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
Here is a brief summary on getting a mortgage loan while in a Chapter 13 Bankruptcy:
You must have 12 payments paid into the Chapter 13 before you can apply for a mortgage loan.
The payments must be made on time for last 12 months or after 12 months if you have been in longer, so no late payments to the Chapter 13 while in it.
You have to ask permission from the courts to seek a mortgage loan. They usually grants this. I have never not seen them grant it.
You have to qualify with the new house payment along with Chapter 13 payments and other debts listed on credit report. Debt to income ratios usually center around 31 and 43% respectively, meaning the new house payment should not be more than 31% of your gross monthly income and your total house payment and debts listed on credit report along with Chapter 13 payment should not be more than 43% of your total gross monthly income.
Credit scores: Most FHA lenders I work with will want a 620 middle score. You have three fico scores from Experian, Equifax, and Transunion, and they throw out the high and low score and take middle score. For example, if you had a 598, 679, and 590 scores respectively for all three bureaus listed above, your qualifying score would be 598.
There are some FHA investors that I am set up with that will go down to 580, but I have seen in my past experiences 620 will get you a better deal and far greater chance of closing on your loan with FHA.
Down payment: For FHA loans, you will need to have at least 3.5% down payment saved up. It is extremely hard to find a no money down loan program to get you approved for a mortgage while you are in a Chapter 13 plan.
FHA and USDA are really the only two options that I know of that offer financing for a borrower with a current Chapter 13 Bankruptcy plan plan, so keep that in mind.
Conventional loan program offered by Fannie Mae will not allow a mortgage loan for someone in a Chapter 13 Bankruptcy plan.
On USDA loans, it is possible to get 100% Financing after you have paid into the plan for 12 months with a good pay history. The credit scores needed for a USDA loan approval really need to be above 640 in my past experience in getting them approved. A lot of USDA lenders will say they will do down to 620, but it is very difficult getting them approved. Best to get your scores up to increase your changes in qualifying for a USDA loan. There is not much that difference in getting your scores up to that range if you are at a 620 score now.
With USDA loans, they have income and property eligibility requirements that FHA does not have, so below is a rough run down of FHA vs USDA loan for you:
Typically, USDA-eligible properties are located in rural areas. It is a mistake, however, to think that you have to live far out in the country to qualify for a USDA loan. USDA-eligible properties are often located near urban areas.
A property’s eligibility is determined by its location with respect to USDA’s map of eligible locations. The USDA program also places limits on your household income based on median earnings in an area. If you exceed that limit, you can’t obtain a USDA loan.
The FHA, by contrast, does not place limits on household earnings. The FHA, however, does establish a maximum limit on the amount of money that can be borrowed through the program.
So if you were in a hurry to buy, after you have been in your Chapter 13 plan for 12 months, I can look at getting you approved to buy a home if you wish:
How to Get Approved for a Kentucky Mortgage While in A Chapter 13 Bankruptcy:
If you have questions about qualifying as first time home buyer in Kentucky, please call, text, email or fill out free prequalification below for your next mortgage loan pre-approval.
This web site is not the FHA, VA, USDA, HUD or any other government organization responsible for managing, insuring, regulating or issuing residential mortgage loans.
All approvals and rates are not guaranteed, and are only issued based on standard mortgage qualifying guidelines
Remember, we are even available this weekend for pre-qualifications or questions. Call our cell phone or email us. If you miss us, leave a message and we WILL call you back
Buying your first house in Kentucky involves several steps, which can vary depending on the type of loan program you choose. Here’s a detailed guide on the steps and requirements for various Kentucky First Time Home Buyer loan programs:
Minimum credit score typically required is 580 for 3.5% down payment.
Scores between 500-579 may qualify with a 10% down payment.
Income:
Stable and sufficient income to cover the mortgage payments.
Work History:
At least 2 years of consistent employment history.
Down Payment:
3.5% of the purchase price if the credit score is 580 or higher.
FICO Score:
Minimum FICO score of 580 for maximum financing.
