Kentucky Welcome Home Grant of $20,000 for Kentucky Home Buyers in 2024

 
 A Comprehensive Guide to the Kentucky Welcome Home Grant

For many Kentuckians, the dream of homeownership can feel out of reach due to financial constraints. But thanks to the Kentucky Welcome Home Grant of $20,000 for Kentucky Home Buyers in 2024 that dream might be closer than you think. This grant program, administered by the Federal Home Loan Bank of Cincinnati (FHLBC), offers down payment and closing cost assistance to eligible homebuyers throughout the state.

Whether you're a first-time homeowner or looking to upgrade your living space, understanding the qualifying guidelines is crucial for securing this valuable assistance. Buckle up, folks, as we delve into the details of the Welcome Home Grant and equip you with the knowledge to unlock your Kentucky homeownership dreams!

Eligibility: The First Step on Your Journey

Before diving into the specific details, let's address the first and most important question: are you eligible? Here's a breakdown of the key criteria:

Income: Your total household income must fall at or below 80% of the Mortgage Revenue Bond (MRB) limit for your specific county. These limits vary depending on location, so be sure to check the current limits here at this link below for your desired area.

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https://kentuckymortgage.wordpress.com/tag/kentucky-welcome-home-grant/

Property: The grant applies to primary residences only, including single-family homes, townhomes, condominiums, and qualified manufactured homes. The property must be located within eligible Kentucky counties. You can find a list of participating counties on the FHLBC website.

Purchase Contract: You must have a fully executed purchase contract for an eligible property before applying for the grant.

Financial Contribution: You must contribute at least $500 of your own funds towards the down payment and/or closing costs.

Additional Considerations: While not mandatory, completing a homebuyer education course can strengthen your application. Moreover, veterans and active-duty military personnel may be eligible for higher grant amounts.

Diving Deeper: Grant Details and Amounts

The Welcome Home Grant offers assistance in the form of a non-repayable grant. The maximum grant amount varies depending on several factors:

  • Your military status: Veterans and active-duty military personnel are eligible for up to $25,000, while all other eligible homebuyers can receive up to $20,000.
  • Your down payment: If you contribute more than the required $500 towards your down payment, the grant amount may be reduced to fit within the total program funding available.

Remember: The grant funds cannot be used towards the property purchase price itself. They are strictly for down payment and closing cost assistance.

Finding Your Path: The Application Process

Now that you understand the eligibility and grant details, let's navigate the application process:

  1. Connect with a participating lender: The Welcome Home Grant program operates through partnering lenders, so start by searching for a lender in your area that participates in the program. You can find a list of participating lenders on the FHLBC website or by contacting the organization directly.
  2. Pre-qualify for a mortgage: This shows both you and the lender a realistic picture of your borrowing capacity and strengthens your application.
  3. Gather your documents: Be prepared to provide proof of income, employment, assets, and other required documentation as outlined by your lender.
  4. Complete the grant application: Your chosen lender will walk you through the grant application process and help you submit the necessary paperwork.
  5. Await a decision: The processing time can vary, but you'll typically receive a decision within a few weeks.

Beyond the Guidelines: Valuable Resources and Tips

Remember, knowledge is power! Equip yourself with as much information as possible to ensure a smooth application process. Here are some valuable resources:

Pro-Tip: Start planning early! Research potential properties, understand the market in your desired area, and get your finances in order well before applying for the grant.

Remember: Homeownership is a significant investment, so proceed with careful planning and consideration. Utilize the available resources, ask questions, and don't hesitate to seek professional guidance if needed.


Important Dates to Remember:


  • Application Period: Reservations for the 2024 Welcome Home Grant program open on March 1st, 2024, at 8:00 AM ET.
  • Funding Availability: Grants are limited and awarded on a first-come, first-served basis.
  • Program Duration: The program runs until all funds are reserved.
  • Must have contract under agreement to submit for funds. 

CURRENTLY OUT OF FUNDS FOR 2024-


Joel Lobb  Mortgage Loan Officer



Text/call: 502-905-3708

http://www.mylouisvillekentuckymortgage.com/



NMLS 57916  | 

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).


