Showing posts with label credit. Show all posts
Showing posts with label credit. Show all posts

A Beginner's Guide to Home Mortgage in Kentucky


  • Conventional home loans - conventional mortgages are the ones that comply with the loan limits and terms set by government-backed mortgage companies Fannie Mae and Freddie Mac. They usually require a 3-5% down payment and allow you to borrow up to $647,200 (as of 2022). Typical credit score requirements are 620 and up. In reality, if scores are under 720, and with minimal down payment, it is hard to get approved for a conventional loan and best to look at doing a FHA loan. 
  • USDA Loans - these mortgages are designed for those buyers looking to invest in rural areas. They are backed by the USDA and don’t require a down payment, but only homes in certain areas might be eligible. No minimum score but 620 to 640 credit score requirement with household income limits for each county in Kentucky.
  • VA Loans - these loans are catered to members of the US military and their families. They are backed by the Department of Veterans Affairs and don’t require a down payment or no monthly Private Mortgage Insurance (PMI). No minimum score but 580 and above with most lenders.
  • FHA Loans - These are loans backed by the Federal Housing Administration and only require a minimum down payment of 3.5 and a score of 580 and 10% down with a 500 credit score.
  • KHC loans with down payment assistance of $7,500 require minimum credit score of 620

 

A Good Credit Score 

Some government-backed loans are accessible with a score no minimum score or 500 to 580, while conventional loans require a minimum credit score of 620.  


Down Payment

Thanks to today’s availability of different loan types, you no longer need to build that infamous 20% down payment, and you can access a loan with a 0-3% down. 


A Debt-To-Income Ratio Below 45%

The debt-to-income (DTI) ratio measures how much of your income is used to repay outstanding debt. 


Disputes on Credit Report and Kentucky Mortgage Loan Approval?

Applying for a Kentucky Mortgage Soon?
Don't Dispute that Account



     Sounds counterintuitive, I'm sure ...

     But until you've talked to me (or your own local Mortgage Originator), don't even think about disputing an account found on your Credit Report.

     Why?  Unknowingly, you can be creating real problems for your Mortgage Application and Approval. 

     Consider this:  A creditor can refuse to change their disputed rating.  Too many disputed accounts on a Credit Report may result in your loan being denied.

     Is that a really a risk you want to run at such an important time?

     A formal dispute placed on a car loan, student loan, credit card, collection ... or even worse, a mortgage loan ... can cause havoc for your new Mortgage Application.  So ...

     Slow down.  Contact me ... and let's talk.  We'll analyze all your options and see what action is appropriate and in your best interest.  

     What is not commonly known:  Credit Bureaus and Automated Underwriting systems now reflect an evolution that has taken place over the last few years regarding credit disputes.  

     Both the Bureaus and Underwriting systems have been re-worked to recognize disputes as a negative impact and rating on a Borrower's "approvability" or "credit-worthiness".  

     But these changes have taken place without much fanfare and public recognition.  And because of that, hopeful Borrowers have all too often been contributing to the issues faced within their Mortgage Process later.     

     Prospective Mortgage Applicants (and the public in general) must be educated to this fact.  The temptation to dispute an account must be avoided, if hoping to finance a home via a Mortgage Loan soon.       

     If a Creditor offers-up a path to formally dispute your account ... just say no!  At least prior to our talking.

     There may be a better course of action available to you.  During our conversation we'll weigh your options and best course as it pertains to your Mortgage and your Approval.  

     But providing solid, written proof and evidence regarding your stance on the account in question, WITHOUT placing a formal "dispute" on said account is often the most prudent course of action ... 

     Remember:  You must have legitimate data and written proof in order to accomplish your goal successfully.  But when you have that proof, your account can be "re-rated" or the derogatory rating can be deleted from your Credit Report. 

     Any "correction" should come from the Creditor (Credit Card company/bank/etc.) and immediately sent to each of the 3 Credit Bureaus (ExperianTransUnionEquifax).  

     This final step trips-up way too many, as it's assumed that the Creditor(s) will share the new updated information with the 3 Credit Bureaus.  They may or may not.  

     Bottomline:  It remains YOUR responsibility to inform each of the 3 Bureaus.  

     Play it safe and follow through with this important task, as it's in your best interest to see that it's successfully done.   