Bankruptcy and Foreclosure:
Chapter 7 bankruptcy: 2 years from discharge with reestablished good credit.
Chapter 13 bankruptcy: 1 year of the payout period with satisfactory payment history.
Foreclosure: 3 years from completion date.
Debt Ratio:
Typically, a maximum debt-to-income (DTI) ratio of 56.9% on backend and 45% on the front end debt ratio.
Collections:
Must be addressed if they affect the borrower’s ability to repay the loan. Collections not required to be paid but must count in debt to income ratio sometimes if aggregate total on credit report is over $1000 total…Non-medical bills only, medical bills don’t count and usually not required to be paid or figure a payment unless you have a judgement of garnishment against your paystubs.
Mortgage Insurance:
Required for all FHA loans. Includes an upfront mortgage insurance premium (UFMIP) and monthly mortgage insurance premiums (MIP).
Time to Close:
Approximately 30-45 days.
Appraisal Requirements:
Property must meet minimum property standards set by HUD.
Mortgage Documents Needed for Pre-Approval Letter in Kentucky to Buy a House using a Kentucky FHA loan:
Proof of income (pay stubs, last two years W-2s, tax returns).
Proof of employment. Last two years
Proof of assets (last two bank statements). 401k or retirement account and stocks and bonds.
Kentucky Mortgage Credit report for all three credit bureaus Experian, Equifax and Transunion
Minimum credit score of 640 is preferred for automated underwriting. No minimum score required.
Scores below 640 may qualify with manual underwriting down to a 580 credit score
Income:
Must meet USDA income eligibility guidelines (typically low to moderate income). 2 year history of income.
Work History:
Stable employment history, usually for the past 2 years.
Down Payment:
No down payment required (100% financing).
FICO Score:
Minimum FICO score of 640 for automated underwriting. can go down to 580 possible
Bankruptcy and Foreclosure:
Chapter 7 bankruptcy: 3 years from discharge.
Chapter 13 bankruptcy: 1 year of the payout period with satisfactory payment history.
Foreclosure: 3 years from completion date.
Debt Ratio:
Typically, 33% for housing expenses and 45% for total DTI.
Collections:
Must be resolved if they impact the ability to repay the loan. Collections typically don’t have to be paid but may have to count a payment in your debt to income ratio if aggregate is over 1k and non-medical
Mortgage Insurance:
Annual fee and upfront guarantee fee. Currently 1% upfront and .35% month
Time to Close:
Approximately 30-45 days, including USDA processing time.
Appraisal Requirements:
Must meet HUD FHA standards.
Mortgage Documents Needed for Pre-Approval:
Proof of income (pay stubs, last two years W-2s, tax returns).
Proof of employment. Last two years
Proof of assets (last two bank statements). 401k or retirement account and stocks and bonds.
Kentucky Mortgage Credit report for all three credit bureaus Experian, Equifax and Transunion
Varies depending on the program; typically, a minimum of 580 for some programs and with KHC it requires a 620 score. .
Income:
Must meet specific program income limits.
Work History:
Stable employment history. Last two years
Down Payment:
Assistance provided to cover down payment and closing costs. 25k welcome home grant, 10k down payment assistance loan from KHC and 5% grant used available toward closing costs and down payment
FICO Score:
Minimum FICO score requirement varies by program.
Bankruptcy and Foreclosure:
Varies by program.
Debt Ratio:
Typically aligns with Kentucky FHA, VA, or USDA requirements.
Collections:
Must be addressed if they impact the ability to repay the loan.
Mortgage Insurance:
Depends on the primary loan program (FHA, VA, USDA).
Time to Close:
Approximately 45-60 days.
Appraisal Requirements:
Must meet the requirements of the primary loan program.
Varies depending on the program; typically, a minimum of 620-640.
Income:
Must meet specific program income limits.
Work History:
Stable employment history.
Down Payment:
No down payment required (100% financing).
FICO Score:
Minimum FICO score requirement varies by program.
Bankruptcy and Foreclosure:
Varies by program; typically 2-3 years from discharge or completion.
