Showing posts with label FHA minimum credit score. Show all posts
Showing posts with label FHA minimum credit score. Show all posts

How Do I Qualify for An FHA Loan in Kentucky based on score, income, work history and credit?

 How to get an Kentucky FHA Mortgage Loan


FHA Home loans offer  lower down payments (3.5%) , lower credit requirements (500 credit score , and the option for financial assistance (Down payment assistance), allowing more Kentucky Homebuyers the option that may be able to qualify.

How to qualify for a Kentucky FHA loan


Kentucky FHA Mortgage Loan Options to consider




1. Low Down Payment

–  FHA Mortgage Loans only require a 3.5% down payment. And what makes that even more attractive is that it can be a gift from a relative. Do you have a parent or sibling who would “Gift” you some money for a down payment? If so, it could be time to apply for an  FHA Mortgage Loan.

2.Flexible Credit Qualifying

– HUD did NOT set a credit score requirement for qualifying for an  FHA Mortgage Loan. However many lenders in the market today have drafted “Overlays” that set minimum credit score requirements. Most lenders like to see a minimum 580 to 620  credit score, but don’t get discouraged if you are not there yet. If you are close to 620, it is often just as simple as reviewing your credit to determine how to quickly raise it. If you are not close to 620, ask your FHA Mortgage Loan Originator if they have a program for you. Chances are, there is! Bankruptcies and prior foreclosures do not automatically disqualify you either.

3.The Seller Can Pay Your Closing Costs

– That’s right. You need to have a quality Realtor who will help you negotiate not only the best price for the home, but also that the seller will pay your closing costs. HUD allows FHA Mortgage Loans to have the seller pay up to 6% of the purchase price. Sounds good so far, a down payment gift and seller paying closing costs!

4.Flexible Income Qualifying

– The standard for income qualifying ratios is 31/43 which means that up to 31% of your monthly income can be used to pay your monthly household mortgage payment; and up to 43% of your monthly income can be used to qualify for ALL monthly expenses. Those ratios can go up to 55% if you have good credit and a good income history allowing you to qualify when others might not.

5.Qualify Without Your Spouse’s BAD Credit –

This is a tricky one but it is also not well known. You can effectively qualify for an FHA Mortgage Loan without your spouse’s Bad Credit. FHA will look at your spouse’s credit but cannot decline your loan due to your spouse’s debt or credit score. So if you have a spouse with a crummy credit profile, you should take a look at  FHA Mortgage Loans to see if it will work for you.

Kentucky FHA Mortgage Requirements 


An FHA loan is a mortgage issued by federally qualified lenders and insured by the Federal Housing Administration (FHA). FHA loans are designed for low-to-moderate income borrowers who are unable to make a large down payment.

Minimum Credit Score is 500 with at least 10% down
Minimum Credit Score is 580 if you put less than 10% down
The FHA Kentucky Maximum loan for 2023 is $472,030
Upfront and Monthly Mortgage Insurance is required regardless of the Loan to Value
FHA Loans are only available for financing primary residences
Maximum Debt to Income Ratio of 50% (unless mitigating factors justify allowing a higher DTI)


Borrowers must have a steady employment history of the last two years within the same industry or line of work. Recent college graduates can use their transcripts to supplant the 2-year work history rule as long as it makes sense
Self-Employed will need a 2-year history of tax returns filed with IRS. They will take a 2-year average.

FHA requires a 3.5% down payment. Can be gifted from family member or from retirement savings plan, or money saved-up. Any type of cash deposits is not allowed for down payments. No exceptions to this rule!! This is one of the biggest issues I see in FHA underwriting nowadays.

 FHA loans are for primary residence occupancy. Not rental houses.

Borrowers must have a property appraisal from a FHA-approved appraiser.

Borrowers’ front-end ratio (mortgage payment plus HOA fees, property taxes, mortgage insurance, homeowners’ insurance) needs to be less than 31 percent of their gross income, typically. You may be able to get approved with as high a percentage as 43 percent. If the Automated Underwriting System gives you an Approved Eligible you can go higher on the debt ratios
Borrowers must have a minimum credit score of 580 for maximum financing with a 3.5% down payment

Borrowers must have a minimum credit score of 500-579 for maximum LTV of 90 percent with a minimum down payment of 10 percent. Most lenders will not go below 580 to 620 score, and very few lenders will go to 580 score. It’s best to work on getting your scores up before you apply or work with a loan officer to improve them.
2 years removed from Chapter 7 is required with good pay history after bankruptcy

1 year removed from Chapter 13 is okay with an excellent pay history with the Chapter 13 plan and permission from trustee. You will need to qualify with the Chapter 13 payment along with new house payment. Again, scores will play into your loan pre-approval.

