How much income do I need qualify for Kentucky Home Loan?

Kentucky Lender's Criteria: Debt-to-Income Ratios

The Debt-to-Income (DTI) ratio is a critical factor in determining whether you qualify for a mortgage along with credit, work history and assets. It measures how much of your gross monthly income is used to cover your monthly debt obligations.

For Most Kentucky Mortgage loans ,the  debt to income ratio is centered around the front end ratio and back end ratio. The front end ratio will vary according to the different types of loans, and I will show them below.  The backend ratio, which measures the new house payment along with your current monthly payments on the credit report along with any court ordered payments like child support, DTI limit is typically 45 to 50%

From a Kentucky Mortgage lender's perspective, your ability to purchase a home depends largely on the following factors:

Front-End Ratio

The front-end ratio is the percentage of your yearly gross income dedicated toward paying your mortgage each month. Your mortgage payment consists of four components: principal, interest, taxes and insurance (often collectively referred to as PITI) A good rule of thumb is that PITI should not exceed 31% of your gross income. If you make $100,000 a year, then your max house payment to include escrows for home insurance, mortgage insurance, property taxes would be $2583.00

Back-End Ratio

The back-end ratio, also known as the debt-to-income ratio, calculates the percentage of your gross income required to cover your debts. Debts include your mortgage, credit-card payments, child support and other loan payments. Most lenders recommend that your debt-to-income ratio does not exceed 45% of your gross income. To calculate your maximum monthly debt based on this ratio, multiply your gross income by 0..45 and divide by 12. For example, if you earn $100,000 per year, your maximum monthly debt expenses should not exceed $3,750 with new mortgage payment. Utility bills, car insurance, cell phone bills, insurance payments does not factor into this ratio. Only bills listed on credit report and 401k loan and child support payment




If you are looking to purchase your first home, you have probably been doing your research about properties in your area, where you might be able to obtain a loan and how to qualify for it. A key term you may recognize from all that research is "debt-to-income ratio," which refers to the figure you get when you add up all your monthly debt payments and then divide that number by your monthly income. In laymen's terms, the debt-to-income ratio gives potential mortgage lenders an idea of how much your expenses are each month in comparison to how much you actually earn.


Depending on where you are in the home-buying process, you may have a good idea of where your credit score lands. As important as a strong credit score is, however, a favorable debt-to-income ratio is arguably of equal importance, and it may be just as closely scrutinized by any potential mortgage lender.

Front-end ratios vs. back-end ratios

When you try and obtain a loan, expect possible lenders to review two types of debt-to-income ratio. The front-end ratio, or "housing" ratio, gives them an idea of what percentage of your monthly income would have to go toward home-related expenses, such as the mortgage, associated taxes and any additional fees, such as homeowner's association expenditures, that may apply.


The back-end ratio, on the other hand, takes a more cumulative approach and compares your monthly income to all your expenses, from the housing-related ones to school tuition, child support, car payments and any other financial obligations you may have.

The ideal debt-to-income ratio

The exact percentage your lender will look for will likely vary based on factors such as your credit score, how much you have in your savings account and how much you have to put down for your down payment. Most standard lenders, however, prefer to see something in the ballpark of 28 percent for a front-end ratio. For a back-end ratio, they will likely look for a percentage that does not exceed 36 percent. Federal Housing Authority lenders typically look for a front-end ratio of about 31 percent and a back-end ratio that does not exceed 43 percent.

Lower a high ratio

Simply put, the most effective way to lower a high debt-to-income ratio and therefore make yourself more appealing to lenders is to pay off some of your debt. If you have a cosigner who may be willing to help you out with a loan, that could serve as an additional method of getting around a high ratio.

To calculate the debt-to-income (DTI) ratio for the scenario you provided, you'll need to figure out both the front-end and back-end DTI ratios.

1. Front-end DTI ratio: This ratio only includes the mortgage payment (including principal, interest, taxes, and insurance) divided by your gross monthly income.




2. Back-end DTI ratio: This ratio includes all monthly debts (mortgage, credit cards, auto loans, student loans, etc.) divided by your gross monthly income.

