FHA mortgage insurance premiums won’t be going down in 2015 | 2014-11-18 | HousingWire.
Frequently Asked Questions about FHA Kentucky Home Loans
Frequently Asked Questions about FHA Kentucky Home Loans.
via Frequently Asked Questions about FHA Kentucky Home Loans.
FHA to 50%…up to 55% with comp factors and a strong borrower
Manual UW’s on FHA/ to 620 Score
FHA purchases and R/t refi’s down to a 580 with DU Approved Eligible
—
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
Underwriting Rental Income for a Kentucky Mortgage Loan in 2014
Rental income can be used if all of the following conditions apply:
• The borrower has a two year history of managing rental properties as demonstrated by two years personal tax returns (1040’s) and schedule E.
• If the borrower wishes to qualify with rental income on the subject property in an investment transaction, they must provide evidence of rent loss insurance to cover six month’s rent in the event of a property vacancy.
• If the borrower owns a rental property that is not yet reflected on schedule E, they may use income from this property to qualify with a lease agreement. However, if the borrower does not have a two year demonstrated history of managing rental properties, this guideline is not valid. Also note, when a property is reflecting on the schedule E of the personal tax returns, lease agreements may not be used to determine qualifying income for any reason.
Once the gross rental income has been calculated from the schedule E of the tax returns OR using 75% of the monthly lease payment, you must deduct the monthly housing expense to determine net rental income. Net rental income is the final figure that is used to calculate the total debt ratio.
For example:
• Using a 24 month average of the calculated schedule E the underwriter has determined there is $300 monthly gross rental income.
• The underwriter then verifies the monthly PITI (principle, interest, taxes, and insurance) of $450 on the rental property. Note: If the rental property has a mortgage insurance or homeowners association dues expense, these amounts will be included in the PITI calculation.
• $300 gross rental income minus $450 monthly PITI nets a rental loss of $150. As a result, a $150 monthly liability is added to the total debt ratio.
This calculation is commonly referred to as “washing” the housing expenses on the property. Even though we still have a net loss that is included in the debt ratio, we were able to “wash” $300 of the $450 monthly PITI thereby improving our total debt ratios.
—
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
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)
Kentucky FHA loans
Kentucky FHA loans have always been a great alternative for people who don’t quite qualify for Conventional financing. The guidelines are more forgiving allowing for smaller down payments, higher debt to income ratios, some credit issues, and more sources for the down payment.
The great thing is that the interest rate is only slightly higher than a conventional loan. Sometimes the interest rate is actually lower. Remember this! IF you go to a Kentucky Mortgage Broker or a Bank and the rate quoted is exceptionally higher, they are charging you too much. Call around for quotes. You will usually get a better rate from a Kentucky Mortgage broker.
Advantages:
- Kentucky FHA loans are not as strict on credit scoring. We can go down to a 580 credit score with compensating factors and if it makes sense.
- High debt to income ratios: 31% / 55%
- 100% of down payment can be a gift from: relative, close friend, or employer. Currently Kentucky Housing will give you up to $6,000 for down payment assistance with Kentucky FHA mortgage loans
- Seller, builder, or realtor can pay up to 6% of the sales price towards the buyers closing costs, discount points, prepaids, and up front mortgage insurance premium.
- Buyer can finance closing costs into the loan, except for prepaids and discount points.
- Credit criteria is not as strict as a Conventional loan. In fact, you might qualify if you have filed a chapter 13 bankruptcy and have been in it for at least one year.
Disadvantages:
- Kentucky FHA mortgage insurance may be more expensive than Conventional mortgage insurance.
- Maximum loan amounts are lower than conventional loans and they are determined by area.
