Category: Payment Shock

Groups Oppose Rural Development Cuts

Groups Oppose Rural Development Cuts.

Kentucky FHA, VA, USDA or other type of Kentucky mortgage, contact one of our  Kentucky Loan Officers today and take the next step toward home ownership today!

Chairman of the House Appropriations Committee, Rep. Hal Rogers (R-KY), have voiced similar concerns about the president’s budget. At a committee hearing earlier this month, Rogers claimed the proposed reductions demonstrate USDA’s “lack of respect for our rural communities and the constituents who have made these programs successful.”

Rogers cited NRHC members Kentucky Highlands Investment Corporation, Frontier Housing and the Federation of Appalachian Housing Enterprises (FAHE) as effective and successful organizations that have used USDA’s Self-Help Housing and Section 502 Direct Loan programs to help low-income, working families become homeowners.

Chairman Rogers voiced concern about how the president’s proposed cuts would affect families who benefit from these programs. For example, Rogers highlighted the story of a woman who had been the victim of extreme domestic abuse who called Kentucky Highlands hoping to find a home for herself and her young daughter. With some financial counseling and guidance from Kentucky Highlands, she was approved for a $66,000 Section 502 Direct Loan. And with the Self-Help Housing program, she was able to build her own home for about $35,000 less than it would have cost to hire a contractor. That means that today, she is living in a home that she can afford that she built with her own hands.

USDA has reported that this program has helped the agency save $1.5 million to date. “Because of this demonstration program, one of my constituents and his family were able to secure a 502 Direct Loan in half the time it normally takes for USDA to process the loans themselves. And because of that loan, he now lives in a new, energy-efficient, green home in Rowan County (Kentucky),” commented Rogers.

Section 502 Direct Homeownership Loans provide fixed-rate mortgages – with up to 38-year terms and subsidized interest rates as low as just one percent – to help low-income rural families gain access to clean, decent and affordable housing.


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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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Kentucky Rural Housing Loans and USDA Guaranteed Loan Underwriting Issues

Kentucky Rural Housing Loans and USDA Guaranteed Loan Issues

Seller Concessions:
Seller concessions cannot be used to pay down buyer’s debt.

Deferred Student Loans and Debt Ratio Calculations:
Deferred student loans should be included in the debt ratio calculations regardless of the
deferment period. If the credit report does not indicate a monthly repayment amount, Lender may use the monthly payment amount provided by the loan servicer, or 1% of the loan balance reflected on the RMCR.

Risk Layering:
Refers to the existence of multiple levels of risk in an application such as marginal credit, high repayment ratios, extensive use of other credit, payment shock, etc. Lenders should be very cautious when evaluating applications with multiple risk levels.

Payment Shock:
Measured by dividing the new PITI by previous housing expenses minus 1. In cases where payment shock is 100% or higher, no additional risk layering should be allowed unless strong compensating factors are present.
Example:
New PITI = $1,500
Current Rent = $650
$1500 ÷ $650 = 2.30 ‐ 1= 1.30 or 130%
The payment shock in this example is above 100% and therefore is a risk factor.

Credit Waivers:
The lender approves a credit waiver and supplies all back up documentation used in the decision making process. Lender must document that the instances of unacceptable credit must have been temporary in nature and beyond the applicant’s control or the result of a justifiable dispute relative to defective goods or services. A lender need not require collection accounts to be paid in full if there are mitigating circumstances as described in RD Instruction 1980.345 (d)(3). Credit scores of 640 and above may eliminate the need for lender documentation of credit waivers.

Interest Rate Buydowns:
Temporary interest rate buydowns are permitted with prior RD approval. Underwriting
requirements for temporary interest rate buydowns include:
 The mortgage loan must be underwritten at the note rate.
 Buydown funds may come from the seller, lender, or third party.
 Buydown funds may not come from the borrower.
 The initial interest rate is temporarily reduced no more than 2% below the note rate
and increased by no more than 1% annually for no more than 2 years.