     When a correction is reported to the Bureaus, they will, in turn, update your Credit Report.  While each case is different (and I do not represent that all results will be successful or as hoped for) ... you may head off potential issues with your Mortgage Approval by acting pro-actively.  Consult with a Credit Repair Specialist if uncertain of corrective steps to be taken.

     In the modern Mortgage Process, the experience level of the Mortgage Originator you choose can't be understated.  Successful navigation through the steps of addressing credit disputes and credit analysis is just one example of this fact.


Disputes on Credit Report and Kentucky Mortgage Loan Approval?


Equifax, Experian and TransUnion will also no longer include medical collection debt under at least $500 on credit reports

 Consumer Reporting Agencies to Remove Most Medical Debt From Credit Reports


The three nationwide credit reporting agencies, Equifax, Experian and TransUnion, announced that effective July 1, 2022, they will no longer include medical debt that was paid after it was sent to collections on consumer credit reports.

The companies’ CEOs provided a joint statement on the decision to change their approach to medical collection debt reporting:

“Medical collection debt often arises from unforeseen medical circumstances. These changes are another step we’re taking together to help people across the United States focus on their financial and personal wellbeing,” said Mark W. Begor, CEO Equifax; Brian Cassin, CEO Experian; and Chris Cartwright, CEO TransUnion. “As an industry we remain committed to helping drive fair and affordable access to credit for all consumers.”

The time period before unpaid medical collection debt would appear on a consumer’s report will be increased from 6 months to one year, according to a press release, “giving consumers more time to work with insurance and/or healthcare providers to address their debt before it is reported on their credit file.”

In the first half of 2023, Equifax, Experian and TransUnion will also no longer include medical collection debt under at least $500 on credit reports.

The changes will remove nearly 70% of medical debt in collections accounts from consumer credit reports.

Medical Collections on Credit Report Equifax, Experian, Transunion



How to Qualify for a Kentucky FHA, VA, USDA and Conventional Home Loan

 There’s no universal minimum credit score needed for a mortgage, but a better credit score will give you more options. 

If you’re trying to get a mortgage, your credit score matters. Mortgage lenders use credit scores — as well as other information — to assess your likelihood of repaying a loan on time.

Because credit scores are so important, lenders set minimum scores you must have in order to qualify for a mortgage with them. Minimum credit score varies by lender and mortgage type, but generally, a higher score means better loan terms for you.

Let’s look at which loan types are best for different credit scores.

How to qualify for a mortgage

The type of mortgage you’re applying for determines the minimum requirements you’ll have to meet for your down payment, credit score, and debt-to-income ratio.

Find out what type of loan you might qualify for or what aspects of your finances you’ll need to improve to get a better shot at qualifying for a mortgage.

Loan TypeMin. Down PaymentMin. Credit ScoreMax DTIProperty Type
Conventional3%62045%Primary, secondary, investment
VA0%nonenonePrimary
FHA3.5%50050%Primary
USDA0%none41%Primary

Keep in mind: The minimum down payment, minimum credit score, and maximum DTI shown in the table apply to mortgages used to purchase a primary residence. While you can use a conventional loan or a jumbo loan to purchase a home for another purpose, you might need a larger down payment, a higher credit score, more cash reserves, or all three.

Credit score needed to buy a house

Mortgage lending is risky, and lenders want a way to quantify that risk. They use your three-digit credit score to gauge the risk of loaning you money since your credit score helps predict your likelihood of paying back a loan on time. Lenders also consider other data, such as your income, employment, debts and assets to decide whether to offer you a loan.

Different lenders and loan types have different borrower requirements, loan terms and minimum credit scores. Here are the requirements for some of the most common types of mortgages.

Conventional loan

Minimum credit score: 620

A conventional loan is a mortgage that isn’t backed by a federal agency. Most mortgage lenders offer conventional loans, and many lenders sell these loans to Fannie Mae or Freddie Mac — two government-sponsored enterprises. Conventional loans can have either fixed or adjustable rates, and terms ranging from 10 to 30 years.

You can get a conventional loan with a down payment as low as 3% of the home’s purchase price, so this type of loan makes sense if you don’t have enough for a traditional down payment. However, if your down payment is less than 20%, you’re required to pay for private mortgage insurance (PMI), which is an insurance policy designed to protect the lender if you stop making payments. You can ask your servicer to cancel PMI once the principal balance of your mortgage falls below 80% of the original value of your home.

