Source: Five strategies for first time home buyers Kentucky 2017
Category: Welcomeo Home Program $5000 grant
The 23 Questions We Asked at Mortgage Pre-Approval
2017 Welcome Home Program for Kentucky Home Buyers.
2017 Welcome Home Program for Kentucky Home Buyers.
Photo post by @kentuckyloan.
Source: 2015 Welcome Home Program for Kentucky Home Buyers.
Kentucky General Mortgage Guide for Underwriting Approval
Kentucky Mortgage Underwriting Guidelines
Understanding Mortgage mortgage underwriting guidelines will help you understand your loan options when purchasing or refinancing 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 Guidelines set in place when reviewing a borrower’s financial history to determine the likelihood of receiving on-time payments. The primary items reviewed are the following 5 areas below:
1. Income
2. Debt
3. Credit History
4. Savings
5. Debt vs Income Ratio
1.Income
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.
2. Debt
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.
3. Credit History
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.
4. Savings
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.
5. Debt vs Income Ratio
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).
Example
An applicant has $4,500 gross monthly income. The maximum mortgage payment is:
$4500 X .30 = $1350
Their total debts come to:
$500 Car
$20 Visa
$30 Sears
$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:
$625 debts
$1350 mortgage
————-
$1975 – which is more than the $1800 (40% of gross debt) we calculated above.
The maximum mortgage payment is therefore:
$1800 – $625 (monthly debt) = $1175.
When your down payment is less than 20% you usually have to pay for Private Mortgage Insurance (PMI). This protects the lender in case you don’t make your house payments. This doesn’t mean you can blow off making your house payments — if you fail to pay, the bank will still repossess your house. The insurance company will pay the bank the difference between 20% and the amount you actually put down. If you put down 5% and default, the insurance company pays the bank the other 15% that you didn’t pay.
So the bank gets protected and you get to pay for their protection.What’s in it for you? What’s in it for you is that you get to buy a home for less than 20% down! Used to be that banks wouldn’t give you a loan under any circumstances unless you made a large down payment because they felt it was too risky. But now with PMI, banks will take loans with very low down payments, sometimes even 0% down. That makes it much easier for you to get into a home.
There’s no PMI on VA (veterans) loans, which is a nice bonus if you qualify for one of these.
You don’t shop for PMI. If your lender requires it, they’ll choose it and add it automatically.
The PMI premium is paid monthly as part of your mortgage payment. The smaller your down payment, the more expensive the PMI is. My PMI Calculator will give you a good estimate.
| PMI Calculator (for 30-year loan) | |
|
Sale price
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$ |
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Down Payment
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3% 4% 5% 10% 15% |
|
Interest Rate
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% |
| Monthly payment (without PMI, taxes, or ins.) | $ |
|
Monthly PMI cost (est.)
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$ |
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Total PMI costs over the life of the loan
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$ |
Another way to do it is to divide the loan amount by 1300, 1500, 2300, or 3700 for loans with down payments of 3%, 5%, 10%, or 15% respectively. For example, let’s say you buy a $200,000 home and put 5% down. Your down payment is $10,000 and the morgtage is $190,000. Divide the $190,000 mortgage by 1500 and you get your monthly PMI cost, $127.
Canceling PMI
PMI is usually (but not always) canceled automatically once you own 22% of your home. It used to be that the insurance company would keep happily charging you the premium forever, since many homeowners didn’t know they could cancel. This was obviously taking advantage of the uninformed homeowner, so now insurance companies are required by law to automatically cancel your PMI as soon as you own at least 22% of your home, based on the original purchase price, although in some cases they’re not required to automatically cancel (which we’ll cover in a minute). Assuming you qualify for automatic cancellation, here’s how long it will take to reach 22% equity, depending on the length of the loan and the interest rate, ignoring any possible appreciation:
| Time it takes to own 22% of your home (for 5% / 10% and 15% down payments) |
||
| Interest Rate | 15-year Mortgage | 30-year Mortgage |
| 6% | 4 / 3 / 2 years | 10.5 / 8.5 / 5.5 years |
| 7% | 4 / 3.5 / 2 years | 11.5 / 9.0 / 6.5 years |
| 8% | 4.5 / 3.5 / 2.5 years | 12.0 / 10.0 / 7.0 years |
| 9% | 4.5 / 3.5 / 2.5 years | 13.5 / 11.0 / 8.0 years |
| 10% | 5 / 3.5 / 2.5 years | 14.5 / 12.0 / 9.0 years |
From this table you might think “Wait a minute — on a 30-year loan I should own about half of my house after about 15 years, but with a 10% interest rate and a 5% down payment you’re saying I’d own only 22%?! What gives?”