Typically, borrowers must be three years out of foreclosure and have re-established good credit. Exceptions can be made if there were extenuating circumstances and you’ve improved your credit. If you were unable to sell your home because you had to move to a new area, this does not qualify as an exception to the three-year foreclosure guideline.

How Do I Qualify for An FHA Loan in Kentucky based on score, income, work history and credit?




Low Down Payment which can be 100% gift from family member or Grant Program
Seller can pay closing costs-Maximum 6% of purchase price
There is maximum mortgage amount for each county. Check FHA loan limit for your county.
Non-occupant co-signers are allowed on this program.
FHA Approved Condos-Single family home-2-4 unit properties, and PUDs are eligible.
Fast automated underwriting approval available. Also, the file can be manually underwritten by a live person to get loan approval if you do not receive approval through automated underwriting system.


How to get approved for FHA loan in Kentucky



FHA loans vs. conventional mortgages
CONVENTIONAL LOANFHA LOAN
Credit score minimum620500
Down payment3% to 20%3.5% for credit scores of 580+; 10% for credit scores of 500-579
Loan terms8- to 30-year terms15- or 30-year terms
Mortgage insurance premiumsPMI (if less than 20% down): 0.58% to 1.86% of loan amountUpfront premium: 1.75% of loan amount; annual premium: 0.45% to 1.05%
Interest typeFixed-rate or adjustable-rateFixed-rate

Pros and cons of Kentucky FHA loans

Pros

  • You can have a lower credit score: If you haven’t established much of a credit history or you’ve encountered some issues in the past with making on-time payments, a 620 credit score — the typical magic number for consideration of a conventional mortgage — might seem out of reach. If your credit score is 580, you’re in good standing with most FHA-approved lenders.
  • You can make a lower down payment: FHA loans also give the option for a smaller down payment. With a credit score of at least 580, you can make a down payment of as little as 3.5 percent. If your credit score is between 500 and 579, you may still be able to qualify for an FHA-backed loan, but you will need to make a 10 percent down payment.
  • You can stop renting earlier: Since FHA loans make buying a home easier, you can start building equity sooner. Instead of continuing to rent while trying to save more money or improve your credit score, FHA loans make the dream of being a homeowner possible sooner.

Cons

  • You won’t be able to avoid mortgage insurance: Since your credit score is lower, you’re a bigger risk of default. To protect the lender, you have to pay mortgage insurance. You can roll the upfront insurance premium into your closing costs, but your annual premiums will be divided into 12 installments and show up on every mortgage bill. If you put down less than 10 percent, you have to pay those annual premiums for the entire life of the loan. There’s no escaping them. That’s a big difference from conventional loans: Once you build up 20 percent equity, you no longer have to pay for private mortgage insurance.
  • You’ll have to meet property requirements: If you’re applying for an FHA loan, the property has to meet some eligibility requirements. The most important is the price: FHA-backed mortgages are not allowed to exceed certain amounts, which vary based on location. You have to live in the property, too. FHA loans for new purchases are not designed for second homes or investment properties.
  • You could pay more: When you compare mortgage rates between FHA and conventional loans, you might notice the interest rates on FHA loans are lower. The APR, though, is the better comparison point because it represents the total cost of borrowing. On FHA loans, the APR can sometimes be higher than conventional loans.
  • Some sellers might shy away: In the ultra-competitive pandemic housing market, sellers weighing multiple offers often viewed FHA borrowers less favorably.

Kentucky FHA Loan Limits

 All counties in Kentucky have the same loan limit of $472,030 for a single-family home. 

What credit score do you need for an Kentucky FHA Mortgage  loan in Kentucky?

FHA home buyers in Kentucky borrowers need to have a minimum mortgage specific credit score of 580. A credit score of 580 can qualify you for a 3.5% down payment.

