Kentucky USDA Underwriting Guideline Updates

 Chapter 11- Ratio Analysis

11.2 B. The Total Debt Ratio:

 Revolving accounts: “with no outstanding balance” are not required to be closed.

 Mortgages: Rental Property - Eliminated language regarding omission of mortgage

debt. Guidance for entry of rental income in GUS is provided in the GUS Lender

User Guide under 4.1.4.1.1, Retained Investment Properties.

 Added: Debt management plans:

o Include the monthly payment amount due from the counseling plan.

o Refer to Chapter 10 for guidance on credit exception and documentation

requirements.

 Student Loans: Removed the phrase “the greater of” from Non-Fixed payment

loans and added guidance regarding “when the payment is above zero” and “when

the payment is zero”.

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11.3 DEBT RATIO WAIVERS AND COMPENSATING FACTORS

A. Purchase Transactions: Debt ratio waivers

 GUS Refer, Refer with Caution, and manually underwritten loans without GUS

assistance:

o Added: “The lender must document compensating factors to support a

debt ratio waiver.”

o Added: “all” of the following conditions are met to the first paragraph.

 Debt Ratio Waiver Request and Agency Approval:

o Added: “The issuance of the Conditional Commitment for a Loan Note

Guarantee represents Agency approval of the ratio waiver.”

B. Refinance Transactions: Debt ratio waivers

 Added a bullet: GUS files that receive a GUS recommendation of Refer or Refer

with Caution are not supported by GUS, require debt ratio waivers, and supporting

documentation must be submitted to the Agency.

 Added: “The issuance of the Conditional Commitment for a Loan Note Guarantee

represents Agency approval of the ratio waiver”.

11.7 OBLIGATIONS NOT INCLUDED IN DEBT-TO-INCOME RATIOS

 Added: "unless a payment plan is in place" to the second bullet concerning

Federal, state, and local taxes.

Louisville Kentucky Mortgage Lender for FHA, VA, KHC, USDA and Rural Housing Kentucky Mortgage: FHA now allowing 0.5% on Student Loans instead of 1%

Louisville Kentucky Mortgage Lender for FHA, VA, KHC, USDA and Rural Housing Kentucky Mortgage: FHA now allowing 0.5% on Student Loans instead of 1%:   FHA now allowing 0.5% on Student Loans instead of 1% On Friday, the  Federal Housing Administration (FHA ) announced updates to its studen...

FHA now allowing 0.5% on Student Loans instead of 1%

On Friday, the Federal Housing Administration (FHA) announced updates to its student loan monthly payment calculations to take steps to remove barriers and provide more access to affordable single-family FHA-insured mortgage financing for creditworthy individuals with student loan debt. The updated policy more closely aligns FHA student loan debt calculation policies with other housing agencies, helping to streamline and simplify originations for borrowers with student loan debt obligations. This announcement enhances FHA’s ability to serve one of its core demographics—first-time homebuyers. For all outstanding student loans, regardless of payment status, the payment must be calculated as follows: If the payment on the credit report is greater than $0, use the payment reporting on credit, or the actual documented payment If the payment on the credit report is $0, use 0.5% of the outstanding loan balance If documented that the loan has been forgiven, canceled, or discharged in full, the payment can be excluded. Lenders may implement the changes immediately but must implement the changes for FHA Case Numbers assigned on or after August 16, 2021.

Kentucky USDA Mortgage Guideline Changes For Student Loan Payment Calculations

A Change in Underwriting for USDA Mortgage Loans in Regards to Student Loans.

 Effective immediately for all Kentucky USDA Rural Housing Mortgage Loans.

If you are a Kentucky USDA Mortgage applicant who has student loan calculations will be changed to the following Fixed Payment Loans:

A permanent amortized, fixed payment may be used when it can be documented that the payment is fixed, the interest rate is fixed, and the repayment term is fixed.

 Non-Fixed Payment Loans (i.e. deferred, income based, graduated, adjustable, etc.): The payment should be calculated as the greater of 0.5% of the loan balance or the actual payment reflected on the credit report. No additional documentation is required.

