HARP has been expanded to help more homeowners qualify for refinancing their
Louisville Kentucky Mortgage Loans
– even those with little or no equity available.
With HARP you could take advantage of low interest rates and other refinancing benefits even if the value of your home has declined and you owe more than your home is worth.
The questions and answers below will help you better understand how this program can help you refinance your underwater mortgage:
- What does it mean to Refinance my Louisville Kentucky Mortgage Loan?When you refinance your mortgage, you are applying for a new mortgage, which replaces your current home loan.
- What does it mean to be upside down on my mortgage?The terms “Upside Down”or “Underwater” simply mean that you owe more on your home loan than your property may appraise or sell for.The percentage that you are upside down is factored into what’s called a Loan-to-Value(LTV) ratio. So, if you owe $125,000 on a property that is valued at $100,000, then your LTV would be 125%.With the new updates to the HARP 2.0 program, borrowers with an LTV ratio greater than 125% may now qualify for a new refinance, provided they meet the other criteria.
- What is the difference between a refinance and a loan modification?Basically, a modification is a change to an existing loan, where a refinance is a new loan.A Refinance on your loan means that you get a new loan to pay off an existing mortgage.A modification is for borrowers who are behind on their mortgage payment, or struggling to remain current, and are either not eligible for a refinance or it will not help them maintain their payments.
- What changes were made to HARP that may make me eligible now?There were several changes to HARP, but the primary enhancement removed the limit on the amount that homeowners could be underwater (owe more on their mortgage than their home is worth). With that change, many homeowners who were not eligible will now qualify.The amount a borrower owes on a mortgage compared to the appraised value of a property is called Loan-to-Value (LTV).With the release of “HARP 2.0” guidelines, the original 125% LTV Cap was lifted, which will essentially allow borrowers who owe more than 125% on their first mortgage the ability to qualify for a new refinance, provided they meet the other underwriting and program criteria.
- Is HARP the only refinance program available for underwater homeowners?HARP is one of several refinancing options available to eligible homeowners. However, HARP is unique because it is the primary refinance program that enables eligible borrowers with little to no equity in their homes to take advantage of low interest rates and other refinancing benefits.Making Home Affordable is a trademark of the United States Department of the Treasury.
- How can I find out whether my loan is owned by Fannie Mae or Freddie Mac?Only mortgages owned or guaranteed by either Fannie Mae or Freddie Mac are eligible for refinance under the enhanced and expanded provisions of HARP. You can confirm that your mortgage is owned by either Fannie Mae or Freddie Mac by checking the following Web sites:http://fanniemae.com/loanlookup/
- Who is Fannie Mae?Fannie Mae is a government-chartered company with a mission to provide a stable source of funding to the U.S. housing and mortgage markets.The company purchases and securitizes mortgage loans to ensure that money is consistently available to financial institutions that lend money to home buyers.
- What is the difference between a lender and a servicer?Your mortgage lender is the financial institution that gave you your mortgage loan.Your servicer is the financial institution that you send your monthly payment to. Your servicer is responsible for collecting your payments and crediting your account.You can find your mortgage servicer contact information on your monthly statement or coupon book.
- On The Fannie Mae loan lookup tool, what does “Match Found” mean?A “Match Found” response to your search in the Fannie Mae Loan Lookup means that Fannie Mae owns a loan at the address entered in the search, however, it does not guarantee or imply that you will qualify for a Fannie Mae loan refinance or loan modification.
- My loan is owned by Fannie, but it says that I don’t qualify for HARP?This is because Fannie Mae needed to receive your loan on May 31, 2009 or before.
- Does Fannie Mae own my first and second mortgage?Fannie Mae generally owns primary (first-lien) mortgages only. A “Match Found” on the Fannie Mae Loan Lookup Tool means that they own the primary mortgage on the address entered in the search field.To find out who owns your second mortgage, refer to your monthly mortgage statement or contact the mortgage servicer to whom you send your monthly payment to.
- What if I have an adjustable-rate mortgage (ARM)?HARP allows you to replace your adjustable-rate mortgage and many homeowners opt for a more stable fixed-rate mortgage.Every adjustable-rate mortgage is different, but refinancing may still provide you with a lower monthly payment, and allow you to avoid the sometimes large payment increase that comes once your ARM initial rate ends. The stability of a fixed monthly payment will give you security in knowing what you’ll owe every month.
