Kentucky VA Mortgage Guidelines for Student Loans

Kentucky VA Mortgage Guidelines for Student Loans
If student loan repayments are scheduled to begin within 12 months of the date of  the Kentucky VA loan closing, lenders should consider the anticipated monthly obligation in the loan analysis. If the borrower is able to provide evidence that the debt may be deferred for a period outside that time frame, the debt need not be considered in the analysis.
Guide Reference – Lenders Handbook Chapter 4, Section 5, Debts and Obligations

 

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STUDENT LOAN CLARIFICATION FOR ALL LOAN PROGRAMS

April 19, 2016
 
STUDENT LOAN CLARIFICATION FOR ALL LOAN PROGRAMS
PROGRAM
GUIDELINE
FNMA
For all student loans, whether deferred, in forbearance, or in repayment (not deferred), the lender must use the greater of the following to determine the monthly payment to be used as the borrower’s recurring monthly debt obligation:
  • 1% of the outstanding balance; or
  • The actual documented payment (documented in the credit report, in documentation obtained from the student loan lender, or in documentation supplied by the borrower).
If the payment currently being made cannot be documented or verified, 1% of the outstanding balance must be used.
Exception: If the actual documented payment is less than 1% of the outstanding balance and it will fully amortize the loan with no payment adjustments, the lender may use the lower, fully-amortizing monthly payment to qualify the borrower.
FHLMC
Use the following:
  • The payment on the credit report
  • 1% of the outstanding balance or
  • The actual documented fully amortizing payment.
FHA
Student loans:
Regardless of the payment status, the mortgagee must use:
  • The GREATER of:
    • 1% of the outstanding balance on the loan; or
    • The monthly payment reported on the credit report; or
  • The actual documented payment, provided the payment will fully amortize the loan over its term.
For example:
Student loan reporting on credit with a balance of $15,000 and a payment of $55.00. 1% of the balance is greater than the payment reporting, so you would use 1%.
If there is documentation showing a fully amortized payment of $125.00, you could use that payment instead of the 1%.
VA
May be excluded from the borrower’s total monthly obligations with evidence of a minimum of 12 months deferment from date of closing.
 
If there is no monthly payment reflected on the credit report, a copy of the borrower’s payment letter or promissory note should be used to determine what payment amount to use.
USDA
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.

Kentucky VA Loan Overview

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I have originated over 300 VA Home loans in Kentucky and I know how great they are for Kentucky Families; a home loan with zero down, at a very low 30 year fixed rate with no monthly mortgage insurance. I consider myself a VA Home loan expert from Louisville Kentucky and I would like to assist you in your next VA home loan in Kentucky. I have created a Kentucky VA home mortgage website for information and insights to the VA Home Loan NMLS #57916

502-905-3708 or email kentuckyloabn@gmail,.com  NMLS#57916

Deal with someone locally on your VA loan instead of a person behind a 1-800 number. Honest, straight-forward service right here in Kentucky.

Maximum LTV

Purchase: 100/100 Max LTV/CLTV

Refinance: 100/100 Max LTV/CLTV (VA Cash-Outs greater than 90% have additional guideline requirements)

FICO/Credit Score

A minimum of 1 credit score is required. A standard Tri-Merge Credit Report is generally required; however a Mortgage Only Credit Report will also be accepted for IRRRLs ONLY so long as it includes valid FICO scores.

Minimum Credit scores for VA loans (including IRRRLs) are:

  • Automated Approval: 580
  • Manual Underwriting: 560
DTI Ratio

Automated Approval: No maximum DTI

Manual Underwriting: Maximum 43% backend DTI

Appraisal

An NOV (Notice of Value) from VA is required.

Maximum Loan Amount

Individual county loan limits may differ. You can find the link to determine loan limits for the subject property county here.

The maximum potential loan amount for a purchase transaction with full entitlement is $1,094,625. Loan amounts up to $1,500,000 are allowed as long as the VA guaranty plus the veteran’s down payment and/or equity equal 25% of the lesser of the sales price or Notice of Value (NOV).

Under certain conditions (see below), Non-IRRRL refinance transactions are allowed up to 100/100 LTV/CLTV. Refinances not meeting these conditions are limited to a maximum 90/90 LTV/CLTV of the property value shown on the CRV or NOV plus the cost of any energy efficient improvements (up to $6,000) plus the VA Funding Fee.

For IRRRLs, Maximum loan amount is the existing VA loan balance plus the following

  • Allowable fees and charges, plus
  • The cost of energy efficiency improvements, and
  • The VA funding fee = .50.
Cash-Out Refinance Loans greater than 90% LTV

VA Cash-Out Refinance loans will now be offered with LTV/CLTV up to 100%. If the LTV or CLTV greater than 90%, the following additional requirements will apply

  • The cash-out loan may be paying off a current mortgage loan (VA or otherwise), a second (seasoned or unseasoned), and/or another non-mortgage debt.
  • Maximum cash in hand after all payoffs cannot be greater than $50,000
  • Minimum FICO 660
  • An additional adjustment of -0.5
  • The loan must have a DU Approve/Eligible (No manual underwrites allowed)
Entitlement

A minimum of 25% of the loan amount must consist of available guaranty. If less than 25% guaranty is indicated on the Loan Guaranty Certificate (LGC), a calculation worksheet must be enclosed indicating the calculations used to determine the full 25% guaranty.

