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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:

If Your Credit Score Is
 
780  

700
680
660
645
630
615
600
585
Your Odds of Becoming 90 Days Delinquent are
 

Factors contributing to someone's credit score...
Factors contributing to someone’s credit score, for Credit score (United States). (Photo credit: Wikipedia)
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
(NMLS#57916)
American Mortgage Solutions, Inc.
800 Stone Creek Pkwy, Ste 7,
Louisville, KY 40223
 Fax:     (502) 327-9119
 
 Company ID #1364 | MB73346

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Louisville KY FHA Loans

 

 

The Federal Housing Administration (FHA) is a federal agency within the U.S. Department of Housing and Urban Development (HUD). FHA’s primary objective is to assist in providing housing opportunities for lo to moderate income families. FHA has both single family (1-4 unit homes) and multi-family (5 or more units) mortgage lending programs. The agency does not generally provide funds for the mortgages, but rather insures home mortgage loans made by private industry lenders such as mortgage bankers, savings and loans and banks.

Is there a Loan Limit on Louisville Ky FHA Loans?


FHA Maximum Loan Amounts are set by HUD for every county in the United States. Maximum loan amounts vary from one county to another. It is critical that the borrower’s loan amount, including financed closing costs, not exceed the maximum set by FHA for the county in which the subject property is located. There are no income limits on Louisville Ky FHA Loans  . Check with you Loan Consultant for the maximum Mortgage amount allowed in the county you are considering purchasing a home in.

Is Mortgage Insurance Required On Louisville Ky FHA Loans?


FHA is a government insured program with a unique mortgage insurance program. Although not as expensive monthly, you have an up front MIP fee. FHA requires a mortgage insurance premium on the 203(b) program. An up front premium of  1.0% of the loan amount is paid at closing and can be financed into the mortgage amount. In addition there is a monthly MIP amount included in the PITI of 1.15% . Condos do not require up front MIP, only monthly MIP.

Can I Use Gift Funds for the Down Payment for a Louisville KY FHA Loans ?

 

One of the most popular aspect of FHA financing is the ability to receive your down payment as a gift. It just needs to be from a relative. The down payment can be 100% gift funds. This is one of the key benefits to the Louisville Ky FHA Loans and FHA program. Most conventional mortgages do not allow 100% gift funds. Generally the borrower must have 5% of the funds.

Verification of the source of gift money is not required. However, it is necessary that the gift funds be deposited in the borrower’s bank account, or in an escrow account, prior to underwriting approval. Proof of deposit is required.

Gift donors are restricted primarily to a relative of the borrower. They can also be certain organizations, such as a labor union or charitable organization. Contact your Loan Consultant for complete information.

 

What are the Rules Regarding Bankruptcy for a Louisville KY FHA Loans?


FHA may have the most lenient policies towards bankruptcy, but you still must have a valid reason and re-established credit. Generally, a bankruptcy will not necessarily disqualify a potential borrower. Guidelines are as follows:

Chapter 7: Two years must have passed since the bankruptcy was discharged. (Note: Discharge, not Filing Date) The borrower must have re-established good credit without delinquencies for two years (or has chosen not to incur new credit obligations), and has demonstrated an ability to manage financial affairs. If the borrower does not incur new credit, such thing as, Car Insurance, Telephone, Cable, Utilities, Medical Payments, Etc. will be used to demonstrate re-established credit.

Chapter 13: A borrower currently paying off debts through this process may qualify if a minimum of one year of the pay out period had elapsed and payment performance has been satisfactory with no new derogatory credit and the borrower must receive court approval to enter into the mortgage transaction.

 

https://kentuckyfhaloan.wordpress.com/2019/12/20/kentucky-fha-loan-requirements-for-2017/

Kentucky Mortgage Broker Offering FHA, VA, USDA, Conventional, and KHC Down Payment Assistance Home Loans Down payment assistance, FHA Guidelines, fha mortgage insurance premiums, first time buyer, First Time Home Buyer, Grants And Down payment Assistance

Down-payment Assistance Programs Louisville and Kentucky

Down-payment Assistance Programs Louisville and Kentucky.

via Down-payment Assistance Programs Louisville and Kentucky.

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Buying a Home/U.S. Department of Housing and Urban Development (HUD)

Buying a Home/U.S. Department of Housing and Urban Development (HUD).

 

HUD   >   Topic Areas   >   Buying a Home
Buying a Home

Thinking about buying a home? We have information that can help! Got questions? Talk to one of ourhousing counselors!

1. Figure out how much you can afford
What you can afford depends on your income, credit rating, current monthly expenses, downpayment and the interest rate.

2. Know your rights

3. Shop for a loan

4. Learn about homebuying programs

5. Shop for a home

6. Make an offer

7. Get a home inspection

8. Shop for homeowners insurance

9. Sign papers
You’re finally ready to go to “settlement” or “closing.” Be sure to read everything before you sign!

Shopping for Your Home

Shopping for Your Loan

Closing the Deal
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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:

  1. 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.
  2. High debt to income ratios: 31% / 55%
  3. 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
  4. 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.
  5. Buyer can finance closing costs into the loan, except for prepaids and discount points.
  6. 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:

  1. Kentucky FHA mortgage insurance may be more expensive than Conventional mortgage insurance.
  2. Maximum loan amounts are lower than conventional loans and they are determined by area.
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Louisville Ky FHA Loans

Louisville Ky FHA Loans.

via Louisville Ky FHA Loans.

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Ky FHA Guidelines/Bankruptcy

Ky FHA Guidelines/Bankruptcy.

 

 

FHA Guidelines/Bankruptcy « Louisville Kentucky Mortgage Loans

Kentucky Mortgage Broker Offering FHA, VA, USDA, Conventional, and KHC Down Payment Assistance Home Loans fha mortgage insurance premiums

Kentucky FHA Mortgage Insurance Premiums 2011

 

 

Kentucky FHA Mortgage Insurance Premiums 2011

Kentucky FHA Mortgage Insurance Premium Amounts
EFFECTIVE FOR CASE ASSIGNMENTS DATED ON OR AFTER APRIL 18, 2011

 
FHA Single Family Mortgage Insurance
Upfront and Annual Mortgage Insurance Premiums
(Loan Terms greater than 15 years)
All premiums are specified in basis points (0.01%)
LTV UFMIP Annual
≤95 100 110
>95 100 115
 
FHA Single Family Mortgage Insurance
Upfront and Annual Mortgage Insurance Premiums
(Loan Terms 15 years or less)
All premiums are specified in basis points (0.01%)
LTV UFMIP Annual
≤90 100 25
>90 100 50

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