   
   

(DTI) ratio requirements for different types of mortgage loans in Kentucky, including FHA, VA, USDA, Fannie Mae, and Kentucky Housing loans:

Joel Lobb  Mortgage Loan Officer

1 -  Email - kentuckyloan@gmail.com 

2.   Call/Text - 502-905-3708

Text/call 502-905-3708


kentuckyloan@gmail.com

Kentucky FHA Loans Are Offering New Flexibilities for Borrowers Previously Affected by Covid-19

FHA Offering New Flexibilities for Borrowers Previously Affected by Covid-19

FHA has announced that the guidelines are being updated when calculating effective income after a reduction or loss of income for borrowers affected by the COVID-19 pandemic. These changes are effective for all case numbers on or after 09/05/2022, but may be implemented immediately.

ML 2022-09 reflects policies that will be incorporated into the 4000.1, providing updates for the following:

Primary Employment

Part-Time Employment

Overtime, Bonus or Tip Income

Employed by Family-Owned Business

Commission Income

Self-Employment Income

Additional Required Analysis of Stability of Employment Income

Additionally, flexibility when calculating income for borrowers who experienced a gap in employment and/or a reduction of loss of income due to the COVID-19 pandemic has been updated allowing a borrower to be employed in the same line of work for at least six months at the time of case assignment.

https://www.hud.gov/press/press_releases_media_advisories/HUD_No_22_129

Kentucky First Time Home Buyer Programs For Home Mortgage Loans: Job History Requirements for a Kentucky Convention...

Kentucky Conventional Mortgage

Two year is standard but shorter employment histories may be permitted for applicants with stable jobs and incomes or other positive factors
Explainable employment gaps of six months or more are also permitted as long as the applicant has been back to work for at least six months and has a two year employment history prior to the work gap

Self-employed borrowers are typically required to demonstrate a two year job history
A self-employed job history of between one and two years is permitted if the applicant was previously employed in a similar field and earns a similar or greater income as evidenced by the borrower's tax returns
Self-employed applicants are also required to provide business tax returns for two years unless the business is at least five years old

A continuous two year history of part-time employment is typically required although part-time work history of one-to-two years may be permitted for stronger applicants
A two year history of seasonal work in the same job or line of work is required
Lenders are also required to verify with the applicant's employer that the applicant will be rehired for the next employment season
Borrowers with seasonal employment are permitted to use unemployment compensation as income as long as the compensation is due to regular, seasonal employment breaks

A two year employment history is recommended for bonus, commission or overtime income to be considered but guidelines permit an income history of one-to-two years for borrowers with strong employment, financial and credit profiles

Kentucky FHA Mortgage Program

The FHA Program does not technically have an minimum employment history requirement but lenders are required to verify applicants' employment history for the prior two years
Applicants are required to explain any employment gaps of at least one month
Explainable employment gaps of six months or more are also permitted

Self-employed borrowers are typically required to demonstrate a two year job history
A self-employed job history of between one and two years is permitted if the applicant was previously employed in a similar line of work for at least two years
A combination of one year of employment in a similar field plus one year of education or training in that field is also permitted for self-employed borrowers

An uninterrupted two year history of part-time employment is typically required although part-time work history of less than two years may be considered as long as the lender determines that the work is likely to continue
Income from seasonal employment is also permitted as long as the applicant has a two year work history and expects to be rehired for future seasons

A two year employment history is required for bonus, commission or overtime income to be considered
An employment history of less than two years is allowed if the lender justifies and documents the reason for including the income
Lenders are also required to explain any significant declines in bonus, commission or overtime income
Significant fluctuations in bonus, commission or overtime income may require the lender to use an average period of longer than two years to calculate the applicant's income

Kentucky USDA Mortgage Program

The USDA Home Loan Program does not technically have an minimum employment history requirement but lenders are required to verify applicants' employment history for the prior two years and confirm that the applicant's income is stable

