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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Why Kentucky Mortgage Loans Are Denied

When applying for a Kentucky mortgage loan, several factors play a crucial role in the approval and denial process. 

Understanding why Kentucky mortgage loans may not get approved due to credit score, bankruptcy, income ratio, work history, and foreclosure is essential for prospective homebuyers. 

Credit Score of 620 or below:

A credit score reflects an individual's creditworthiness. Lenders use this score to assess the risk of lending money. A lower credit score, typically below 620, can raise concerns for lenders. It may indicate past financial challenges, missed payments, or high levels of debt. To improve mortgage approval chances, borrowers should aim for a higher credit score by paying bills on time, reducing debt, and fixing any errors on their credit report.

Bankruptcy less than 2 years or foreclosure less than 3 years:


Bankruptcy can significantly impact mortgage approval. Depending on the type of bankruptcy (Chapter 7 or Chapter 13) and how long ago it occurred, lenders may view it as a red flag. 

Bankruptcies stay on credit reports for 10 years, affecting credit scores and indicating financial instability. Lenders may require a waiting period after bankruptcy before considering a mortgage application.

 
Chapter 7

If you have filed a Chapter 7  Bankruptcy, the mortgage waiting periods begin after the discharge date:

Fannie Mae (conventional) loan – 4 years from discharge date
FHA loan – 2 years from discharge date
VA loan – 2 years from discharge date
USDA loan – 3 years from discharge date

Chapter 13 Bankruptcy

On the other hand, if you have filed a Chapter 13 Bankruptcy, the mortgage waiting periods are shorter:

Fannie Mae (conventional) loan – 2 years from discharge date, and also 4 years from the dismissal date.
FHA loan – 1 year from the payout period. However, you also need court permission, and proof of satisfactory bankruptcy payment and performance.
VA loan – 1 year from the payout period. Also, court permission, and proof of satisfactory bankruptcy payment and performance.
USDA loan – 1 year of the payout must elapse and payment performance must be satisfactory. In addition, you need court permission to borrow again.

After Short Sale/Deed-in-Lieu of Foreclosure

The mortgage waiting periods after a short sale begin after the completion date:Fannie Mae (conventional) loan – 4 years
FHA loan – 3 years
VA loan – 2 years
USDA loan – 3 years



Debt to Income Ratio over 50% 

Lenders assess income ratios to determine if borrowers can afford mortgage payments. The debt-to-income ratio (DTI) compares monthly debt payments to gross monthly income. A high DTI suggests financial strain and may lead to loan denial. Lenders typically prefer a DTI below 50% for conventional loans. Increasing income or reducing debt can help improve this ratio and enhance loan approval chances.


Work History less than 2 years with job gaps: 

2 year Stable employment and consistent income are vital for mortgage approval. Lenders evaluate work history to ensure borrowers have a reliable source of income to repay the loan. Job changes, gaps in employment, or irregular income can raise concerns. Ideally, borrowers should demonstrate a steady work history with consistent or increasing income over time.











Joel Lobb Mortgage Loan Officer

Text/call: 502-905-3708

email: kentuckyloan@gmail.com


http://www.mylouisvillekentuckymortgage.com/








The view and opinions stated on this website belong solely to the authors, and are intended for informational purposes only. The posted information does not guarantee approval, nor does it comprise full underwriting guidelines. This does not represent being part of a government agency. The views expressed on this post are mine and do not necessarily reflect the view of my employer. Not all products or services mentioned on this site may fit all people.
NMLS ID# 57916, (www.nmlsconsumeraccess.org).

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

Kentucky Mortgage Underwriting Guidelines For Deposits, Job Gaps, Credit Inquiries

Kentucky Mortgage Underwriting Guidelines 

Applying for a Kentucky Mortgage

 Most Kentucky home buyers will need to gather and document the information upfront so you will have minimal problems once the underwriter issues your final mortgage loan approval .  Let’s look at some common underwriting issues that arises on the final mortgage approval.

Job Gap—The application will call for you to document your last two years of employment history. If you have had several jobs, or job gaps of more than 6 months, you will need to document why you were off work and why you made the changes in your job. The underwriter is looking for stability in your pay and job. If you were in school recently, then the underwrite may want to see transcripts to verify this.

Credit Inquiries- Are there credit inquiries producing a red flag? • Does the applicant have excessive verified assets that could cover the dollar amount of the large deposit to, in essence, negate the effect of the large deposit?
The asset documentation must present sufficient funds of an acceptable source for down payment, closing costs and reserves. If you have had a lot of recent inquiries on your credit report, the underwriter will want an explanation on why the inquiries were made and see if any new debts has opened since the credit report has been issued.

