Tag: Mortgage loan

No Money Down Kentucky USDA Rural Loan Program


How USDA Government  Underwriters calculate your Debt-to-Income or DTI ratio.

One of the most frequent questions that come from perspectives Kentucky  home buyers is

“How Much House Can I Afford?”

Answering this question is determined based on calculating what are known as the borrower’s Debt-to-Income or DTI ratios. The established standard DTI ratio used for a USDA Loan is based on two sets of ratios, which are as follows:

  • Front-end or housing ratio – the monthly mortgage payment cannot exceed 29% of the gross monthly income.
  • Back-end or total debt ratio – the total debts, including the new monthly mortgage payment, cannot exceed 41% of the gross monthly income.

A monthly mortgage payment includes the principal and interest payment on the mortgage note, as well as the monthly pro-rated portion of the annual fee, property tax and homeowner insurance premium.

 

Specific to the USDA Rural Loan program is the pro-rate portion of the USDA Annual Fee, which is often referred to as a monthly mortgage insurance payment. If there are any Condominium or Homeowner Association (HOA) fees, these fees must be included in the monthly mortgage payment as well.

Total debts include the anticipated monthly mortgage payment and all monthly re-occurring credit obligations.

 

Examples of reoccurring credit obligations include monthly car payments, minimum payment on credit cards, and student loan payments. If the borrower is obligated to make any alimony or child support payments, these payments will be included within the total debt calculations as well.

If the total debts exceed 41% of the gross monthly income, the maximum monthly mortgage payment must be reduced in order to bring total DTI back down to 41%. For example, assume a monthly income of $5,000.

 

Based on the 29%/41% ratio requirements, the maximum housing expense will be $1,450 and total debts will be $2,050. If the non-housing expense exceeds $600 ($2,050 – $1,450), the housing expense will need to be reduced by an equal amount to keep the total ratio at 41%.

While the 29%/41% ratio is considered to be the Underwriting standard guideline, the USDA Loan Program will allow for DTI ratios as high as 33.99%/45.99%.

 

What determines the ability to qualify at a higher ratio is a combination of factors, such as an approval through Guaranteed Underwriting System, which is USDA’s automated approval, and other compensating factors such as:

  • 680 or higher credit score
  • No or low “payment shock” – less than a 100% increase in proposed mortgage payment vs. current rental housing expenses
  • Fiscally sound use of credit
  • Ability to accumulate savings
  • Stable employment history with 2 or more years in current position or continuous employment history with no job gaps
  • Cash reserves available for use after settlement
  • Career advancement as indicated by job training or additional education in the applicant’s profession
  • Trailing spouse income – as a result of a job transfer, in which the house is being purchased, prior to the secondary wage-earner obtaining employment. This assumes that the secondary wage-earner has an established history of employment and has a reasonable chance to obtain new employment in the area upon relocating to the area
  • Low total debt load

Joel Lobb (NMLS#57916)
Senior  Loan Officer

American Mortgage Solutions, Inc.

10602 Timberwood Circle Suite 3

Louisville, KY 40223Company 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/

When qualifying for a USDA Loan and the borrower already owns another house?


The USDA Loan assumes a very conservative perspective on financing homeowners who already own a home, unless the borrower can prove that the current home is not “adequate or suitable” for the borrower’s needs. Owning a house can be defined as not only being on the mortgage loan but also being on title to the property without being on the mortgage loan for that property. Factors that can determine when a house is not “adequate or suitable” include the following:

  • Household size change in which the borrower’s family size now exceeds the room count of the current house. The assumption being made here is that there is more than 1.5 household residents per room. The room count generally includes a living room, dining room, kitchen, recreation room, and bedroom(s). Room counts do not include bathrooms, hallways, or foyers.
  • In the case of divorce where the borrower remains on the mortgage loan, but the Courts have awarded the house to the ex-spouse.
  • Job transfer in which the borrower has relocated more than 50 miles away from the current residence.
  • Manufactured houses (i.e. doublewides) not on a permanent foundation.
  • The current house is not suitable due to documentable health and safety related issue, which includes the disability or limited mobility of a household resident that cannot be accommodated without substantial retrofitting of the current house.

Under no circumstances will the borrower be able to obtain another USDA Loan if the existing home is already financed using a USDA Loan. When qualifying for a USDA Loan and the borrower already owns another house, the costs associated with the current house, including the mortgage payment, property taxes, homeowner insurance, condo or Homeowner Association Fees, and lot rent in the case of a manufactured home, will be considered a liability to the borrower when calculating their debt-to-income ratio.

If the borrower has two years of rental history, as documented on their tax returns, the mortgage liability can be offset by the rental income. Also, in the case of a court ordered divorce settlement where the borrower can document 12 months of on-time mortgage payments being made by their ex-spouse, the liability can be excluded.

