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Complete Guide to FHA Loan Requirements in Kentucky

FHA loans are a popular choice for many first-time homebuyers in Kentucky. This is due to their flexible qualifying criteria. If you’re considering an FHA loan in the Bluegrass State, understanding the key qualifying factors is crucial. Here’s a comprehensive guide to the criteria you need to know:

  1. Credit Score Requirements:
    • FHA loans are known for accommodating borrowers with lower credit scores. The minimum required credit score can vary. Typically, a credit score of 580 or higher is needed to qualify for the minimum down payment of 3.5%. Borrowers with credit scores between 500 and 579 might still qualify. They will need a higher down payment, usually around 10%.
  2. Down Payment:
    • The minimum down payment for an FHA loan in Kentucky is 3.5% of the home’s purchase price. This is advantageous for buyers who may not have substantial savings for a larger down payment, making homeownership more accessible.
  3. Work History:
    • Lenders typically look for a steady 2 year employment history when considering FHA loan applications. A consistent work history is beneficial. It is preferable to have worked with the same employer or within the same field. This helps demonstrate financial stability and the ability to repay the loan.
  4. Debt-to-Income Ratio (DTI):
    • The debt-to-income ratio is a crucial factor in mortgage approval. For FHA loans, the maximum allowable DTI ratio is typically around 40% to 45% of your gross monthly income. It can go higher up to 56% with good credit scores, a large down payment, or a shorter-term loan. Lenders may also consider higher ratios in certain cases if compensating factors are present.
  5. Bankruptcy and Foreclosure:
    • FHA loans have lenient guidelines regarding bankruptcy and foreclosure. Generally, borrowers with a past bankruptcy may qualify for an FHA loan after two years. This is possible if they have re-established good credit and demonstrated responsible financial behavior. For foreclosures, the waiting period is usually three years.
  6. Mortgage Term:
    • FHA loans offer various mortgage term options, including 15-year, 20 year, 25 year and 30-year fixed-rate loans. The choice of term depends on your financial goals and ability to manage monthly payments.
    • Occupancy: Primary residences with 1-4 units. Not for investment properties or second homes.
    • Mortgage Insurance on the loan for life of loan. Larger down payments and shorter terms will reduce the upfront mi and monthly mi premiums
    • can be used for refinances, not only for purchases.
    • No income limits nor property restrictions on where home is located
    • Can close within 30 days typically with good appraisal and title work

FHA Loan Requirements in Kentucky for Credit scores, Down payment, Debt Ratio and work history below

RequirementDetails
Credit Score– 580+: Eligible for a 3.5% down payment.
– 500-579: Requires a 10% down payment.
Down PaymentMinimum of 3.5% for qualified buyers; 10% for lower credit scores below 580 to 500 score range
Debt-to-Income Ratio (DTI)– Ideal: 45% or lower on front end ratio or housing ratio.
– Acceptable: Up to 57% with compensating factors. There are two ratios. Front end and back end with front end being maxed at 45% and the backed end ratio being 56.99% with an AUS approval. If manually underwritten, see guidelines here
Employment HistoryMust provide at least **2 years of consistent employment—College transcripts can supplement with a less than 2 year work history

Key Benefits of FHA Loans in Kentucky

  1. Low Credit Score Requirements
    • FHA loans accept borrowers with credit scores as low as 500. However, a score of 580+ qualifies you for the lowest down payment option.
  2. Low Down Payment Options
    • You can purchase a home with as little as 3.5% down if you meet credit requirements, making FHA loans more accessible than conventional loans.
  3. Competitive Interest Rates
    • FHA loans typically offer rates comparable to conventional mortgages. They may even offer lower rates. This could save you money over the life of the loan.
  4. Flexible Loan Uses
    • With an FHA 203(k) loan, you can bundle home purchase and renovation costs into a single mortgage.
  5. Assumable Loans
    • FHA loans can be transferred to a new buyer. This feature is especially valuable if you sell your home when interest rates are higher.