Large Deposits in Checking and Savings Accounts–  this is a biggie for most people.   what constitutes a large deposit requiring additional explanation and documentation. For Kentucky Mortgage Conforming loans:  considers a large deposit to be any deposit greater than 25% of the borrower’s qualified monthly income. A letter of explanation and sufficient documentation to support the source of the funds will be required.  For FHA/VA loans:  will require a letter of explanation on any large deposit, as determined by the underwriter. Additionally, any deposit of an amount equivalent to 2% or greater of the loan sales price must have its source of funds documented and verified.

Most Kentucky Mortgage underwriters now days  considers a large deposit to be any deposit greater than 25% of the borrower’s qualified monthly income. Any such deposit not consistent with the borrower’s employment, earnings and/or savings profile must be fully explained and sourced with acceptable documentation in order to be eligible for down payment, closing costs, earnest money deposit and reserves. All funds used for down payment, closing costs, earnest money deposit and reserves must be from an acceptable source and clearly not be a result of undisclosed borrowed funds or incentive from an interested party such as a seller, real estate agent or developer.

A large deposit could be a single deposit or multiple deposits over a period of time that in aggregate, result in a large deposit. A review of the borrower’s financial profile must be conducted in order to draw a conclusion that a deposit must be sourced. Items to take into consideration when identifying deposits to be sourced are as follows: • Are the deposits within the normal deposit pattern from an identifiable
income source?

• Are total monthly deposits consistent with income?
 • Is the ratio of deposits to income reasonable?
• Is the borrower’s income direct deposited?
• Are there multiple deposits over a period of time that in aggregate, result in a large deposit?
• Was the account recently opened?

All large deposits must be addressed. Regardless of how long ago the earnest money was deposited, it must be verified. A signed letter of explanation from the borrower is required in all circumstances. If the borrower is able to provide a reasonable explanation and sufficient documentation to support the deposit is of an acceptable source, the large deposit may be included in the funds to close.

There may be an occasion, when the borrower is able to provide a reasonable explanation, but unable or unwilling to sufficiently document the source of a large deposit and has assets exclusive of the large deposit that are sufficient for closing and reserves. An underwriter, after exercising due diligence to ensure funds are not from an unacceptable source, may deduct the large deposit from the balance of the account, and allow the remaining balance in the account to be used as funds to qualify. In the course of due diligence, the underwriter must be confident the deposit was not as a result of an undisclosed debt or as a result of incentives from a seller, real estate agent or developer. In the event that an asset balance is reduced by the amount of a deposit, the system must be corrected, the reason for the change in the asset amount documented and the AUS decision must be updated.

Any deposit that cannot be adequately explained could potentially raise a red flag and result in a declination. Items for consideration when excluding a deposit from the asset balance:
• Do the overall assets seem reasonable given the borrower’s financial profile?
• Is there other documentation in the file (such as tax returns) that may support additional income or asset sources?
• Is the deposit possibly a loan?

GIFT FUNDS —- Gift funds are acceptable from a close relative, a close friend with a clearly defined interest in the borrower, the borrower’s employer or a non-profit organization.  Entire cash investment can be gifted by relative, church municipality, non-profit agency.  Transfer of funds must be documented (no exceptions).  Underwriters  will require the donor’s account statement and proof of withdrawal.   Provide copy of fully executed gift letter (FHA applicant must also sign).  Provide copy of cancelled check from donor or copy of donor’s withdrawal slip and matching deposit into applicant’s bank account or deposit slip; or  Provide copy of cashier/treasurer/certified check to be given to closing agent.  Amount must be denoted on HUD-1.  If funds wired at closing, provide copy of wire transfer or copy of the check.  This will need to take place prior to the funding of the loan.  Only family members may provide a gift of equity.

CASH ON HAND—Money must be deposited and verified either through VOD or title company escrow letter AND the applicant must provide satisfactory evidence of the ability to have saved this money. If a VOD is used, a 1 month bank statement supporting the VOD is required. (The applicant must also provide a letter explaining how the money was saved and the length of time it took to save it.) May not be used as a source of assets for gift transactions.
Note: All other factors being equal, those individuals with checking and/or savings accounts are less likely to save money at home than an individual with no history of such accounts.

If you would like more information or just have questions about qualifying for a Kentucky Mortgage in 2013, be it FHA, VA, Fannie Mae, USDA,  just contact me below for your mortgage needs.

Earnest Money Deposit-

Earnest Money Deposit (EMD)
A deposit made by the buyer when the purchase offer is accepted. The funds are held by the escrow company and credited towards the cost of down payment and closing costs.

Earnest Money Deposit– If you put down a deposit on the home you are buying, you will need to get a copy of the bank statement or cancelled check to show the check has cleared your bank account and it will need to show your updated balance after the cancelled check has cleared.

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/