- Will the lender require an appraisal with a new HARP loan?Maybe – Even though the new updates to this program are intended to give borrowers with a Loan-to-Value (LTV) ratio above 125% the ability to refinance, lenders will still run an online valuation or require a full appraisal.Fannie Mae and Freddie Mac are updating their systems as this program progresses, but a good rule-of-thumb to follow is that loans under 125% LTV will generally not have an appraisal.If the appraisal is not conducted because of what is called PIW (Property Inspection Waiver), there will still be a $75 fees paid to Fannie Mae. Irrespective of what the appraisal value comes out to be, the loan would go through. However, some lenders may still cap the LTV to 150% – 200% or more, mainly depending on how the market reacts to this new program. Basically, expect LTV, Appraisal and Lending Limits to vary between lenders, and the time of the month.
- Do I have to refinance through my current lender?No – As of March 19, 2012, Fannie Mae and Freddie Mac have opened this program up to non-servicing mortgage lenders.This is a huge benefit to borrowers in the fact that you have an opportunity to find a bank or mortgage broker who specializes in the new HARP program and can offer competitive rates.
- Am I eligible for a refinance if my current loan has mortgage insurance (MI)?Yes, and the good news is that most of the mortgage insurance companies are working with HARP lenders to make the process as seamless as possible.Your new lender will do the work to make sure your current mortgage insurance scenario is similar to what you were, or were not paying.
- Will I have to pay MI with a HARP since my new LTV will be >80%?No – If you did not originally have mortgage insurance due to the fact that your original LTV was less than 80% when acquired that loan, you will not be required to have MI, even though your new Loan-to-Value ratio will be greater than 80%.
- I did not put 20% down when I purchased my property, but I do not have MI?If your current loan at the time of closing was over 80% and you are not paying a monthly Mortgage Insurance, most likely you have a Lender Paid Mortgage Insurance (LPMI).And yes, you would be able to refinance if you have an LPMI. Your lender will simply need to transfer the same coverage level from your current MI company to the new HARP 2.0 Refinance.
- Can I Combine My First And Second Mortgage Into The New HARP Refinance?No – HARP does not allow for cash-out refinances or combining a first and second.Your new lender will order a subordination from your current second mortgage holder, which may require a fee.To quote the guidelines: “The refinance will not have a cash-out component, except for closing costs and certain de minimis allowances to cover items such as association fees, property tax bills, insurance costs, and rounding adjustments.
- Will the lender need to verify income, assets and employment?Fannie Mae doesn’t expressly ask for Income, Employment or Asset verification for HARP 2.0 Loans. But, Fannie Mae suggests that the lender must obtain a verbal verification of employment (VOE) and verify the borrower’ss source of non-employment income, plus obtain any other income documentation as required by the Underwriting Findings Report.The borrower’s ability to repay the mortgage loan is based primarily on the acceptable payment history of the existing mortgage and the borrower benefit provisions. The acceptable payment history is no late in last 6 months and no more than one 30 days late in 7-12 months.If the borrower’s principal and interest payment is increasing more than 20%, the borrower must be re-qualified for the new loan, including verification of all income sources and amounts, and verification of any assets needed to close.Basically, your new lender will run your application through an online Fannie Mae or Freddie Mac approval engine, which will then provide a list of necessary documentation you need to prepare for loan submission.
- Can I qualify for a new loan on an investment property or second home?All occupancy types i.e. Primary Residence, Second Homes and Investment Properties are allowed with HARP, even if the occupancy type has changed since the time of the original loan.Aliquam porttitor metus felis. Curabitur euismod porta justo ut mattis. Mauris condimentum ultrices justo, ac suscipit leo tempor eget
- Are All Borrowers on the existing mortgage required to be on the new loan?Borrower(s) may be removed through the new transaction, provided that:a) The lender obtains documented evidence that the remaining borrower has been making payments from his or her own funds for the past 12 months, andb) The borrower(s) being removed is also removed from the deed.If the borrower(s) is being removed due to death, however, evidence that the remaining borrower(s) has been making payments from his or her own funds is not required.
