Showing posts with label USDA Government Mortgage Underwriting Guideline Updates for 2023. Show all posts
Showing posts with label USDA Government Mortgage Underwriting Guideline Updates for 2023. Show all posts

Kentucky Mortgage Loan Approval Requirements for 2023


They're 3 basic items that a borrower needs to show a lender in order to get approved for a mortgage in Kentucky for 2023.

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 and Fannie Mae, or Conventional loans require a 3% to 5% down payment. The more you put down, the better your rate and terms usually and your chances of qualifying.

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 borrow 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

580 to 620 is the bottom score (again with few exceptions) that lenders will permit. Below a 620, then you have to look at doing a FHA loan or VA loan if you are a veteran. Even at 620, 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. 760 is even better.

Watch your credit scores carefully. You have three credit scores, and the lender will take your middle score. For example, let's say you have a 590 on Transunion, 679 on Experian, and a 618 on Equifax. Then your middle qualifying credit score will be 618 credits score.

If you absolutely cannot get your credit scores up to 620, then FHA will be a good option for you. FHA states that if your fico credit score is 580 or above, they will allow for a 3.5% down payment, and if below 580, you will need 10% down payment.

There are a lot of mortgage lenders that will not go below 580 to 620 range, so keep that in mind when you are shopping for a mortgage lender, because they create credit overlays.

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.

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

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


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Kentucky FHA, VA, USDA Government Mortgage Updates for 2023

Kentucky FHA, VA, USDA Government Underwriting
Guideline Updates


Effective immediately, for all loans, the FHA, VA, and USDA Underwriting Guides have been updated with the below information.

USDA Updates to HB-1-3555

Delinquent Federal Debt

All borrowers must be screened using HUD’s Credit Alert Interactive Voice Response System (CAIVRS) except those borrowers financing a Streamlined-Assist or Streamlined Refinance.

CAIVRS will return the following results:

  • A: Approved by CAIVRS (no issues exist)
  • B: Multiple cases from one or more Federal agencies
  • C: Claim filed
  • D: Default on loan
  • F: Foreclosure of loan
  • J: Judgment filed

The only acceptable result is A: Approved by CAIVRS (no issues exist). Borrowers with delinquent federal non-tax debt are not eligible for a USDA loan until the debt is paid in full or a release of liability is documented.

Appraisal Validity

The effective date of the appraisal report must not be more than 180 days of the Note date (previously 150 days).


Non-Federal Judgements

Added that open and unpaid non-federal judgments are eligible when the borrower is not delinquent and has a payment arrangement with the creditor and has made regular and timely payments for the three (3) months prior to application date.

This update clarifies that the borrower cannot be delinquent, not previously specified.

Court-Ordered Child Support

Below highlights the current and new guideline.

Current GuidelineNew Guideline

Delinquent court-ordered child support must meet one (1) of the following:

  • Must have an approved repayment agreement with three (3) timely payments made prior to closing;
  • The arrearage is paid in full; or
  • A release of liability is documented.

Delinquent court ordered child support, subject to the collection by an administrative offset (allows for federal payments in order to collect past due child support) must meet one (1) of the following:

  • Must have brought payments current prior to closing;
  • The debt is paid in full; or
  • A release of liability is documented.

Appraisal Requirements

Multiple Parcel Requirements

Clarified that when multiple parcels are not adjoined, the parcel without a residence must be non-buildable (such as waterfront properties where the parcel without the residence provides access to the water) and the entire property will contain only one (1) dwelling but may have non-residential, non-income producing buildings, such as a garage.

Accessory Dwelling Unit (ADU)

Clarified that an ADU should support household members and not create potential rental income.

Individual Water Supply System (Well)

Updated the requirement that a valid water test from the local health authority or a lab qualified to conduct water testing in the jurisdictional state or local authority must be obtained and that the water analysis report must be no greater than 150 days old as of the Note date.

FHA and VA Underwriting Guideline Updates and Clarifications

Maximum Number of Borrowers

The FHA and VA Underwriting Guide has been updated with the maximum number of borrowers allowed for submission to DU or LPA.

  • Up to four (4) borrowers may be on a loan application and submitted to DU.
  • Up to five (5) borrowers may be on a loan application and submitted to LPA.

If the number of borrowers exceeds four/five, the loan must be manually underwritten.

Inquiries and Undisclosed Debt (FHA)

Updated the FHA Underwriting Guide to require the following: When the credit report reveals a significant debt not listed on the application, a written explanation from the borrower addressing the omission is required. The absence of a written explanation from the borrower may render the loan ineligible.

Future Income (VA)

For Future Income, when a borrower’s employment will begin after the Note date, employment must begin within 90 days after the Note date (previously 60 days).

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

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, (