Tag: Debt Ratio and Deferred Student Loans

Kentucky Rural Housing USDA Loan Student Loan Debt Calculations

How to Qualify for a Rural Housing Loan in Kentucky with Student Loans.

For potential home buyers with student loans that are either in a deferred payment status or being paid back through an income based or graduated repayment program, the treatment of this liability needs to be considered.

When student loan debts are not currently being paid upon, due to the loan applicant still being in school or recently graduating from school, the monthly liability will be calculated based on the lower of 1/2 of 1% of the outstanding loan balance or the monthly payment listed on the credit report.

Example if you owe $100,000 in student loan debt the monthly payment will be $500. Also, if the student loan is being paid upon, but at a lesser amount than originally agreed, such as the payment being determined based on repayment ability (i.e. Income Based Repayment Plan), the monthly payment will be calculated the same as above (monthly liability = 1/2 of 1% of the outstanding loan balance).

This offers a significant improvement compared to the FHA Loan guidelines, in which student loans that are in deferment or under an income based repayment plan will have the monthly payment calculated at 1% of the outstanding loan balance.

If the student loan is being paid upon as originally agreed upon when the loan was first obtained, the monthly liability will be the amount specified on the credit report.

Or if the student loans have been consolidated into a new loan, so long as the monthly payment is based on a fixed repayment schedule, that payment will be used when calculating the borrower’s debt to income ratio.

If you have yet to apply for your Kentucky USDA Loan pre-qualification request, you can do so online

Joel Lobb
Mortgage Loan Officer
Individual NMLS ID #57916
 
American Mortgage Solutions, Inc.

Text/call:      502-905-3708

fax:            502-327-9119
email:          kentuckyloan@gmail.com

 

Posted by Joel Lobb, Mortgage Broker FHA, VA, KHC, USDA 

The difference between a front-end and a back-end debt-to-income ratio for a Kentucky Mortgage Loan FHA, VA, KHC, USDA, Fannie Mae

What is your debt-to-income ratio?

 
Commonly referred to as your “DTI,” your debt-to-income ratio is a personal finance benchmark that relates your monthly debt payments to your monthly gross income.
As an example… Let’s say that your gross monthly salary is $5,000 and you are spending $2,800 of it toward monthly debt payments. In that case, your DTI would be an unhealthy 56%.
This version of your DTI is sometimes referred to as your “back-end” DTI. This is often broken down further to give a front-end debt-to-income ratio, which is a component of your back-end DTI.
 

How to calculate your front-end DTI for a Kentucky Mortgage Loan Approval

 
Your front-end DTI is calculated by dividing your monthly housing costs by your monthly gross income. Front-end DTI for renters is simply the amount paid in rent, whereas for homeowners it is the sum of mortgage principal, interest, property taxes, and home insurance (i.e., your PITI) divided by gross monthly income.
From above, if that $2,800 in debt payments is attributable to $1,500 in housing costs and $1,300 in non-housing costs, then your front-end DTI is $1,500/$5,000 = 30% (and your back-end ratio is still 56%, as calculated above).
 

How lenders use your DTI for a Kentucky Mortgage Loan Approval

 
Kentucky Mortgage lenders typically use DTI (along with other variables) to determine whether or not you qualify for a loan, and to help determine your Kentucky mortgage rate. A high front-end DTI raises red flags with lenders because it is commonly associated with borrower default. In fact, reducing front-end DTI to reduce the risk of homeowner default was one of the main objectives of the loan modification programs introduced by the government in 2009.
There are specific limits for DTI that are used as cut-off points when evaluating borrowers. Current DTI limits for conventional conforming mortgage loans are typically 28% on the front end and 36% on the back end, though these limits are slightly higher for government subsidized Kentucky FHA loans.
While there are certainly other factors to consider w
 
 
 
 
 
 
 
 
 
American Mortgage Solutions, Inc.
10602 Timberwood Circle Suite 3
Louisville, KY 40223
Company ID #1364 | MB73346
 

Text/call 502-905-3708
kentuckyloan@gmail.com
 
 
 
http://www.nmlsconsumeraccess.org/
 
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/
— Some products and services may not be available in all states. Credit and collateral are subject to approval. Terms and conditions apply. This is not a commitment to lend. Programs, rates, terms and conditions are subject to change without notice. The content in this marketing advertisement has not been approved, reviewed, sponsored or endorsed by any department or government agency. Rates are subject to change and are subject to borrower(s) qualification.
 
Posted by Joel Lobb, Mortgage Broker FHA, VA, KHC, USDA 

Student Loan Changes to Kentucky Rural Housing Loans Approvals

Beginning on September 23rd, 2019, the way USDA calculates student loans in regards to  Student Loans and they effect  loan approvals.

Kentucky Rural Housing loan Changes for Student Loans
Effective immediately for all Kentucky Rural Development  loans, student loan calculations will be changed to the following
  • Fixed Payment Loans: A permanent amortized, fixed payment may be used when it can be documented that the payment is fixed, the interest rate is fixed, and the repayment term is fixed.
  • Non-Fixed Payment Loans (i.e. deferred, income based, graduated, adjustable, etc.): The payment should be calculated as the greater of 0.5% of the loan balance or the actual payment reflected on the credit report. No additional documentation is required.

 

RHS temporarily modified the calculation of non-fixed student loan payments for purposes of determining debt-to-income ratios. Per the modified requirements, lenders must now use the higher of .50% of the loan balance or the actual payment reflected on the credit report as the monthly payment (rather than 1% of the loan balance). The modified requirements went into effect September 23, 2019 and will be permanently incorporated into Chapter 11 of the Single Family Housing Loan Program Technical Handbook (HB-1-3555) in the near future.

 

BIG change announced for Kentucky Rural Housing USDA loans today regarding how minimum payments on your Student Loans are calculated. Reach out to see if you qualify for this awesome loan!

 

Have you or someone you know been turned down for a USDA loan recently because of student loans?
New guidelines effective today may allow you to qualify (or qualify for a little higher loan amount)

 

**This is not an offer for extension of credit or a commitment to lend. All loans must satisfy company underwriting guidelines. Information and pricing are subject to change at any time and without notice. Not all applicants will qualify for all loan products offered. This is not an offer to enter into a rate lock agreement under any applicable law. Not endorsed or part of USDA Federal Government Agency.

NMLS ID. 57916 www.nmlsconsumeraccess.org

 

Kentucky Single Family Housing USDA RHS Guaranteed Loan Program Update 2011

Kentucky Single Family Housing USDA RHS Guaranteed Loan Program Update 2011.

via Kentucky Single Family Housing USDA RHS Guaranteed Loan Program Update 2011.

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