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Kentucky Housing Income Limits for Mortgage Loans

New Income Limits for KHC Loans in Kentucky




New Income and Purchase Price Limits for Secondary Market and Mortgage Revenue Bond KHC’s eliminated the front-end ratio of 40%, effective with new reservations on Monday, June 24, 2024.

Eligibility: Both first-time and repeat home buyers purchasing a single-family dwelling. Purchase price can be no more than $510,939.

 Applicant’s income must be within applicable secondary market limits in effect.

KHC mortgage loans,First Time Home Buyer Louisville Kentucky Mortgage,Down Payment Assistance Program - Housing - Louisville Ky,KHC Down payment Assistance Program Kentucky Housing,

KHC mortgage loans,First Time Home Buyer Louisville Kentucky Mortgage,Down Payment Assistance Program - Housing - Louisville Ky,KHC Down payment Assistance Program Kentucky Housing,


Federal Housing Administration (FHA)

•
Minimum 620 credit score.
•
Financing to 96.50% of lesser of sales price or appraised value.
•
Maximum ratio 50%.
Upfront and Annual Mortgage Insurance Premiums 30-Year Loan Term LTV less than or equal to 95% 1.75% UFMIP .50 Annual LTV greater than 95% 1.75% UFMIP .55 Annual

Rural Housing Services (RHS)


Minimum 620 credit score.
•
Financing to 100% of the appraised value, plus guarantee fee of 1.00%/0.35% annual fee.
•
Maximum ratio 50%.

Veteran’s Administration (VA)


Minimum 620 credit score.
•
Financing to 100% of the lesser of the appraised value or sale price plus funding fee.
•
Maximum ratio 50%.
•
No monthly mortgage insurance.



Regular Down Payment Assistance Programs (DAP) 


Only home buyers obtaining a Kentucky Housing Corporation first mortgage are eligible for DAP funds. Interest Rate with DAP applicable. 

 Up to $10,000 Minimum of $1,000 
Terms 3.75% amortized over 10 years Purchase Price Limit $510,939

With AUS approval, can go up to 50% with all loans.
 Required Repairs Buyer or seller must use OWN funds to pay for repairs

Joel Lobb  Mortgage Loan Officer




Text/call: 502-905-3708

email: kentuckyloan@gmail.com

http://www.mylouisvillekentuckymortgage.com/

NMLS 57916  | Company NMLS #1364/MB73346135166/MBR1574
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).



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Can you use Foster Income for a Kentucky Mortgage Loan Approval?

 Foster Income for a Kentucky Mortgage 



Yes, if it can be documented that foster care income has been received for the last 2 years that income is likely to continue for at least 3 years from the date of the Note, then it can be used to qualify. 

 If it can be verified that income is not taxable, it can be grossed up per 4000.1 II.A.4.c.xii.(P) or II.A.5.b.xii.(P) by either borrower's actual tax rate or 115% whichever is lower.
Yes, we need to show 24 months receipt of this income, possible exception if only received for 12 months, and we would need something from the agency showing this will continue for 3 years.

Foster-Care Income for a Mortgage Loan Approval


What are the guidelines?


Income received from a state- or county-sponsored organization for providing temporary care for one or more children may be considered acceptable stable income if the following requirements are met.
✓Verification of Foster-Care Income
Verify the foster-care income with letters of verification from the organizations providing the income.
Document that the borrower has a two-year history of providing foster-care services. If the borrower has not been receiving this type of income for two full years, the income may still be counted as stable income if
  • the borrower has at least a 12-month history of providing foster-care services, and
  • the income does not represent more than 30% of the total gross income that is used to qualify for the mortgage loan.


Foster Income for a Kentucky Mortgage






Joel Lobb (NMLS#57916)
Senior  Loan Officer



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/

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How to Qualify For A Kentucky Mortgage Loan




Joel Lobb  Mortgage Loan Officer NMLS 57916

EVO Mortgage
 911 Barret Ave, Louisville, KY 40204
Company NMLS ID # 173846

Text/call: 502-905-3708

email: kentuckyloan@gmail.com

http://www.mylouisvillekentuckymortgage.com/

NMLS 57916  | Company NMLS #173846
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).

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How To Buy A House In Kentucky With Zero Down Payment!