Understanding these qualifying criteria can help you navigate the FHA loan application process in Kentucky more effectively. Working with an experienced mortgage professional can provide valuable guidance. They offer assistance tailored to your specific financial situation and homeownership goals.

Joel Lobb  Mortgage Loan Officer

Any questions, please don’t hesitate to reach out via, text, email,  or call.  Advice is always free. 
 
One of Kentucky’s highest rated mortgage loan officers for FHA, VA, USDA, Kentucky Housing KHC and conventional mortgage loans.  
1 – 📅 Email – kentuckyloan@gmail.com 
2.  📞 Call/Text – 502-905-3708
 

Joel Lobb
Mortgage Loan Officer – Expert on Kentucky Mortgage Loans

🌐 Website: www.mylouisvillekentuckymortgage.com
🏢 Address: 911 Barret Ave., Louisville, KY 40204

Evo Mortgage
Company NMLS# 1738461
Personal NMLS# 57916

For assistance with Kentucky mortgage loans, reach out via email, call, or text Joel Lobb directly.

Kentucky Local Home Loan Lender Services

✅ First-Time Home Buyers Welcome
✅ FHA, Rural Housing (USDA), VA, and Kentucky Housing Corporation (KHC) Loans
✅ Conventional Loan Options Available
✅ Fast Local Decision-Making
✅ Experienced Guidance Through the Home Buying Process

 

NMLS 57916  | Company NMLS #173846
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.
(www.nmlsconsumeraccess.org).
Kentucky First Time Homebuyers FHA, VA, USDA & Rural Housing, KHC and Fannie Mae mortgage loans
 
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2026 FHA Loan Options for Kentucky Homebuyers

Kentucky FHA Loan Requirements – Updated for 2026

Kentucky FHA loan guidelines are established by the U.S. Department of Housing and Urban Development (HUD). FHA loans remain one of the most flexible mortgage options available to Kentucky homebuyers, particularly first-time buyers, borrowers rebuilding credit, and households using down payment assistance.

Employment and Income Requirements

Borrowers must demonstrate a stable employment history covering the most recent two years. This does not require the same employer, but the work history must show consistency in the same industry or line of work.

Recent college graduates may satisfy the two-year work history requirement by providing college transcripts, provided the current employment aligns logically with the education received.

Self-employed borrowers must document a minimum two-year history of self-employment and provide the most recent two years of federal tax returns filed with the IRS. FHA underwriting uses a two-year average of qualifying income, adjusted for business stability and trends.

All income must be verifiable through acceptable documentation such as pay stubs, W-2s, or tax returns. Cash income, undocumented deposits, or bank-statement-only income is not permitted for FHA qualifying purposes.

Down Payment Requirements

FHA loans require a minimum down payment of 3.5 percent for borrowers with credit scores of 580 or higher.

Borrowers with credit scores between 500 and 579 are limited to a maximum loan-to-value of 90 percent, requiring a minimum 10 percent down payment. In practice, most lenders apply overlays requiring higher credit scores, typically between 580 and 620, even though HUD technically allows lower scores.

Down payment funds must come from an approved source. Acceptable sources include personal savings, retirement account loans or withdrawals, and properly documented gift funds. Large or undocumented cash deposits are not allowed and remain one of the most common reasons for FHA loan delays or denials in underwriting.

Occupancy and Property Use

FHA loans are for primary residences only. The borrower must occupy the property as their primary home and move in within 60 days of closing. FHA financing may not be used for rental properties or investment homes.

Appraisal and Property Standards

The property must be appraised by a Kentucky-licensed, FHA-approved appraiser. The home must meet HUD’s minimum property standards, meaning it must be safe, sound, and secure.

Common appraisal concerns include peeling paint, exposed wiring, missing handrails, roof condition, and health or safety hazards. Most FHA appraisal issues are correctable prior to closing.

Debt-to-Income Ratio Guidelines

FHA evaluates two debt ratios:

The housing ratio (front-end), which includes principal, interest, property taxes, homeowners insurance, mortgage insurance, and HOA dues, is typically capped at 31 percent of gross monthly income.

The total debt ratio (back-end), which includes the housing payment plus all other monthly obligations reported on credit, is typically capped at 43 percent.