Some lenders may accept a credit score of 500-579 with a 10% down payment. Not all lenders will go this low on a credit score. Some FHA Mortgage Lenders will not go below 580 credit score or in some cases, 620 credit score. Check with your FHA mortgage lender in Kentucky on this before you apply.

 Kentucky first-time homebuyer programs below to consider 




Conventional Mortgage Loan in Kentucky.


620 credit score or higher needed for this loan program. 4 years removed from bankruptcy minimum sometime longer. Private mortgage insurance required for over 80% loan to value on a refinance or down payments less than 20%. Tighter debt to income requirements with max backend-ratio usually not over 45% with less than 20% down payment. Easier on properties to qualify if they have deferred maintenance or need some fixing up to pass Government standards like FHA, VA, USDA loans. Down payment requirements are as little as 3% down payment. Better rates and lower mortgage insurance with a larger down payment and pmi is not for life of loan. 

This is for stronger borrowers with good credit (above 680 or 720) and at least 3-5% down payment with no foreclosures or bankruptcies in he last 4-7 years. Can go higher on the loan amount too versus FHA. Max loan in Kentucky for 2023 for conventional loans is $726,200


FHA Loans in Kentucky

500 minimum credit score with 10% down payment, and credit scores above 580 can do 3.5% down payment. Don't have to be a first-time home buyer and no foreclosures in the last 3 years or Chapter 7 bankruptcies in the last 2 years. Possible to get a FHA loan with a Chapter 13 active as long as it has been open for 12 months with a good pay history and permission from the trustee. 

This type of loan is insured by the Federal Housing Commission. Low to moderate-income borrowers can be approved to get this loan. First-time homeowners prefer this too because you can get an interest rate of as low as 3.5 percent for this loan.

Kentucky Max FHA loan for 2023 is $472,030

Kentucky VA Home Loans

This is something you could qualify for as a service member, veteran, or surviving spouse. A VA loan or mortgage is generous when it comes to providing competitive rates. Sometimes, a down payment and mortgage insurance isn’t even necessary for you to get approved for this. Just make sure that you have a good credit standing of at least 580.

USDA Loans in Kentucky

This is a zero-down payment mortgage that is usually approved for rural and suburban homebuyers. This type of loan is handled and issued by the US Department of Agriculture through the USDA Rural Development Guaranteed Housing Loan Program.  A credit score of at least 620 will also be needed for this even though USDA says they have no minimum score it is hard to get them pre-approved for scores below 620---***640 is really the preferred score for mortgage approval usually through GUS, the USDA underwriting automated system.

There is no max USDA loan just maximum household income limits based on number of people in the household.





Kentucky Housing Loan Program



2023 KHC first-time home buyer programs

Conventional Preferred Program for low-income borrowers with a down payment of just 3%.

Conventional Preferred Plus 80 Program for a down payment of just 3%.

Home Buyer Tax Credit for reimbursement of a portion of the annual mortgage interest payments.

Regular Down Payment Assistance Program for a down payment loan of up to $10.000.

Knowing about national and Kentucky state loan programs to help buy a home is a good start; now it’s time to dig into the details. For specifics, visit the Kentucky Housing Corp. website. There you’ll find information about all the loan programs, including eligibility requirements, how to enroll in home buyer counseling and a list of approved lenders in your county.


There are max income limits and max loan amounts and max purchase price limits.

See link below for more info:πŸ‘‡






Have Questions or Need Expert Advice? Text, email, or call me below:





Joel Lobb
Mortgage Loan Officer

Individual NMLS ID #57916


American Mortgage Solutions, Inc.
10602 Timberwood Circle
Louisville, KY 40223
Company NMLS ID #1364



Text/call: 502-905-3708
fax: 502-327-9119
email:
 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 approvalnor 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).









WHAT IS THE MINIMUM CREDIT SCORE FOR A KENTUCKY FHA MORTGAGE HOME LOAN APPROVAL?


Kentucky FHA Mortgage Credit Score Requirements


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 500 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.


The new credit requirements are not expected to dramatically change the number of Kentucky FHA mortgage approvals.


Get used to the term credit overlays. You may call several FHA lenders and a lot of them will tell you that even though FHA will insure lower credit scores, most lenders had already imposed a minimum credit score requirement of 580 to 620 or higher for Kentucky FHA borrowers.


