- 4 Things Required for a KY Mortgage Loan Approval
- Credit Scores Required For A Kentucky Mortgage Loan Approval in 2021
- Down Payment Assistance Kentucky 2021 Kentucky Housing Corporation KHC
- Kentucky First-time Home Buyer Programs
- Kentucky FHA Mortgage Information
- Kentucky VA Mortgage Loan Information
- USDA Rural Housing Kentucky Loan Information
- Zero Down Kentucky Mortgages
- First-time Home-buyers in Kentucky
- Documents Needed Mortgage Approval in Kentucky
- Free Credit Score Booklet
- Do's & Dont's before closing:
- Closing Costs Kentucky Mortgage
- Lock Kentucky Mortgage Loan Rate
- Home Inspections Kentucky
- Accessibility Statement
Student Loan Payment Requirement
Must be included in the borrower’s liabilities regardless of the payment type or
status. The payment amount must be either:
▪ The greater of:
· 1% of the outstanding balance on the loan or
· Monthly payment reported on the borrower’s credit report, or
▪ The servicer’s documented payment provided the payment will fully amortize
the loan over the repayment term period
A payment does not need to be included if written evidence supports that the
student loan debt will be deferred beyond 12 months of closing.
Include loans with payments starting within 12 months. Calculate threshold
payment as a rate of 5% of outstanding balance divided by 12 months. If credit
report payment is higher, use credit report payment. If current documentation
from student loan servicer reflects actual terms and payment for each loan,
the verified payments may be used even if less than the threshold payment
A permanent amortized, fixed payment is used when documentation supports fixed payment, interest and term.
Use .5% of the loan balance reflected on the credit report. Payment arrangements
that are deferred or non-fixed (Income Based Repayment (IBR), graduated, adjustable, interest only, etc.) may not be used.
Loans in Repayment Period
▪ If provided, use the credit report payment
▪ If credit report is incorrect, obtain student loan documentation from the servicer
to verify the payment used for qualification
Use the student loan documentation to verify the actual monthly payment. Borrower
may be qualified with a $0 payment if the documentation supports it.
Loans in Deferment or
▪ A payment equal to 1% of the outstanding student loan balance (even if this
amount is lower than the actual fully amortizing payment) or
▪ A fully amortizing payment using the documented loan repayment terms
Loans in Repayment
Use the greater of payment reported on credit report or .5% of the higher of original
or outstanding loan balance as shown on credit report.
Loans in Deferment or
Use greater of payment reported on credit report or .5% of the higher of original or
current outstanding loan balance as shown on the credit report.
Payment may be excluded if file contains documentation that indicates:
▪ Monthly payment is deferred and/or in forbearance and full balance of the loan will be forgiven, canceled, discharged or will be paid if qualified for an employment-contingent repayment program and
▪ Borrower currently meets requirements for the student loan forgiveness/cancelation program
Obtain documentation from the student loan servicer to show the loan will be forgiven, canceled, discharged or that the borrower qualifies and is approved under an employment contingent repayment program that will extinguish the debt.
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Louisville Kentucky Mortgage Lender for FHA, VA, KHC, USDA and Rural Housing Kentucky Mortgage: Using Gift Money for a Down Payment in Kentucky Fo...
About FICO® Scores
A credit score is a number that summarizes your credit risk to lenders, or the likelihood that you’ll pay the lender back the amount you borrowed plus interest. The score is based on a snapshot of your credit report(s) at one of the three major credit bureaus—Equifax®, Experian®, and TransUnion®—at a particular point in time, and helps lenders evaluate your credit risk. Your credit score can influence the credit that’s available to you and the terms, such as interest rate, that lenders offer you.
A credit bureau, also known as a consumer reporting agency, collects and stores individual credit information and provides it to creditors so they can make decisions on granting loans and other credit activities. Typical clients include banks, mortgage lenders, and credit card issuers. The three largest credit bureaus in the U.S. are Equifax®, Experian®, and TransUnion®.
FICO® Scores are the most widely used credit scores and are used in over 90% of U.S. lending decisions. Your FICO® Scores (you have more than one) are based on the data generated from your credit reports at the three major credit bureaus, Experian®, TransUnion® and Equifax®. Each of your FICO® Scores is a three-digit number summarizing your credit risk, that predicts how likely you are to pay back your credit obligations as agreed.