However, borrowers receiving an “Approve/Eligible” finding through FHA’s automated underwriting system may qualify with higher ratios, depending on credit scores, cash reserves, and other compensating factors.

Credit Score and Credit History Requirements

The minimum FHA credit score for maximum financing remains 580 in 2026. This does not guarantee approval, as lenders apply additional underwriting standards and overlays.

Borrowers must demonstrate acceptable recent payment history. FHA places significant weight on the most recent 12 months of credit performance.

Bankruptcy and Foreclosure Guidelines

Chapter 7 bankruptcy requires a minimum waiting period of two years from discharge, with re-established good credit and on-time payments afterward.

Chapter 13 bankruptcy may be eligible after at least 12 months of on-time plan payments, with trustee approval, and the borrower must qualify including the Chapter 13 payment.

Foreclosure generally requires a three-year waiting period from the date of foreclosure completion. Exceptions may be considered only for documented extenuating circumstances beyond the borrower’s control. Job relocation alone does not qualify as an extenuating circumstance.

Federal Debt and CAIVRS Requirements

Borrowers may not have delinquent federal debt, defaulted federal student loans, unpaid federal judgments, or unresolved FHA claims.

Lenders are required to check the CAIVRS (Credit Alert Interactive Voice Response System) database for all federally backed loans, including FHA, VA, USDA, and SBA loans. Title 31 of the U.S. Code prohibits delinquent federal debtors from receiving federal loan insurance or guarantees.

If a CAIVRS alert appears, the debt must be resolved or paid in full before closing.

FHA Gift Fund Rules for Down Payments

FHA permits gift funds for down payments and closing costs, provided there is no expectation of repayment.

Acceptable gift sources include relatives, employers, labor unions, close friends with a documented relationship, charitable organizations, and government or public entities.

Unacceptable gift sources include the seller, real estate agents, brokers, builders, or any party with a financial interest in the transaction.

A proper gift letter is required, stating that repayment is not expected. The donor must provide identifying information and documentation showing the transfer of funds from their account to the borrower.

Government and Employer Assistance Programs

Borrowers without access to family gift funds may qualify for state, local, or employer-assisted housing programs that provide down payment or closing cost assistance. In Kentucky, FHA loans can often be paired with Kentucky Housing Corporation (KHC) down payment assistance programs, subject to income limits and program availability.

How FHA Loans Are Used in Kentucky

FHA does not directly lend money. Instead, it insures loans made by FHA-approved lenders. These loans are designed for borrowers with limited down payment funds, past credit challenges, or non-traditional credit profiles.

Many Kentucky borrowers who do not qualify for conventional financing are still able to achieve homeownership through FHA-insured loans at competitive interest rates.

Pros and Cons of FHA Loans

Advantages include low down payment requirements, flexible credit standards, and the ability to combine FHA loans with down payment assistance programs.

Disadvantages include mandatory mortgage insurance. FHA charges an upfront mortgage insurance premium of 1.75 percent of the loan amount, which can be financed, and an annual mortgage insurance premium that ranges from approximately 0.45 percent to 1.05 percent depending on loan term, loan-to-value, and origination date. This annual premium is paid monthly and, in most cases, remains for the life of the loan unless refinanced.

Final Thoughts for Kentucky Homebuyers in 2026

FHA loans continue to be a practical, reliable option for Kentucky homebuyers who need flexibility without sacrificing long-term stability. While FHA guidelines are forgiving compared to conventional loans, preparation matters. Clean documentation, stable income, responsible credit behavior, and proper sourcing of funds are essential to a smooth approval.

Working with an experienced Kentucky FHA lender can help you navigate overlays, improve credit positioning, and pair FHA financing with available assistance programs.

Joel Lobb
NMLS #57916
Text or Call 502-905-3708
kentuckyloan@gmail.com
www.mylouisvillekentuckymortgage.com

Company NMLS #1738461
Equal Housing Lender

Information is provided for educational purposes only and does not guarantee loan approval. All loans are subject to underwriting guidelines, program availability, and lender approval.