• Student loans. Lenders must include the payment as follows:
• 
  
• Fixed payment loans: A permanent amortized, fixed payment may be used in the debt ratio when the lender retains documentation to verify the payment is fixed, the interest rate is fixed, and the repayment term is fixed.
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• Non-Fixed payment loans: Payments for deferred loans, Income Based Repayment (IBR), Graduated, Adjustable, and other types of repayment agreements which are not fixed cannot be used in the total debt ratio calculation. The higher of one half percent (.50%) of the loan balance or the actual payment reflected on the credit report must be used as the monthly payment in the underwriter decision. No additional documentation is required.

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/-- 

Kentucky Rural Housing USDA Loan Financing - Student Loan Monthly Payment Calculations

Kentucky Rural Housing USDA Loan Financing - Student Loan Monthly Payment Calculations

Debt-to-income ratio for borrowers with student loans and getting approved for a USDA Loan in Kentucky. 

For potential Rural Kentucky  home buyers with student loans that are either in a deferred payment status or being paid back through an income based repayment program, the treatment of this liability needs to be considered. When student loan debts are not currently being paid upon, due to the loan applicant still being in school or recently graduating from school, the monthly liability will be calculated as 1% of the outstanding loan balance. 

 Example if you owe $100,000 in student loan debt the monthly payment will be $1,000.  Also, if the student loan is being paid upon, but at a lesser amount than originally agreed, such as the payment being determined based on repayment ability (i.e. Income Based Repayment Plan), the monthly payment will be calculated the same as above (monthly liability = 1% of the outstanding loan balance).

This is the same as Kentucky FHA Loan new guidelines, in which student loans that are in deferment or under an income based repayment plan will have the monthly payment calculated at 1% of the outstanding loan balance.  

If the student loan is being paid upon as originally agreed upon when the loan was first obtained, the monthly liability will be the amount specified on the credit report.  Or if the student loans have been consolidated into a new loan, so long as the monthly payment is based on a fixed repayment schedule, that payment will be used when calculating the borrower's debt to income ratio.















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Wondering how to factor existing student debt into your clients’ DTI ratios? Keep this checklist handy, and you can skip study hall. FHA: Greater of 1% of balance, monthly payment per the credit report or fully amortized documented payment. Fannie Mae: Lender must include a monthly payment in the borrower’s recurring monthly debt obligation, using one of the options below to determine this amount: 1% of the outstanding balance; the actual payment listed on the credit report; a calculated payment that will fully amortize the loan(s) based on the documented loan repayment terms. Loans that are deferred or in forbearance with no documentation require that 1% of the balance be considered when qualifying. If the borrower is on an income-driven payment plan, obtain student loan documentation to verify the actual monthly payment is $0 to qualify the borrower with a $0 payment. Freddie Mac: If in repayment, use the greater of: Monthly payment amount on the credit report; 0.5% of the original loan balance or outstanding balance per the credit report. If in deferment or forbearance, use the greater of: Monthly payment on the credit report; 1.0% of the original loan balance or outstanding balance as report on the credit report. For student loan forgiveness, cancellation, discharge and employment-contingent repayment programs, payment may be excluded if: Loan has fewer than 10 monthly payments remaining Monthly payment is deferred or in forbearance AND borrower currently meets requirements for student loan forgiveness, cancellation, discharge or employment-contigent repayment program. USDA: RHS Student Loans   Effective immediately for all RHS loans, student loan calculations will be changed to the following Fixed Payment Loans: A permanent amortized, fixed payment may be used when it can be documented that the payment is fixed, the interest rate is fixed, and the repayment term is fixed. Non-Fixed Payment Loans (i.e. deferred, income based, graduated, adjustable, etc.): The payment should be calculated as the greater of 0.5% of the loan balance or the actual payment reflected on the credit report. No additional documentation is required. VA: Omit if deferred>= 12 months.  If not, greater of documented payment or payment at 5% rate on unpaid balance over 12 months.