FHA loan

Minimum credit score (10% down): 500

Minimum credit score (3.5% down): 580

FHA loans are backed by the Federal Housing Administration (FHA), a part of the U.S. Department of Housing and Urban Development (HUD). The FHA incentivizes lenders to make mortgage loans available to borrowers who might not otherwise qualify by guaranteeing the federal government will repay the mortgage if the borrower stops making payments. This makes an FHA loan a good option if you have a lower credit score.

FHA loans come in 15- or 30-year terms with fixed interest rates. Unlike conventional mortgages, which only require PMI for borrowers with less than 20% down, all FHA borrowers must pay an up-front mortgage insurance premium (MIP) and an annual MIP, as long as the loan is outstanding.

VA loan

Minimum credit score: N/A

VA loans are mortgages backed by the U.S. Department of Veterans Affairs (VA). The VA guarantees loans made by VA-approved lenders to qualifying veterans or service members of the U.S. armed forces, or their spouses. This type of loan is a great option for veterans and their spouses, especially if they don’t have the best credit and don’t have enough for a down payment.

VA loans are fixed-rate mortgages with 10-, 15-, 20- or 30-year terms.

Most VA loans don’t require a down payment or monthly mortgage insurance premiums. However, they do require a one-time VA funding fee, that ranges from 1.4% to 3.6% of the loan amount.

USDA loan

Minimum credit score: N/A

The U.S. Department of Agriculture guarantees loans for borrowers interested in buying homes in certain rural areas. USDA loans don’t require a minimum down payment, but you have to meet the USDA’s income eligibility limits, which vary by location.

All USDA mortgages have fixed interest rates and 30-year repayment terms.

USDA-approved lenders must pay an up-front guarantee fee of up to 3.5% of the purchase price to the USDA. That fee can be passed on to borrowers and financed into the home loan. If the home you want to buy is within an eligible rural area (defined by the USDA) and you meet the other requirements, this could be a great loan option for you.

What else do mortgage lenders consider?

Your credit score isn’t the only factor lenders consider when reviewing your loan application. Here are some of the other factors lenders use when deciding whether to give you a mortgage.

  • Debt-to-income ratio — Your debt-to-income (DTI) ratio is the amount of debt payments you make each month (including your mortgage payments) relative to your gross monthly income. For example, if your mortgage payments, car loan and credit card payments add up to $1,800 per month and you have a $6,000 monthly income, your debt-to-income ratio would be $1,800/$6,000, or 30%. Most conventional mortgages require a DTI ratio no greater than 36%. However, you may be approved with a DTI up to 45% if you meet other requirements.
  • Employment history — When you apply for a mortgage, lenders will ask for proof of employment — typically two years’ worth of W-2s and tax returns, as well as your two most recent pay stubs. Lenders prefer to work with people who have stable employment and consistent income.
  • Down payment — Putting money down to buy a home gives you immediate equity in the home and helps to ensure the lender recoups their loss if you stop making payments and they need to foreclose on the home. Most loans — other than VA and USDA loans — require a down payment of at least 3%, although a higher down payment could help you qualify for a lower interest rate or make up for other less-than-ideal aspects of your mortgage application.
  • The home’s value and condition — Lenders want to ensure the home collateralizing the loan is in good condition and worth what you’re paying for it. Typically, they’ll require an appraisal to determine the home’s value and may also require a home inspection to ensure there aren’t any unknown issues with the property.

How is your credit score calculated?

Most talk of credit scores makes it sound as if you have only one score. In fact, you have several credit scores, and they may be used by different lenders and for different purposes.