Kentucky Mortgage Broker Offering FHA, VA, USDA, Conventional, and KHC Down Payment Assistance Home Loans Cashout Refinance, FHA Refund Upfront MIP, FHA Streamline Refinance, KY FHA LOANS, Refinance, Refinance Streamline, Streamline

How to Get A Kentucky FHA Upfront Mortgage Insurance Premium (UFMIP) Refund

FHA Mortgage Insurance Premium (MIP) guidelines is correct. As of March 2025, FHA loans require an upfront MIP of 1.75% of the loan amount. The annual MIP rates and their duration are influenced by factors. These factors include the loan term, loan amount, and loan-to-value (LTV) ratio.​

Annual MIP Rates for FHA Loans with Terms Greater Than 15 Years:

  • Loan Amounts ≤ $726,200:
    • LTV ≤ 90%: Annual MIP of 0.50% for 11 years.​
    • LTV > 90% and ≤ 95%: Annual MIP of 0.50% for the life of the loan.​
    • LTV > 95%: Annual MIP of 0.55% for the life of the loan.​
  • Loan Amounts > $726,200:
    • LTV ≤ 90%: Annual MIP of 0.70% for 11 years.​
    • LTV > 90% and ≤ 95%: Annual MIP of 0.70% for the life of the loan.​
    • LTV > 95%: Annual MIP of 0.75% for the life of the loan.​

Annual MIP Rates for FHA Loans with Terms 15 Years or Less:

  • Loan Amounts ≤ $726,200:
    • LTV ≤ 90%: Annual MIP of 0.15% for 11 years.​
    • LTV > 90%: Annual MIP of 0.40% for the life of the loan.
  • Loan Amounts > $726,200:
    • LTV ≤ 78%: Annual MIP of 0.15% for 11 years.​
    • LTV > 78% and ≤ 90%: Annual MIP of 0.40% for 11 years.​
    • LTV > 90%: Annual MIP of 0.65% for the life of the loan.
How to Get A Kentucky FHA Upfront Mortgage Insurance Premium (UFMIP) Refund

1 –  Email – kentuckyloan@gmail.com 

2.   Call/Text – 502-905-3708

Joel Lobb
Mortgage Loan Officer – Expert on Kentucky Mortgage Loans


🌐 Website: www.mylouisvillekentuckymortgage.com
🏢 Address: 911 Barret Ave., Louisville, KY 40204

Evo Mortgage
Company NMLS# 1738461
Personal NMLS# 57916

For assistance with Kentucky mortgage loans, reach out via email, call, or text Joel Lobb directly.

Kentucky Local Home Loan Lender Services

✅ First-Time Home Buyers Welcome
✅ FHA, Rural Housing (USDA), VA, and Kentucky Housing Corporation (KHC) Loans
✅ Conventional Loan Options Available
✅ Fast Local Decision-Making
✅ Experienced Guidance Through the Home Buying Process

If you are an individual with disabilities who needs accommodation, please contact us at 502-905-3708. If 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. These include income, property evaluation, sufficient equity in the home to meet Loan-to-Value requirements, and final credit approval. Approvals depend on underwriting guidelines, interest rates, and program guidelines. These can change without notice based on the 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/

Kentucky Mortgage Broker Offering FHA, VA, USDA, Conventional, and KHC Down Payment Assistance Home Loans Refinance, Refinance Streamline, Streamline

A fast and easy refinance for those with an FHA mortgage | CharlotteObserver.com

A fast and easy refinance for those with an FHA mortgage | CharlotteObserver.com.

Verification and documentation requirements are also very light compared to the traditional mortgage requirements. With an FHA refinance, there is no employment verification and no income verification. While the FHA approves these lighter requirements, some individual lenders may decide to verify these items for their own purposes.

FHA Streamline Refinance also does not require a credit score verification. Instead, payment history is used as a guideline for your ability to pay the loan in the future. So, low FICO scores are not a problem as long as your payment history is in good shape.

The FHA Streamline Refinance program does require several things to get your loan approved:

• First, you’ll need a history of making payments on time over the past year, and at least six months must have passed since the closing date on your original FHA mortgage.

