KENTUCKY VA MORTGAGE QUALIFYING GUIDELINES

 

Joel Lobb
Mortgage Loan Officer

Individual NMLS ID #57916

American Mortgage Solutions, Inc.

10602 Timberwood Circle 

Louisville, KY 40223

Company NMLS ID #1364

click here for directions to our office

Text/call:      502-905-3708

fax:            502-327-9119
email:          kentuckyloan@gmail.com

https://www.mylouisvillekentuckymortgage.com/

 

Kentucky VA Mortgage Guidelines for Student Loan Payments

Clarification and New Policy for Student Loan Debts and Obligations

 1. Purpose. The purpose of this Circular is to clarify and explain new policy regarding
student loans for the underwriting of Department of Veterans Affairs (VA) guaranteed home
loans.

 2. Background. The policy in the Lender’s Handbook- VA Pamphlet 26-7, chapter 4, section 5,
paragraph G will now be titled Student Loans. The clarification will apply to deferred student
loans and the new policy will provide guidance for student loans in repayment or, to begin
repayment within 12 months of a VA loan closing. Student loans under certain repayment plan
types are described at studentaid.ed.gov. This policy applies to all student loan repayment types.

 3. How to Calculate a Student Loan Monthly Payment.

 a. If the Veteran or other borrower provides written evidence that the student loan debt will be
deferred at least 12 months beyond the date of closing, a monthly payment does not need to be
considered.
 b. If a student loan is in repayment or scheduled to begin within 12 months from the date of
VA loan closing, the lender must consider the anticipated monthly obligation in the loan
analysis and utilize the payment established in paragraph (1) or (2) below. Calculate each loan
at a rate of 5 percent of the outstanding balance divided by 12 months (example: $25,000
student loan balance x 5% = $1,250 divided by 12 months = $104.17 per month is the monthly
payment for debt ratio purposes).

 (1) The lender must use the payment(s) reported on the credit report for each student loan(s) if
the reported payment is greater than the threshold payment calculation above.
 (2) If the payment reported on the credit report is less than the threshold payment calculation
above, the loan file must contain a statement from the student loan servicer that reflects the
actual loan terms and payment information for each student loan(s). The statement(s) must be
dated within 60 days of VA loan closing and maybe an electronic copy from the student loan
servicer’s website or a printed statement provided by the student loan servicer. It is the
lender’s discretion as to whether the credit report should be supplemented with this information

Joel Lobb (NMLS#57916)
Senior  Loan Officer

American Mortgage Solutions, Inc.

10602 Timberwood Circle Suite 3

Louisville, KY 40223

Company ID #1364 | MB73346

Text/call 502-905-3708
 kentuckyloan@gmail.com

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#57916 http://www.nmlsconsumeraccess.org/

-- Some products and services may not be available in all states. Credit and collateral are subject to approval. Terms and conditions apply. This is not a commitment to lend. Programs, rates, terms and conditions are subject to change without notice. The content in this marketing advertisement has not been approved, reviewed, sponsored or endorsed by any department or government agency. Rates are subject to change and are subject to borrower(s) qualification.

VA Student Loans for Kentucky Mortgage Loan Approval

 Kentucky VA Student Loans

Did you know that VA has a new policy for calculating student loan payments?

Considering the Payment:

• If the student loan repayments are to begin within 12 months of closing, the debt will be considered.
  

• If the student loan payment is being deferred for a period longer than 12 months after closing, the debt does not need to be considered.

Calculating the Payment:

• Calculate each loan at a rate of 5% of the outstanding balance then divide that by 12 months.

            Example: $25,000 x 5% = $1,250 divided by 12 months is $104.17 per month.

• If the student loan payment reported on the Borrower’s credit report is greater than the calculated payment, then the credit report payment will be used.
  

• If the payment reported on the credit report is less than the calculated amount, the lender must require a statement (dated within 60 days of closing)  from the student loan servicer that reflects the actual terms and payment information for each student loan.
  