HARP REFINANCE QUESTIONS?
You can determine whether your mortgage is owned by either Fannie Mae or Freddie Mac by checking the following Web sites:
Fannie Mae and Freddie Mac have adopted changes to the Home Affordable Refinance Program (HARP) and you may be eligible to take advantage of these changes. If your mortgage is owned or guaranteed by either Fannie Mae or Freddie Mac, you may be eligible to refinance your mortgage under the enhanced and expanded provisions of HARP.
We Are Not The Government. All approvals and rates are not guaranteed, and are only issued based on standard HARP or other mortgage qualifying guidelines. Equal Opportunity Lending, Fair Credit, Truth in Lending, and their own local and state RESPA, or otherwise lending laws. Privacy Statement | Equal Housing
Making Home Affordable is a trademark of the United States Department of the Treasury.
Call us at 502-905-3708 today, or CLICK HERE to apply online.
Senior Loan Officer
How do I refinance using my Kentucky VA Home Loan?
You can use your Kentucky VA home loan benefit to refinance your existing VA home loan to a lower
interest rate, with little or no out-of-pocket cost. This is called an Interest Rate Reduction
Refinancing Loan (IRRRL), also known as a “rapid refinance” or a “streamline refinance.”
Generally, no appraisal, credit information, or underwriting is required for this refinancing
option, although some lenders may require an appraisal and credit report. The fees and
charges associated with the refinancing loan may be incorporated into the new VA loan.
Remember: The interest rate on the new loan must be lower than the rate on the old loan
(unless you refinance an adjustable-rate mortgage to a fixed-rate mortgage).
To receive an IRRRL, work with your lender to process your application. It’s generally a good
idea to compare several lenders’ rates first, as there may be large differences in the terms
they offer. Also, some lenders may contact you suggesting that they are the only lenders
with the authority to make IRRRLs, but according to VA, any lender can
make you an IRRRL.
An IRRRL can be done only if you have already used
your eligibility for a KentuckyVA loan on the property you intend to
refinance. If you have your Certificate of Eligibility, take it
to the lender to show your prior use of the entitlement.
The occupancy requirement for an IRRRL is different from that for
other VA loans. When you originally got your Kentucky VA loan, you certified
that you occupied or intended to occupy the home. For an IRRRL, you
need only certify that you previously occupied it.
The loan may not exceed the sum of the outstanding balance on the existing VA loan,
plus allowable fees and closing costs, including the funding fee.
What’s the Cash-out Refinance Option?
The Veterans’ Benefits Improvement Act of 2008 allows you to free up cash with a cash-out
refinance, a VA home loan refinance program in which you can cash-out on the equity you
have built up in your home. As an example, if you still owe $70,000 on your original loan, you
can refinance for a $90,000 loan, which gives you a cash-out of $20,000.
An appraisal is required and you must qualify for the loan. If you are refinancing for the first
time, VA charges a 2.15% funding fee for this program (2.15% of the total loan) which can be
rolled into the loan amount. If you refinance more than once, the funding fee is 3.3%.
There is no minimum amount of time that you must own your home, yet your home must have
sufficient equity to qualify for KEntuckyVA refinancing. Existing loans can be refinanced whether they
are in a current or delinquent status, but refinancing loans are subject to the same income
and credit requirements as regular home loans. As long as you have title to the property
you can refinance an assumed loan. Check with your lender as there are some additional
regulations concerning assumed loans.
Conventional to VA Refinance
If you do not have a KentuckyVA home loan but are eligible for one, you can refinance a subprime or
conventional mortgage for up to 100 percent of the value of the property. Usually you will be
charged a funding fee of around 2-3 percent (depending on the lender you choose) if you are
using your VA loan guarantee for the first time. Benefits to this type of refinancing are that
your new interest rate may be lower and you will have no monthly mortgage insurance or outof-
pocket closing costs.
Can I reuse my Kentucky VA Home Loan benefit?
The Kentucky VA home loan benefit can be reused if you have paid off your priorKentucky VA loan and sold the
property. In addition you may, on a one-time-only basis, be able to reuse or restore your
benefit eligibility if your prior VA loan has been paid in full and you still own the property.