In limited cases, borrowers with scores between 580 and 639 could still obtain mortgage approval with compensating factors such as large down payment (more than 3.5% minimum), low debt to income ratios, and substantial reserves in the bank with a verifiable pay history of no late payments in the last 12 months of rent and on credit report. A late is considered 30 days late in the credit rating world.

Ultimately, there is no singular credit score that can guarantee you a mortgage approval. Each lender is free to set their own credit score requirements.

But many loan types are insured by government organizations. And lenders cannot accept borrowers with credit scores below the minimum these organizations set. The four most popular home loan types are:


Conventional: Not backed by any government agency, but must meet the Fannie Mae and Freddie Mac underwriting guidelines

FHA: Loans backed by the Federal Housing Administration


VA: Loans backed by the US Department of Veterans Affairs (for military members)USDA: Loans backed by the US Department of Agriculture (for low- to moderate-income families who buy homes in rural areas)



The minimum credit score requirements for each of these loan types:



Conventional:


620 SCORE NEEDED. BUT TO GET APPROVED FOR A FANNIE MAE LOAN MOSTLY LIKE YOU WILL NEED A 720 SCORE OR HIGHER IF YOU HAVE LESS THAN 20% EQUITY POSITION OR LESS THAN 20% DOWN PAYMENT DUE TO PRIVATE MORTGAGE INSURANCE


FHA:

580 for a 3.5% down payment
500 for down payments of at least 10%
**MOST FHA LENDERS WILL WANT A 580 to 620 CREDIT SCORE NOWADAYS

VA:

No minimum BUT MOST VA LENDERS WILL WANT A 580 to 620 CREDIT SCORE

USDA:

No minimum, but with a credit score of at least 620 to 640 you could qualify for streamlined credit analysis and chances of approval goes way down if score is below 640...



WHAT IS THE MINIMUM CREDIT SCORE FOR A KENTUCKY FHA MORTGAGE HOME LOAN APPROVAL?






Which credit score is used to qualify for a Mortgage loan in Kentucky?






CREDIT SCORES OR FICO SCORES USED FOR A KENTUCKY MORTGAGE LOAN APPROVAL




For example if you have a 598, 625, 604 on each of the main three reporting agencies, then your qualifying fico score would be 604. 



If you’re planning to apply for a mortgage, be aware that the credit score you see on your application might differ slightly from the one you’re used to. 

It might even be different than what comes up when you monitor your credit, or even when you apply for a car loan.

Banks use a slightly different credit score model when evaluating mortgage applicants. Below, we go over what you need to know about credit scores you’re looking to buy a home.

The scoring model used in mortgage applications

While the FICO® 8 model is the most widely used scoring model for general lending decisions, banks use the following FICO scores when you apply for a mortgage:

FICO® Score 2 (Experian)
FICO® Score 5 (Equifax)
FICO® Score 4 (TransUnion)

As you can see, each of the three main credit bureaus (Equifax, Experian and TransUnion) use a slightly different version of the industry-specific FICO Score. That’s because FICO tweaks and tailors its scoring model to best predict the creditworthiness for different industries and bureaus. You’re still evaluated on the same core factors (payment history, credit use, credit mix and age of your accounts), but the categories are weighed a little bit differently.


The FICO 8 model is known for being more critical of high balances on revolving credit lines. Since revolving credit is less of a factor when it comes to mortgages, the FICO 2, 4 and 5 models, which put less emphasis on credit utilization, have proven to be reliable when evaluating good candidates for a mortgage.

Mortgage lenders pull all three reports,from all three bureaus, but they only use one when making their final decision.

“A bank will use all three bureaus,”--- “It’s called a tri-merge.”

If all three of your scores are the same, then their choice is simple. But what if your scores are different?


If two of the three scores are the same, lenders use that one, regardless of whether it’s higher or lower than the other one.

And if you are applying for a mortgage with another person, such as your spouse or partner, each applicant’s FICO 2, 4 and 5 scores are pulled. The bank identifies the median score for both parties, then uses the lowest of the final two.

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

 





Kentucky FHA Loans with Bad Credit in 2023.

How to get approved for a Kentucky FHA Mortgage Loan with Bad Credit in 2023.


