accounts you have, late payments, collection actions, outstanding debt, and the age of your accounts, is collected from your credit application and your credit report. Using a statistical program, creditors compare this information to the credit performance of consumers with similar profiles. A credit scoring system awards points for each factor that helps predict who is most likely to repay a debt. A total number of points -- a credit score -- helps predict how creditworthy you are, that is, how likely it is that you will repay a loan and make the payments when due.


The most widely use credit scores are FICO scores, which were developed by Fair Isaac Company, Inc. Your score will fall between 350 (high risk) and 850 (low risk).


Because your credit report is an important part of many credit scoring systems, it is very important to make sure it's accurate before you submit a credit application.


 To get copies of your report, contact the three major credit reporting agencies:

Equifax: (800) 685-1111
Experian (formerly TRW): (888) EXPERIAN (397-3742)
Trans Union: (800) 916-8800
These agencies may charge you up to $9.00 for your credit report.


You are entitled to receive one free credit report every 12 months from each of the nationwide consumer credit reporting companies – Equifax, Experian and TransUnion. This free credit report may not contain your credit score and can be requested through the following website: https://www.annualcreditreport.com


What can I do to improve my credit score?


Credit scoring models are complex and often vary among creditors and for different types of credit. If one factor changes, your score may change -- but improvement generally depends on how that factor relates to other factors considered by the model. Only the creditor can explain what might improve your score under the particular model used to evaluate your credit application.

Nevertheless, scoring models generally evaluate the following types of information in your credit report:

·         Have you paid your bills on time? Payment history typically is a significant factor. It is likely that your score will be affected negatively if you have paid bills late, had an account referred to collections, or declared bankruptcy, if that history is reflected on your credit report.

·         What is your outstanding debt? Many scoring models evaluate the amount of debt you have compared to your credit limits. If the amount you owe is close to your credit limit, that is likely to have a negative effect on your score.

·         How long is your credit history? Generally, models consider the length of your credit track record. An insufficient credit history may have an effect on your score, but that can be offset by other factors, such as timely payments and low balances.

·         Have you applied for new credit recently? Many scoring models consider whether you have applied for credit recently by looking at "inquiries" on your credit report when you apply for credit. If you have applied for too many new accounts recently, that may negatively affect your score. However, not all inquiries are counted. Inquiries by creditors who are monitoring your account or looking at credit reports to make "prescreened" credit offers are not counted.

·         How many and what types of credit accounts do you have? Although it is generally good to have established credit accounts, too many credit card accounts may have a negative effect on your score. In addition, many models consider the type of credit accounts you have. For example, under some scoring models, loans from finance companies may negatively affect your credit score.

Scoring models may be based on more than just information in your credit report. For example, the model may consider information from your credit application as well: your job or occupation, length of employment, or whether you own a home.

To improve your credit score under most models, concentrate on paying your bills on time, paying down outstanding balances, and not taking on new debt. It's likely to take some time to improve your score significantly.

 

What is an appraisal?


An Appraisal is an estimate of a property's fair market value. It's a document generally required (depending on the loan program) by a lender before loan approval to ensure that the mortgage loan amount is not more than the value of the property. The Appraisal is performed by an "Appraiser" typically a state-licensed professional who is trained to render expert opinions concerning property values, its location, amenities, and physical conditions.

 

What is PMI (Private Mortgage Insurance)?


On a conventional mortgage, when your down payment is less than 20% of the purchase price of the home mortgage lenders usually require you get Private Mortgage Insurance (PMI) to protect them in case you default on your mortgage. Sometimes you may need to pay up to 1-year's worth of PMI premiums at closing which can cost several hundred dollars. The best way to avoid this extra expense is to make a 20% down payment, or ask about other loan program options.

 

What happens at closing ?


The property is officially transferred from the seller to you at "Funding".  Often you will go to a title company or attorneys office for your "closing".  However, this is just to sign all the final documents. Ownership of the property is officially transferred either later that day of often the next business day, which is when you will normally obtain the keys to the home.  If you can't attend the closing meeting personally, i.e., if you’re out-of-state, closing can take anywhere just about anywhere as we have mobile notaries that can help you with signing documents and notarizing your signature. 

 



KENTUCKY FIRST TIME HOME BUYER REQUIREMENTS MORTGAGE LOAN APPROVAL?






--Joel Lobb

Mortgage Loan Officer
Individual NMLS ID #57916

American Mortgage Solutions, Inc.

Text/call:      502-905-3708
fax:            502-327-9119
email:
          kentuckyloan@gmail.com