Most credit scoring models follow a credit score range of 300 to 850 with that 850 being the highest score you can have. However, there can be other ranges for different models, some of which are customized for a particular industry (credit card, auto lending, or insurance for example). While the majority follow the 300 to 850 range, there are some scores (e.g., FICO® Bankcard Score) that range from 250 to 900 and others that may use other score ranges. For more information on the different scoring models, view Understanding the difference between credit scores.
There are many reasons why your score may change. The information on your credit report changes each time lenders report new activity to the credit bureau. So, as the information in your credit report at that bureau changes, your FICO® Scores may also change. Keep in mind that certain events such as late payments or bankruptcy can lower your FICO® Scores quickly.
FICO® Scores consider five main categories of information in your credit report.
- Your payment history
- The amount of money you currently owe
- The length of your credit history
- New credit accounts
- Types of credit in use
In order for a FICO® Score to be calculated, a credit report must contain these minimum requirements:
- At least one account that has been open for six months or more.
- At least one account that has been reported to the credit reporting agency within the past six months.
- No indication of deceased on the credit report (Please note: if you share an account with another person and the other account holder is reported deceased, it is important to check your credit report to make sure you are not impacted).
No. Most lenders use a number of factors to make credit decisions, including a FICO® Score. Lenders may look at information such as the amount of debt you are able to handle reasonably given your income, your employment history, and your credit history. Based on their review of this information, as well as their specific underwriting policies, lenders may extend credit to you even with a low FICO® Score, or decline your request for credit even with a high FICO® Score.
It depends on the type of negative information. Here’s the basic breakdown of how long different types of negative information will remain on your credit reports:
- Late payments: 7 years from the original delinquency date.
- Chapter 7 bankruptcies: 10 years from the filing date.
- Chapter 13 bankruptcies: 7 years from the filing date.
- Collection accounts: 7 years from the original delinquency date of the account
- Public Record: Generally 7 years
Keep in Mind: For all of these negative items, the older they are the less impact they will have on your FICO® Scores. For example, a collection that is 5 years old will hurt much less than a collection that is 5 months old.
No. FICO® Scores do not consider your gender, race, nationality or marital status. In fact, the Equal Credit Opportunity Act prohibits lenders from considering this type of information when issuing credit. Independent research has shown that FICO® Scores are not unfair to minorities or people with little credit history. FICO® Scores have proven to be an accurate and consistent measure of repayment for all people who have some credit history. In other words, at a given FICO® Score, non-minority and minority applicants are equally likely to pay as agreed.
Married couples don’t share joint FICO® Scores; each person has their own individual credit report, which is used to calculate FICO® Scores, and isn’t impacted by their spouse’s credit history. However, married couples should be mindful of the potential impact of opening joint credit accounts. For example, if you get a new credit card in both spouses’ names, and there is a late payment on that account, the late payment will impact both individuals’ FICO® Scores.
By federal law, you are entitled to one free credit report every 12 months from each credit reporting company, TransUnion®, Equifax®, and Experian®. Find them at annualcreditreport.com. Take advantage of this service annually to ensure the information on your credit report is current and accurate.
Impacts to FICO® Scores
It is possible that closing a credit account may have a negative impact depending on a few factors. FICO® Scores may consider your “credit utilization rate”, which looks at your total used credit in relation to your total available credit. Essentially, it measures how much of your available credit you are actually using. The more of your credit that you use, the higher your utilization rate and high credit utilization rates may negatively impact your FICO® Score. Before you close any credit card account, Wells Fargo recommends that you should first consider whether you really need to close the account or if your real intention is just to stop using that credit card. If you really just want to stop using that card, it may make sense if you stop using the card and put it somewhere for safe keeping in case of an emergency. It’s also important to note that length of your credit history accounts for 15% of your FICO® Score calculation. Therefore, having credit card accounts that are open and in good standing for a long time may affect your FICO® Score.
Refinancing and loan modifications may affect your FICO® Scores in a few areas. How much these affect the score depends on whether it’s reported to the consumer reporting agencies as the same loan with changes or as an entirely new loan. There are many reasons why a score may change. FICO® Scores are calculated using many different pieces of credit data in your credit report. This data is grouped into five categories: payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%) and credit mix (10%). If a refinanced loan or modified loan is reported as the same loan with changes, two pieces of information associated with the loan modification may affect your score: the new credit inquiry and changes to the amounts owed. If a refinanced loan or modified loan is reported as a “new” loan, your score could still be affected by the new credit inquiry and an increase in amounts owed,— along with the additional impact of a new “open date” which may affect the credit history category. In the end, a new or recent open date typically indicates that it is a new credit obligation and, as a result, may impact the score more than if the terms of the existing loan are simply changed.