The answer is that because of how mortgage interest works, most of your payments in the early years goes to interest, not paying down your loan. On a 30-year loan of $100k at 7%, the payment is $665/mo., but when you make the first payment, a whopping $583 goes to interest, and a mere $82 goes towards owning the home. On 15-year loans a much higher percentage goes towards the home itself, which is why 15-year mortgages are a better deal if you can get them — and why you should try to pay off your loan in 15 years anyway if you can’t. There’s more on this in our section about paying off a loan early.
But let’s get back to PMI and canceling it. Of course, you don’t have to wait for the automatic cancellation at 22%. You can write to the insurance company and ask them to cancel your PMI coverage as soon as you hit 20% equity.
And here’s one more thing you can do: If your house has increased in value then you suddenly own a lot more of it, and you can cancel your PMI even earlier. For example, let’s say you put $5,000 down on a $100,000 home, and in a couple of years the value shoots up to $119,000 because it’s a hot real estate market. You own the $5000 you put into the house, plus the $19,000 it increased, for a total of $24,000. (You also own the equity you built from making mortgage payments, but because of how mortgage interest works, most of your payments for the first few years goes to interest and not principal, so we’ll ignore paid equity for our example.) So the $24,000 you own divided by the $119,000 value of the home means you own over 20% of your home. So you don’t need PMI any more. But to cancel the PMI you’ll need to convince the lender that your home is really worth $119,000 now, so you’ll have to pay for an appraisal which might run $400 or so. You’ll have to weigh the cost of the appraisal against the amount you’ll save by canceling PMI early to see if it’s a good deal for you.
When PMI is canceled automatically and when it isn’t
Don’t assume your PMI will be canceled automatically. Check this table.
| Canceled Automaticallyif ALL are true | Not Canceled Automaticallyif ANY are true |
| Conventional loans | FHA loans |
| Loan signed on or after July 29, 1999 | Loan signed earlier than that |
| All mortgage payments have been made on time in the year prior to PMI cancellation | Any mortgage payments have been late |
| Buyer is not considered high risk | Buyer is considered high risk |
References
- Article examining the overall advantage of PMI to homeowners, Auburn University, 1997
—
Joel Lobb
Senior Loan Officer
Senior Loan Officer
(NMLS#57916)
American Mortgage Solutions, Inc.
800 Stone Creek Pkwy, Ste 7,
Louisville, KY 40223
phone: (502) 905-3708
Fax: (502) 327-9119
Company ID #1364 | MB73346
Credit Scores Needed To Qualify For A Kentucky Mortgage Loan Approval?
Credit Scores Needed To Qualify For A Kentucky Mortgage Loan Approval
Source: Credit Scores Needed To Qualify For A Kentucky Mortgage Loan Approval?
2017 Welcome Home Program for Kentucky Home Buyers.
$5000 Welcome Home Grant Kentucky
$5000 Welcome Home Grant Kentucky
If you have questions about qualifying as first time home buyer in Kentucky, please call, text, email or fill out free prequalification below for your next mortgage loan pre-approval.
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 views of my employer. Not all products or services mentioned on this site may fit all people
Welcome Home Program
This is only a brief overview of the Welcome Home Program. Complete details, limits, requirements, definitions, and guidelines are contained in Attachment H of the 2017 AHP Implementation Plan and in the 2017 Welcome Home Guide.
What is the Welcome Home Program?
The Welcome Home Program (WHP) offers grants to fund reasonable down payments and closing costs incurred in conjunction with the acquisition or construction of owner-occupied housing by low- and moderate-income homebuyers. The grants are limited to $5,000 per homebuyer and Members are subject to an aggregate limit of $200,000 per offering. All funds are reserved for specific homebuyers purchasing specific homes and cannot be transferred to other homebuyers or to other homes. Welcome Home funds will be available for reservation on a first-come, first-served basis beginning at 8:00 AM ET on March 1, 2017, and will remain available until all funds have been reserved.