The three national credit bureaus — Experian, Equifax and TransUnion — collect information from banks, credit unions, lenders and public records to formulate your credit score. The most common and well-known scoring model is the FICO Score, which is based on the following five factors:

  • Payment history (35%) — A history of late payments will drag your score down, as will negative information from bankruptcies, foreclosures, repossessions or accounts referred to collections.
  • How much you owe (30%) — Your credit utilization ratio is the amount of revolving credit you’re using compared to your total available credit. For example, if you have one credit card with a $2,000 balance and a $4,000 credit limit, your credit utilization ratio is 50%. Credit scoring models view using a larger percentage of your available credit as risky behavior, so high balances and maxed-out credit cards will negatively impact your score.
  • Length of credit history (15%) — This factor considers the age of your oldest account, newest account and the average age of all your credit accounts. In general, the longer you’ve been using credit responsibly, the higher your score will be.
  • Types of accounts (10%) — Credit scoring models favor people who use a mix of credit cards, installment loans, mortgages and other types of credit.
  • Recent credit history (10%) — Lenders view applying for and opening several new credit accounts within a short period as a sign of financial trouble and it’ll negatively impact your score.

Ready to shop around for a mortgage?







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

email: kentuckyloan@gmail.com

https://kentuckyloan.blogspot.com/

Kentucky First Time Home Buyer Questions Answered:

What will my mortgage rate be?


We’ll begin with what always seems to be everyone’s number one concern, saving money. Similar to any other monthly payments you’re attempting to negotiate, it depends on a lot of factors. But we can at least clear up a few items to give you an idea of how things will go. Ultimately, the more risk you present to the mortgage lender, the higher your mortgage rate. So, if you have poor credit and come in with a low, down payment, expect a higher interest rate relative to someone with a flawless credit history and a large down payment. The higher interest rate is intended to compensate the lender for the potential of greater risk of a missed payment as data proves those with questionable credit and low down payments are more likely to fall behind on their mortgages. The property itself can also affect mortgage rate pricing – if it’s a condo or multi-unit investment property, expect a higher rate, all else being equal. Then it’s up to you to take the time to shop around, as you would any other important purchase. Two borrowers with identical loan scenarios may receive completely different rates based on shopping alone. And someone worse off on paper could actually obtain a lower rate than a so-called prime borrower simply by taking the time to gather several quotes instead of just one. For the record, a Freddie Mac study proved that home buyers who obtained more than one quote received a lower rate. There is no single answer here, but the more time you put into improving your financial position, shopping different mortgage lenders, and familiarizing yourself with the process so you can effectively negotiate, the better off you’ll be. And of course, you can keep an eye on average mortgage rates to get a ballpark estimate of what’s currently being offered.  To sum it up, compare mortgage rates as you would anything you buy, but consider the fact that you could be paying your mortgage for the next 30 years. So put in even more time!

How long is my mortgage rate good for?


Once you do find that magic mortgage rate, you’ll probably be wondering how long it’s actually good for. If you’re not asking that question, you should be because rates aren’t set in stone unless you specifically ask them to be. By that, we mean locking in the mortgage rate you negotiate or agree upon with the lender so even if rates change from one day to the next, your rate won’t. Otherwise, you’re merely floating your mortgage rate, and thereby taking your chances. Without a rate lock, it’s really just a rate quote.  Lenders will often charge a fee to lock in an interest rate. Rates can generally be locked in for anywhere from 15 to 90 days or longer, with shorter lock periods cheaper than longer ones. But pay attention to the expiration date of your lock, because you will need to close the loan before that date or you will have to renew the lock.



How do you calculate a mortgage payment?


At some point in the mortgage process, you’re going to be searching for a mortgage calculator to figure out your proposed payment.  You can see how monthly payments on mortgage loans are truly calculated using the real math, or you can simply find a payment calculator that does all the work and tells you nothing about how it comes up with the final sum.  Just make sure you use a mortgage calculator that considers the entire housing payment, including taxes, insurance, HOA dues, and so forth. Otherwise, you’re not seeing the complete picture.

What is a mortgage refinance?


As the name implies, refinancing simply means obtaining new financing for something you already own (or partially own, like real estate).  It’s kind of like a balance transfer where you move your loan from one lender to another to get better terms, except it’s a mortgage payoff.of your old mortgage loan for a new mortgage loan. If you currently have a rate of 6% on your mortgage, but see that refinance rates are now 4%, a refinance could make sense and save you a lot of money over time. You’d essentially have the lender pay off your existing loan with a brand-new loan at the lower interest rate. There is also the cash-out refinance, which allows you to tap into your home equity while also changing the rate and term of your existing mortgage. So, if you currently owe $200,000, but your home is worth $500,000, you could potentially take out $100k cash and your new loan amount would be $300,000. Your monthly payments may not even go up if interest rates are favorable, and you’d have that cash to use for whatever you wish. Be sure to use a refinance calculator or payoff calculator to help guide your decision, and consider the loan term, otherwise known as your expected tenure in the property

How much will my housing payment really be?