• Second, while there are no requirements for employment verification or income verification, you do need to provide copies of your W-2s or tax returns.

• Third, your loan balance cannot increase to cover closing costs. You can only add the upfront portion of the required mortgage insurance premium to the balance of your loan. So, the new loan balance can’t exceed the current amount outstanding, plus the upfront portion of the mortgage insurance premium. You’ll either have to pay the closing costs upfront in cash, or qualify with your lender for a zero-cost FHA Streamline refinance.

• Finally, the refinance must have a purpose that benefits the homeowner, such as significantly lowering the monthly mortgage payments, or moving from an adjustable-rate mortgage to a more stable fixed-rate mortgage. If lowering the monthly payment is the purpose, you must be able to demonstrate at least a 5 percent drop in your monthly mortgage payments, including the mortgage insurance premiums.

The FHA frequently updates these mortgage guidelines, and individual lenders may add their own specific requirements, so it’s best to check with your preferred lender to determine your exact situation. Also, if your original FHA mortgage was closed after May 31, 2009, the mortgage insurance premiums most likely will be significantly higher, so make sure to evaluate those costs carefully versus the savings you’ll receive from the lower interest rate.

Joel Lobb (NMLS#57916)
Senior  Loan Officer
502-905-3708 cell
502-813-2795 fax
kentuckyloan@gmail.com

Key Financial Mortgage Co. (NMLS #1800)*
107 South Hurstbourne Parkway*
Louisville, KY 40222*

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Market And The Mortgage Rate Prevalent In The Market Tend To Change Constantly. Today, Due To The Drastic Drop In The Housing, Millions Of People Are Suffering From Declined Worth Of Their Homes. In Order To Allow Them To Refinance Their Mortgage, FHA…

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Steps for refinancing FHA Mortgage Loans

Steps for refinancing FHA Mortgage Loans.

via Steps for refinancing FHA Mortgage Loans.

Steps for refinancing FHA Mortgage Loans

Steps for refinancing FHA Mortgage Loans

Posted on April 15, 2013

26Step 1: Get in touch with your local FHA mortgage lender / bank and make clear that you would like to refinance the present FHA mortgage loan. You don’t require working with the loaner /the bank that’s presently servicing the loan. You’re able to shop about for lenders to put forward the least fees / the speediest turnaround time.

Conditions needed to get a FHA Loan:

•    stable employment record, not less  than 2 years of service history

•    Consistent revenue over the last 2 years

•    Any Chapter seven bankruptcy on documentation must be not less than 2 years old with excellent credit for the 2 successive subsequent years.

•    Any foreclosure have to be not less than 3 years old

•   Inquire the lender regarding streamlined FHA refinance. This kind of refinance happens to only be for homeowners who by now contain an FHA loan. FHA Streamline mortgage refinance have need of a good deal less documentation compared to a refinance that isn’t traditional. You are only going to be qualified for streamlined refinancing in the event of you currently being in a FHA Loan.

Step 2: have the lender sent by mail, fax, or e-mail, based on first choice, all documents that mortgage lender asks for.

Step 3: Provide the lender with authorization to verify your credit & to evaluate your house. Both are significant for the mortgage refinance (or Mortgage Refinancing) process. Lenders depend on customer’s credit score – anything over 720 is thought to be good, even as scores beneath 620 is thought to be bad – to establish if they are going to lend you cash and what ROI. They would be sending an appraiser for ensuring that your home worth has sufficient equity. The majority of lenders & banks require you to have not less than 90% equity in your residence.

FHA house Mortgage Loans happen to be backed by the Federal Housing management and is a more and more popular option for house buyers. This happens to be partly for the reason that the FHA Refinance need just a 3.5 advance in the house purchase cost, as the majority of mortgage lenders need 20% down payment. Find an FHA accepted Mortgage Lender.

The benefits of Streamline FHA Mortgage Refinance Loans:

1. The house owner is able to get a lesser ROI and this is going to assist them to decrease their monthly mortgage imbursement.