In general, if you are “loan shopping” - meaning that you are applying for the same type of loan with similar amounts with multiple lenders in a short period of time - your FICO® Score will consider your “shopping” as a single credit inquiry on your score if the shopping occurs within a short time period (30 to 45 day) depending on which FICO® Score version is used by your lenders.
A history of payments is the largest factor in FICO® Scores. FICO® Scores consider late payments in these general areas; how recent the late payments are, how severe the late payments are, and how frequently the late payments occur. So this means that a recent late payment could be more damaging to a FICO® Score than a number of late payments that happened a long time ago. Late payments are listed on credit reports by how late the payments are. Typically, creditors report late payments in one of these categories: 30-days late, 60-days late, 90-days late, 120-days late, 150-days late, or charge off (written off as a loss because of severe delinquency). Of course a 90-day late is worse than a 30-day late, but the important thing to understand is that people who continually pay their bills on time tend to appear less risky to lenders. However, for people who continue not to pay debt, and their creditor either charges it off or sends it to a collection agency, it is considered a significant event with regard to a score and will likely have a severe negative impact.
A bankruptcy is considered a very negative event by FICO® Scores. As long as the bankruptcy is listed on your credit report, it will be factored into your scores. How much of an impact it will have on your score will depend on your entire credit profile. As the bankruptcy item ages, its impact on a FICO® Score gradually decreases. Typically, here is how long you can expect bankruptcies to remain on your credit reports (from the date filed):
- Chapter 11 and 7 bankruptcies up to 10 years.
- Completed Chapter 13 bankruptcies up to 7 years.
These dates and time periods refer to the public record item associated with filing for bankruptcy. All of the individual accounts included in the bankruptcy should be removed from your credit reports after 7 years.
Public records are legal documents created and maintained by Federal and local governments, which are usually accessible to the public. Some public records, such as divorces, are not considered by FICO® Scores, but adverse public records, which include bankruptcies, are considered by FICO® Scores. FICO® Scores may be affected by the mere presence of an adverse public record, whether paid or not. Adverse public records will have less effect on a FICO® Score as time passes, but they can remain in your credit reports for up to ten years based on what type of public record it is.
Inquiries may or may not affect FICO® Scores. Credit inquiries are classified as either “hard inquiries” or “soft inquiries”—only hard inquiries have an effect on FICO® Scores.
Soft inquiries are all credit inquiries where your credit is NOT being reviewed by a prospective lender. FICO® Scores do not take into account any involuntary (soft) inquiries made by businesses with which you did not apply for credit, inquiries from employers, or your own requests to see your credit report. Soft inquiries also include inquiries from businesses checking your credit to offer you goods or services (such as promotional offers by credit card companies) and credit checks from businesses with which you already have a credit account. If you are receiving FICO® Scores for free from a business with which you already have a credit account, there is no additional inquiry made on your credit report. FICO® Scores take into account only voluntary (hard) inquiries that result from your application for credit. Hard inquiries include credit checks when you’ve applied for an auto loan, mortgage, credit card or other types of loans. Each of these types of credit checks count as a single inquiry. Inquiries may have a greater impact if you have few accounts or a short credit history. Large numbers of inquiries also mean greater risk.
Applying for new credit only accounts for about 10% of a FICO® Score. Exactly how much applying for new credit affects your score depends on your overall credit profile and what else is already in your credit reports. For example, applying for new credit may have a greater impact on your FICO® Scores if you only have a few accounts or a short credit history. That said, there are definitely a few things to be aware of depending on the type of credit you are applying for. When you apply for credit, a credit check or “inquiry” can be requested to check your credit standing.
