This type of loan is administered by KHC in the state of Kentucky. They typically have $12,500 down payment assistance year around, that is in the form of a second mortgage that you pay back over 15 years at a interest rate of 4.75% depending on your income in the household.
Joel has worked with KHC for 12 of his 20 years in the mortgage lending business. Joel said, “A lot of my clients would not have been able to purchase a home of their own or possibly delayed their purchase due to lack of down payment but with the $6,000 DAP loan program, this gets them into a house sooner and starts their path to homeownership while building equity instead of throwing their money away.”
FHA loans are a popular choice for many first-time homebuyers in Kentucky. This is due to their flexible qualifying criteria. If you’re considering an FHA loan in the Bluegrass State, understanding the key qualifying factors is crucial. Here’s a comprehensive guide to the criteria you need to know:
Credit Score Requirements:
FHA loans are known for accommodating borrowers with lower credit scores. The minimum required credit score can vary. Typically, a credit score of 580 or higher is needed to qualify for the minimum down payment of 3.5%. Borrowers with credit scores between 500 and 579 might still qualify. They will need a higher down payment, usually around 10%.
Down Payment:
The minimum down payment for an FHA loan in Kentucky is 3.5% of the home’s purchase price. This is advantageous for buyers who may not have substantial savings for a larger down payment, making homeownership more accessible.
Work History:
Lenders typically look for a steady 2 year employment history when considering FHA loan applications. A consistent work history is beneficial. It is preferable to have worked with the same employer or within the same field. This helps demonstrate financial stability and the ability to repay the loan.
Debt-to-Income Ratio (DTI):
The debt-to-income ratio is a crucial factor in mortgage approval. For FHA loans, the maximum allowable DTI ratio is typically around 40% to 45% of your gross monthly income. It can go higher up to 56% with good credit scores, a large down payment, or a shorter-term loan. Lenders may also consider higher ratios in certain cases if compensating factors are present.
Bankruptcy and Foreclosure:
FHA loans have lenient guidelines regarding bankruptcy and foreclosure. Generally, borrowers with a past bankruptcy may qualify for an FHA loan after two years. This is possible if they have re-established good credit and demonstrated responsible financial behavior. For foreclosures, the waiting period is usually three years.
Mortgage Term:
FHA loans offer various mortgage term options, including 15-year, 20 year, 25 year and 30-year fixed-rate loans. The choice of term depends on your financial goals and ability to manage monthly payments.
Occupancy: Primary residences with 1-4 units. Not for investment properties or second homes.
Mortgage Insurance on the loan for life of loan. Larger down payments and shorter terms will reduce the upfront mi and monthly mi premiums
can be used for refinances, not only for purchases.
Max FHA loan in Kentucky for 2025 is Kentucky FHA Loan Limits by County $524,225 1 unit $671,200 2 unit $811,275 3 unit $1,008,300 4 unit– This changes every year
No income limits nor property restrictions on where home is located
Can close within 30 days typically with good appraisal and title work
FHA Loan Requirements in Kentucky for Credit scores, Down payment, Debt Ratio and work history below
Requirement
Details
Credit Score
– 580+: Eligible for a 3.5% down payment. – 500-579: Requires a 10% down payment.
Down Payment
Minimum of 3.5% for qualified buyers; 10% for lower credit scores below 580 to 500 score range
Debt-to-Income Ratio (DTI)
– Ideal: 45% or lower on front end ratio or housing ratio. – Acceptable: Up to 57% with compensating factors. There are two ratios. Front end and back end with front end being maxed at 45% and the backed end ratio being 56.99% with an AUS approval. If manually underwritten, see guidelines here
Employment History
Must provide at least **2 years of consistent employment—College transcripts can supplement with a less than 2 year work history
Key Benefits of FHA Loans in Kentucky
Low Credit Score Requirements
FHA loans accept borrowers with credit scores as low as 500. However, a score of 580+ qualifies you for the lowest down payment option.
Low Down Payment Options
You can purchase a home with as little as 3.5% down if you meet credit requirements, making FHA loans more accessible than conventional loans.
Competitive Interest Rates
FHA loans typically offer rates comparable to conventional mortgages. They may even offer lower rates. This could save you money over the life of the loan.
Flexible Loan Uses
With an FHA 203(k) loan, you can bundle home purchase and renovation costs into a single mortgage.
Assumable Loans
FHA loans can be transferred to a new buyer. This feature is especially valuable if you sell your home when interest rates are higher.
Understanding these qualifying criteria can help you navigate the FHA loan application process in Kentucky more effectively. Working with an experienced mortgage professional can provide valuable guidance. They offer assistance tailored to your specific financial situation and homeownership goals.
Joel Lobb Mortgage Loan Officer
Any questions, please don’t hesitate to reach out via, text, email, or call. Advice is always free.
One of Kentucky’s highest rated mortgage loan officers for FHA, VA, USDA, Kentucky Housing KHC and conventional mortgage loans.
Evo Mortgage Company NMLS# 1738461 Personal NMLS# 57916
For assistance with Kentucky mortgage loans, reach out via email, call, or text Joel Lobb directly.
Kentucky Local Home Loan Lender Services
First-Time Home Buyers Welcome FHA, Rural Housing (USDA), VA, and Kentucky Housing Corporation (KHC) Loans Conventional Loan Options Available Fast Local Decision-Making Experienced Guidance Through the Home Buying Process
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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 view of my employer. Not all products or services mentioned on this site may fit all people. (www.nmlsconsumeraccess.org).