Debt Ratio:
Varies by program, typically around 41-45%.
Collections:
Must be addressed if they impact the ability to repay the loan.
Mortgage Insurance:
Depends on the primary loan program (FHA, VA, USDA).
Time to Close:
Approximately 30-45 days.
Appraisal Requirements:
Must meet the requirements of the primary loan program.
Mortgage Documents Needed for Pre-Approval:
Proof of income (pay stubs, W-2s, tax returns).
Proof of employment.
Proof of assets (bank statements).
Credit report.
General Steps for Buying Your First Home in Kentucky
Check Your Credit Score:
Obtain a copy of your credit report and check your credit score.
Determine Your Budget:
Use a mortgage calculator to estimate your monthly payments and determine a comfortable budget.
Get Pre-Approved:
Contact a mortgage lender to get pre-approved for a loan. Provide necessary documents for income, employment, and assets.
Choose a Real Estate Agent:
Select a knowledgeable real estate agent to help you find a home that meets your needs and budget.
Start House Hunting:
Visit properties, attend open houses, and narrow down your choices.
Make an Offer:
Once you find a home, work with your real estate agent to make a competitive offer.
Home Inspection:
Hire a professional inspector to check the condition of the home.
Finalize Your Loan:
Work with your lender to finalize the loan application and submit all required documents.
Appraisal:
The lender will order an appraisal to determine the home’s value.
Closing:
Review and sign all closing documents. Pay any remaining closing costs and receive the keys to your new home.
Following these steps and meeting the specific requirements of your chosen loan program will help you successfully purchase your first home in Kentucky.
Joel Lobb Mortgage Loan Officer
American Mortgage Solutions, Inc. 10602 Timberwood Circle Louisville, KY 40223 Company NMLS ID #1364
Kentucky FHA Loans are good for borrowers who have the following:
• Credit scores less than 680.
• Less than 5% down payment and no reserves to use.
• Borrowers with past foreclosures between 3 and 7 years old.
• Borrowers with past short sales between 2 and 4 years old.
• Borrowers who need a gift for the down payment and/or closing costs, prepaid taxes and
insurance.
The FHA Mortgage Insurance premium is a premium that exists for the FHA Loan that is
paid up front and monthly by the homebuyer. This premium protects the lender should the
buyer default. They vary per state and per type of loan Kentucky home buyers qualify for. In Kentucky, upfront mortgage insurance premiums are 1.75%.
Below are the rates per type of loan:
• 15-Year Fixed with down payment more than 10%: .45%
• 15-Year Fixed with down payment less than 10%: .70%
• 30-Year Fixed with down payment more than 5%: .80%
• 30-Year Fixed with down payment less than 5%: .85%
Kentucky Conventional loans are usually reserved for the following:
• Credit scores greater than 680
• Greater than or equal to 5% down payment with reserves
• Borrowers with past foreclosures over 7 years old.
• Borrowers with past short sales between 5-7 years old.
• Borrowers who have a lot of money saved up and want to get rid of mortgage insurance within the first 5 years give or take. 20% equity position is needed for no mi
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The biggest difference between conventional loans and FHA loans comes down to the mortgage insurance. Mortgage insurance is more expensive for FHA loans, but the trade off is a lower fixed rate than conventional loans.
On Conventional loans there is no upfront mortgage insurance like FHA, and if you have a high credit score you can possibly get a lower monthly mi premium as compared to FHA where everybody gets the same mortgage insurance premium not matter your credit score or down payment.
Lastly, FHA Mortgage insurance is for life of loan, whereas Conventional mortgage insurance or pmi it’s called, is discontinued once you reach the 80% threshold equity position of your home loan.
Again, I would not get too caught in FHA having mortgage insurance for life of loan, because most loans are only kept open a minimum of 5-7 years so a lot of times it may make sense to go with the lower rate and pay the mortgage insurance with FHA because most people don’t hold their mortgage for 30 years.
You can call or text me with your questions and we can compare the differences based on your credit score, down payment and income.