 

There are several programs in Kentucky  to help homebuyers purchase a house with zero down payment. The various Kentucky down payment assistance programs in Kentucky, including KHC, FHA, VA, USDA, UWM's $15,000 Welcome Home Grant, the $25,000 Kentucky Welcome Home Grant, and the 5% grant. We will also detail the qualifying criteria, such as credit score, income, work history, and assets.

Kentucky Housing Corporation (KHC) Programs

KHC FHA Loan

The Kentucky Housing Corporation offers down payment assistance programs that work in conjunction with Kentucky FHA loans. These programs aim to help first-time homebuyers achieve homeownership with minimal upfront costs.

Qualifying Criteria:

  • Credit Score: Minimum 620
  • KHC Income Limits: Varies by county and household size
  • Work History: Steady employment for at least two years
  • Assets: Limited to ensure assistance goes to those in need
  • Minimum down payment of 3.5% and 6% seller concessions
  • Max debt to income ratios of 40 and 50% respectively
  •  

KHC Down Payment Assistance Programs

KHC offers several down payment assistance options, including a regular DPA loan of  up to $10,000. These loans are repayable over ten years at 3.75% over 10 years and cannot be subordinated and paid off if you refinance or sell the home before they are paid off. No prepay penalty

Qualifying Criteria:

  • KHC Credit Score: Minimum 620
  • Income Limits: Varies by county and household size
  • Work History: Stable employment history required
  • Assets: Applicants must meet asset limitations
  • Loan limits changes every year.

Kentucky FHA Loans

Kentucky FHA loans are insured by the Federal Housing Administration and require a lower down payment of 3.5, but when paired with down payment assistance programs, Kentucky homebuyers can potentially buy a home with zero down payment.

Qualifying Criteria:

  • Credit Score: Minimum 580 (with 3.5% down payment), 500-579 (with 10% down payment)
  • Income Limits: None, but debt-to-income ratio must be manageable
  • Work History: Steady employment for at least two years
  • Assets: Must demonstrate sufficient assets to cover closing costs and reserves
  • Loan limits for FHA loans. Changes every year

Kentucky VA Loans

Kentucky VA loans are guaranteed by the Department of Veterans Affairs and are available to eligible veterans, active-duty service members, and certain members of the National Guard and Reserves. These loans often come with zero down payment requirements.

Qualifying Criteria:

  • Credit Score: No minimum, but most lenders prefer at least 580 to 620
  • Income Limits: None, but borrowers must have stable income
  • Work History: Typically, two years of consistent employment
  • Assets: Sufficient to cover closing costs; no down payment required
  • Residual Income Requirements
  • Debt ratio set by VA...No max debt ratio, but most like to see a 43% backend ratio on a manual underwrite but can go higher on an AUS automated underwriting approval through DO or LP
  • Max VA loan limits changes every year.

Kentucky USDA Loans

Kentucky USDA loans are backed by the U.S. Department of Agriculture and are available to Kentucky homebuyers in eligible rural areas of Kentucky. These loans offer 100% financing. $0 down payment

Qualifying Criteria:

  • Credit Score: No minimum score but most KY Rural Housing Lenders will a 620 to 640 minimum credit score
  • Income Limits: Varies by county and household size--
  • Work History: Stable employment for at least two years
  • Assets: Limited to ensure assistance goes to those in need-
  • No purchase price or loan limits, just income limits for each Kentucky County.
  • Max income limits changes every year
  • Debt to income rate usually around 31% on front end and 45% max on back-end ratio ...
  • Has to be run through GUS, the Guarantee Underwriting system for initial pre-approval

$15,000 Welcome Home Grant

United Wholesale Mortgage (UWM) offers a $15,000 Welcome Home Grant to help eligible homebuyers with down payment and closing costs.

Qualifying Criteria:

  • How does the $15,000 Down Payment Assistance work in Kentucky for Homebuyers
    • First  mortgage meets Loan to Value requirements for Fannie Mae or Freddie Mac ltv
    • Mortgage lenders in Kentucky  provides a second lien mortgage for 3% of the purchase price, up to $15,000
    • Second lien has no monthly payment requirement and no interest-no payments to lender
    • Second lien balance is due when the first lien loan is refinanced or paid off, whichever comes first
    • Payments on the second lien can be made throughout the loan term, but are not required

    How Kentucky borrowers can qualify for the $15,000 Down Payment Assistance:

    • Kentucky Borrowers must be at or below 80% of the Area Median Income (AMI) for the Kentucky mortgage property address they are buying and meet Home Possible® guideline requirements
      • For very-low income borrowers whose qualifying income is at or below 50% AMI (VLIP borrowers), they will receive a $2,500 credit as part of the 3% assistance
        • This credit does not need to be repaid by the borrower and lowers their debt obligation from the second lien
      • 620+ FICO and LTV must be equal to or greater than 95% LTV, up to 97%

    —OR—

    • At least one Kentucky home mortgage borrower must be a first-time homebuyer and meet HomeOne® and lender’s guideline requirements
      •  

$25,000 Kentucky Welcome Home Grant

The $25,000 Kentucky Welcome Home Grant is designed to provide substantial assistance to homebuyers for down payment and closing costs.

Qualifying Criteria:

  • All Kentucky first-time homebuyers must complete a homebuyer counseling program (but you don’t have to be a first-time homebuyer to participate).
  • Homebuyers must contribute at least $500 of their own funds toward down payment and closing costs (60% of these funds may be received as a gift).
  • All funds are reserved for specific homebuyers purchasing specific homes and can not be transferred to other homebuyers or to other homes.
  • Kentucky Welcome Home Grant Funds can be used with Kentucky FHA, USDA, VA, Home Ready, and other Conventional products.
  • Homebuyers must remain in the home for 5 years or prorated repayment of the grant may be required.
  • More information from the Federal Home Loan Bank of Cincinnati can be found at https://www.fhlbcin.com/housing-programs/welcome-home-program/.
  •  Kentucky Welcome Home Grant program, providing eligible homebuyers with grants of up to $25,000. The program, offered by the Federal Home Loan Bank of Cincinnati (FHLB Cincinnati), aims to support honorably discharged veterans, surviving spouses, and active-duty military personnel, along with other qualified home seekers.

  • Funds are available starting March 1 at 8am ET, and are available until all funds have been reserved. The FHLB Cincinnati not only assists service personnel with up to $25,000 grants but also extends up to $20,000 grants to other qualified homebuyers.

    To learn more about the application process and eligibility criteria, visit www.fhlbcin.com.

    Don't miss out on this incredible opportunity! Contact us at phone or text  at 502-905-3708

    Act fast, as funds are limited!---As of 5/22/2024 Funds for Welcome Home Grant in Kentucky has been depleted. ☹

5% Kentucky Home Buyer Grant

Some lenders in Kentucky offer a 5% grant program that provides assistance based on the purchase price of the home. This grant can be used for down payment and closing costs.

Qualifying Criteria:

  • Down payment assistance products to help Kentucky home buyers purchase the home of their dreams!

    Key Benefits

    • Utilize with either Kentucky FHA or Kentucky USDA loan to purchase a home
    • Up to 5% of purchase price can be used towards borrower’s down payment, closing costs, or to lower rate on the underlying mortgage.
    • Fully forgivable or repayable options
    • No income or first-time homebuyer restrictions
    • SmartBuy Down Payment Assistance
      5 Year Forgivable DPA 30/10 Repayable  DPA Closing Cost Assistance – Repayable

      Down payment assistance (DPA) program
      requiring the delivery of the underlying
      30 year FHA or USDA loan with the
      subordinated second lien. The second
      lien is fully forgiven after 5 years if the
      borrower meets criteria.

    • Down payment assistance (DPA)
      program with a repayable second
      lien. The second is not forgivable
      and is originated with a 30 year
      term due in 10 year balloon.
    • Closing cost assistance (CCA) program
      with a repayable second lien. The second
      is not forgivable and is originated with a
      30 year term due in 10 year balloon.
    •  
    • Borrower Eligibility Based on FHA or USDA program guidelines (USDA
      Not required to be first-time homebuyers
      No income restrictors beyond USDA guidelines

      Credit Score Minimum Representative Score of 620
      All Borrowers must have at least one
      score

Navigating the various down payment assistance programs available to Kentucky homebuyers can be complex, but with the right information, you can find the program that best fits your needs.

Whether you are a Kentucky first-time homebuyer or a veteran, these programs can help you achieve the dream of homeownership with little to no down payment. Be sure to review the specific qualifying criteria for each program and consult with a knowledgeable mortgage broker, such as Joel Lobb, to guide you through the process and help you secure the best assistance available.