Like we mentioned in the related question above, be sure to factor in all the elements that go into a mortgage payment, not just the principal and interest payment that you often see advertised.  It’s not enough to look at P&I (Principal & Interest), you have to consider the PITI (Principal, Interest, Taxes and Insurance). And sometimes even the “A” (Homeowners Association Assessments).  If you don’t consider the full housing payment, including property taxes and homeowners insurance (and maybe even private mortgage insurance) you might do yourself a disservice when it comes to determining how much you can afford during the home financing process. You can check out my mortgage affordability calculator to see where you stand. Whether you have an escrow account or not, mortgage lenders will qualify you by factoring in taxes and insurance, not just your monthly mortgage payment.

When is the first mortgage payment due?


This depends on when you close your home loan and if you pay prepaid interest at  closing.  For example, if you close late in the month, chances are your first mortgage payment will be due in just over 30 days.  Conversely, if you close early in the month, you might not make your first payment for nearly 60 days. That can be nice if you’ve got moving expenses and renovation costs to worry about, or if your checking account is a little light.

What credit score do I need to get approved?


It depends what type of mortgage you’re attempting to get, and also what down payment you have, or if it’s a purchase or a refinance.  The good news is that there are a lot of mortgage programs available for those with low credit scores, including VA loans and FHA mortgages.  For example, the FHA goes as low as 500 FICO, Fannie and Freddie 620, and the USDA and VA don’t technically have a minimum credit score, though most lenders want at least 620/640. If you’re in good shape financially, a poor credit score may not actually be a roadblock. But you can save a lot of money if you have excellent credit via the lower interest rate you receive for being a better borrower. Simply put, loan rates are lower if you’ve got a higher credit score.

How large of a mortgage can I afford?


Here you’ll need to consider home values, how much you make, what your other monthly liabilities are, what you’ve got in your savings account, and what your down payment will be in order to come up with your loan amount. From there, you can calculate your debt-to-income ratio, which is very important in terms of qualifying for a mortgage.  This is a fairly involved process, so it’s tough to just estimate what you can afford or provide some quick calculation. There’s also your comfort level to consider. How much home are you comfortable financing? And don’t forget the property taxes and insurance, as well as routine maintenance costs, which can make your total housing obligations much more expensive!

Do I even qualify for a mortgage?


This is an important question to consider. Are you actually eligible for a mortgage or are you simply wasting your time and the lender’s?  While requirements do vary, most lenders require two years of credit history or clean rental history, and steady employment, along with some assets in the bank. As mentioned, if you are looking to purchase a new home, getting that pre-qualification, or better yet, pre-approval, is a good way to find out if the real thing (a loan application) is worth your while. However, even if you are pre-qualified or pre-approved, things can and do come up that turn a conditional approval into a denial letter, such as an undisclosed credit card, personal loan, auto loan, or pesky student loans. Many lenders will also verify employment and credit and income, prior to loan closing to make sure nothing has changed.  Simply, your loan is not 100% done until it funds.

Why might I be denied a mortgage?


There are probably endless reasons why you could be denied a mortgage, and likely new ones being realized every day. It’s a complicated business, really. With so much money at stake and so much risk to lenders if they don’t do their due diligence, you can bet you’ll be vetted pretty thoroughly.  If anything doesn’t look right, with you or the property, it’s not out of the realm of possibilities to be flat out denied. Those aforementioned undisclosed student loans or credit cards can also come back to bite you, either by limiting how much you can borrow or by pushing your credit scores down below acceptable levels. That doesn’t mean give up, it just means you might have to go back to the drawing board and improve your credit score, reduce some debts, or find a new lender willing to work with you. It also highlights the importance of preparation!

What documents do I need to provide to get a home loan?


In short, a lot of them, from tax returns to pay stubs to bank statements and other financials like a brokerage account if using assets from such a source. This process is becoming less paperwork intensive thanks to new technologies like single source validation, but it’s still quite cumbersome. You’ll also have to sign lots of loan disclosures, credit authorization forms, letters of explanation, and so on.  While it can be frustrating and time consuming, do your best to get any documentation requests back to the lender ASAP to ensure that you will close your home loan on time. And make sure you always send all pages of documents to avoid re-requests.