Below details the DTI requirements The maximum Front and Back ratios applicable to manually underwritten Kentucky FHA Mortgages are detailed below. 

Maximum DTI allowed for Manual UW is 40/50 

**IMPORTANT – any loan where ALL borrowers have No Fico Score, the Maximum DTI is 31/43 per HUD DTI and Compensating Factor Requirements: 

560 FICO and Above – DTI up to 31/43.Comp Factors Required - NONE. 

560 FICO and Above - DTI up to 37/47Comp Factors Required– 1 Required 

560 FICO and Above – DTI up to 40/50Comp Factors Required– 2 Required

ACCEPTABLE COMPENSATING FACTORS:

RESERVES – 3 mo (1-2 Unit) 6 Mo (3-4 Unit)

HOUSING DECREASE – new PITI is no more than $100 or 5%, the lesser of the two

RESIDUAL – Meet VA residual requirements

ADDITIONAL INCOME – Income not reflected in DTI (this comp factor is only permitted when DTI is over 37/47 and if income were used, it would decrease DTI under 37/47)

DTI requirements The maximum Front and Back ratios applicable to manually underwritten Kentucky FHA Mortgages


MANUAL UNDERWRITE REQUIREMENTS ON ALL LOANS

12 Months verified housing history OR rent free letter,

Reserves, AND

1 month reserves for 1-2 Unit

3 month reserves for 3-4 Unit

NOTE: If you use reserves as a compensating factor, then you do not need these reserves in addition

Letter of explanation for all derogatory credit, including any NSFs and/or overdrafts in bank accountIf applicable, 2 months for all bank statements in the file (60 days activity)

Maximum DTI 40/50 (HUD guideline, no exceptions


Instructions for Residual Income as Compensating Factor

Residual income may be used as compensating factor when it meets or exceeds the stated amounts in

the table below. Note that all household members must be counted for ‘family size’ except for individuals

who are fully supported from a verified source of income not included in the effective income of the loan.

Residual Income as Compensating Factor for Kentucky FHA Mortgage Loan


Residual Income Calculation When Needed as a Compensating Factor

Gross Monthly Income1 2

- (State income taxes3)

- (Federal income taxes3)

- (Municipal or other taxes3)

- (Retirement deductions and/or Social Security deductions)

- (Total monthly housing payment)

- (Estimated maintenance and utilities4)

- (Job related expenses (e.g., childcare)5)

= Monthly Residual Income for Family Support.

[When using Residual Income as a compensating factor, the “Monthly Residual Income for Family Support” must

meet or exceed the dollar amount in the “Residual Income Table” above.

1 Income from occupying borrowers only

2 Non-taxable income may not be grossed up

3 Federal and state taxes must be used to determine appropriate deductions or paystub if taxes are not available

4 Multiply total living area (sq ft) x 14

5 Childcare letter is not required (as it is for VA) and should not be requested

Exceptions to the Required Residual Income

You may reduce the residual income figure from the above tables by 5% if:

1. The borrower(s) is an active duty or retired serviceperson, OR

2. There is a clear indication that a borrower will receive the benefits resulting from use of military-based

facilities located near the property.

Examples of military service for reduced residual income are:

Guard and Reserve military retirees, 100% disabled Veterans and their family members, or Medal of Honor

recipient.


Kentucky FHA Mortgage Lender for Bad Credit in 2023




Joel Lobb
Mortgage Loan Officer

Individual NMLS ID #57916


American Mortgage Solutions, Inc.
10602 Timberwood Circle
Louisville, KY 40223
Company NMLS ID #1364



Text/call: 502-905-3708
fax: 502-327-9119
email:
 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 approvalnor 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).


FHA Mortgage Manual Underwriting Video Guidelines




We have the expertise to manually underwrite even the most difficult Kentucky  FHA Mortgage loans. Whether it’s purchase or refi—we work hard to approve what other lenders won’t. 

 

Did you know over 50% of our Kentucky  FHA loans are manual underwrites?