2. They are able to alter the terms of their present loans like loan length.

3. Rapid processing and abridged paperwork & documentation. This is the way in which they obtain the name “streamlined”. It is going to be taking less time to close up and you would be spending less time attempting to get all the paperwork & information together.

4. Closing prices are able to be chosen to incorporate them in the fresh loan if there’s sufficient equity in the house or they are able to opt to have no closing prices but that possibly will bring about a higher ROI.

5. The house owner doesn’t have to authenticate income /employment status.

Certainly there’re some qualifications which you must meet to be able to get the Streamlined FHA Refinance loan.

Steps for refinancing FHA Mortgage Loans

Steps for refinancing FHA Mortgage Loans

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How to Get Qualify for FHA Streamline Mortgage Refinance Program

 

Eligibility Requirements
Oddly enough, the FHA Streamline mortgage refinance program is one of the easiest to qualify for. All one has to have is a current FHA-insured mortgage loan. To refinance it, one does not need a new appraisal of his home; the FHA will count the original value of the house as its existing worth. The only homeowners who cannot qualify for this program are those whose conventional loans are owned or serviced by Sallie Mae or Freddie Mac.
The Streamline Mortgage Refinance Plan
There are official rules for participating in an FHA mortgage Streamline refinance. The first of these is that one must have an excellent payment record that goes back at least three months. Another is that all loans must be current at the time they are closed upon. Also, the FHA mandates that borrowers complete 6 mortgage payments on their FHA mortgages, and that no less than 210 days go by from the most current closing to qualify for Streamline refinance.
What Verification?
Another perk of FHA Streamline mortgage refinance is that there is no verification of … anything, really. A person should be aware of the FHA Streamline refinance mortgage rates, but that’s all he’ll need to know. The FHA does not require income verification, proof of employment, or that one provide income tax returns. It also doesn’t look at one’s credit score because it relies on payment histories to determine future loan functioning. Add to that the fact that there’s no need for an appraisal, and this is a pretty good deal.

—

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Image adapted from US fed gov't source nationa...
Image adapted from US fed gov’t source nationalatlas.gov Category:Congressional districts of Kentucky (Photo credit: Wikipedia)

Our Kentucky FHA lenders can help you buy a home with no money down or refinance to the lowest rates possible!

via Kentucky FHA Streamline Refinance.

via Kentucky FHA Streamline

Kentucky FHA Streamline Refinance Calculator

Refinance.

Kentucky FHA Streamline Refinance

Kentucky FHA Streamline Refinance

Kentucky FHA Streamline Refinance

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CHANGES TO KENTUCKY FHA STREAMLINE REFINANCE TRANSACTIONS.

CHANGES TO KENTUCKY FHA STREAMLINE REFINANCE TRANSACTIONS.

502-905-3708 for your free FHA Mortgage Prequalification
502-905-3708 for your free FHA Mortgage Prequalification

In order to be in compliance with HUD Mortgagee Letter 2009-32, the following changes
to Kentucky  FHA Streamline Refinances will be effective for new case numbers assigned on or
after November 17, 2009. Please review the new maximum insurable mortgage
calculations below.

**** Revised Streamline Refinance Transactions WITHOUT an Appraisal ****
The maximum insurable mortgage cannot exceed:
• The outstanding principal balance* (from payoff) minus the applicable
refund of the UFMIP,
PLUS
• The new UFMIP that will be charged on the refinance.
**Closing cost cannot be included in the new maximum loan amount.
****Revised Streamline Transaction WITH an Appraisal****
The maximum insurable mortgage is the lower of:
1) Outstanding principal balance* minus the applicable refund of UFMIP, plus
closing costs, prepaid items to establish the escrow account and the new
UFMIP that will be charge on the refinance;
OR
2.) 97.75 percent of the appraised value of the property plus the new UFMIP that
will be charged on the refinance.
Discount points may not be included in the new mortgage. If the borrower
has agreed to pay discount points, the lender must verify the borrower has the
assets to pay them along with any other financing costs that are not included in
the new mortgage amount.
* Outstanding principle balance for the above calculations is defined as the principle balance of the loan
and may include interest charged by the servicing lender when the payoff is not received on the first day of
the month but may not include delinquent interest, late charges or escrow shortages.