• If the student loan payment is in an Income Based Repayment Plan and the current payment is documented to continue for at least 12 months after closing, the lender may use the IBR amount. If the payment is not expected to continue for at least 12 months after closing, a monthly statement is required. If a statement is not available, the calculation of 5% of the balance, divided by 12 will be used.
  

Documentation for payments and 12 months continuance will be required

For more Information see VA Circular 26.17.02 dated 1/23/17

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Student Loan Guidelines For Qualifying for a Mortgage Loan in Kentucky.

Loan type	Student Loan Payment Requirement
FHA	Must be included in the borrower’s liabilities regardless of the payment type or status. The payment amount must be either: ▪ The greater of: ·        ..5% of the outstanding balance on the loan or ·        Monthly payment reported on the borrower’s credit report, or ▪ The servicer’s documented payment provided the payment will fully amortize the loan over the repayment term period
VA	Deferred A payment does not need to be included if written evidence supports that the student loan debt will be deferred beyond 12 months of closing. In Repayment Include loans with payments starting within 12 months. Calculate threshold payment as a rate of 5% of outstanding balance divided by 12 months. If credit report payment is higher, use credit report payment. If current documentation from student loan servicer reflects actual terms and payment for each loan, the verified payments may be used even if less than the threshold payment calculation.
USDA	Fixed Payment A permanent amortized, fixed payment is used when documentation supports fixed payment, interest and term. Non-Fixed payment Use .5% of the loan balance reflected on the credit report. Payment arrangements that are deferred or non-fixed (Income Based Repayment (IBR), graduated, adjustable, interest only, etc.) may not be used.
Fannie	Loans in Repayment Period ▪ If provided, use the credit report payment ▪ If credit report is incorrect, obtain student loan documentation from the servicer to verify the payment used for qualification Income Driven Repayment Plan Use the student loan documentation to verify the actual monthly payment. Borrower may be qualified with a $0 payment if the documentation supports it. Loans in Deferment or Forbearance ▪ A payment equal to 1% of the outstanding student loan balance (even if this amount is lower than the actual fully amortizing payment) or ▪ A fully amortizing payment using the documented loan repayment terms
Freddie	Loans in Repayment Period Use the greater of payment reported on credit report or .5% of the higher of original or outstanding loan balance as shown on credit report. Loans in Deferment or Forbearance Use greater of payment reported on credit report or .5% of the higher of original or current outstanding loan balance as shown on the credit report. Loan Forgiveness Cancelation Discharge Employment Contingent Repayment Programs Payment may be excluded if file contains documentation that indicates: ▪ Monthly payment is deferred and/or in forbearance and full balance of the loan will be forgiven, canceled, discharged or will be paid if qualified for an employment-contingent repayment program and ▪ Borrower currently meets requirements for the student loan forgiveness/cancelation program Obtain documentation from the student loan servicer to show the loan will be forgiven, canceled, discharged or that the borrower qualifies and is approved under an employment contingent repayment program that will extinguish the debt.

-- 

Joel Lobb
Mortgage Loan Officer

Individual NMLS ID #57916

American Mortgage Solutions, Inc.

10602 Timberwood Circle 

Louisville, KY 40223

Company NMLS ID #1364

click here for directions to our office

Text/call:      502-905-3708

fax:            502-327-9119
email:          kentuckyloan@gmail.com

https://www.mylouisvillekentuckymortgage.com/

100% Financing Zero Down Payment Kentucky Mortgage Home Loans for Kentucky First time Home Buyers: Kentucky VA Home Loan Guidelines

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Kentucky VA Home Loan Guidelines

Minimum History of Employment

A minimum of 2 year history in the same industry/line of work is required in most

instances but it’s not a universal rule.

Recent graduates can satisfy the two year requirement by providing proof of

schooling with a degree for the line of work you are now

employed in.

Active duty members do not need a two year history as

long as the minimum service requirement for eligibility

has been met.