Equal Housing Lender. NMLS#:57916 http://www.nmlsconsumeraccess.org/Rates, terms, and program information are subject to change without notice. Subject to certain approvals, terms and conditions. This is not a commitment to lend.
Not part of any government lending agency and only lending in the State of Kentucky.
Looking at FHA loans vs Conventional loans can arm you with a lot of valuable information as these are the 2 most popular mortgage loan products today. Before getting to the content let’s look at some abbreviations that will need to be defined.
PMI stands for Private Mortgage Insurance
MIP stands for Mortgage Insurance Premium
Credit Scores are a numerical measure of your credit worthiness, the maximum score is 850
Debt-to-Income Ratio measures your monthly income versus your monthly obligations. A good rule of thumb is to try to be below 45%
FHA Loans vs Conventional Loans
Conventional Mortgage Benefits
20% down payment preferred to avoid PMI
No upfront PMI
3% Down Payment Conventional Loan Option is available
PMI expires once principal balance is less than 78%
Houses do not have to be owner-occupied (so they can be used at rentals)
Can purchase any condominium and townhome (no FHA regulations)
Conventional Mortgage Disadvantages
Significant upfront investment (20% down preferred)
Credit score of 620 required
No Down Payment Assistance
Down Payment must be at least 5% unless you qualify for a 3% conventional mortgage
Harder to Qualify for a Conventional Mortgage
No government inspection so the home can be in any quality
Only a portion of a down payment can be a gift
Interest rates are higher than FHA loans
Most of the disadvantages of conventional mortgages stem around qualifications and resources needed upfront. If a borrower has significant resources most of these disadvantages are of little consequence.
The major advantage to going with an FHA loan is that there are much more lax credit standards you have to meet to obtain financing. Usually, FHA mortgages require a lower down payment, can work with lower credit scores, less elapsed time is needed if you have some credit problems (charge-offs, foreclosures) and you can use a non-occupant co-borrower or co-signer (who is a relative) to help you qualify for the loan. That way you can use blended ratios. Blended ratios are debt-to-income ratios that equally blend or combine the primary borrower’s income and the non-occupant co-borrower’s income and monthly payments to help get approval for the loan. Except for HomeReady (formerly Fannie Mae HomePath) mortgages, conventional loans do not allow you to use a non-occupant co-borrower.
Government-backed program. Ideal for first-time home buyers
Easier to obtain, lower credit scores needed and lower minimum down payment
Down Payment minimum is 3.5%
All of down payment can be a gift
Down Payment Assistance Available (in some circumstances)
No reserves required
Minimum credit score is 500 (for 3.5% down payment)
edition to be approved for FHA so there are less potential upfront repairs needed
Lower interest rates than conventional mortgages
FHA Loan Disadvantages
FHA loans require the owners to live in the home
Mortgage Insurance Premium required if borrowers put down less than 10%
Private Mortgage Insurance monthly cost is higher for FHA loans
Government Licensed Inspector required to inspect home before sale can be approved
Condominiums require FHA approval
FHA Loans take longer to process because of government requirements and all mandated repairs have to be completed before sales can be finalized
Most of these disadvantages involve extra requirements or limits added to the process of the house (see Pros and Cons of FHA Loans). Some of these might not be disadvantages depending on one’s personal situation, but they are extra steps to note. Since FHA mortgages are a government program, more care and consideration goes into the process, which may be better in some situations.
FHA loans vs Conventional loans
There are four important numbers in deciding which loan you will go with: credit scores, down payment amount, debt-to-income, and mortgage insurance percentage rate. Conventional mortgages and FHA home loans have different limits and rates which are important to examine. They also have important differences which affect the availability of properties, the condition of the properties one wishes to buy and how your down payment can be paid. So comparing FHA loans vs Conventional loans can sometimes be a tricky endeavor.