The following changes apply for Kentucky FHA Streamline loans with or without appraisal:
A.) Seasoning – At the time of loan application, the borrower must have made at least 6
payments on the FHA-insured mortgage being refinanced.

B.) Payment History – Current mortgage must be 0x30 in the last 12 months or for the life of the loan if loan is < 12 months old and > 6 months old. ) If borrower has less than 12 month history on current loan and has a previous consecutive mortgage, that mortgage must be 0x30 up to the 12 months required.

C.) Net Tangible Benefit – The lender must determine that there is a net tangible benefit
as a result of the streamline refinance transaction, with or without an appraisal. The
transaction must meet FHA  net tangible
benefit.

For FHA Net tangible benefit is defined as:
1.) A reduction in the total mortgage payment (principal, interest, taxes and
insurances, HOA fees, ground rents special assessments and all
subordinate liens): The new total mortgage payment is 5% lower than the
total mortgage payment for the mortgage being refinanced. Example: Total
mortgage payment on the existing FHA mortgage is $895; the total mortgage
payment for the new FHA mortgage must be $850 or less.
2.) Refinancing from an adjustable rate mortgage (ARM) to a fixed rate
mortgage: The interest rate on the new fixed mortgage will be no greater
than 2 percentage points above the current rate of the one-year arm. For
hybrid ARMs, the total mortgage payment on the new fixed rate mortgage may
not increase by more than 20%. Example: total mortgage payment on the
hybrid ARM is $895; the total mortgage payment for the new fixed rate
mortgage must be $1,074 or less.
3.) Reducing the term of the mortgage: For transactions that include a
reduction in the mortgage term, that loan must be underwritten and closed as
a rate and term (no cash-out) refinance transaction.
D.) Employment – Streamline refinances must now include evidence of employment and
include a verbal (must be on 1003).
E.) Assets – If there are any closing cost to be paid at close, verification of funds to close
must be included in the file submission.
F.) The file must also include the pay-off statement.
G.) Maximum Combined Loan to Value –
Kentucky Mortgage guidelines will remain at
100% CLTV.)
• For streamline refinance transactions WITHOUT an appraisal, the CLTV is
based on the original appraised value of the property.
• For streamline refinance transactions WITH an appraisal, the CLTV is based on
the new appraised value. H.)TOTAL Scorecard – Lenders should not use TOTAL on streamline refinance
transactions. If a lender uses TOTAL, that loan must be underwritten and closed
as a rate and term (no cash-out) refinance transaction.
I.) Uniform Residential Loan Application (URLA) – Mortgagees may no longer use
an abbreviated version of the URLA. Due to various disclosure requirements and
our long-standing belief that borrowers are best served when certifications they must
make are divulged as early as possible in the loan application process, the
application for mortgage insurance must be signed and dated by the borrower(s)
before the loan is underwritten. Mortgagees are permitted to process and underwrite
the loan after the borrowers and interviewer complete the initial URLA and initial
form HUD-92900A, HUD/VA Addendum to Uniform Residential Loan
Application.

Click here for revised FHA Refinance Grid.

If you have any questions regarding this announcement,

Joel Lobb (NMLS#57916)
Senior  Loan Officer
502-905-3708 cell
502-813-2795 fax
jlobb@keyfinllc.com

Key Financial Mortgage Co. (NMLS #1800)*
107 South Hurstbourne Parkway*
Louisville, KY 40222*

Apply for Free for your Louisville Kentucky Mortgage-Takes only 3 Minutes
Apply for Free for your Louisville Kentucky Mortgage-Takes only 3 Minutes

Kentucky Mortgage Broker Offering FHA, VA, USDA, Conventional, and KHC Down Payment Assistance Home Loans Mortgage Insurance UFMIP, Refinance, Refinance Streamline, Streamline

Changes to FHA Streamline Refinance To Benefit Borrowers

Changes to FHA Streamline Refinance To Benefit Borrowers.