If you have any questions or need further assistance, feel free to contact Joel Lobb at email or visit his website for more information.

 

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Text/call: 502-905-3708


email: kentuckyloan@gmail.com
http://www.mylouisvillekentuckymortgage.com/

 
NMLS 57916  | Company NMLS 1738641
 

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).

 
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How the NAR Settlement Is Changing Kentucky Homebuyers Options for Mortgage Loan Approval

 On March 15th, 2024, the National Association of Realtors (NAR) agreed to pay $418 million in damages to settle some of their real estate commission lawsuits. The settlement prohibits NAR from requiring a seller's agent to engage in cooperative compensation with a buyer's agent.

The key details are:

  • Date: March 15th, 2024
  • Payment: NAR agreed to pay $418 million in damages
  • Settlement terms: NAR prohibited from requiring seller's agent to cooperate with buyer's agent on commissions

This settlement is significant because the new terms will likely have ripple effects that both consumers and industry stakeholders will experience:

Consumers:

  • Potentially lower real estate commission fees as a result of increased competition between agents
  • More flexibility and control for sellers in how they compensate buyer's agents
  • Possibility of buyers having to pay their agent's fees directly rather than them being bundled into the home price

Industry Stakeholders:

  • Real estate brokerages and agents may need to adjust their business models and commission structures
  • Reduced influence of NAR in setting industry standards and practices around commissions
  • Potential for new business models and pricing approaches to emerge in the real estate market

Overall, this settlement represents a shift in the power dynamics of the real estate industry that could lead to more competition and consumer-friendly changes in the way real estate transactions are conducted. Let me know if you have any other questions!


Real Estate Commissions and Loan Types in Kentucky

The National Association of Realtors (NAR) recently reached a settlement that impacted real estate commissions for different mortgage loan types in Kentucky and across the United States. Here's a breakdown of how commissions can vary:

Conventional Loans

  • For conventional mortgage loans, the typical real estate commission is 3-6% of the home's sale price.
  • This commission is usually split evenly between the buyer's agent and the seller's agent.
  • Buyer may pay their Agent's reasonable commissions or have the seller or agent constructio to the commission of the buyer agents' commission.  Typical fees paid by the seller are not subject to the IPC limits.  (interested party contribution)

FHA Loans

  • For FHA (Federal Housing Administration) loans, the real estate commission is typically slightly lower, around 3-6% of the sale price.
  • This lower commission is due to the additional requirements and paperwork involved with FHA loans.

  • FHA Loans-FHA allows buyer to pay commissions of their agents, or negotiate the seller's or agent contribution to commission to the buyer's agent. – If the State and Local law or custom permits this, and if the commissions and fees are reasonable in amount, the existing policy would not treat it as an IPC. (interested party contribution)

VA Loans

  • For VA (Veterans Affairs) loans, the real estate commission is usually the lowest, around 3-6% of the sale price.
  • VA loans have strict guidelines, and the lower commission helps offset some of the additional costs associated with these loans.
  • VA Loans-Buyer may pay their agent's commission or negotiate the seller or  agents contribution to commission to the buyer's agent.  (interested party contribution) IPC is not mentioned. A temporary variance is permitted for the Veteran buyer to pay Buyer Broker Fees.

USDA Loans

  • USDA (United States Department of Agriculture) loans, which are designed for low-income homebuyers in rural areas, also typically have a real estate commission of 3-6%.
  • The lower commission helps make these loans more affordable for the homebuyers.
  • USDA loans-Buyer may pay their agents commission or negotiate the seller's or agent's contribute to the commission of the buyer's agent. Real Estate Commission Fees are excluded from the 6% cap for IPC concessions



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Interested Party Contributions: On April 15, Fannie Mae and Freddie Mac announced that they will not count buyer’s agent commissions as part of their allowable interested party contributions (IPCs). This is not an update to their selling guides, but a clarification on how seller-paid real estate agent fees are treated. Fannie/Freddie guidelines allow sellers to contribute 2-9% of the property value toward the borrower’s closing costs. In their announcement, Fannie and Freddie stated that “fees or costs customarily paid by the property seller according to local convention are not subject to these financing concessions limits.”