Who Can Use the WHP?
The FHLB has established a set-aside of Affordable Housing Program (AHP) funds to help create homeownership. These funds are available to Members as grants to assist their mortgage loan applicants in the home buying process. This is our most widely used program, ideally suited to the needs of community lenders and their customers.
What are the Program Requirements?
Below is an abbreviated list of program eligibility requirements:
- The total income for all occupants must be at or below 80 percent of the Mortgage Revenue Bond (MRB) limit for the county and state where the property is located. The FHLB has an Income and Affordability Workbook to assist in determining household income eligibility.
- Homebuyers must contribute at least $500 of their own funds towards down payment and/or closing costs.
- WHP applicants do not have to be first-time homebuyers. However, all first-time homebuyers are required to complete a homeownership counseling program.
- WHP grant funds are intended only for homebuyers who qualify for the first mortgage based on their own merit. Co-signors and co-borrowers are not allowed unless they will occupy the home as their primary residence and their incomes are included in determining eligibility.
- WHP grant funds may be used in conjunction with other local, state and federal funding sources and with the FHLB Cincinnati’s Community Investment Cash Advance Programs.
- The Member who reserves the WHP funds must originate the first loan, but the loan may close in the name of a third party.
- The interest rate for the first mortgage may not exceed 7.25 percent.
- The interest rate for the second mortgage may not exceed 10.75 percent.
- Only second mortgages provided by formal organizations, community development financial institutions, housing finance agencies, non-profit organizations, etc. are acceptable.
All eligible property assisted with WHP funds is subject to a five-year retention mechanism (Retention Agreement), which may require the household to repay all, or a portion, of the subsidy, if the home is sold or refinanced within five years from the closing of the transaction.
How Do I Apply?
Reserving WHP Funds
Homebuyers must apply with one of our Member institutions. Click here to search our Member Directory.
Members may reserve funds via the Welcome Home Program link through the FHLB’s Members Only portal by submitting an online Reservation Request with supporting documentation. Instructions for accessing Members Only may be found here.
The FHLB will perform a preliminary review of the Reservation Request and the documentation submitted to determine eligibility of the homebuyer, availability of funds in the program, and availability of funds for the Member. If any of the information is incomplete, additional documentation or information may be required. Note: The Reservation Request will be denied upon receipt if a fully executed loan application is not included.
Written notification will be provided to the Member as to the homebuyer’s eligibility. Submission of a Reservation Request does not constitute an approval of funds. Funds are reserved only upon written notification of approval from the FHLB.
Please allow four weeks for the FHLB to review the Reservation Request and supporting documentation.
Disbursing WHP Funds
Welcome Home funds will only be disbursed after closing. The FHLB has some general guidance and specific instructions that Members and Closing Agents should use in closing mortgages using Welcome Home funds. Funds will be disbursed only to the extent they are required to fill the gap for down payment, closing costs, and counseling fees.
Members may submit a Request for Payment of Reserved Funding with supporting documentation via the Welcome Home Program link through the FHLB’s Members Only portal. Submission of a Request for Payment of Reserved Funding is not an approval of funds disbursement. Once the Request for Payment of Reserved Funding has been reviewed and approved, funds will be disbursed to the Member.
In the event the FHLB determines that funds were used for an ineligible expense, the grant will be reduced by the amount of the ineligible expense unless the household brings adequate funds to the closing to cover the amount of the ineligible expense. Under no circumstances will cash back to the homebuyer be permitted.
Please allow four to six weeks for the FHLB to review the Request for Payment of Reserved Funding and supporting documentation.
Additional Information and Technical Assistance
Documentation requested by the FHLB must be emailed to welcomehome@fhlbcin.com. Any documentation requiring an original signature must be mailed to:
FHLB Cincinnati
Welcome Home Program
P.O. Box 598
Cincinnati, OH 45201-0598
For more information or assistance, please contact the Housing & Community Investment Department at (513) 852- 7680 or toll-free (888) 345-2246 or email us at welcomehome@fhlbcin.com.
For assistance with Members Only, please contact the Service Desk at 800-781-3090.