Kentucky Mortgage Broker Offering FHA, VA, USDA, Conventional, and KHC Down Payment Assistance Home Loans Mortgage Insurance UFMIP, Refinance Streamline

April 2012: The New (& Expensive) FHA Mortgage Insurance Premium (MIP) Schedule

April 2012: The New (& Expensive) FHA Mortgage Insurance Premium (MIP) Schedule.

via April 2012: The New (& Expensive) FHA Mortgage Insurance Premium (MIP) Schedule.

 

The FHA will raise its mortgage insurance premiums April 1, 2012. All FHA mortgage applicants — first-time buyers, repeat buyers, and users of the FHA Streamline Refinance program — will be subject to the new fees.


New FHA Mortgage Insurance Premium Schedules

The new FHA mortgage insurance premium schedule raises FHA loan costs significantly.

FHA mortgage insurance is paid in two parts.

The first part is the “Upfront Mortgage Insurance Premium”. Sometimes abbreviated as UFMIP, upfront mortgage insurance premiums will rise from 1.000% of your FHA loan size to 1.750% of your FHA loan size.

For example, if you live in Chicago, Illinois and you borrow up to the FHA’s local loan limit of $417,000, your upfront mortgage insurance premium will rise 75% from $4,170 to $7,298. This amount is added to your loan size. FHA upfront MIP is not paid via cash. You’ll pay interest on this amount for the life of your loan.

The changes in the FHA’s annual mortgage insurance premiums (MIP) are less extreme, rising only 10 basis points.

The new schedule, for loans with case numbers assigned on or after April 1, 2012:

  • 15-year loan terms with loan-to-value over 90% : 0.60 percent annual MIP
  • 15-year loan terms with loan-t0-value under 90% : 0.35 percent annual MIP
  • 30-year loan terms with loan-to-value over 95% : 1.25 percent annual MIP
  • 30-year loan terms with loan-to-value under 95% : 1.20 percent annual MIP

Furthermore, all FHA mortgages made for $625,500 or more will be subject to an additional 0.25 percent annual mortgage insurance fee.

Loans made prior to April 1, 2012 will use the old FHA mortgage insurance schedule:

  • 15-year loan terms with loan-to-value over 90% : 0.50 percent annual MIP
  • 15-year loan terms with loan-t0-value under 90% : 0.25 percent annual MIP
  • 30-year loan terms with loan-to-value over 95% : 1.15 percent annual MIP
  • 30-year loan terms with loan-to-value under 95% : 1.10 percent annual MIP
  • There is no “jumbo FHA mortgage premium” for loans made prior to April 1, 2012.


Special Cases: FHA Streamline Refinance MIPs

As part of the FHA’s announcement, there was also reference to the FHA’s benchmark refinance program, the FHA Streamline Refinance.

The FHA suggested that a subset of households using the streamline refi program will get access to lower mortgage insurance premiums after refinancing — not higher.

No official announcement has been made, but it’s believed that mortgage insurance premiums — both upfront and annual — will be dramatically lowered for FHA Streamline Refinances used to replace an existing FHA mortgages originated prior to June 1, 2009. New FHA Streamline Refinances that replace loans originally originated after June 1, 2009 will still pay the new, standard FHA mortgage insurance rates listed above.

The June 1, 2009 deadline should sound familiar — it’s the same deadline for Fannie Mae and Freddie Mac’s HARP 2.0 program.

The FHA is expected to confirm new FHA Streamline Refinance mortgage insurance premiums within a few weeks.

Lock Your FHA Rate Before The Price Hike

The FHA will make a formal announcement on its new FHA premiums in the coming days. Some of the exact numbers at top may change slightly. However, the FHA has confirmed the April 1, 2012 rollout date.


If you’re planning to use the FHA for your next home mortgage, get your loan application started today. If you wait, you’ll be subject to the FHA’s new premiums.


Source – Dan Green  

Author’s note : This information is subject to final review by the FHA. It’s based on an initial FHA announcement made February 27, 2012. It’s unofficial until the FHA releases its mortgagee letter on the matter.