Kentucky First Time Homebuyers FHA, VA, USDA & Rural Housing, KHC and Fannie Mae mortgage loans
NMLS 57916 | Company NMLS #1364/MB73346135166/MBR1574
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 view of my employer. Not all products or services mentioned on this site may fit all people. NMLS ID# 57916, (www.nmlsconsumeraccess.org).
The type of mortgage you’re applying for determines the minimum requirements you’ll have to meet for your down payment, credit score, and debt-to-income ratio.
Find out what type of loan you might qualify for or what aspects of your finances you’ll need to improve to get a better shot at qualifying for a mortgage.
Loan Type
Min. Down Payment
Min. Credit Score
Max DTI
Property Type
Conventional
3%
620
45%
Primary, secondary, investment
VA
0%
none
none
Primary
FHA
3.5%
500
50%
Primary
USDA
0%
none
41%
Primary
Keep in mind: The minimum down payment, minimum credit score, and maximum DTI shown in the table apply to mortgages used to purchase a primary residence. While you can use a conventional loan or a jumbo loan to purchase a home for another purpose, you might need a larger down payment, a higher credit score, more cash reserves, or all three.
Credit score needed to buy a house
Mortgage lending is risky, and lenders want a way to quantify that risk. They use your three-digit credit score to gauge the risk of loaning you money since your credit score helps predict your likelihood of paying back a loan on time. Lenders also consider other data, such as your income, employment, debts and assets to decide whether to offer you a loan.
Different lenders and loan types have different borrower requirements, loan terms and minimum credit scores. Here are the requirements for some of the most common types of mortgages.
Conventional loan
Minimum credit score: 620
A conventional loan is a mortgage that isn’t backed by a federal agency. Most mortgage lenders offer conventional loans, and many lenders sell these loans to Fannie Mae or Freddie Mac — two government-sponsored enterprises. Conventional loans can have either fixed or adjustable rates, and terms ranging from 10 to 30 years.
You can get a conventional loan with a down payment as low as 3% of the home’s purchase price, so this type of loan makes sense if you don’t have enough for a traditional down payment. However, if your down payment is less than 20%, you’re required to pay for private mortgage insurance (PMI), which is an insurance policy designed to protect the lender if you stop making payments. You can ask your servicer to cancel PMI once the principal balance of your mortgage falls below 80% of the original value of your home.
FHA loan
Minimum credit score (10% down): 500
Minimum credit score (3.5% down): 580
FHA loans are backed by the Federal Housing Administration (FHA), a part of the U.S. Department of Housing and Urban Development (HUD). The FHA incentivizes lenders to make mortgage loans available to borrowers who might not otherwise qualify by guaranteeing the federal government will repay the mortgage if the borrower stops making payments. This makes an FHA loan a good option if you have a lower credit score.
FHA loans come in 15- or 30-year terms with fixed interest rates. Unlike conventional mortgages, which only require PMI for borrowers with less than 20% down, all FHA borrowers must pay an up-front mortgage insurance premium (MIP) and an annual MIP, as long as the loan is outstanding.
VA loan
Minimum credit score: N/A
VA loans are mortgages backed by the U.S. Department of Veterans Affairs (VA). The VA guarantees loans made by VA-approved lenders to qualifying veterans or service members of the U.S. armed forces, or their spouses. This type of loan is a great option for veterans and their spouses, especially if they don’t have the best credit and don’t have enough for a down payment.
VA loans are fixed-rate mortgages with 10-, 15-, 20- or 30-year terms.
Most VA loans don’t require a down payment or monthly mortgage insurance premiums. However, they do require a one-time VA funding fee, that ranges from 1.4% to 3.6% of the loan amount.
USDA loan
Minimum credit score: N/A
The U.S. Department of Agriculture guarantees loans for borrowers interested in buying homes in certain rural areas. USDA loans don’t require a minimum down payment, but you have to meet the USDA’s income eligibility limits, which vary by location.
All USDA mortgages have fixed interest rates and 30-year repayment terms.
USDA-approved lenders must pay an up-front guarantee fee of up to 3.5% of the purchase price to the USDA. That fee can be passed on to borrowers and financed into the home loan. If the home you want to buy is within an eligible rural area (defined by the USDA) and you meet the other requirements, this could be a great loan option for you.
What else do mortgage lenders consider?
Your credit score isn’t the only factor lenders consider when reviewing your loan application. Here are some of the other factors lenders use when deciding whether to give you a mortgage.
Debt-to-income ratio — Your debt-to-income (DTI) ratio is the amount of debt payments you make each month (including your mortgage payments) relative to your gross monthly income. For example, if your mortgage payments, car loan and credit card payments add up to $1,800 per month and you have a $6,000 monthly income, your debt-to-income ratio would be $1,800/$6,000, or 30%. Most conventional mortgages require a DTI ratio no greater than 36%. However, you may be approved with a DTI up to 45% if you meet other requirements.
Employment history — When you apply for a mortgage, lenders will ask for proof of employment — typically two years’ worth of W-2s and tax returns, as well as your two most recent pay stubs. Lenders prefer to work with people who have stable employment and consistent income.
Down payment — Putting money down to buy a home gives you immediate equity in the home and helps to ensure the lender recoups their loss if you stop making payments and they need to foreclose on the home. Most loans — other than VA and USDA loans — require a down payment of at least 3%, although a higher down payment could help you qualify for a lower interest rate or make up for other less-than-ideal aspects of your mortgage application.
The home’s value and condition — Lenders want to ensure the home collateralizing the loan is in good condition and worth what you’re paying for it. Typically, they’ll require an appraisal to determine the home’s value and may also require a home inspection to ensure there aren’t any unknown issues with the property.
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