Applicants are required to explain any employment gaps of at least one month
Explainable employment gaps of six months or more are also permitted as long as the applicant can document the reason for the gap, has been back to work for at least six months and has a two year employment history prior to the work gap

Self-employed borrowers are typically required to demonstrate a two year job history as documented by the applicant's tax returns

A self-employed job history of between one and two years is permitted if the applicant was previously employed in a similar line of work for at least two years or one year of work plus one year of formal education or training

The lender is required to confirm that the self-employment income is expected to continue for at least three years

A self-employed history of less than one year is not permitted

An uninterrupted two year history in the same position is typically required for part-time employment although a part-time work history of less than two years may be considered if the lender verifies with the employer that the work is likely to continue at the same compensation level

Income from seasonal employment is permitted as long as the applicant has a two year work history and expects to be rehired for future seasons

The lender is required to determine that part-time and seasonal income is expected to continue for the next three years

Income from part-time or seasonal work must be reported on the borrower's tax returns to be considered by a lender

A consecutive two year payment history and determination by the lender that the income is expected to continue for the next three years is required for bonus, commission or overtime income to be considered
Bonus, commission or overtime income earned for less than a year is not permitted without significant compensating factors such as a change in the applicant's compensation structure

Lenders are required to explain any significant declines in bonus, commission or overtime income
Significant variations in bonus, commission or overtime income may require the lender to use an average period of more than two years to calculate the applicant's income

Kentucky VA Mortgage Program

The VA Program requires lenders to verify an applicant's employment history for the prior two years although there is no minimum employment history guideline

Applicants with an employment history of less than a year may be considered if the lender determines and documents that the applicant has a high probability of continuing his or her job
The applicant's employment history is evaluated on a case-by-case basis

Active military personal who are within 12 months of their release date are required to reenlist or provide verification of a job offer after their release from the military

Self-employed borrowers are typically required to demonstrate a two year job history unless the applicant was previously employed in a similar line of work or received specialized training in that field

A self-employed history of less than one year is highly uncommon

A continuous and verified two year history of part-time employment is generally required
The applicant's income from part-time work should be steady and predictable and the lender is required to determine that the work will continue in the future

The lender is also required to confirm that applicants can handle the part-time job along with the demands of their primary job

A two year work history is required for bonus, commission and overtime income to be considered by the lender unless the borrower has extensive experience or training in their field of work

The lender must determine that the income is predictable and likely to continue in the future
Bonus, commission and overtime income with less than a two year work history is rarely permitted and requires extensive documentation by the lender

Joel Lobb (NMLS#57916)
Senior  Loan Officer

American Mortgage Solutions, Inc.

10602 Timberwood Circle Suite 3

Louisville, KY 40223

Company ID #1364 | MB73346

Text/call 502-905-3708

kentuckyloan@gmail.com

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/

Self-Employed Income for a Kentucky Mortgage Loan Guidelines

Self-Employed Income for a Kentucky Mortgage Loan Guidelines

Under normal Fannie Mae underwriting standards, a borrower is considered self-employed if he or she owns more than 25% of a business from which income is derived. Any lower percentage ownership and a borrower can simply be considered employed by the firm (Yes, this is a help for co-owners of a small business - if you own less than 25% you don't even have to read this article).

Self-employed borrowers who want to go the full documentation route must be able to provide the following: 1) two years of business tax returns; 2) two years of personal tax returns; 3) a letter from a CPA confirming two years of self-employment; and 4) a year to date profit and loss statement. If there are any problems with this information, then additional documentation will be required, such as letters from accountants, business bank statements or other financial records.

Underwriters average the net income to the business owner over the past two years to obtain an estimate of total income.

If a business owner suffered a difficult year in 2011, but in all years before and after income was significantly higher, then the averaging method of analyzing income would unfairly deny the borrower a standard loan.

Hit the link below to apply for your Free Mortgage Loan  Approval for you next Kentucky Mortgage Loan

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Joel Lobb
Senior  Loan Officer

(NMLS#57916)

American Mortgage Solutions, Inc.