Kentucky Lender's Criteria: Debt-to-Income Ratios
From a Kentucky Mortgage lender's perspective, your ability to purchase a home depends largely on the following factors:
The front-end ratio is the percentage of your yearly gross income dedicated toward paying your mortgage each month. Your mortgage payment consists of four components: principal, interest, taxes and insurance (often collectively referred to as PITI) A good rule of thumb is that PITI should not exceed 31% of your gross income. If you make $100,000 a year, then your max house payment to include escrows for home insurance, mortgage insurance, property taxes would be $2583.00
The back-end ratio, also known as the debt-to-income ratio, calculates the percentage of your gross income required to cover your debts. Debts include your mortgage, credit-card payments, child support and other loan payments. Most lenders recommend that your debt-to-income ratio does not exceed 45% of your gross income. To calculate your maximum monthly debt based on this ratio, multiply your gross income by 0..45 and divide by 12. For example, if you earn $100,000 per year, your maximum monthly debt expenses should not exceed $3,750 with new mortgage payment. Utility bills, car insurance, cell phone bills, insurance payments does not factor into this ratio. Only bills listed on credit report and 401k loan and child support payment
If you are looking to purchase your first home, you have probably been doing your research about properties in your area, where you might be able to obtain a loan and how to qualify for it. A key term you may recognize from all that research is "debt-to-income ratio," which refers to the figure you get when you add up all your monthly debt payments and then divide that number by your monthly income. In laymen's terms, the debt-to-income ratio gives potential mortgage lenders an idea of how much your expenses are each month in comparison to how much you actually earn.
Depending on where you are in the home-buying process, you may have a good idea of where your credit score lands. As important as a strong credit score is, however, a favorable debt-to-income ratio is arguably of equal importance, and it may be just as closely scrutinized by any potential mortgage lender.
When you try and obtain a loan, expect possible lenders to review two types of debt-to-income ratio. The front-end ratio, or "housing" ratio, gives them an idea of what percentage of your monthly income would have to go toward home-related expenses, such as the mortgage, associated taxes and any additional fees, such as homeowner's association expenditures, that may apply.
The back-end ratio, on the other hand, takes a more cumulative approach and compares your monthly income to all your expenses, from the housing-related ones to school tuition, child support, car payments and any other financial obligations you may have.
The exact percentage your lender will look for will likely vary based on factors such as your credit score, how much you have in your savings account and how much you have to put down for your down payment. Most standard lenders, however, prefer to see something in the ballpark of 28 percent for a front-end ratio. For a back-end ratio, they will likely look for a percentage that does not exceed 36 percent. Federal Housing Authority lenders typically look for a front-end ratio of about 31 percent and a back-end ratio that does not exceed 43 percent.
Simply put, the most effective way to lower a high debt-to-income ratio and therefore make yourself more appealing to lenders is to pay off some of your debt. If you have a cosigner who may be willing to help you out with a loan, that could serve as an additional method of getting around a high ratio.
Joel Lobb (NMLS#57916)
Senior Loan Officer
American Mortgage Solutions, Inc.
10602 Timberwood Circle Suite 3
Louisville, KY 40223
Company ID #1364 | MB73346
If you are an individual with disabilities who needs accommodation, or you are having difficulty using our website to apply for a loan, please contact us at 502-905-3708.
Disclaimer: No statement on this site is a commitment to make a loan. Loans are subject to borrower qualifications, including income, property evaluation, sufficient equity in the home to meet Loan-to-Value requirements, and final credit approval. Approvals are subject to underwriting guidelines, interest rates, and program guidelines and are subject to change without notice based on applicant's eligibility and market conditions. Refinancing an existing loan may result in total finance charges being higher over the life of a loan. Reduction in payments may reflect a longer loan term. Terms of any loan may be subject to payment of points and fees by the applicant Equal Opportunity Lender. NMLS#57916http://www.nmlsconsumeraccess.org/
First Time Home Buyer in Kentucky Zero Down, First Time Home Buyer Louisville Kentucky Mortgage, Kentucky Mortgage Rates FHA VA KHC, Kentucky Rural Development Loans, Kentucky VA Loan Approval, USDA loans
Kentucky First Time Home Buyer Programs For Home Mortgage Loans: 5 Things to Know For First Time Home Buyers in Ken...
How to Raise Your Credit Score Fast for Kentucky Mortgage Loan Approval for FHA, VA, USDA and KHC Mortgage loans.
How to Raise Your Credit Score Fast for Kentucky Mortgage Loan Approval for FHA, VA, USDA and KHC Mortgage loans.
Fico Score Tips to raise score
How to Raise Your Credit Score Fast
1. Find Out When Your Issuer Reports Payment History
2. Pay Down Debt Strategically
3. Pay Twice a Month
4. Raise Your Credit Limits
5. Mix It Up
Mortgage Loan Officer