Q. Does KHC allow non-occupying coborrowers?
A. KHC does not allow non-occupying co-borrowers or co-signors.
Q. If a borrower's current primary residence has a KHC first and second mortgage, can they retain current property and still purchase a new primary if they qualify with both mortgages? The new loan will not be a KHC loan.
A. A property secured by a KHC first mortgage must be the borrower's primary residence for the life of the loan. If the property will no longer be the borrower's primary residence, the KHC first and the KHC second mortgage, if applicable, will need to be paid off.
Q. Can a borrower own other real estate?
A. For a Secondary Market Program loan, borrower(s) may own other real estate property at closing, following insuring agency guidelines. The new property through KHC must be the borrower's primary residence.
For MRB or MCC loans, borrower(s) may not own other property at the time of closing.
Q. Does KHC allow interest credits?
A. KHC does not allow interest credits.
Q. What Visas will KHC accept for financing for permanent residents?
A. KHC does not have an overlay for this. Follow agency guidelines per the loan type.
Q. Are KHC loans assumable?
A. Conventional loans through KHC are not assumable. All FHA, VA and RHS loans through KHC are assumable. Buyer must meet agency guidelines and KHC Secondary Market Program requirements. DAP second mortgage loans are not assumable; DAP loans would have to be paid off.
Q. Does KHC allow IRS payment plans?
A. KHC does not have an overlay regarding IRS payment plans. Follow agency guidelines per the loan type.
Q. Is a manual underwrite allowed on a KHC loan?
A. KHC allows a manual underwrite on government loans. Follow agency guidelines per the loan type, FHA loans should also follow the
KHC-FHA Manual Underwrite Matrix.
Q. Does KHC require collections to be paid off if they are over a certain amount?
A. KHC does not have an overlay for this. Follow agency guidelines per the loan type.
Q. Does KHC allow a no credit score manual underwrite or allow a co-borrower with no score if the file receives an approve/eligible AUS finding?
A. KHC requires each borrower to meet the minimum credit score requirements. For a Government loan the minimum requirement is 620 and for a conventional loan the minimum requirement is 660.
Q. If a borrower has multiple charge-offs on their credit report will this make them ineligible for a KHC loan?
A. KHC does not have an overlay for charge-offs. Follow agency guidelines per the loan type.
Q. What is KHC's requirement for sourcing deposits?
A. KHC requires deposits over $500 to be sourced to determine if there is additional income that needs to be included in the compliance income calculation.
Q. Does KHC require 30 days or 60 days bank printout/statement?
A. Follow agency guidelines per the loan type. At minimum, KHC requires a one-month bank statement/printout for each account on the 1003, be reviewed for KHC compliance purposes.
Q. Does KHC limit the amount of assets a borrower may have?
A. KHC does not have an overlay for maximum amount of assets a borrower may have. Follow agency guidelines per the loan type.
Note: when using MRB or MCC funds, imputed income from liquid asset reserves must be included in the KHC Income Calculator in PowerLender. Liquid assets include, but are not limited to, checking and savings accounts. Non-liquid account types, such as a retirement income account, are not required to be included in the calculation. The liquid asset reserve amount is entered into the calculator and 1% of the reserve amount is included in compliance income.
Q. Does KHC accept bank statements in a language other than English? Will KHC translate them?
A. Bank statements in another language are acceptable but will need to be translated before providing them to KHC. Translations must meet agency guidelines, per the loan type.
Q. Can a borrower receive cash back at closing?
A. Cash back at closing on a purchase transaction cannot exceed the amount the applicant(s) has put into the transaction, such as:
- Earnest Money Deposit (EMD).
- Any fees Paid Outside of Closing (POCs).
- Home Inspection.
- Termite Inspection.
Any amount over what the applicant has paid should be applied as a principal reduction, first to the DAP loan (if applicable), otherwise, to the first mortgage.
Q. If a contract sales price exceeds the KHC maximum sales price, can the borrower use their own funds to pay the difference?
A. A contract sales price higher than KHC's Secondary Market/MRB purchase price limit is not eligible for KHC financing.
Q. Does KHC require a Seller's Disclosure in the file?
A. KHC requires the Seller's Disclosure of Property Condition (KREC Form 402) on all purchase transactions, regardless of real estate agent involvement. This is due to the Kentucky Revised Statutes § 324.360, requiring sellers of single-family residential properties to make certain disclosures to a potential buyer. This law applies regardless of whether a licensed salesperson or broker is involved in the transaction. The form is not required for: residential purchases of new construction homes if a warranty is provided; sales of real estate at auction; or a court-supervised foreclosure.
Q. Is a manufactured home an eligible property type for a KHC loan?
A. Yes. Follow agency guidelines per the loan type. KHC requires an Affidavit of Conversion to Real Estate and a copy of the title, which can be completed on or before closing.
Q. Is a berm home an eligible property type for a KHC loan?
A. Yes. A berm home is an eligible property type. Follow agency guidelines per the loan type.
Q. Does KHC allow property inspection waivers on conventional loans?
A. No. KHC requires a full appraisal on each loan regardless of loan type.
Q. Does KHC allow escrows for incomplete items?
A. Yes. General requirements for escrows are:
Repairs that affect livability or safety must be completed and inspected prior to loan closing.
Delegated and Correspondent lender's DE Underwriter makes the determination if escrows should be allowed.
TPO lenders must email khcuw@kyhousing.org for approval of escrowing of repairs or incomplete items.
KHC will hold funds for TPO lenders, but Delegated and Correspondent lenders are responsible for holding escrow funds.