Down Payment Requirements
Conventional Mortgages require between 5 and 20% upfront
In certain circumstances, down payments can be as low as 3% (Conventional 97 loan program)
FHA Mortgages have 2 possibilities
If Credit Score is 500-579 then 10% down payment is required (not all lenders will even go down this low)
If Credit Score is 580+ then 3.5% down payment is required
Debt-to-Income Ratio
Conventional Mortgages’ maximum debt-to-income ratio is 43% (hard cap)
FHA Mortgages’ maximum debt-to-income ratio is 45%
Soft cap as in certain circumstances this can be adjusted up to 50%
Mortgage Insurance Premium Rates
FHA Mortgages
If Down Payment is 10% or more the percentage is .80% MIP
If Down Payment is less than 10% the rate is .85% MIP.
Credit Score Minimum Requirement
Conventional Mortgage minimum credit score
Most lenders will require between 620 and 640
Some lenders it will be as high as 700
FHA Mortgage minimum credit score
Credit Score is a minimum of 500 if putting 10% down
Credit Score is a minimum of 580 if not
These four numbers are important to know and will affect one’s decision to pursue a particular type of home loan. Knowing your combination of numbers as you are looking to buy a house will help buyers find the best loans for their particular situation.
OTHER COMPARISONS
All sellers will take conventional mortgages and some sellers will not take FHA Loans
People looking for short-sells won’t take FHA because FHA has a longer closing process.
If sellers know there are FHA repairs that are needed in order to sell their house, they will not always accept FHA financing.
Thus, if one is wanting a low-risk transaction then the FHA home loan route is a better option to pursue, even though it limits your options for homes that you might wish to buy. If one is looking to fix-up a house and raise its equity quickly then a conventional loan is going to be more beneficial because there are no requirements as to the condition of the house and it’s occupied status.
DOWN PAYMENT GIFTING
Making the Down Payments (Assistance and Gifts)
Conventional mortgages have no assistance but can be partially fulfilled with a gift
FHA Mortgages have loans and assistance programs available and the whole down payment can be fulfilled with a gift
In this article, we have given you the basic parameters of FHA loans vs Conventional loans. The conventional loans are for people who have a better financial track record and can handle a larger upfront cost. Because of PMI, conventional loans are cheaper in the long run if you can put enough of a down payment to get rid of PMI. However, there are no down payment assistance programs to help you reach that goal. FHA loans are for people who are looking to build their investment and in some cases may not have a great financial track record. FHA loans have lower down payment requirements and many grants/forgivable loans to help people wanting to buy a first house in which to live for at least a few years. It is important to assess your situation and decide which mortgage is going to work better for your circumstances.
CONCLUSION
Both mortgages have a lot of benefits and drawbacks because they are designed for people with different needs. This article has hopefully helped you to get a basic understanding of the different terms and conditions of different mortgage packages when looking at FHA loans vs Conventional loans. Home buying can be an emotional roller coaster and the knowledge in this article will help you navigate the various emotional struggles of home buying.
Just like the gas prices at the pump, mortgage rates can change daily or throughout the day. Typically mortgage rates are published at 10-11 am daily by most lenders and you can lock up through the close of business which is usually around 6-7 PM. Mortgage rates can change up or down throughout the day based on various financial, economics, and geopolitical news in the US Financial markets and World markets. Generally speaking, good economic news is bad for rates and vice versa, bad economic news is good for mortgage rates.
The good news is this: Once you find a home and get it under contract, you can lock your mortgage loan rate. Typically it takes about 30-45 days to close a mortgage loan in Kentucky, so the typical lock is for 30-60 days. If rates get better you may be able to negotiate a better rate with your lender, but they usually have to improve by at least 25 basis points (.25) to do that. Not all lenders offer this option. The longer you lock the loan, the greater the costs. It is usually free to lock in a loan for up to 90 days without having to pay a fee.
What a lot of lenders are experiencing now is that some loans don’t close on time for various reasons. You can always extend the lock on the loan but it will costs you usually .125 basis points to do so. If you let the lock expire on the loan, then you have to take worse case pricing on that day when you go to relock. It is usually best to extend the lock on your loan.
