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Understanding Key Mortgage Terms for Homebuyers

The mortgage process can often be a confusing one — whether you’ve bought a home before or not. There’s a lot of prep work and moving parts, and most of the terminology is unfamiliar to the average consumer.

Fortunately, that last part is an easy fix.

Are you getting ready to buy a home or refinance your current mortgage? Take a look at some of the lesser-known terms you might want to know.

  • Annual Percentage Rate (APR): This number reflects the total annual cost of taking out your mortgage loan. It’s different from your mortgage interest rate and includes some extra fees.
  • Underwriting: When a loan professional evaluates your application and verifies all your financial details, that’s underwriting. It’s important to ensure that you have the means to manage your new monthly payment.
  • Escrow: An escrow account is used to hold funds prior to closing, including your earnest money deposit. You might also pay into an escrow account to cover property taxes, homeowners insurance and private mortgage insurance (if you have it).
  • Closing Disclosure: This is a document that you’ll be given at least three days before your closing date. It should detail all the final costs of your loan, as well as what you’ll be expected to pay on closing day.
  • Mortgage Note: You’ll sign this document at closing.It outlines the terms of your home loan and includes how much you’re borrowing, whether it’s a fixed-rate or adjustable-rate mortgage and more.
  • Prepaid Costs: These also come up at closing and will go into your escrow account. They usually cover mortgage interest, property taxes and homeowners insurance expenses that occur between your closing date and the date your first mortgage payment is due.

If you need help understanding any part of the mortgage process, get in touch today.

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Gift Funds for a Kentucky FHA Mortgage

Getting Gift Funds for your down payment on a Kentucky FHA Mortgage. 

Gift Funds for a Mortgage Loan Approval.

What is the Great Way to do it?

To avoid getting turn down for your Kentucky FHA mortgage loan if you are getting a gift from your mom, dad or another family member, please follow these rules:

The source of the down payment must always show Kentucky FHA gift funds and their source (usually a relative). It cannot be a personal loan or cash.

Common Gift Fund Issues:

Scenario 1 – only gift funds being used in the transaction
Gift amount: $5,000

Common submission problem:

  • Source of down payment submitted as “checking and savings account.”
  • Asset submitted as “checking account” with the financial institution as “Gift from Relative.”

Correct submission practice:

  • Source of a down payment should be submitted as an “FHA Gift from a relative for $5,000”
  • If funds are not yet in the bank account, DU should be submitted as miscellaneous assets, “Gift for $5,000”

Scenario 2 – (gift funds and borrower’s own funds being used in transaction)
Gift amount: $5,000

Common submission problem:

  • Checking account has $7,000 in total – including the gift.
  • Source of down payment submitted as “checking and savings account.”
  • Asset submitted as “checking account”:
    • Financial institution with $7,000 AND
    • Miscellaneous asset, “Gift from relative of $5,000”
  • When ran this way, the gift is put through twice and assets are overstated by $5,000.

Correct submission practice:

  • Source of down payment should be submitted as an “FHA Gift from relative $5000.”
  • Since the gift fund is already in the Borrower’s bank account, DU should be submitted as “checking or savings” in ABC account in the amount of $7,000. DU will recognize that $5,000 of the $7,000 in the account is from a gift. 
Scenario 3 – (gift funds and borrower’s own funds being used in transaction)
Gift amount: $5,000Correct submission practice:
  • Checking account currently has $2,000. The $5,000 gift will be wired to the title company.
  • Source of down payment submitted as “checking and savings account.”
  • Asset submitted as “checking account:”
    • The financial institution with $7,000, AND
    • Miscellaneous asset, “Gift from relative of $5,000.”

Correct submission practice:

  • Source of down payment should be run as “FHA Gift from relative $5,000.”
  • Since gift funds will be provided to the title company and not the borrower:
    • DU should be submitted as checking or savings in ABC account in the amount of $2,000, AND
    • Miscellaneous assets, “gift funds as $5,000.”

 

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Understanding FHA’s Identity of Interest Transactions

Does FHA Restrict down payment requirements on Identity of Interest Transactions?

The 85 percent maximum LTV restriction does not apply for Kentucky FHA Loans in regards to FHA Identity-of-Interest transactions under the following circumstances:

👇👇👇

FAMILY MEMBER TRANSACTIONS•  the principal residence of another family member; or  a property owned by another family member in which the borrower has been a tenant for at least six months immediately predating the sales contract. A lease or other written evidence to verify occupancy is required.

BUILDER’S EMPLOYEE PURCHASE• An employee of a builder, who is not a family member, purchases one of the builder’s new houses or models as a principal residence.

CORPORATE TRANSFER • A corporation transfers an employee to another location, purchases the employee’s house, and sells the house to another employee.

TENANT PURCHASE• the current tenant purchases the property where the tenant has rented the property for at least six months immediately predating the sales contract. A lease or other written evidence to verify occupancy is required.

Source: FHA Handbook 4000.1

What You Need To Know About Identity Of Interest Transactions
What You Need To Know About Identity Of Interest Transactions

 
 


Text/call 502-905-3708
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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/
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Kentucky Mortgage Broker Offering FHA, VA, USDA, Conventional, and KHC Down Payment Assistance Home Loans employment, Employment Gaps, job gaps FHA Kentucky Loan, job history FHA loan, Self Employed, work history requirements FHA

Kentucky FHA Loan Employment History Requirements

  • No matter what you must provide a 2 year employment history. Conventional or Kentucky FHA Mortgage Loan.  Conventional does not always need to be verified with a written work verification form
    • if you do not have a complete 2 year history you must explain any large gaps.  Typically I have seen this to be greater than 30 days.
    • you must have a 2 year history prior to the gap as well.  (two underwriters from two different lenders have recently told me the same thing)
    • also check your AUS-Automated Underwriting Findings  because that can help when speaking with your potential borrower.
    •  
  • Exception to the 2 year history is college or HS graduation
    • need official college transcripts or they can be unofficial if you get them with the web URL just like bank activity.
    • good idea to snag their diploma as well.
    •  
    • you probably don’t even need to use this exception if the person was a student but also worked and had a 2 year job history.
  •  Kentucky FHA Case Number Assignment
    • if there are any job gaps greater than 6 months in their two year history the borrower must be on their current job for at least 6 months before the FHA case number can be assigned.
    • again you must then get a 2 year employment history prior to the 6 month or more gap.  however far you must go back.
    •  
  •  
  • W2s / 1099s
    • even if you are not using the income to qualify from a part time job please get every single w2 / 1099 from your borrowers.  

– fha pic

 
Kentucky FHA Mortgage Work History and Income Requirements.

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.

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