2011 Welcome Home Program
2011 Welcome Home Program
2011 Welcome Home Program
Frequently Asked Questions
Q. How are funds reserved?
A.
A homebuyer applies for a mortgage through one of the Federal Home Loan Bank of
Cincinnati’s (FHLBank) Members. The Member will then submit an online
Welcome Home Reservation Request, loan application, and pertinent income
documentation to the FHLBank. Funds are reserved on a first-come, first-served
basis.
Q. What is the maximum amount of grant funds a homebuyer and Member can
receive?
A.
A homebuyer may receive Welcome Home grant funds up to $5,000 to be used for
down payment and closing costs. A Member may utilize a maximum of $200,000 for
the Welcome Home round.
Q. How long does it take to get an approval for a Reservation Request?
A.
Please allow a minimum of four to six weeks from the time the Reservation Request
was submitted. If it has been more than four weeks and you have not received an
answer, please contact us via email at
welcomehome@fhlbcin.com. Please state the
homebuyer’s full name and the date you sent the request.
Q. If I put my name and contact information on the Reservation Request form, why
are the approval letters not coming to me?
A
. Each Member may only have one contact person. We use the information on the first
Reservation Request received, unless instructed otherwise. If the Member wants a
particular person to be the contact, please let us know via email at
welcomehome@fhlbcin.com
.
Q. Can Welcome Home funds be used in conjunction with other local, state, and
federal funding sources?
A
. Yes. However, Welcome Home funds may not be used with an existing or future
award through the FHLBank’s competitive Affordable Housing Program (AHP).
Q. Where can I find the Mortgage Revenue Bond limit for my county?
A.
The MRB income limits can be found on our website at http://www.fhlbcin.com or at the
State Housing Finance Agencies. Remember: Welcome Home income limits are
80% of the MRB income limits.
Q. How long do I have to close my loan?
A.
All Welcome Home approvals are valid until December 1, 2011.
Page 2 of 3
Q. What if the property address changes or the grant amount needed changes after
I send in my Reservation Request or after I have received an approval letter?
A
. A Reservation Request and approval are only valid for the property originally
submitted and the grant amount originally submitted. To make any changes, the
Member should withdraw the original Reservation Request and submit a new online
Reservation Request with the updated property address or requested grant amount.
The four to six week review period will begin again upon resubmission.
Q. Are non-occupant co-borrowers or co-signors permitted?
A.
No. Welcome Home funds are intended to only assist homebuyers who qualify for
the first mortgage based on their current household income, not relying on others, and
not relying on any expected but uncertain change in job status or income.
Q. When and how are the grant funds disbursed?
A.
The Welcome Home funds are disbursed to the Member after the loan has closed.
The Member must provide the funds to the borrower at time of closing and then send
an online Funding Request, a copy of the fully executed HUD-1, the final signed
Truth-in-Lending for all repayable mortgages, and a copy of the warranty deed
containing our 2011 retention language to the FHLBank. Please allow four to six
weeks for it to be reviewed and for funds to be disbursed.
Q. What if I do not need the whole amount I was approved for?
A.
If you do not need the entire amount of the approved grant, you may apply the
difference to the first mortgage loan as a principal reduction. Be sure to show it on
the HUD-1. No cash back may be given to the homebuyer and no earnest money may
be returned!
Q. Why wasn’t my disbursement for the full amount I requested?
A.
The HUD-1 may have shown payoff of debt, return of the earnest money deposit, or
cash back at closing. All of these issues will cause the grant disbursement to be
reduced.
Q. Does the applicant have to be a first-time homebuyer?
A
. No. However, at least one-third of Welcome Home funds must be reserved for firsttime
homebuyers.
Q. Will the FHLBank send me confirmation that my fax or email was received?
A.
No. It is the Member’s responsibility to set their fax machine or email to print a
confirmation. Do not call the FHLBank asking if your information was received
unless it has been at least four weeks since you sent it. A status report will be sent to
the Member contact every Friday.
Page 3 of 3
Q. Can the subject property be a manufactured home?
A.
Yes. However, the manufactured home must be built on a permanent chassis,
installed on an FHA Title II permanent foundation system, be a multi-section home at
least 24 feet wide. Additionally, the home and lot must be taxable together as real
property and the home must be built to the Manufactured Home Construction and
Safety Standards (HUD Code). A copy of the appraisal is required at time of funds
reservation.