What type of mortgage should I get?


There are a lot of loan options, including fixed-rate mortgages and adjustable-rate mortgages, along with conventional loans and government loans, such as FHA and VA. While most borrowers just default to the 30-year fixed-rate mortgage loan, there are plenty of other loan programs available, and some may result in significant savings depending on your plans. For example, a 5/1 ARM might come with an interest rate 0.75% below a 30-year fixed, and it’s still fixed for the first five years, adjusting every year thereafter. You might want to start with the fixed-rate versus ARM comparison, then go from there. If you’re comfortable with an ARM, you can explore the many options available. If you know a fixed rate is the only way to go with a home loan, you can determine whether a shorter-term option like the 15-year fixed is in your budget and best interest. Also consider the FHA vs. conventional pros and cons to ensure you’ve covered all your bases if trying to decide between those two loan types.


How big of a down payment do I need?


That depends on a lot of factors, including the purchase price of the home, the type of loan you choose, the property type, the occupancy type, your credit score, and so on. There are still zero down mortgage options available in certain situations, including for USDA and VA loans, and widely available 3% and 3.5% down options as well.  In short, you can still get a mortgage with a relatively small down payment, assuming it’s owner-occupied and not a vacation home or investment property. Just make sure you can afford the higher monthly payments!

Do I need to pay mortgage insurance?


Good question. The answer coincides with down payment and/or existing home equity, along with loan type. Basically, you want to be at or below 80% loan-to-value to avoid mortgage insurance entirely, at least when it comes to a home loan backed by Fannie Mae or Freddie Mac. That means a 20% down payment or greater when purchasing a home, or 20%+ equity when refinancing a mortgage. However, for a FHA loan, mortgage insurance is unavoidable, regardless of the loan to value.


What are mortgage points? Do I need to pay them?


The choice is yours when it comes to points, though it does depend on how the lender. Are they discount points or a loan origination fee?  Points paid by you, that are for a lender origination fee do not reduce the interest rate. They are a fee to compensate the lender for their cost to originate the mortgage loan. Discount points will reduce the loan interest rate. For every point paid, there is a corresponding reduction in interest rate charged.  Of course, these points can be paid directly and out-of-pocket, or indirectly via a higher mortgage rate and/or rolled into the loan. This is part of the negotiation process, and also your preference.

What closing costs are negotiable?


Closing costs will be fees assessed by and paid to your lender and fees assessed by your lender but paid to a third-party. Many closing costs may be negotiable, including some third-party fees that you can shop for like title insurance. Closing costs refer to fees both paid to the lender as well as fees assessed and paid to a third-party provider.  If you look at your Loan Estimate (LE), and provided settlement Service Provider list, you’ll actually see which services identified which you can shop for. Then there are the loan costs, which you may be able to negotiate with some lenders. In some instances, you may not be charged an outright fee, because it will be built into the rate, which also may be negotiated at times. You have every right to go through each and every fee and ask what it is and why it’s being charged. And the lender should have a reasonable response.


How quickly can I get a mortgage?


This is an easier mortgage question to answer, though it can still vary quite a bit. In general, you might be looking at anywhere from 30 to 45 days for a typical residential mortgage transaction, whether it’s a mortgage refinance or home purchase. Of course, stuff happens, a lot, so it’s not out of the ordinary for the process to take up to 60 days or even longer. At the same time, there are companies (and related technologies) that are trying to whittle the process down to a couple weeks, if not less. So, look forward to that in the future!


Do I really need a 20% down payment to purchase a home?


A. No. There are several other loan options available that allow you to put as little as 5%, 3%, or even 0% down. Just keep in mind that a conventional home loan with less than a 20% down payment typically requires Private Mortgage Insurance (PMI). FHA loans will require mortgage insurance premiums regardless of the down payment. Mortgage Insurance protects the lender from losing money if you end up not being able to pay the loan.

When should I lock in my interest rate?