  •  The new terms outlined in this settlement will have ripple effects that both consumers and industry stakeholders will likely experience.

  • The consumer impact:

    Consumers may feel more pressured to finance the broker’s commission into their loan. This could negatively impact underserved, low-to moderate-income, and first-time borrowers who may not have the necessary means to fund a buyer’s commission out of pocket.

  • Higher mortgage costs:

    Financing the buyer-broker commission into the loan poses challenges to the Section 32 points & fees test, which could lead to an increase in higher-cost mortgages and non-qualified mortgage (QM) loans.



On March 15th, 2024, the National Association of Realtors (NAR) agreed to pay $418 million in damages to settle some of their real estate commission lawsuits. The settlement prohibits NAR from requiring a seller's agent to engage in cooperative compensation with a buyer's agent.

The key details are:

  • Date: March 15th, 2024
  • Payment: NAR agreed to pay $418 million in damages
  • Settlement terms: NAR prohibited from requiring seller's agent to cooperate with buyer's agent on commissions

This settlement is significant because the new terms will likely have ripple effects that both consumers and industry stakeholders will experience:

Consumers:

  • Potentially lower real estate commission fees as a result of increased competition between agents
  • More flexibility and control for sellers in how they compensate buyer's agents
  • Possibility of buyers having to pay their agent's fees directly rather than them being bundled into the home price

Industry Stakeholders:

  • Real estate brokerages and agents may need to adjust their business models and commission structures
  • Reduced influence of NAR in setting industry standards and practices around commissions
  • Potential for new business models and pricing approaches to emerge in the real estate market

Overall, this settlement represents a shift in the power dynamics of the real estate industry that could lead to more competition and consumer-friendly changes in the way real estate transactions are conducted. Let me know if you have any other questions!



Reach out to me anytime on my cell --  Always happy to help!


Joel Lobb  Mortgage Loan Officer NMLS 57916

EVO Mortgage
 911 Barret Ave, Louisville, KY 40204
Company NMLS ID # 173846

Text/call: 502-905-3708

email: kentuckyloan@gmail.com

http://www.mylouisvillekentuckymortgage.com/



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NMLS 57916  | Company NMLS #173846
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).

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Assumption of A Kentucky Mortgage Loan

An assumable mortgage is a type of home loan that allows a new buyer to take over the seller's existing mortgage instead of obtaining a new loan. Here are the key points about assumable mortgages:

  1. Transfer of responsibility: The buyer assumes the remaining balance, interest rate, repayment term, and other conditions of the seller's mortgage.
  2. Potential benefits:
    • Buyers may get a lower interest rate than current market rates
    • Lower closing costs compared to a new mortgage
    • Simplified process in some cases
  3. Restrictions:
    • Not all mortgages are assumable
    • Lender approval is usually required
    • The buyer typically needs to qualify financially
  4. Common types:
    • FHA loans
    • VA loans
    • Some adjustable-rate mortgages (ARMs)
  5. Considerations:
    • The buyer may need to make up the difference if the purchase price exceeds the remaining mortgage balance
    • There may be fees associated with assuming the mortgage


Advantages and disadvantages of assuming someone's mortgage loan.

Advantages:

  1. Lower interest rates: If current market rates are higher than the rate on the existing mortgage, the buyer can benefit from a lower rate.
  2. Lower closing costs: Assuming a mortgage often involves fewer fees than getting a new loan, potentially saving thousands in closing costs.
  3. Easier qualification: Sometimes, the qualification process for an assumable mortgage is less stringent than for a new loan.
  4. Avoiding appraisal: In some cases, a new appraisal may not be required, which can save time and money.
  5. Preserving favorable terms: If the original mortgage has beneficial terms, such as a low fixed rate or no prepayment penalty, these can be preserved.