Q. Are tax returns required to document total household income?
A.
Depends. If income is from employment, we require two consecutive YTD pay stubs
or a completed Verification of Employment. If income is from self-employment, we
require the most recent two years’ signed federal tax returns. More information on
documenting income can be found in our Welcome Home Guide, which is available
on our website at
Q. Can the Member close their loan with a repair escrow?
A.
Yes. However, if the repair escrow is greater than $500 and is held from the buyer’s
funds, the Member must obtain pre-approval from the FHLBank. The Member
should send the FHLBank a copy of the appraisal showing all repairs were required
and the estimated amount of the repairs. The FHLBank staff will review the request
and email the Member contact with a response. Note: We expect the Member or
their closing agent to hold the escrowed funds and to disburse them upon presentation
of acceptable receipts and/or invoices. If the repair escrow is held from the seller, no
pre-approval or documentation is required.
Q. What documentation does the FHLBank need to prove the escrowed repairs
have been completed?
A.
The Member must submit an inspection showing all repairs have been made, copies
of invoices and/or receipts showing all parties were paid, and proof no funds were
returned to the homebuyer.
Q. What should I do if the homebuyer did not spend/use all of the escrowed funds?
Can they have cash back?
A.
If all escrowed funds are not used, the balance should be applied to the first mortgage
as a principal reduction. However, if the HUD-1 clearly shows that the homebuyer
used their own funds to set up the repair escrow account, and they did not use all
those funds, they may have their remaining funds back as long as they have the
minimum $500 in the transaction. If the HUD-1 shows the homebuyer only had the
minimum $500 in the transaction, and they did not use all of the escrowed funds, the
balance must be applied to the first mortgage as a principal reduction or the Welcome
Home grant will be reduced.
Q. Where can I find the complete description and requirements for the Welcome
Home Program?
A.
The 2011 Welcome Home Guide is available on our website at http://www.fhlbcin.com
KHC down payment assistance | FHA, VA or Rural Housing Kentucky
KHC down payment assistance | FHA, VA or Rural Housing Kentucky
***Kentucky housing IMPORTANT GUIDELINES*** KHC Guidelines
Jefferson, Oldham and Bullitt Co. requirements for New Bond Funds:
Maximum purchase price: $258,000
Maximum household income limits: $ 61,500 (1 or 2 person households) $70,725 ( 3 or more in the household)
Maximum DTI ratios with AUS approve/eligible: 40/45
Minimum credit score: 620 for govt. loans (FHA, VA and Rural Housing)
Maximum seller paid fees: 6.0% of purchase price
Borrower must be: 1st time homebuyer OR purchase in a “targeted” county (note: Jefferson, Bullitt and
Oldham Counties are NOT “targeted counties).
U.S. citizen or resident alien
Purchasing a primary residence to owner occupy
Kentucky Housing recognizes that down payments, closing costs and prepaids are stumbling blocks for many potential home buyers. Here are several loan programs to help. Your KHC-approved lender can help you apply for the program that meets your needs.
Regular Down payment Assistance Program (DAP)
- Purchase price up to $243,000.
- Assistance in the form of a loan up to $4,000 in $100 increments.
- Repayable over a seven-year term at 6 percent. A DAP of $4,000 over 7 years at 6 percent interest would equal a payment of $58.44.
- Available to all KHC first mortgage loan recipients who are first-time homebuyers in non-targeted counties and first and second-time homebuyers in targeted counties.
HOME-DAP
- Purchase price up to $195,700.
- Assistance up to $4,500
- No monthly repayment; forgiven over five years.
- Existing homes only.
- Borrowers must meet HOME-income guidelines.
HOME Special Program
- Purchase price up to $195,700.
- Assistance up to $10,000
- No monthly repayment; forgiven over five years.
- Existing homes only.
- Borrowers must meet HOME-income guidelines.
- Eligible borrowers include:
- Households that include a person with a permanent disability and who receives disability income (SSI, SSDI, Veterans Disability etc.).
- Households where at least one of the home buyers is age 62 or older.
HOME Family Program
- Purchase price up to $195,700.
- Assistance up to $10,000
- No monthly repayment; forgiven over five years.
- Existing homes only.