Self employed borrowers must always have a two year history of self

employment and must show a two year history of filed tax returns to meet the

24 month requirement.

Income Calculations

If you are salaried, your base income will be used to qualify you for the loan.

However, if you are an hourly employee with varied hours, more than likely, your income will be averaged

over an extended period such as 18 or 24 months depending on the situation.

Overtime, bonuses, commission and part time employment must have a 24 history in order to be included

in the qualifying income. The income will be averaged out over 24 months. Verification of likelihood to

continue will also be required.

Non taxable income can be grossed up to account for the non-taxable status.

Retirement, Disability, alimony and child support income does not require a 2

year history but verification that it will continue for at least 3 years is required in

order for it to be included.

ASSETS

No down payment does not mean no cash needed

As mentioned in the closing cost section, there are fees that will need to be paid as part of your home

purchase or refinance.

You must have sufficient funds to cover any closing costs or fees not paid by the

seller or lender credit.

VA does not require additional cash to cover a certain number or mortgage

payments or unplanned expenses (cash reserves), however, your ability to

accumulate liquid assets and the amount of assets currently available is taken into

consideration in the overall credit worthiness analysis.

Allowable source of funds

Funds for your down payment, closing costs and other expenses can come from:

• Checking/savings accounts

• Investment accounts

• Retirement account

Gift funds from a relative are an allowed source of funds to cover down payment and or closing costs.

The gift will need to be verified and paper trailed via bank statements and a gift letter will need to be signed

by your and the gift donor .

Funds from unsecured loans (signature loans, credit card advances) or funds that can not be documented

are not acceptable source of funds.

Federal regulations require that all deposits into your account be documented.

In the instance of payroll deposits, nothing will need to be done if the deposit shows as a Direct Deposit

from your employer.

All other deposits will need to be explained and documented.

 
Debt to Income Ratios

A debt to income ratios is the percentage of your total debt obligation, including the new estimated

mortgage payment, all debts shown on your credit report, as well as alimony, child support etc, as

compared to your gross qualifying income.

EXAMPLE

The rule of thumb is that your debt to income ratio should not exceed 50% of the usable, gross monthly

income. However, higher percentages can be approved.

In addition to the debt to income ratio requirements, VA also has residual income requirements. VA residual

income looks at how much income is available after all monthly liabilities, including tax withholdings,

utilities and child care, are accounted for.

Residual Income By Region

For loan amounts of $80,000 and above

Family

Size

Northeast Midwest South West

1 $450 $441 $441 $491

2 $755 $738 $738 $823

3 $909 $889 $889 $990

4 $1025 $1033 $1033 $1117

5 $1062 $1039 $1039 $1158

over 5 Add $80 for each additional member up to a family of

seven

2400/5000= 48%

Deferred student loans

If student loan repayments are scheduled to

begin within 12 months of the date of loan

closing, the anticipated monthly payment will

be included.

If you are able to provide evidence that the

loan(s) will be deferred for a period outside

that time frame, the payment will not be

included.

Qualifying income: $5000

New mortgage payment: $2000

All other obligations: $400

Monthly debt payments

The payments shown on

your credit report will be

used to qualify you. If the

payments are incorrect,

you will be asked to

provide proof of the correct

payment.

Co-signed loans

If you co-signed for someone on a loan and

that loan is showing on your credit report, the

payment will be included in the ratios unless

you are able to provide evidence that the other

person on that loan has been making the

monthly payments from an account that you

are NOT a co-owner on.

Alimony/child support

You will be expected to

truthfully declare that

you pay alimony or child

support. You will be asked

to provide your divorce

decree and/or child support

order to verify the amounts.

Non-purchasing spouse

You should be aware that if you purchasing a home

in a community property state such as California

and are married, your spouse’s credit report will be

required. His/her debts will be included in the ratio

calculations even if he/she is not going to be on the

purchase or loan.

Documentation Checklist

The following is a general list of documentation required for a home loan application.