In either case, to restore your eligibility, you must send a completed VA Form 26-1880 to your
VA Eligibility Center. (See VA Loan Documents Checklist Above.)
To prevent delays in processing, you should also include evidence that the prior loan has
been paid in full and, if applicable, the property disposed of. This evidence can be presented
in the form of a paid-in-full statement from the former lender, or a copy of the HUD-1
settlement statement completed in connection with a sale of the property or refinance of the
Depending on the circumstances, if you have already used a portion of your VA-guaranteed
amount (up to $89,912), and the used portion cannot be restored, any remaining portion of
your VA guarantee is available for use on another loan. You will have to ask your lender if your
remaining VA-guaranteed portion will be enough, or if you will need to make a down payment
to qualify for the loan. If you have a question about your specific case, contact VA.
What are the advantages of a Kentucky VA Home Loan?
The following is a quick list of reasons why a Kentucky VA loan may be your best option:
No down payment required
VA funding fee may be financed in the loan
VA Loans do not require perfect credit – there is no credit score cut-off
VA funding fees may be waived for veterans with VA rated service-connected
disabilities and surviving spouses of veterans with service-connected disabilities
Closing costs may be shared between the buyer and lender
No mortgage insurance premiums – this is huge in today’s housing market
VA guarantied mortgages are assumable
No pre-payment penalties
Homes are inspected and appraised by VA prior to approval and/or during
VA can offer assistance to veteran borrowers in default due to temporary financial
Refinance and Interest Rate Reduction loans are available
All in all, the pros far outweigh the cons. And, considering there are very few “no-down
payment” mortgage options around that offer lower associated fees, using your VA home
loan benefit seems like a no-brainer – as long as the red tape doesn’t scare you.
- Louisville Kentucky VA Refinance Loans (kentuckyvaloan.com)
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First Time home buyers louisville kentucky
Louisville Mortgage Underwriting Guidelines
Understanding Louisville Mortgage mortgage underwriting guidelines will help you understand your loan options when purchasing or refinacing a home. Now that you have found your dream house, you are going to need to apply for a Louisville Mortgage mortgage loan. Your realtor will either recommend a banking institution or you may already have one in mind. You will be dealing with a loan officer who will be compiling all the data on you to see if you qualify for a loan to pay for this house. All lending institutions have different Underwriting Guildelines set in place when reviewing a borrower’s financial history to determine the likelihood of receiving on-time payments. The primary items reviewed are:
Income is one of the most important variables a lender will examine because it is used to repay the loan. Income is reviewed for the type of work, length of employment, educational training required, and opportunity for advancement. An underwriter will look at the source of income and the likelihood of its continuance to arrive at a gross monthly figure.
Salary and Hourly Wages – Calculated on a gross monthly basis, prior to income tax deductions.
Part-time and Second Job Income – Not usually considered unless it is in place for 12 to 24 straight months. Lenders view part-time income as a strong compensating factor.
Commission, Bonus and Overtime Income – Can only be used if received for two previous years. Further, an employer must verify that it is likely to continue. A 24-month average figure is used.
Retirement and Social Security Income – Must continue for at least three years into the future to be considered. If it is tax free, it can be grossed up to an equivalent gross monthly figure. Multiply the net amount by 1.20%.
Alimony and Child Support Income – Must be received for the 12 previous months and continue for the next 36 months. Lenders will require a divorce decree and a court printout to verify on-time payments.
Notes Receivable, Interest, Dividend and Trust Income – Proof of receiving funds for 12 previous months is required. Documentation showing income due for 3 more years is also necessary.Rental Income – Cannot come from a Primary Residence roommate. The only acceptable source is from an investment property. A lender will use 75% of the monthly rent and subtract ownership expenses. The Schedule E of a tax return is used to verify the figures. If a home rented recently, a copy of a current month-to-month lease is acceptable.
Automobile Allowance and Expense Account Reimbursements – Verified with 2 years tax returns and reduced by actual expenses listed on the income tax return Schedule C.
Education Expense Reimbursements – Not considered income. Only viewed as slight compensating factor.