- Borrowers must meet HOME-income guidelines.
- Eligible borrowers include:
- Single- and two-parent households that have at least one dependent child under the age of 18 living in the household and that are first-time home buyers (have not owned a home or had an ownership interest in a home in the last 3 years).
More about down payment and closing costs
- No liquid asset review and no limit on borrower reserves for Regular DAP.
- Borrowers may retain two months’ house payments in reserve while using available funds first before looking for any form of HOME DAP assistance.
- Specific credit underwriting standards may apply to down payment programs.
KHC Loan Programs |
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- All Kentucky Housing first mortgage loans are for a 30-year term at a fixed rate of interest.
- The home you purchase through Kentucky Housing must be the only residential property you own and you must occupy the home as your principal residence while the loan debt is still outstanding.
- To qualify, you must meet KHC’s regular income guidelines, make a down payment or qualify for down payment assistance, be a US citizen or legal alien and have an acceptable credit history.
- Some Kentucky Housing loans are subject to a federal recapture tax. Recapture is a federal income tax that the borrowers may have to pay if they have considerable growth in their income and they sell or transfer their KHC-financed home within 9 years. However, KHC has implemented a Recapture Tax Guarantee Program for all loans that close after October 1, 2006. The Recapture Tax Guarantee Program will reimburse homeowners if they are subject to pay the Federal Recapture Tax on their KHC mortgage loan upon the sale of their home.
Conventional
- Insured by approved mortgage insurance company.
- Minimum credit score of 660 or better.
- Quick turnaround time, 20 percent down payment and no up-front or monthly mortgage insurance.
FHA
- Insured by the Federal Housing Administration.
- Down payments as little as 3.5 percent.
- Can use DAP for 3.5 percent down payment requirement.
- Upfront and monthly mortgage insurance.
- Minimum credit score of 620.
VA
- Guaranteed by the Veterans Administration for qualified military veterans.
- No down payment if the property appraises for the sale price or greater.
- Credit underwriting is flexible.
- Minimum credit score of 620.
- No monthly mortgage insurance payments.
RHS
- Guaranteed by Rural Housing Services (RHS).
- Home must be located in a rural area as defined by RHS.
- No down payment if the property appraises for the sale price or greater.
- Minimum credit score of 620.
- No monthly mortgage insurance payments.
Mortgage Credit Certificates (MCC)
A Mortgage Credit Certificates (MCC) reduces the amount of federal income tax you pay, giving you more available income to qualify for a mortgage loan. MCCs are NOT mortgages. They are tax credits that put extra cash in your pocket each month, so you can more easily afford a house payment. That means fewer tax dollars will be withheld from your regular paycheck, increasing your take-home pay. The federal government allows every homeowner an income tax deduction for all the interest paid each year on a mortgage loan. But an MCC gives you a tax credit of 25 percent (not to exceed $2,000). You can still deduct the remaining 75 percent interest on your income taxes. A tax credit is not the same as a tax deduction. A tax deduction reduces the portion of your income that is taxed, so you pay less. A tax credit is a direct, dollar for dollar reduction in the total tax you owe. The MCC is effective for the life of the loan as long as you live in the home. If you sell your home in the first nine years of ownership, you may be subject to Federal Recapture Tax.
Special First Mortgage Loan Programs
New Construction Program for Single-Parent, Disabled and Elderly Households offers loans for newly constructed houses at interest rates from 1 to 6 percent. These limited funds are available, usually in July, on a first-come, first-served basis.
Guidelines
- Interest rate determined by the families’ ability to repay the loan.
- For new homes with a purchase price of $115,000 or less.
- Eligible borrowers:
- Single parents (at least one dependent under the age of 18 must live in the home.)
- Households with a person who has a permanent disability and who receives some form of disability income (SSI, SSDI, Veterans Disability etc.).
- Households where at least one of the home buyers is age 62 or older.
- Income guidelines:
- $28,000 for a household of 1 or 2 people; or
- $33,000 for a household of 3 or more people.
- Kentucky Housing’s DAP loan program may be used for down payment and closing cost assistance.
Applying for a Kentucky Housing loan is easy. Just contact us at 502-905-3708 or email us at
kentuckyloan@gmail.com for an application..It’s free –What are you waiting for?