800 Stone Creek Pkwy, Ste 7,

Louisville, KY 40223

 phone: (502) 905-3708

 Fax:     (502) 327-9119

kentuckyloan@gmail.com

 Company ID #1364 | MB73346

http://mylouisvillekentuckymortgage.com 

FHA Announces Important Guideline Changes

FHA Announces Important Guideline Changes

The purpose of this Mortgagee Letter (ML) is to:

Modify documentation requirements for self-employed borrowers,
Provide new guidance on disputed accounts, and
Expand the current definition of family members for identity of interest
transactions.



The new guidance in this section of the ML is effective for case numbers assigned on or after
April 1, 2012, and will apply to all FHA insured loans except non-credit qualifying
streamline refinance loans and Home Equity Conversion Mortgage loans.
Below is a matrix with old and new documentation requirements for self-employed
borrowers.

NEW Guidance for Self-Employed Income Borrowers

P&L and Balance Sheet required if more than a calendar quarter has elapsed since date of most recent calendar or fiscal-year end tax return was filed by the borrower – with no exceptions.Additionally, if income used to qualify the borrower exceeds the two year average of tax returns, an audited P&L or signed quarterly tax returns obtained from IRS are required.Same requirements as an“Accept”.

New Guidance for Disputed Accounts

If the Automated Underwriting System using the TOTAL Mortgage Scorecard rates the mortgage loan application as an Accept, the mortgage application will no longer be referred to a
DE underwriter for review due to disputed accounts, as long as these accounts meet both of the following conditions:The total outstanding balance of all disputed credit accounts or collections are less than $1,000,and Disputed credit accounts or collections are aged two years from date of last activity as indicated on the most recent credit report.If the borrower has individual or multiple disputed credit accounts or collections with singular or cumulative balances equal to or greater than $1,000, the accounts must be resolved (e.g. payment arrangements with a minimum three months of verified payments made as agreed) or paid in full, prior to, or at the time of closing. The lender must obtain documentation supporting the payment arrangements or that the debt has been paid off. The payments arranged for the accounts must be included in the calculation of the borrower’s debt-to-income ratios.

Disputed credit accounts or collections resulting from identity theft, credit card theft, or unauthorized use, etc., will be excluded from the $1,000 limit under the terms shown below.The mortgagee must provide in the case binder, a credit report or letter from the creditor, or other appropriate documentation,to support that the borrower filed an identity theft or police report to dispute the fraudulent charges. Mortgagees must
provide documentation in the case binder to show all disputed or collection accounts are resolved, verified as not a debt to the borrower, arrangements made for payment, or paid in full.


If the total outstanding balance of all collection accounts is equal to or greater than
$1,000 the borrower must resolve the accounts (e.g. entered into payment
arrangements with minimum three months verified payments- paid as agreed) or paid in
full at the time of, or prior to closing.Mortgagees must document the case binder
showing each account was resolved or paid in full.If the total outstanding balance of all
collection accounts is less than $1,000, the borrower is not required to pay off the
collection accounts as a condition of mortgage approval.FHA continues to require judgments to be
paid off before the mortgage loan is eligible for FHA insurance.*

New Guidance for Identity of Interest Transactions

For the purpose of Identity of Interest transactions, the definition of family member includes:
child, parent, or grandparent spouse legally adopted son or daughter, including a child who is placed with the borrower by an authorized agency for legal adoption foster child brother, stepbrother sister, stepsisteruncle, and aunt Note: A child is defined as a son, stepson, daughter, or stepdaughter. A parent or grandparentincludes a step-parent/grandparent or foster parent/grandparent.
As stated in handbook HUD 4155.1 2.B.2.b, identity-of-interest transactions may result in a
reduced maximum loan-to-value limitation.

Joel Lobb (NMLS#57916)Senior  Loan Officer
502-905-3708 cell
502-813-2795 fax
jlobb@keyfinllc.com

Key Financial Mortgage Co. (NMLS #1800)*
107 South Hurstbourne Parkway*
Louisville, KY 40222*

http://mylouisvillekentuckymortgage.com 

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