Not all items will apply to your situation

CREDIT / IDENTIFICATION/ ELIGIBILITY

F Copy of driver’s license or other photo I.D.

F Copy of divorce decree

F Copy of bankruptcy papers, including all schedules and discharge, and credit explanation letter for

reason for bankruptcy.

F Letter of explanation on any late payments, collections, charge off’s or derogatory credit

F Letter of explanation for all recent credit inquiries

F DD214 if not active duty or Statement of service if active duty

EMPLOYMENT/INCOME

F Pay stubs (LES) for the most recent 30 days available

F W-2's for the previous two years

F Federal tax returns for the previous two years. All pages and schedules must be included

F If self-employed, provide all pages and schedules of last two years’ business tax returns and

corporate K-1's

F Award letter for Social Security benefits, disability or Pension

F Proof of receipt of child support, alimony or any other non-employment source of income

ASSETS

F Provide ALL pages of most recent 2 months’ statements for all accounts; including all checking, savings,

stocks, IRA, 401k, etc. The statements must show your name, account number and the name of the

banking institution. Any non-payroll deposits will have to be explained and documented.

F If funds to close will come from a gift, complete the gift letter (will be provided to you) and the following:

F From the donor - bank statements showing the funds in the donor's account and a copy of the check

from the donor's account

F From you - a copy of the deposit slip showing the gift check deposited into your account

F If funds to close are from sale of home

F Estimated closing statement showing anticipated proceeds

F Copy of final closing statement and deposit slip showing proceeds deposited into bank account

PROPERTY

F Select your insurance agent and provide agent's name, address, and phone number

F If refinance, or if you will be retaining your current home or own other property

F Current mortgage statement

F Copy of insurance declaration page

F If you’re currently renting, provide your Landlord’s name, phone number and address.

F 12 months canceled rent checks will be necessary for private landlords. If you live with a family member,

letter stating you live rent-free will be required

Kentucky VA Mortgage Requirements for Bankruptcy, Foreclosure, Collections and Student loans.

Bankruptcy VA Mortgage Loan Requirements

Chapter 7 : 2 years from discharge date

•Chapter 13: No seasoning required if discharged. If open requires court approval and 0x30 last 12 months to trustee.


Borrower must demonstrate re-established credit since dismissal from Bankruptcy.

Judgments VA Mortgage Loan Requirements


•Judgments must be paid or in a repayment plan for 12 months with a most recent 0x30x12 timely payments.

Student Loans VA Mortgage Loan Requirements

•Monthly payment does not need to be considered if the Veteran or borrower provides written evidence that the student loan debt will be deferred at least 12 months beyond the date of closing

•Use payment shown on credit report (unless credit report reflects $0 or no payment amount).
Use Balance x 5% / 12 for payment

Foreclosure and VA Mortgage Loan Requirements

•Foreclosure - 2 years removed from sale date of home


Collection Accounts and VA Mortgage Loan Requirements

•Collection and charge-offs are generally not required to be paid off, however follow Desktop Underwriting Findings through Fannie Mae  DU or Freddie Mac LP Findings automated underwriting systems if payoff is required.

•A letter of explanation is required for all collection/charge-off/judgment accounts.

•Collections and charge offs must be included in DTI at the amount on credit or 5% of balance if no payment shown.

•Borrowers with a history of collection/charge-off accounts should have re-established a 12 month satisfactory credit history.

 

Joel Lobb (NMLS#57916)
Senior  Loan Officer

 

American Mortgage Solutions, Inc.

10602 Timberwood Circle Suite 3

Louisville, KY 40223

Company ID #1364 | MB73346

 

Text/call 502-905-3708
kentuckyloan@gmail.com

 

 

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/

-- Some products and services may not be available in all states. Credit and collateral are subject to approval. Terms and conditions apply. This is not a commitment to lend. Programs, rates, terms and conditions are subject to change without notice. The content in this marketing advertisement has not been approved, reviewed, sponsored or endorsed by any department or government agency. Rates are subject to change and are subject to borrower(s) qualification.