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 Fannie Mae Guideline Updates On Student Loan

Fannie Mae Updates Selling Guide Fannie Mae has announced updates to the April Selling Guide (SEL-2017-04) to include the following.  All changes but one; noted below, are effective immediately. Student Loan Payment Calculation If a payment amount is provided on the credit report, that amount can be used for qualifying purposes. Note: we have confirmed with Fannie Mae that this will include income based repayment options reporting to credit that are not fully amortizing. If the credit report does not identify a payment amount (or reflects $0), we can use either 1% of the outstanding student loan balance, or a calculated payment that will fully amortize the loan based on the documented loan repayment terms. Note: The DU messaging when an installment debt on the loan application does not include a monthly payment will be updated in a future release to reflect this new policy. Until then, we may disregard the statement in the message specifying the previous policy and follow the new policy.  Debts Paid by Others Requirements will be simplified for excluding non-mortgage debts from the debt-to-income ratio. Non-mortgage debts include debt such as installment loans, student loans, and other monthly debts as defined in the Guide. If documentation is obtained that a non-mortgage debt has been satisfactorily paid by another party for the past 12 months, then the debt can be excluded from the debt-to-income ratio. This policy applies regardless of whether the other party is obligated on the debt. Note: The DU message on omitted debts will require documentation to support the omission of the debt, but will not reference the documentation requirements specified as DU is not able to identify if the debt was omitted as a result of the new policy. This policy does not apply if the other party is an interested party to the subject   transaction (such as the seller or realtor). For more information see the Fannie Mae Student Debt Solutions Fact Sheet    Fannie Mae Student Loan Cash-out Refinance Features LLPA is waived for loans that meet the student loan cash-out refinance requirements. Features Requirements Requirements Shown are New or Aligns with C/O or LCO Guidelines Student Loans Eligible for Payoff At least one student loan must be paid off. Loan proceeds must be paid directly to the student loan servicer at closing. Only student loans for which the borrower is personally obligated can be paid through the  transaction. Student loan debt must be paid in full with the proceeds – partial payments of student loan debt are not permitted. New Policy Eligibility The standard cash-out refinance LTV, CLTV, and HCLTV ratios apply per the Eligibility Matrix.Max is 80% Aligns with cash-out refinance Underwriting Method DU only New policy Maximum Cash Back Lesser of 2% or $2k (over and above the student loan payoff) Aligns with limited cash-out refinance Mortgage Payoff 1st mortgage and purchase-money seconds Aligns with limited cash-out refinance Other Requirements Property cannot be listed for sale at time of disbursement Payoff of taxes ineligible unless escrow account is established Payoff of delinquent taxes ineligible Aligns with limited cash-out refinance

Kentucky Rural Housing and USDA Student Loans Guidelines Changes for 2016

Kentucky Rural Housing and USDA Student Loans Guidelines Changes for 2016 Recent updates to the 3555 Handbook intended to simplify guidance for the delivery of the guaranteed loan program have caused some misperception in regards to total debt ratio calculations, specifically in the subject of student loans.  The Agency is working on revisions to Chapter 11: Ratio Analysis; however, we want to further clarify the subject at this time. Total debt includes monthly housing expenses plus any other credit obligations incurred by the applicant.  Student loan payments must be included in the calculation of the total debt-to-income ratio and captured under liabilities on the application.  Student loan payments should be treated as described below: Fixed payment loans:  A fixed payment may be used in the debt ratio when the lender retains documentation to verify the payment is fixed, the interest rate is fixed, and the repayment term is fixed.  There must be no future adjustments to the terms of the student loan payments.  Non-Fixed payment loans:  Payments for deferred loans, Income Based Repayment (IBR), Graduated, Adjustable, and other types of repayment agreements which are not fixed cannot be used in the total debt ratio calculation.  One percent of the loan balance reflected on the credit report must be used as the monthly payment.  No additional documentation is required.   - Joel Lobb Senior  Loan Officer (NMLS#57916)  phone: (502) 905-3708  Fax:     (502) 327-9119 kentuckyloan@gmail.com http://www.mylouisvillekentuckymortgage.com/