Credit Scores Needed to qualify for a Ky Mortgage.
via Credit Scores Needed to qualify for a Ky Mortgage.
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Kentucky FHA Loans and requirements for a loan approval after a bankruptcy, foreclosure, short sale
Kentucky FHA loans guidelines for after a bankruptcy, foreclosure, short-sale below:
- Foreclosures: 3 years from the foreclosure completion date and transferred back to the lender to the credit report date
- Short Sale: 3 years from the title transfer date
- Bankruptcy Chapter 7: 2 years from the discharge date. If a property is surrendered in chapter 7 bankruptcy, it is considered to be possible foreclosure which could increase waiting time
- Bankruptcy Chapter 13: 1 year wait with a scheduled payment plan on liabilities factored into debt-to-income ratio and bankruptcy court approval for mortgage process or 2 years from discharge date
Joel Lobb
Senior Loan Officer
Senior Loan Officer
(NMLS#57916)
American Mortgage Solutions, Inc.
800 Stone Creek Pkwy, Ste 7,
Louisville, KY 40223
phone: (502) 905-3708
Fax: (502) 327-9119
Company ID #1364 | MB73346
Kentucky FHA loans have new guidelines for collections, judgements, and disputed accounts on credit report.
HA has published the following guideline updates, which will be effective for all loans with case numbers assigned on or after September 9th
- Specific verbiage for Well Water Testing has been added indicating that it must be performed by a disinterested party in a method acceptable to the local health authority. The borrower or any other interested party may not have contact with the sample. Additionally, cases mandating a Well Water Test have been added to include (but not limited to) the following
- Newly constructed properties and/or wells
- Properties with deficiencies in the well or well water as determined by an appraiser
- Areas where water has been reported or is otherwise known to be unsafe
- Properties located in close proximity to dumps, landfills, industrial sites, farms, or other sites that could contain hazardous waste
- Properties where distance between well and septic systems is less than 100 feet
- Clarification issued indicating Overtime, Bonus, or Tip Income must be calculated using the lesser of
- Average Overtime, Bonus, or Tip income earned over the previous 2 years (or if earned less than 2 years, the total length of time it has been received); OR
- Average Overtime, Bonus, or Tip income earned over the previous year
- All requirements regarding unreimbursed business expenses and Commission Income or Automobile Allowances has been completely removed to align with current IRS tax laws
- Mortgagees and Third Party Originators have been specifically added to the list of parties to which Interested Party Contribution (IPC) limits apply, with the exception that Premium Pricing credits do not apply to the IPC limit unless the mortgagee is also acting as the seller, agent, builder, or developer.
- Rent Below Fair Market has been defined as an inducement to purchase when the borrower is allowed to live in the property rent free or at a rental amount more than 10 percent under the fair market rent as determined by the appraiser.
- Disaster Certifications and new Appraisals in Disaster Areas must now be dated at least 14 days after the Incident Period start date. NOTE: This requirement is in addition to the standard Century Disaster Area Policy.
- Clarification has been added that Reduction in Term for Streamline Refinances refers specifically to the reduction of the remaining amortization period of the existing mortgage.
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Manual Underwriting Tips for FHADon’t Forget to Submit!
- Verbal VOE, paystub(s) covering most recent 30 day period, W2’s for the past 2 years
- 2 year employment history
- At least 1 months reserves from the borrower’s own funds (cannot be a gift); 3 months required for 3-4 unit properties
- VOR or 12 months cancelled checks if credit does not report last 12 months housing history
- LOX for any derogatory credit or any late payments within the last 24 months
DTI Requirements:- 31/43% FHA (no compensating factors required)
What can trigger a downgrade to manual underwrite?- $1,000 or more in Disputed Derogatory Credit Accounts
- 20% or greater decline in self employed income
- Mortgage lates in the last 12 months (see guidelines for full list)
Payment History Requirements:- All mortgage and installment loan payments must have been on time within the last 12 months and no more than two 30 day lates within the last 24 months
- No derogatory credit on revolving accounts in the last 12 months
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FHA – Underwriting must follow DU to determine if a collection account must be paid, even on a manual underwrite. Typically DU will require the following:
- If the credit report shows a cumulative balance of $2,000 or more for collection accounts:
- The debt(s) must be paid in full prior to or at closing, or
- Payment arrangements must be made with the creditor and the monthly payment included in the DTI, or
- A monthly payment of 5% of the outstanding balances of each collection must be included in the borrower’s DTI.
- Collection accounts of non-borrowing spouses in a community property state must be included in the $2,000 cumulative balance and analyzed as part of the Borrower’s ability to pay all collection accounts. Community property states are Arizona, California, Texas, Washington, and Wisconsin.
Kentucky FHA Credit Score Requirements for 2014, Based on Lender Feedback
FHA Minimum FICO
FICO 620-639 will be allowed as long as the borrower has an Approve through DU . Manually underwritten loans will still be capped at a minimum FICO of 640.
Joel Lobb is a Licensed Mortgage Originator: NMLS #57916. Key Financial Mortgage NMLS # 1800 is a licensed Mortgage Broker Company in the State of Kentucky
Legal Disclaimer
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This web site is not the FHA, VA, USDA, HUD or any other government organization responsible for managing, insuring, regulating or issuing residential mortgage loans.
**Download Fair Housing Booklet – CLICK HERE
Mortgages and Credit Scores
Today, credit scores plays a big role in determining whether or not your mortgage loan is approved and at what interest rate. Obtaining a mortgage loan at an interest rate just one point less results in a savings of about $5,000 on the average 15 year mortgage, and significantly more on a 30 year mortgage (about $50,000).