A. This answer differs depending on whether you’re purchasing or refinancing a home. But of course, either way, you want to obtain the lowest rate possible on such a large amount of money.  If you’re refinancing, your application has to be credit-approved before you can lock in your rate. If you’re shopping for a home, your application has to be credit-approved and the seller has accepted your offer before you can lock in your rate.  Then, you’ll need to decide if you want to lock in today’s rate or keep an eye on rates in the days that follow.  Be sure to understand any fees associated with the rates you see advertised — not all are created equal, so you want to pay attention to the Annual Percentage Rate (APR), not just the interest rate.


How long does my pre-approval last?


A. Pre-approvals on average are good from 60 to 90 days, at which time, if you haven’t put an offer on a home and submitted a loan application, you’ll need to get pre-approved again.

When I purchase a new home, what exactly, are closing costs, and how much should I expect to pay?


A. When you decide to buy a home, you’ll spend more than just your down payment. You’ll also pay for things like recording fees, wire fees, or escrow account, origination fees, upfront insurance premiums and any “points” you buy to lower your interest rate. These expenses are collectively called closing costs, and you can expect them to run you anywhere from 2% to 5% of the purchase price of your home.

What type of mortgage should I choose?


A. This is entirely unique to your financial situation, what you want to buy, how long you plan to live in the home, and more. With options that range from a standard 30-year fixed-rate home loan to an adjustable-rate mortgage that lets you pay less in interest for the first few years, your best bet at finding the right loan is to speak with an expert. Our mortgage loan advisors can spend time understanding your needs and goals to assist you in determining the best loan program for you




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

 




Here are action steps you can take right now to buy a home in Kentucky in 2022

 Here are action steps you can take right now to buy a home in Kentucky in 2022


1. Focus on your credit score

FICO credit scores are among the most frequently used credit scores, and range from 350-800 (the higher, the better). A consumer with a credit score of 750 or higher is considered to have excellent credit, while a consumer with a credit score below 620 is considered to have poor credit.

To qualify for a mortgage and get a low mortgage rate, your credit score matters.

Each credit bureau collects information on your credit history and develops a credit score that lenders use to assess your riskiness as a borrower. If you find an error, you should report it to the credit bureau immediately so that it can be corrected.


2. Manage your debt-to-income ratio

Many lenders evaluate your debt-to-income ratio when making credit decisions, which could impact the interest rate you receive.

A debt-to-income ratio is your monthly debt payments as a percentage of your monthly income. Lenders focus on this ratio to determine whether you have enough excess cash to cover your living expenses plus your debt obligations.

Since a debt-to-income ratio has two components (debt and income), the best way to lower your debt-to-income ratio is to:

  • repay existing debt;
  • earn more income; or
  • do both

3. Pay attention to your payments

Simply put, lenders want to lend to financially responsible borrowers.

Your payment history is one of the largest components of your credit score. To ensure on-time payments, set up autopay for all your accounts so the funds are directly debited each month.

FICO scores are weighted more heavily by recent payments so your future matters more than your past.

In particular, make sure to:

  • Pay off the balance if you have a delinquent payment
  • Don't skip any payments
  • Make all payments on time

4. Get pre-approved for a mortgage before you start shopping for a home loan.

Too many people find their home and then get a mortgage.

Switch it.

Get pre-approved with a lender first. Then, you'll know how much home you can afford.

To get pre-approved, lenders will look at your income, assets, credit profile and employment, among other documents.

5. Keep credit utilization low on your credit cards

Lenders also evaluate your credit card utilization, or your monthly credit card spending as a percentage of your credit limit.

Ideally, your credit utilization should be less than 30%. If you can keep it less than 10%, even better.

For example, if you have a $10,000 credit limit on your credit card and spent $3,000 this month, your credit utilization is 30%.

Here are some ways to manage your credit card utilization:

  • set up automatic balance alerts to monitor credit utilization
  • ask your lender to raise your credit limit (this may involve a hard credit pull so check with your lender first)
  • pay off your balance multiple times a month to reduce your credit utilization

6. Look for down payment assistance in Kentucky

There are various types of down payment assistance, even if you have student loans.

Here are a few:

  • FHA loans - federal loan through the Federal Housing Authority
  • USDA loans - zero down mortgages for rural and suburban homeowners
  • VA loans - if military service
  • Kentucky Housing Down Payment Assistance of $6000



There are federal, state and local assistance programs as well so be on the look out.



