Job Gaps in Employment and Getting Approved for a Mortgage Loan in Kentucky for FHA and Fannie Mae Conventional loans

Gaps in Employment and getting approved for a KY FHA and Conventional Mortgage Loan A borrower who has no verifiable employment for 6 months or longer is deemed to have a gap in employment.  Fannie:  Fannie does not address gaps in employment in their guidelines.  We must ensure that DU’s income documentation can be met.  This will typically require the borrower’s most recent paystub and a W-2 from the most recent year.  FHA:  borrower must be employed at their current job for 6 months or more at the time of case number assignment and a 2 year work history prior to the gap can be documented. Can income from employment that has not begun be considered effective income? Expected income refers to income from cost-of-living adjustments, performance raises, a new job, or retirement that has not been, but will be received within 60 days of mortgage closing.  The Mortgagee must verify and document the existence and amount of expected income with the employer in writing and that it is guaranteed to begin within 60 days of mortgage closing.  Income is calculated in accordance with the standards for the type of income being received. The Mortgagee must also verify that the borrower will have sufficient income or cash reserves to support the mortgage payment and any other obligations between mortgage closing and the beginning of the receipt of the income.   For additional information see Handbook 4000.1 II.A.4.c.xii.(L) or II.A.5.b.xii.(L) available at https://www.hud.gov/program_offices/administration/hudclips/handbooks/hsgh How does FHA view borrowers who change jobs frequently? If the borrower has changed jobs more than three times in the previous 12-month period, or has changed lines of work, the Mortgagee must take additional steps to verify and document the stability of the borrower’s employment income. The Mortgagee must obtain: • transcripts of training and education demonstrating qualification for a new position; or • employment documentation evidencing continual increases in income and/or benefits.  For additional information see Handbook 4000.1 II.A.4.c.xi.(A) or II.A.5.b.xi.(A) available at https://www.hud.gov/program_offices/administration/hudclips/handbooks/hsgh How does FHA view borrowers who change jobs frequently? If the borrower has changed jobs more than three times in the previous 12-month period, or has changed lines of work, the Mortgagee must take additional steps to verify and document the stability of the borrower’s employment income. The Mortgagee must obtain: • transcripts of training and education demonstrating qualification for a new position; or • employment documentation evidencing continual increases in income and/or benefits.  For additional information see Handbook 4000.1 II.A.4.c.xi.(A) or II.A.5.b.xi.(A) available at https://www.hud.gov/program_offices/administration/hudclips/handbooks/hsgh Joel Lobb  Mortgage Loan Officer 1 -  Email - kentuckyloan@gmail.com  2.   Call/Text - 502-905-3708

Job Requirements and Employment History for a Kentucky VA loan Approval.

Mortgage Employment or Job History Requirements for a VA Loan Approval in Kentucky

Gaps in Employment A borrower who has no verifiable employment for 6 months or longer is deemed to have a gap in employment.   VA:  VA does not address gaps in employment and generally does not consider non military employment less than 12 months as stable and reliable. Any exceptions based on the loan as a whole is underwriter discretion. Medical or Temporary Leave Income The borrower has taken a temporary leave of absence from work typically for medical leave such as maternity, illness, surgery, or on the job injury.  This leave is short term in nature and the borrower is still employed with their same employer prior to the leave of absence.    VA: Borrower’s on temporary leave are not eligible for a loan transaction.    Frequent Job Changes Frequent job changes may indicate instability in a borrower’s income.  VA: the borrower must demonstrate the ability to maintain an income at a constant level over the recent 2-year period even if he or she has worked for a variety of employers. Seasonal Employment Seasonal Employment refers to employment that is not year round typically due to weather conditions.  Seasonal Employment can be full time or part time.   VA:  Borrower must have worked the same job (or same line of seasonal work) for the past 2 years and the borrower’s employer must state there is a reasonable expectation that the borrower will be rehired for the next season.  Tax returns will be required if unemployment compensation will be used to qualify the borrower.  *Income calculation will follow calculation guidelines.  These guidelines are for employment history and profile only.

Have Questions or Need Expert Advice? Text, email, or call me below:

Joel Lobb
Mortgage Loan Officer
Individual NMLS ID #57916





email: kentuckyloan@gmail.com

Text/call: 502-905-3708

http://www.mylouisvillekentuckymortgage.com/

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The reasons you will get turn down for a mortgage loan in Kentucky.

 There are several reasons why people in Kentucky might get turned down for a mortgage loan. These reasons can be broadly categorized into issues with the borrower or the property:

Borrower-related reasons:

• Credit score: Low credit scores (generally below 620) are a major factor in loan denials. Having a history of late payments, delinquencies, or collections can negatively impact your score.
• Debt-to-income ratio (DTI): This ratio compares your monthly debt payments to your gross income. A high DTI (generally above 50%) indicates you have a lot of debt compared to your income, making it harder to afford a mortgage payment.
• Employment history: Lenders prefer borrowers with stable employment and income. Recent job changes, gaps in employment, or insufficient income documentation can raise concerns.
• Down payment: A smaller down payment increases the loan amount and loan-to-value ratio (LTV), making the loan riskier for lenders. In Kentucky, FHA loans require a minimum 3.5% down payment, while conventional loans typically require 20%.
• Insufficient assets: While not always a disqualifier, having limited savings or assets can weaken your application by reducing your financial cushion.

Property-related reasons:

• Appraisal value: If the appraised value of the property is lower than the purchase price, it creates a high LTV, making the loan riskier for lenders.
• Property condition: Major repairs or structural issues with the property could require significant investment before closing, which lenders may not be comfortable with.
• Location: Properties in floodplains or other high-risk areas may be ineligible for certain loan types or require additional insurance.

Here are some resources that can help:

• Reasons loan denied in Kentucky https://www.mylouisvillekentuckymortgage.com/2010/10/get-approved-for-mortgage-or-home-loan.html

Joel Lobb  Mortgage Loan Officer

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/

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