Self Employment Income – Lenders are very careful in reviewing self-employed borrowers. Two years minimum ownership is necessary because two years is considered a representative sample. Lenders use a 2-year average monthly income figure from the Adjusted Gross Income on the tax returns. A lender may also add back additional income for depreciation and one-time capital expenses. Self-employed borrowers often have difficulty qualifying for a mortgage due to large expense write offs. A good solution to this challenge used to be the No Income Verification Loan, but there are very few of these available any more given the tightened lending standards in the current economy. NIV loan programs can be studied in the Mortgage Program section of the library.
An applicant’s liabilities are reviewed for cash flow. Lenders need to make sure there is enough income for the proposed mortgage payment, after other revolving and installment debts are paid.
- All loans, leases, and credit cards are factored into the debt calculation. Utilities, insurance, food, clothing, schooling, etc. are not.
- If a loan has less than 10 months remaining, a lender will usually disregard it.
- The minimum monthly payment listed on a credit card bill is the figure used, not the payment made.
- An applicant who co-borrowed for a friend or relative is accountable for the payment. If the applicant can show 12 months of on-time cancelled checks from the co-borrowee, the debt will not count.
- Loans can be paid off to qualify for a mortgage, but credit cards sometimes cannot (varies by lender). The reasoning is that if the credit card is paid off, the credit line still exists and the borrower can run up debt after the loan is closed.
- A borrower with fewer liabilities is thought to demonstrate superior cash management skills.
Most lenders require a residential merged credit report (RMCR) from the 3 main credit bureaus: Trans Union, Equifax, and Experian. They will order one report which is a blending of all three credit bureaus and is easier to read than the individual reports. This “blended” credit report also searches public records for liens, judgments, bankruptcies and foreclosures. See our credit report index.
Credit report in hand, an underwriter studies the applicant’s credit to determine the likelihood of receiving an on-time mortgage payment. Many studies have shown that past performance is a reflection of future expectations. Hence, most lenders now use a national credit scoring system, typically the FICO score, to evaluate credit risk. If you’re worried about credit scoring see our articles on it.
The mortgage lending process, once very forgiving, has tightened lending standards considerably. A person with excellent credit, good stability, and sufficient documentable income to make the payments comfortably will usually qualify for an “A” paper loan. “A Paper”, or conforming loans, make up the majority of loans in the U.S. and are loans that must conform to the guidelines set by Fannie Mae or Freddie Mac in order to be saleable by the lender. Such loans must meet established and strict requirements regarding maximum loan amount, downpayment amount, borrower income and credit requirements and suitable properties. Loans that do not meet the credit and/or income requirements of conforming “A-paper” loans are known as non-conforming loans and are often referred to as “B”, “C” and “D” paper loans depending on the borrower’s credit history and financial capacity.
Here are some rules of thumb most lenders follow:
- 12 plus months positive credit will usually equal an A paperloan program, depending on the overall credit. FHA loans usually follow this guideline more often than conventional loans.
- Unpaidcollections, judgments and charge offs must be paid prior to closing an A paper loan. The only exception is if the debt was due to the death of a primary wage earner, or the bill was a medical expense.
- If a borrower has negotiated an acceptable payment plan, and has made on time payments for 6 to 12 months, a lender may not require a debt to be paid off prior to closing.
- Credit items usually are reported for 7 years. Bankruptcies expire after 10 years.
- Foreclosure – 5 years from the completion date. From the fifth to seventh year following the foreclosure completion date, the purchase of a principal residence is permitted with a minimum 10% down and 680 FICO score. The purchase of a second or investment property is not permitted for 7 years. Limited cash out refinances are permitted for all occupancy types.
- Pre-foreclosure (Short Sale) – 2 years from the completion date (no exceptions or extenuating circumstances).
- Deed-in-Lieu of Foreclosure – 4 year period from the date the deed-in-lieu is executed. From the fifth to the seventh year following the execution date the borrower may purchase a property secured by a principal residence, second home or investment property with the greater of 10 percent minimum down payment or the minimum down payment required for the transaction. Limited cash out and cash out refinance transactions secured by a principal residence, second home or investment property are permitted pursuant to the eligibility requirements in effect at that time.