The maximum guaranty is the lesser of the veteran’s available entitlement or the maximum potential guaranty amount detailed below:

Up to $45,000 50% of the loan amount
$45,001 – $56,250 $22,500
$56,251 – $144,000 40% of the loan amount with a maximum of $36,000
$144,001 – $417,000 25% of the loan amount with a maximum of $104,250
$417,001 – $1,500,000 25% of the loan amount with a maximum of $273,656

Note: the maximum guaranty for loan amounts > $417,000 varies depending upon the location of the property.

VA Funding Fees

All IRRRLs have a funding fee of 0.50. For other loans, see the table below

Purchase and Construction Loans
Type of Veteran Down Payment Percentage for First-Time Use Percentage for Subsequent Use
Regular Military 0 – 4.99%
5 – 9.99%
10% or more
2.15%
1.50%
1.25%
3.30%
1.50%
1.25%
Reserves/National Guard 0 – 4.99%
5 – 9.99%
10% or more
2.40%
1.75%
1.50%
3.30%
1.75%
1.50%
Refinance Loans
Type of Veteran Percentage for First-Time Use Percentage for Subsequent Use
Regular Military 2.15% 3.30%
Reserves/National Guard 2.40% 3.30%
Funding Fee Exemption

A veteran must establish any claim for exemption from the fee with documentation included in the loan file. The following are the only exceptions allowed:

  • Veterans receiving VA compensation for service-connected disabilities
  • Veterans who would be entitled to receive compensation for service-connected disabilities if they did not receive retirement pay
  • Surviving spouses of veterans who died in service or from service-connected disabilities (regardless of whether such surviving spouses are veterans with their own entitlements and whether they are suing their own entitlements on the loan)
  • Veterans who are rated by the VA as eligible to receive compensation as a result of pre-discharge disability examination and rating.
VA Student Loans
  • Student Loans deferred at least 12 months may still be excluded
  • When repayment will begin within the next 12 months, calculate a 5% yearly payment. Then divide that by 12 to get the monthly payment.
    • If the reported payment on the credit report is higher than the above calculated payment, the payment on the credit report must be used.
    • A lower payment reported on the credit report can only be used if corroborated with an official statement from the student loan servicer(s) confirming the loan terms and payment information. This statement can be no more than 60 days old at the time of VA loan closing.
Credit Report and AUS Fee Requirement
  • The combined total of Credit Report Fees and AUS charges cannot exceed $100.
  • The only time a Veteran can be charged with both Credit Report Fees and AUS charges is on AUS “Refer” cases.
VA Short Sales

A borrower with a previous Short Sale will now be eligible without the standard waiting period if they meet all of the following

  • Borrower was current on all mortgage payments for the prior mortgage during the 12 months prior to the Short Sale
  • No 30 day lates on any installment loans during the 12 months prior to the Short Sale.
  • No late payments at all within the last 24 months
  • 660 FICO
  • Loan must receive DU approval
IRRRL QM Requirements

VA IRRRLs must meet the following requirements:

  • The loan being refinanced was originated at least 6 months prior to the IRRRL closing date,
  • At least 6 payments must have been made on the original loan,
  • The borrower has not been more than 30 days late on a payment in the past six months,
  • The recoupment period for all allowable fees and charges financed as part of the loan or paid at closing does not exceed 36 months,
  • The refinance does not increase the principal balance outstanding on the prior loan, except to the extent of fees and charges allowed by the VA,
  • Points and fees do not exceed 3% ,
  • regardless of loan amount—this applies even to lower-balance loans,
  • Loan must also comply with VA limitations on fees and charges,
  • The interest rate on the IRRRL is lower than the interest rate on the loan being refinanced (unless the borrower is refinancing from an adjustable rate loan to a fixed rate loan under VA guidelines),
  • The refinance is fully amortizing and there is no balloon payment,
  • The loan being refinanced is a loan that VA has already guaranteed, and
  • Both the loan being refinanced and the IRRRL meet all other VA requirements.

 

 

Joel Lobb
Mortgage Loan Officer
Individual NMLS ID #57916
American Mortgage Solutions, Inc.
Company NMLS ID #1364
Text/call:      502-905-3708
fax:            502-327-9119
email:
          kentuckyloan@gmail.com
Mortgage loans only offered in Kentucky.
All loans and lines are subject to credit approval, verification, and collateral evaluation and are originated by lender. Products and interest rates are subject to change without notice

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 approvalnor does it comprise full underwriting guidelines. This does not represent being part of a government agency. The views expressed on this post are mine and do not necessarily reflect the view of my employer. Not all products or services mentioned on this site may fit all people.
NMLS ID# 57916, (www.nmlsconsumeraccess.org).