Disadvantages:

  1. Limited availability: Not all mortgages are assumable. Conventional loans are rarely assumable, while FHA and VA loans are more likely to be.
  2. Lender approval required: Most assumable mortgages still require the buyer to be approved by the lender, which can be a hurdle.
  3. Possible down payment gap: If the home's purchase price is higher than the remaining mortgage balance, the buyer needs to cover the difference, potentially requiring a large down payment or second mortgage.
  4. Seller's liability: In some cases, the original borrower may remain partially liable for the loan unless formally released by the lender.
  5. Outdated loan terms: If interest rates have fallen significantly since the original mortgage was issued, assuming the loan might not be advantageous.
  6. Potential due-on-sale clause: Some mortgages have a due-on-sale clause that requires full repayment upon transfer, which can complicate or prevent assumption.
  7. Assumption fees: While often lower than new loan costs, there may still be fees associated with assuming a mortgage.
  8. Less flexibility: The buyer is locked into the existing loan's terms, which may not be ideal for their financial situation.


What is an Example of an Assumable Mortgage?


An example of an assumable mortgage would typically involve a government-backed loan, as these are the most common types of assumable mortgages. Let's walk through a specific scenario:

Example: FHA Loan Assumption

  1. Original Mortgage:
    • Loan type: FHA (Federal Housing Administration) loan
    • Original loan amount: $300,000
    • Interest rate: 3.5% fixed
    • Term: 30 years
    • Time elapsed: 5 years
  2. Current Situation:
    • Remaining balance: $270,000
    • Remaining term: 25 years
    • Current market interest rates: 5.5%
  3. Assumption Process:
    • Home seller lists their property for $350,000
    • Buyer agrees to purchase and assume the existing FHA loan
    • Buyer applies with the current lender to assume the mortgage
    • Lender reviews buyer's credit and financial situation
  4. Outcome:
    • Buyer is approved to assume the mortgage
    • Buyer takes over the remaining $270,000 loan at 3.5% interest
    • Buyer pays the $80,000 difference ($350,000 - $270,000) as a down payment or obtains a second mortgage
  5. Benefits for the Buyer:
    • Obtains a 3.5% interest rate instead of the current 5.5% market rate
    • Saves on closing costs compared to a new mortgage
    • Inherits the remaining 25-year term of the original mortgage

This example illustrates how a buyer can benefit from assuming an existing mortgage, particularly in a rising interest rate environment. The process preserves the favorable terms of the original loan while allowing the property to change hands.




This sounds good on paper but in reality it never works. I have never done in my 20 years of doing mortgages and if they decide to go that route, they must get approved with the current servicer of the loan in which can be a very cumbersome process and usually does not work. 


Below I listed the reasons why assuming someone's mortgage does not work. In the end, most servicers will not make an assumption of the current mortgage because they don't want to be on the hook for such a low rate. Most lenders are trying to get rid of the low fixed rates on their books that were made during the Pandemic.



Only Certain Loans Are Eligible


Only USDA, FHA, and VA loans are eligible for mortgage assumption. Additionally, sellers may have to jump through a few hoops to release themselves of liability from the loan. This situation makes assumable mortgage loans less appealing to sellers if they have traditional offers on the table.


A Large Down Payment Is Required


The biggest obstacle to assuming a mortgage loan is the large down payment. You can obtain a second mortgage if you do not have the cash to cover the seller’s equity, but this situation can complicate things a bit. Depending on how much equity the seller has, it may be easier and more advantageous for you to obtain a traditional mortgage.


Stringent Approval Process



Assuming a mortgage isn’t a walk in the park. Buyers must provide extensive documentation and undergo a lengthy approval process, often taking up to 90-120 days. This can be cumbersome and time-consuming, potentially delaying the home buying process. Most services of current mortgage loans will not do an assumption due to the low rate.


Seller’s Liability



In a simple assumption, the seller remains liable for the outstanding mortgage debt. If the buyer defaults on payments, both parties’ credit scores are affected. This shared risk can strain the relationship between buyer and seller and lead to financial repercussions for both.



Assumptions are permitted, however they are rarely used as 7 CFR 3555.256(b)(2) requires the transferor to remain personally liable for the debt after the acquisition and assumption (among other requirements) Names cannot be removed from the loan without a refinance of the loan.



Assuming A Mortgage Loan.



Questions about assuming someone's mortgage. Contact me below.



Thanks

Joel Lobb Mortgage Loan Officer NMLS 57916
EVO Mortgage
911 Barret Ave, Louisville, KY 40204
Company NMLS ID # 173846

Text/call: 502-905-3708

email: kentuckyloan@gmail.com


http://www.mylouisvillekentuckymortgage.com/








NMLS 57916 | Company NMLS #173846

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).



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