- Chapter 7 Bankruptcy – A borrower is eligible for an A paper loan program 4 years after discharge or dismissal, provided they have reestablished credit and have maintained perfect credit after the bankruptcy.
- Chapter 13 Bankruptcy – 2 years from the discharge date or 4 years from the dismissal date.
- Multiple Bankruptcies– 5 years from the most recent dismissal or discharge date for borrowers with more than one filing in the past 7 years.
- The good credit of a co-borrowerdoes not offset the bad credit of a borrower.
- Credit scores usually range from 400 to 800. Changes to lending standards are occurring on a daily basis as a result of tightening lending standards, and can vary from lender-to-lender– so this information should be considered simply a guideline. For conforming loans, most lenders will lend down to a FICO of 620, with additional rate hits for the lower-end credit scores and loan-to-values. When you are borrowing more than 80%, they typically will not lend if you have a FICO below 680. The FHA/VA program just changed their minimum required FICO to 620, unless you are qualifying a borrower with non-traditional credit. The few non-conforming loan programs that are still available typically require 30% down payment with a minimum FICO of 700 for self-employed and 650 for W-2 employees, and the loan-to-value will change with the loan amount.
- A credit score below 600 may require an Alternative Credit mortgage program.
- Misinformation on a credit report can be repaired! For more information see our credit repairsection.
- The FTC states, “Credit repair companies take your money and vanish.” Anything a credit repair company does for a fee, a consumer can do for free. Be wary of these guys!
- If a borrower falls behind on a payment, the creditor should be contacted as quickly as possible. Most creditors will work with a borrower who makes an initial good faith effort to communicate with them.
Lenders evaluate savings for three reasons.
- The more money a borrower has after closing, the greater the probability of on-time payments.
- Most loan programs require a minimum borrower contribution.
- Lenders want to know that people have invested their own into the house, making it less likely that they will walk away from their life’s savings. They analyze savings documents to insure the applicant did not borrow the funds or receive a gift.
Lenders look at the following types of accounts and assets for down payment funds:
Checking and Savings – 90 days seasoning in a bank account is required for these funds.Gifts and Grants – After a borrower’s minimum contribution, a gifts or grant is permitted.
Sale of Assets – Personal property can be sold for the required contribution. The property should be appraised and a bill of sale is required. Also, a copy of the received check and a deposit slip are needed.
Secured Loans – A loan secured by property is also an acceptable source of closing funds.
IRA, 401K, Keogh & SEP – Any amount that can be accessed is an acceptable source of funds.
Sweat Equity and Cash On Hand – Generally not acceptable. FHA programsallow it in special circumstances.
Sale Of Previous Home – Must close prior to new home for the funds to be used. A lender will ask for a listing contract, sales contract, or HUD 1 closing statement.
The percentage of one’s debt to income is one of the most important factors when underwriting a loan. Lenders have determined that a house payment should not exceed approximately 30% of Gross Monthly Income. Gross Monthly Income is income before taxes are taken out. Furthermore, a house payment plus minimum monthly revolving and installment debt should be less than 40% of Gross Monthly Income (this figure varies from 35%-41% contingent on the source of financing).
An applicant has $4,500 gross monthly income. The maximum mortgage payment is:
$4500 X .30 = $1350
Their total debts come to:
$75 Master Card
$625 per month.
Remember, their total debts (mortgage plus other debts) must be less than or equal to 40% of their gross monthly income.
$2,800 X .40 = $1800
$1800 is the maximum debt the borrower can have, debts and mortgage payments combined. Can the borrower keep all their debts and have the maximum mortgage payment allowed? NO!
In this case, the borrower, since they have high debts, must adjust the maximum mortgage payment downward, because:
$1975 – which is more than the $1800 (40% of gross debt) we calculated above.
The maximum mortgage payment is therefore:
$1800 – $625 (monthly debt) = $1175.
Senior Loan Officer
American Mortgage Solutions, Inc.800 Stone Creek Pkwy, Ste 7,Louisville, KY 40223
phone: (502) 905-3708Fax: (502) 327-9119
Company ID #1364 | MB73346