Why do lenders use your credit score in their lending decisions? Because they discovered that there is a direct correlation between your credit score and the odds of your becoming delinquent on your monthly mortgage payments. Consider the following statistics the mortgage industry has compiled:
Your Odds of Becoming 90 Days Delinquent are
576 to 1
288 to 1
144 to 1
72 to 1
36 to 1
18 to 1
9 to 1
4 to 1
2 to 1
As the above table illustrates, those with credit scores below 630 are not a very good risk, so they will obtain a mortgage at a significantly higher interest rate and this will add anywhere from $50 to about $250 to their monthy mortgage payment and add thousands to the price of the home.
If your score is 660 or above, you can get a mortgage loan fairly easily since you are a pretty good risk. As stated above, the higher your score the lower your interest rate, so your goal shouldn’t be to obtain a credit score of 660; it should be to achieve a credit score of at least 700. Some lenders will reward you if your credit score is higher than 725, by lowering your interest rate by about 1/4th of a percent. If it is between 700 and 724, it will be lowered by 1/8th of a percent.
Does an interest point or two make such a big difference in the price of the house? You bet it does! It means saving thousands in finance charges and a lower monthly payment. For example, paying an interest rate just two points higher means paying an additional $200 each month on your house payment on the typical $150,000, 30-year mortgage loan. That’s at least $72,000 more you’re going to pay for your house!
There are steps you can take to raise your credit score or overcome a low credit score:
(1) Offer a larger down payment so that you aren’t borrowing so much money
(2) Lower your debt-to-income ratio by paying off as much debt as you possibly can before applying for a mortgage loan in order to increase your credit score
(3) Don’t buy a car just before applying for a mortgage loan as it lowers your credit score
For a Kentucky FHA Purchase Loan, we can go down to a 620 credit score with the minimum down payment of 3.5%. No bankruptcies or foreclosures in the last 2 years.
FHA Manual Underwriting
The minimum FICO for FHA Manual Underwrites is being lowered to 620
Joel Lobb
Senior Loan Officer
Senior Loan Officer
(NMLS#57916)
American Mortgage Solutions, Inc.
800 Stone Creek Pkwy, Ste 7,
Louisville, KY 40223
phone: (502) 905-3708
Fax: (502) 327-9119
Company ID #1364 | MB73346
ated Articles
- Kentucky FHA Mortgage Guideline Changes April, 2013 (louisvillemortgageguide.com)
- Louisville Kentucky Mortgage Rates (kentuckyusdaloan.com)
- Unintended consequences? (itv.com)
- Credit Score Need a Tweak? Here’s How (hispanicbusiness.com)
- Is subprime heating up again? (bankrate.com)
The Best Kind of Loan for Your Credit Score
The Best Kind of Loan for Your Credit Score.
I’m often asked if having certain types of credit or loans is better or worse than other types of credit or loans.
I get questions like, “John, is it better to have a car loan
or a mortgage for my scores?” I also hear, “John, is it better to have a secured card or an unsecured card for my scores?”
In fact, you can swap in almost any type of credit-related account and I’ve been asked about that scenario.
I’ve been getting this type of question for almost 15 years now, and it seems that people believe there’s value or a penalty for having certain types of loans or accounts on your credit reports. That’s completely understandable and, thankfully, almost a complete myth.
Credit Cards
First, let’s tackle the secured credit card, versus the unsecured credit card, versus the charge card question. The assumption is that the type of card has a direct impact on your credit scores. That’s an incorrect assumption, meaning, you’re not penalized or rewarded for having one type of card over another.
That doesn’t mean one form of plastic isn’t better or worse for your credit than another. For example, a secured credit card is easier to max out than an unsecured credit card.
Why? The reason is because secured cards have considerably lower credit limits than unsecured credit cards. It has nothing to do with the fact that one is secured and one isn’t. It has everything to do with the credit limits.
Installment Loans
When it comes to installment loans, the issue of credit limits disappears because installment loans don’t have credit limits. They do, however, have original loan amounts.
An auto loan is likely to have a considerably lower loan amount than a mortgage, home equity loan and perhaps even a student loan. And, balances do matter on installment loans, albeit slightly.
Exactly like credit cards, credit scores do not treat installment loans of one variety or another differently. The collateral issue of balances can cause variable score impact, however.
Defaulting
One thing we haven’t addressed yet is the issue of missing payments and defaulting. Defaulting on a credit card, secured card, charge card, auto loan, mortgage, or any other kind of credit card, is treated equally — as one default.
You’re not penalized because you’ve defaulted on one variety of credit account versus another. You can, however, have a much larger default amount on a mortgage than any other type of credit account and that’s where the score impact can be variable.
The bottom line is: it’s not really the type of account that’s important, but it’s the incident that matters.
One Exception to the Rule
There is one very small exception to this rule. In fact, it’s so small that I thought very hard about omitting it.
There’s a chance your score could be negatively impacted if you have too many finance company accounts on your credit reports. These are the loans offered by consumer finance lenders who often target the near or subprime consumer.
Notwithstanding the consumer finance issue, the lender is also meaningless in your scores. So, you don’t get rewarded for doing business with a large, well-known credit card issuer and you don’t get penalized for doing business with a subprime credit card issuer.
In fact, credit scores are brand agnostic when it comes to your credit accounts. The most important factor is how you manage them.
Editor’s Note: This article by John Ulzheimer was originally published on MintLife.
See more from Mint.com:
Kentucky FHA Mortgage Lender 