 

Kentucky FHA will consider the borrower’s entire story, including extenuating circumstances and compensating factors, to justify loan approvals. If your borrower falls under any of these conditions, they may benefit from manual underwriting:

  • Non-traditional credit / lack of credit
  • True extenuating circumstances affecting credit or income history
  • Lack of seasoning on a Chapter 13
  • Disputed accounts over $1,000
  • Frequent job changes in the last 12 months

If you think your borrower could benefit from  manual underwriting call us to learn more about manual underwriting or submit your scenario today.

Lowest Minimum Decision Credit Score Maximum Qualifying Ratios (%) Acceptable Compensating Factors
All manual underwritten loans require a VOR.
If the borrower does not pay rent a letter of explanation from borrower stating where living rent free.
620 & Above
31/43
• No compensating factors required.
• Energy Efficient Homes may have stretch ratios of 33/45.
620 & Above
37/47
One of the following:
• Verified & documented cash reserves equal to at least three total monthly mortgage payments.
• New total monthly mortgage payment is not more than $100 or 5% higher than previous total monthly housing payment, whichever is less; and there is a documented twelve-month housing payment history with no more than one thirty-day late payment.
• Residual Income per VA chart.
620 & Above
40/40
• Borrower has established credit lines in his/her own name (open for at least six months) but carries no discretionary debt (monthly total housing payment is only open installment account and borrower can document that revolving credit has been paid off in full monthly for at least the past six months).
620 & Above
40/50
Two of the following:
• Verified & documented cash reserves equal to at least three total monthly mortgage payments.
• New total monthly mortgage payment is not more than $100 or 5% higher than previous total monthly housing payment, whichever is less; and there is a documented twelve-month housing payment history with no more than one thirty-day late payment.
• Verified and documented significant additional income that is not considered effective income and likely to continue (part-time or seasonal income verified for more than 1 year but less than 2 years). The income if it were included in gross effective income is sufficient to reduce the qualifying ratios to not more than 37/47.
• Residual Income per VA chart.

Residual Income
Calculating Residual Income
Residual income is calculated in accordance with the following:
• Calculate the total gross monthly income of all occupying borrowers
• Deduct from the gross monthly income the following items:
➢ State income taxes
➢ Federal income taxes
➢ Municipal or other income taxes
➢ Retirement or Social Security
➢ Proposed total monthly fixed mortgage payment
➢ All recurring monthly debt obligations
➢ Estimated maintenance and utilities ($0.14 x sq. ft.)
➢ Job related expenses (e.g., child care)
• The difference between the gross monthly income and the deductions above is the residual income
Compensating Factors
Using Residual Income as a Compensating Factor
Count all members of the household of the occupying borrowers without regard to the nature of their relationship and without regard to whether they are joining on title or the note.
Exception: As stated in the VA Guidelines, the mortgagee may omit any individuals from “family size” who are fully supported from a source of verified income which is not included in the effective income in the loan analysis. These Individuals must voluntarily provide sufficient documentation to verify their income to qualify for this exemption.
From the table below, select the applicable loan amount and household size. If residual income equals or exceeds the corresponding amount on the table, it may be cited as a compensating factor.

Kentucky FHA Mortgage  Manual Undewriting Guidelines for FHA Mortgage Refer Eligible or Manual Downgrades








Accept Risk Class required downgrade to Manual Underwriting


The Mortgagee must downgrade and manually underwrite any mortgage that received an accept or approve/eligible recommendation if:
• The mortgage file contains information or documentation that cannot be evaluated by TOTAL.
• Additional information, not considered in the AUS recommendation affects the overall insurability of the mortgage.
• 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 the case number assignment.
• The case number assignment date is within three years of the date of the transfer of title through a Pre-Foreclosure Sale (Short Sale).
• The case number assignment date is within three years of the date of the transfer of title through a foreclosure sale.
• The case number assignment date is within three years of the date of the transfer of title through a Deed-in-Lieu (DIL) of foreclosure.
• The Mortgage Payment history, for any mortgage trade line reported on the credit report used to score the application, requires a downgrade as defined in Housing Obligations/Mortgage Payment History.
• The Borrower has undisclosed mortgage debt that requires a downgrade.
• Business income shows a greater than 20 percent decline over the analysis period.

• Per AUS Findings.
FHA FAQ link
ML 2014 – 02 on Manual Underwriting was incorporated into the HUD Handbook 4000.1. Additional source for questions will be the FAQ’s. Use “manual underwriting and compensating factors” to searcH