 

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
 

Kentucky USDA Rural Development Loan Program:


The following is a list of the “nuts and bolts” of the Kentucky USDA Rural Development Loan Program:

  • The house has to be located in a Kentucky USDA Rural Development Loan Program: area designated as an USDA eligible area.
  • To determine the USDA approved designated areas, reference the following USDA map instructions:
    • Go the USDA Rural Development Website
    • On the top left hand side, click “Single Family Housing Guaranteed”
    • Click “Accept”
    • Enter the property address to determine if a specific house or general area is located in an USDA eligible area
  • The household income must be moderate as determined by USDA. The USDA Loan evaluates household income, which includes the combined income of all adults living in the household; even if they are not on the mortgage loan. Click here to determine your household income eligibility.
  • If it appears that the household income exceeds the moderate income thresholds established by USDA, do not throw in the towel just yet. USDA allows for deductions for child care and medical expenses as well as for children, students, and elderly members of the household that will be living in the USDA financed property.
  • This is not a farmer’s loan. As a matter of fact, the property cannot have any income producing capabilities, and when the land value of the property exceeds 30% of the appraised value additional requirements must be met.
  • The house has to be in fairly good condition. The appraisal type being utilized is an FHA appraisal, so make sure that there are not any safety related challenges(i.e. missing banisters, peeling paint, exposed electric).
  • This is a true no money down loan program. Or stated differently, you do not need a down payment.
  • While there is a monthly mortgage insurance premium (or prorated portion of an Annual Fee), the cost of the monthly mortgage insurance is 59% less than a comparable FHA Loan. This makes the USDA loan more affordable than an FHA Loan when analyzing down payment requirements and monthly mortgage payments.
  • The seller can pay all closing costs and pre-paids (i.e. escrows). Often the home buyer’s only out-of-pocket cost as part of the purchase transaction is approximately $550 for the appraisal report.
  • If the house appraises for more than the purchase price, the difference can be used to pay for closing costs and pre-paids (i.e. escrows). Only the USDA Loan program allows for closing costs to be rolled on top of the purchase price.
  • USDA has no restriction on whether you are a first time home buyer or move-up home buyer.
  • This loan program is only for primary residence (i.e. no second home or investment properties).
  • You should not own any other functional property; although there are some circumstances under which USDA may waive this requirement.
  • The preferred minimum credit score is 640. However, if you have a documented rent history, no late payments on your credit cards, and no new collections within the last 12 months, a credit score as low as 620 may be considered.
  • All property types including single family homes, town homes, modular, and even condominiums qualify for this loan program. Manufacture homes such as single and doublewides constructed prior to January 1, 2006 do not qualify.
  • There is no maximum mortgage amount, but the house does have to be considered moderate in a size

Kentucky Rural Housing USDA loan program


What are the eligibility requirements for a Kentucky USDA loan?

Kentucky Rural Housing USDA loan program

Kentucky Rural Housing USDA loan program
Kentucky Rural Housing USDA loan program

The Kentucky Rural Housing USDA loan program has certain eligibility requirements .

Must be located in a eligible USDA Rural Housing Area.

The home would be your primary residence, not a rental property
Household income requirements beginning around $91, 000for a family of four and up to $120,400 for a family of five or more

Clear Cavirs Numbers.

No minimum credit score requirement but most lenders that offer USDA loans will want a 620 credit score or higher

What are USDA loan fees in Kentucky?

There are two fees on a USDA loan. An upfront fee, called the Guarantee fee and the monthly annual fee.

The upfront guarantee fee for fiscal year 2020 is 1 percent of the loan amount. This fee can often be rolled into the mortgage, instead of paying it out of pocket. The annual fee for  is .35 percent of the loan amount.

It’s important to check the maximum income limits   for your family size and where you live to get the most accurate data.

Advantages of USDA Loans

Zero Down Payment

Low Credit Score Requirements

Can finance closing costs up to appraised value

Streamline refinance an existing USDA with less documentation

No max loan amount

Disadvantages  of USDA Loans

only eligible in rural areas

Must be 3 years removed from bankruptcy or foreclosure

Limited to Income Requirements

Debt to income ratios tighter qualifying guidelines than FHA, Fannie Mae

Joel Lobb Mortgage Loan Officer Individual NMLS ID #57916 American Mortgage Solutions, Inc. 10602 Timberwood Circle Louisville, KY 40223 Company NMLS ID #1364 click here for directions to our office Text/call: 502-905-3708 fax: 502-327-9119 email: kentuckyloan@gmail.com https://www.mylouisvillekentuckymortgage.com/

Joel Lobb
Mortgage Loan Officer
Individual NMLS ID #57916
 
American Mortgage Solutions, Inc.
10602 Timberwood Circle 
Louisville, KY 40223
Company NMLS ID #1364
 

Text/call:      502-905-3708


email:          kentuckyloan@gmail.com

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