How to get approved for a Kentucky FHA Mortgage Loan with Bad Credit in 2023.
Below details the DTI requirements The maximum Front and Back ratios applicable to manually underwritten Kentucky FHA Mortgages are detailed below.
Maximum DTI allowed for Manual UW is 40/50
**IMPORTANT – any loan where ALL borrowers have No Fico Score, the Maximum DTI is 31/43 per HUD DTI and Compensating Factor Requirements:
560 FICO and Above – DTI up to 31/43.Comp Factors Required - NONE.
560 FICO and Above - DTI up to 37/47Comp Factors Required– 1 Required
560 FICO and Above – DTI up to 40/50Comp Factors Required– 2 Required
ACCEPTABLE COMPENSATING FACTORS:
RESERVES – 3 mo (1-2 Unit) 6 Mo (3-4 Unit)
HOUSING DECREASE – new PITI is no more than $100 or 5%, the lesser of the two
RESIDUAL – Meet VA residual requirements
ADDITIONAL INCOME – Income not reflected in DTI (this comp factor is only permitted when DTI is over 37/47 and if income were used, it would decrease DTI under 37/47)
MANUAL UNDERWRITE REQUIREMENTS ON ALL LOANS
12 Months verified housing history OR rent free letter,
Reserves, AND
1 month reserves for 1-2 Unit
3 month reserves for 3-4 Unit
NOTE: If you use reserves as a compensating factor, then you do not need these reserves in addition
Letter of explanation for all derogatory credit, including any NSFs and/or overdrafts in bank accountIf applicable, 2 months for all bank statements in the file (60 days activity)
Maximum DTI 40/50 (HUD guideline, no exceptions
Instructions for Residual Income as Compensating Factor
Residual income may be used as compensating factor when it meets or exceeds the stated amounts in
the table below. Note that all household members must be counted for ‘family size’ except for individuals
who are fully supported from a verified source of income not included in the effective income of the loan.
Residual Income Calculation When Needed as a Compensating Factor
Gross Monthly Income1 2
- (State income taxes3)
- (Federal income taxes3)
- (Municipal or other taxes3)
- (Retirement deductions and/or Social Security deductions)
- (Total monthly housing payment)
- (Estimated maintenance and utilities4)
- (Job related expenses (e.g., childcare)5)
= Monthly Residual Income for Family Support.
[When using Residual Income as a compensating factor, the “Monthly Residual Income for Family Support” must
meet or exceed the dollar amount in the “Residual Income Table” above.
1 Income from occupying borrowers only
2 Non-taxable income may not be grossed up
3 Federal and state taxes must be used to determine appropriate deductions or paystub if taxes are not available
4 Multiply total living area (sq ft) x 14
5 Childcare letter is not required (as it is for VA) and should not be requested
Exceptions to the Required Residual Income
You may reduce the residual income figure from the above tables by 5% if:
1. The borrower(s) is an active duty or retired serviceperson, OR
2. There is a clear indication that a borrower will receive the benefits resulting from use of military-based
facilities located near the property.
Examples of military service for reduced residual income are:
Guard and Reserve military retirees, 100% disabled Veterans and their family members, or Medal of Honor
recipient.
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
fax: 502-327-9119
email: kentuckyloan@gmail.com
http://www.mylouisvillekentuckymortgage.com/
NMLS ID# 57916, (www.nmlsconsumeraccess.org).