If you want a personalized answer for your unique situation call, text, or email me or visit my website 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

email:          kentuckyloan@gmail.com
 

https://kentuckyloan.blogspot.com/

 









--

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

 

Credit Karma DOES NOT give you FICO scores! Which is what mortgage lenders use.

Great information to share with your clients that uses Credit Karma. A lot of people do not know that the Credit Karma app is a Vantage Score.

Credit Karma is NOT Free!
Credit Karma makes money off of the personal information you volunteered!
Credit Karma is NOT a credit monitoring site! - They collect your information from the credit agencies to create targeted campaigns based on your personal information which makes Credit Karma an affiliate marketing site!
Credit Karma DOES NOT give you FICO scores! Which is what mortgage lenders use.
Credit Karma provides you with Vantage scores (Not heavily used by lenders)
Credit Karma buys your information for pennies on the dollar, this is how they are able to provide you with updates every 7 days.
Why?... To get you to look at your scores and their AFFILIATE offers! You know, the offers for those credit cards that say you have a fair, good or very good chance of being approved for....
Have you noticed they never say, "You have a bad or poor chance”?
Apply, get denied and now you have an inquiry on your credit profile.
For those of you that are seeing you have a "chance" of getting approved for an American Express 💳 think again... You would be surprised to know, American Express only pulls from Experian for credit cards?
Credit Karma DOES NOT give you Experian credit report or scores

While it’s common knowledge that mortgage lenders use FICO scores, most people with a credit history have three FICO scores, one from each of the three national credit bureaus (Experian, Equifax, and TransUnion). 


Credit Karma DOES NOT give you FICO scores! Which is what mortgage lenders use. Which FICO Score is Used for Mortgages?



  • Which FICO Score is Used for Mortgages?

Most lenders determine a borrower’s creditworthiness based on FICO® scores, a Credit Score developed by Fair Isaac Corporation (FICO™). This score tells the lender what type of credit risk you are and what your interest rate should be to reflect that risk. FICO scores have different names at each of the three major United States credit reporting companies. And there are different versions of the FICO formula. Here are the specific versions of the FICO formula used by mortgage lenders:

  • Equifax Beacon 5.0
  • Experian/Fair Isaac Risk Model v2
  • TransUnion FICO Risk Score 04

Lenders have identified a strong correlation between Mortgage performance and FICO Bureau scores (FICO score). FICO scores range from 300 to 850. The lower the FICO score, the greater the risk of default.

Which Score Gets Used?

Since most people have three FICO scores, one from each credit bureau, how do lenders choose which one to use?

For a FICO score to be considered “usable”, it must be based on adequate, concrete information. If there is too little information, or if the information is inaccurate, the FICO score may be deemed unusable for the mortgage underwriting process. Once the underwriter has determined if a score is usable or not, here’s how they decide which score(s) to use for an individual borrower:

  • If all three scores are different, they use the middle score
  • If two of the scores are the same, they use that score, regardless of whether the two repeated scores are higher or lower than the third score

Lenders have identified a strong correlation between Mortgage performance and FICO Bureau scores (FICO score). FICO scores range from 300 to 850. The lower the FICO score, the greater the risk of default.

If it helps to visualize this information:

Identifying the Underwriting Score
ExampleScore 1Score 2Score 3Underwriting Score
Borrower 1680700720700
     

Joel Lobb

Mortgage Loan Officer

Individual NMLS ID #57916

 

American Mortgage Solutions, Inc.

10602 Timberwood Circle 

Louisville, KY 40223

Company NMLS ID #1364

click here for directions to our office

 

Text/call:      502-905-3708

fax:            502-327-9119
email:
          kentuckyloan@gmail.com

 

https://www.mylouisvillekentuckymortgage.com/

 

 
 

 

 
 
Joel Lobb
Senior  Loan Officer
(NMLS#57916)
 
 Company ID #1364 | MB73346
 

text or call my phone: (502) 905-3708
email me at kentuckyloan@gmail.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 view of my employer. Not all products or services mentioned on this site may fit all people. NMLS ID# 57916, (www.nmlsconsumeraccess.org). USDA Mortgage loans only offered in Kentucky.

All loans and lines are subject to credit approval, verification, and collateral evaluation