Weather related escrows – expiration dates are as follows:
If HUD REO, the repair escrow should be listed in the purchase contract.
Q. Does KHC require a termite inspection?
A. KHC follows insuring agency guidelines regarding termite inspections. If a termite/pest inspection is not performed, borrowers must sign the KHC Termite Waiver Certification Form. The waiver prints from the C-closing Stage forms in PowerLender.
If a termite report is done, either as borrower choice or if required for the loan type, such as a VA loan, KHC requires a copy of the report.
If termite report shows damage to main support beams of foundation, a structural damage review must be provided by a structural engineer.
Water in crawlspace or basement must be addressed.
All infestation must be treated
Q. Does KHC allow for eSign eligible documents (non-critical) to be signed days prior to the note and mortgage.
A. The Note and Mortgage are to be signed with “wet" signatures. The CD, Deed, Note and Mortgage should be executed on the same day. If this is considered a “mail away" for one of the borrowers to sign, it is understood those documents would be signed on a different day than the actual closing day. However, KHC needs to know the reservation number in question and the reasons for the hybrid closing prior to approving the request.
Q. I have a client considering a KHC first mortgage with a DAP loan. The spouse does not want to go on title. Is KHC okay with the spouse waiving spousal rights off title at closing?
A. The non-purchasing spouse does not have to be on title, but they are required to sign the mortgage and if appliable, the Tax-Exempt Finance Rider.
Q. Will KHC allow someone not on the loan and not on title to be on homeowners insurance policy?
A. No. KHC does not allow.
Q. What is the maximum deductible allowed on homeowners insurance on a KHC loan?
A. Maximum deductible is equal to 5% of policy face amount, not to exceed $5,000.
Q. What is the amount of coverage required for homeowners' insurance on a KHC loan?
A. Amount of coverage must be equal to the loan amount.
Q. Does KHC have an overlay for student loan payments?
A. KHC does not have an overlay regarding student loan payments. Follow agency guidelines per the loan type.
Q. What is KHC's policy for borrowers wanting to refinance? Are there rules or restrictions on refinancing those loans? Can the DPA be subordinated?
A. KHC does allow the following refinances:
When refinancing a KHC loan with DPA, the DPA would need to be paid in full or refinanced into the new loan if going through another investor. KHC will only subordinate a DPA loan when the first mortgage is coming back through KHC. There are no pre-payment penalties to the borrower for paying off the first or second mortgage to KHC.
Q. Can the Federal Home Loan Bank (FHLB) Welcome Home Funds be used with KHC financing?
A. The FHLB Welcome Home Program grant funds are eligible to be used with KHC first and second mortgage financing. KHC does not reserve the WHP grant funds for lenders. Lenders must be eligible FHLB Members to reserve the grant funds with FHLB.
Q. Can down payment assistance from a city government be used with the MRB Program?
A. KHC does not have an overlay for down payment assistance programs being used with MRB or Secondary Market first mortgage program funds. Please follow agency guidelines per the loan type in determining if the down payment assistance is an eligible source of funds for the loan. For KHC purposes, if KHC DPA is also being used, KHC DPA must remain in a 2nd lien position. If the city's down payment assistance program is determined to be an eligible source of funds and will be used with KHC DPA, the city must be willing to take a 3rd lien position.
Q. Is a duplex or 3–4-unit property eligible for KHC financing if one of the units is owner occupied?
A. No. KHC will accept a one-unit, single family dwelling, new or existing property located in Kentucky.
Q. Does KHC accept berm homes?
A. KHC does not have an overlay for a berm home. Follow agency guidelines per the loan type.
Q. Can KHC financing, including KHC DPA, be used if a borrower is purchasing a KHC REO property?
A. KHC DPA can be used with KHC government first mortgage loans to finance a KHC loan secured by a KHC REO subject property. KHC DPA cannot be used with KHC conventional first mortgage loans when the subject property is KHC REO.
Q. How should a POA be reflected on closing documents?
A. KHC does not have an overlay for how the POA is reflected on the document, please follow agency guidelines per the loan type.
Q. Does KHC require the first and second mortgages to be on the title?
A. The title commitment and the title policy reflect the first mortgage amount.
Q. Is a copy of the hazard insurance Notice of Transfer letter sent to the insurance company acceptable proof of transfer?
A. KHC requires Correspondent and Delegated Lenders to endorse the hazard and/or flood insurance to Kentucky Housing at the time of purchase. An updated mortgagee clause will be a pre-purchase condition. A copy of the Notice of Transfer letter sent to the insurance company will no longer be accepted as proof of transfer. The reason for this change is that a high number of policies are not being updated by the insurance companies and the result is misplacement for forced insurance on our borrowers' loans.
KHC requires an updated certificate of insurance reflecting KHC's mortgage clause: Kentucky Housing Corporation, ISAOA, P.O. Box 4150, Frankfort, KY 40604-4150.
While the updated mortgagee clause is preferred prior to loan purchase, we understand some companies may hold that transfer until the loan is purchased. For that reason, KHC will not delay the loan purchase for this one condition but will move the condition to a post-purchase condition. The main point being a copy of the Notice of Transfer letter will not be accepted as proof of actual transfer.
Q. How do I sign up for emails from KHC regarding KHC updates, rates, program changes, etc.?
A. Sign up for KHC eGrams by going to KHC's homepage
https://www.kyhousing.org/Pages/default.aspx, click the envelope on the bottom left corner, fill in the requested information, check the box for Lender eGrams, then click Subscribe.