Latest FHA shift to mitigate risks may shut out some Kentucky home buyers wanting FHA Loans in 2019

Kentucky FHA Loan Changes for Fico and Credit Scores for 2019

 

Latest FHA shift to mitigate risks may shut out some homebuyers:

Kentucky FHA Loan Changes for FICO Scores and Credit Scores for 2019

Kentucky FHA Loan Changes for Fico and Credit Scores for 2019

Last week, the Federal Housing Administration took steps to mitigate risks to its single-family portfolio, announcing updates to its TOTAL Mortgage Scorecard that may flag some loans for manual underwriting.
The change applies to all loans with case numbers assigned on or after March 18th, meaning that it is likely to affect some of the loans currently sitting in an FHA lender’s pipeline.
Chatter among members of the lending community suggests a number of originators are unhappy about the changes, fearing that the end result may be that some of their borrowers will be shut out of FHA financing.
Some said the FHA did not go about implementing the changes the right way, creating confusion about how the risk is being mitigated, while others said they felt as if the rug had been pulled out from under them, and fear that borrowers who no longer qualify will be angry, according to email exchanges between lenders and mortgage brokers, shared with HousingWire.
For its part, the FHA said it is taking necessary steps to address some of the risk trends apparent in its single-family portfolio and flagged as concerning in its 2018 Report to Congress.
Specifically, FHA loans have seen a substantial increase in cash-out refinances, a drop in the average borrower credit score, and an increase in borrowers with high debt-to-income ratios.
In its letter about the Scorecard updates, the FHA said that the number of FHA refinances that are cash-outs increased 60% in 2018, and that almost a quarter of all FHA loans in 2018 had a DTI ratio above 50%.
The average credit scores for FHA borrowers has also declined, falling to 670 in 2018 – the lowest average since 2008.
Combined, these factors are signaling untenable risk for the agency as they flag the potential for the program to drain the Mutual Mortgage Insurance Fund.
“Federal Housing Commissioner Montgomery has publicly stated numerous times in recent months that FHA must seek the right balance between managing risk and fulfilling its mission of supporting sustainable home-ownership,” the FHA said in its letter.
“To be successful long term, FHA must maintain the integrity of its insurance endorsements,” it continued. “This includes assessing the causes of the increase in higher-risk credit characteristics in the portfolio and making prudent and necessary changes to re calibrate and adjust its policies as warranted to manage credit risk.”
The agency said the updates to its Scorecard are just the first step it will be taking to address these risk factors.
“FHA will carefully monitor the impact of this change and is preparing to implement additional changes to maintain a better balance of managing risk and fulfilling its mission,” the agency stated.

 

I can answer your questions and usually get you pre-approved the same day. 


Call or Text me at 502-905-3708 with your mortgage questions.
Email Kentuckyloan@gmail.com

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
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Source: Latest FHA shift to mitigate risks may shut out some homebuyers

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2019 Kentucky FHA Loan Requirements

Kentucky HUD $100 Down FHA Program for 2019

The requirements for Kentucky FHA loans are set by HUD.

  • Borrowers must have a steady employment history of the last two years within the same industry or line of work. Recent college graduates can use their transcripts to supplant the 2 year work history rule as long as it makes sense.
  • Self-Employed will need a 2 year history of tax returns filed with IRS. They will take a 2 year average.
  • FHA requires a 3.5% down payment. Can be gifted from family member or from retirement savings plan, or money saved-up. Any type of cash deposits are not allowed for down payments. No exceptions to this rule!! This is one of the biggest issues I see in FHA underwriting nowadays.
  •  FHA loans are  for primary residence occupancy. Not rental houses.
  • Borrowers must have a property appraisal from a FHA-approved appraiser.
  • Borrowers’ front-end ratio (mortgage payment plus HOA fees, property taxes, mortgage insurance, homeowners insurance) needs to be less than 31 percent of their gross income, typically. You may be able to get approved with as high a percentage as 43 percent. If the Automated Underwriting System gives you an Approved Eligible you can go higher on the debt ratios
  • Borrowers must have a minimum credit score of 580 for maximum financing with a 3.5% down payment
  • Borrowers must have a minimum credit score of 500-579 for maximum LTV of 90 percent with a minimum down payment of 10 percent. Most lenders will not go below 620 score, and very few lenders will go to 580 score. It’s best to work on getting your scores up before you apply or work with a loan officer to improve them.
  • 2 years removed from Chapter 7 is required with good pay history after bankruptcy
  • 1 year removed from Chapter 13 is okay with an excellent pay history with the Chapter 13 plan and permission from trustee. You will need to qualify with the Chapter 13 payment along with new house payment. Again, scores will play into your loan pre-approval.
  • Typically borrowers must be three years out of foreclosure and have re-established good credit. Exceptions can be made if there were extenuating circumstances and you’ve improved your credit. If you were unable to sell your home because you had to move to a new area, this does not qualify as an exception to the three-year foreclosure guideline.
  • Max FHA loan in Kentucky is between $294,000 to $304,000 depending on the county in Kentucky for FHA loans in KY for 2019
  • The property must be appraised by an Kentucky FHA-approved appraiser.
  • The property must be safe, sound and secure, in compliance with minimum property standards as defined by the U.S. Department of Housing and Urban Development, or HUD.
  • You may not have delinquent federal debt or judgments, or debt associated with past FHA loans. Caivrs Alert System will show up if you owe the government money.
  • 2019 Kentucky FHA loan limits are as follows:

All Kentucky Counties received a loan amount increase in 2019 for FHA loans made starting January 1, 2019

The new loan limits are effective with case numbers assigned on
or after January 1, 2019

Most Kentucky Counties will have a max of $314, 827 for 2019 FHA loans made in KY.
To find the Kentucky FHA  loan limit for a specific county in Kentucky for 2019, please use the link below.

kentucky fha loan limits for 2019 will be $314,827

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https://entp.hud.gov/idapp/html/hicostlook.cfm

Why Lenders Use CAIVRS

It is true that your CAIVRS report can help lenders to predict the risk of doing business with you, just like a traditional consumer credit report. But the primary reason lenders check your CAIVRS report is because they are generally required to do so for any applications that involve a federal loan (FHA, VA, USDA, SBA, etc.). Lenders are required to conduct a CAIVRS search because Title 31 of the United States Code (Section 3720B) bars “delinquent federal debtors from obtaining federal loans or loan insurance guarantees.”

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Kentucky FHA Loan Requirements for 2019

 

 

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  • Gift Rules for Down-Payment Sources Guidelines on FHA Mortgage Programs

    One of the biggest obstacles to buying a home for Americans is the down payment. There was a time when you needed a 20% down payment and a high credit score to buy a home. But in 2018, you can buy a home with average to below average credit and a low down payment in some cases. One of the most popular loan programs for these buyers if the FHA loan. A major advantage of the FHA mortgage loan is you can get approved with only a 3.5% down payment with a 580 or higher credit score. If you have a lower score than that, you need a 10% down payment.

    Still, there are situations where the borrower is having trouble coming up with the down payment for the loan. What to do then? FHA guidelines do allow other options. Keep reading to learn more.

    More on FHA Down Payments and Approved Sources

    As we note above, you are required to have at least a 3.5% down payment to be approved for an FHA loan. The money must be verified by the FHA-approved lender to come from an ‘approved source.’ What is an approved source, anyway? Most people get their down payment from cash reserves, investments, borrow from 401k or IRA, etc. The idea behind verifying where the money came from is to make sure the borrower did not get the down payment from a credit card or payday loan, etc.

    But there are other options for your down payment. The funds also can come from a gift. The gift and the giver do need to meet FHA requirements, but this flexible guideline makes it possible to get into an FHA loan with, technically, zero money down. To determine if the down payment gift can be used or not, it is necessary to check HUD rules. According to HUD 41.55.1 Chapter 5 Section B, for the funds to be a gift, there cannot be any expected repayment of the money.

    Also, FHA will scrutinize the giver of the gift. Chapter 5 of the HUD Code states the cash gift is ok if it comes from your relative; employer or labor union; close friend with a defined interest in you; charitable organization; government agency or public entity.

    FHA also states who cannot give gift funds to you for the down payment. These are the seller; the real estate agent or broker on the deal; the builder or an associated entity.

    Gift Terms Explained

    The gift for your down payment cannot be made based upon paying it back later. You are required to get a gift letter from the person or organization. The letter should state that you are not required to pay the money back. It also should provide the contact information for the borrower, such as name, address, and phone number. Also included should be the bank account from which the funds will be sent.

    The gift donor should be OK with giving a bank statement with the letter. Also, he or she should ensure that the transfer amount matches what is in the gift letter and what is deposited into your account.

    FHA rules are very specific on these areas to ensure that the home buying process through FHA is fair and just. But as long as you follow the FHA rules, you should be able to get help with your down payment from a friend or relative.

    Don’t Have Friends or Family Who Can Help?

    Not every borrower has friends or family who can give them a gift for their down payment. But HUD lists many government programs spread throughout the country in most states that can offer down payment and closing cost help for certain borrowers.

    It also is worth checking if your employer and state have employer assisted housing. This program can help people with moderate incomes to get a loan to cover closing costs and down payment. Look up EAH in your state on Google to see what is available.

    Experts say that down payment help is available for nearly 90% of homes in the US. There is a good chance that you can get help on your down payment through one of these organizations. References: https://www.fha.com/fha_article?id=441

  • Benefits and Drawbacks for an FHA Borrower
  • Call or Text me at 502-905-3708 with your mortgage questions.
    Email Kentuckyloan@gmail.com


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    Kentucky FHA Loan Requirements for 2019
    What are the requirements for a FHA loan in Kentucky?

     

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    2019 Kentucky FHA Loan Requirements from r/personalfinance

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    Joel Lobb
    Senior  Loan Officer

    (NMLS#57916)
    text or call my phone: (502) 905-3708
    email me at kentuckyloan@gmail.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). Mortgage loans only offered in Kentucky.
    All loans and lines are subject to credit approval, verification, and collateral evaluation and are originated by lender. Products and interest rates are subject to change without notice. Manufactured and mobile homes are not eligible as collateral.