2. What kind of Credit Score Do I need to qualify?
When applying for a mortgage loan, lenders will pull what they call a “tri-merge” credit report which will show three different fico scores from Trans union, Equifax, and Experian. The lenders will throw out the high and low score and take the “middle score” For example, if you had a 614, 610, and 629 score from the three main credit bureaus, your qualifying score would be 614. Most lenders will want at least two scores. So if you only have one score, you may not qualify. Lenders will have to pull their own credit report and scores so if you had it ran somewhere else or saw it on a website or credit card you may own, it will not matter to the lender, because they have to use their own credit report and scores. Most lenders will pull your credit report for free nowadays so this should not be a big deal as long as your scores are high enough. The Secondary Market of Mortgage loans offered by FHA, VA, USDA, Fannie Mae, and KHC all have their minimum fico score requirements and lenders will create overlays in addition to what the Government agencies will accept, so even if on paper FHA says they will go down to 580 or 500 in some cases on fico scores, very few lenders will go below the 620 threshold. If you have low fico scores it may make sense to check around with different lenders to see what their minimum fico scores are for loans. The lenders I currently deal with have the following fico cutoffs for credit scores: FHA–580 minimum score VA—-580 minimum score Fannie Mae–620 minimum score USDA–620 minimum score KHC with Down Payment Assistance –620 minimum score.
As you can see, 580-620 is the minimum score with most lenders for a FHA, VA, or Fannie Mae loan, is required for the no down payment programs offered by USDA for Kentucky for First Time Home Buyers wanting to go no money down.
3. What are the down payment requirements?
The most popular programs for Kentucky First Time Home Buyers usually involves one of the following housing programs outlined in bold below: FHA:
FHA will allow a home buyer to purchase a house with as little as 3.5% down. If your credit scores are low, say 680 and below, a lot of times it makes sense to go FHA because everyone pays the same mortgage insurance premiums no matter what your score is, and the down payment can be gifted to you. Meaning you really don’t have to have any skin into the game when it comes to down payment.
They even allow down payment assistance for down payment requirements of 3.5% through eligible parties like Kentucky Housing, Welcome Home Grants and Louisville KY and Covington Kentucky Down Payment Grants.
Lastly, FHA will allow for higher debt to income ratios with sometimes getting loan pre-approvals up to 55% of your total gross monthly income. So if you have a debt to income ratio of over 50%, Fannie Mae will not do the loan and USDA usually likes their debt to income ratios no more than 45%.
Think back to the last time you financed a purchase — be it a home, automobile, or what have you… You may remember having heard the term “debt-to-income ratio.” Today I want to spend some time going over exactly what this ratio is, and to also touch on how it can effect your personal finances.
4. What is your debt-to-income ratio?
Commonly referred to as your “DTI,” your debt-to-income ratio is a personal finance benchmark that relates your monthly debt payments to your monthly gross income. As an example… Let’s say that your gross monthly salary is $5,000 and you are spending $2,800 of it toward monthly debt payments. In that case, your DTI would be an unhealthy 56%. This version of your DTI is sometimes referred to as your “back-end” DTI. This is often broken down further to give a front-end debt-to-income ratio, which is a component of your back-end DTI.
How to calculate your front-end DTI for a Kentucky Mortgage Loan Approval
Your front-end DTI is calculated by dividing your monthly housing costs by your monthly gross income. Front-end DTI for renters is simply the amount paid in rent, whereas for homeowners it is the sum of mortgage principal, interest, property taxes, and home insurance (i.e., your PITI) divided by gross monthly income.
From above, if that $2,800 in debt payments is attributable to $1,500 in housing costs and $1,300 in non-housing costs, then your front-end DTI is $1,500/$5,000 = 30% (and your back-end ratio is still 56%, as calculated above). Fannie Mae: Fannie Mae requires just 3% down with their new Home Possible Program, but if you use their traditional mortgage loan, then 5% is the Fannie Mae Standard. Fannie Mae will go down 620 score, but if your scores are below 680, I would look seriously at the FHA loan program because Fannie Mae has steep increases to the interest rate and the mortgage insurance premiums if your scores are low. A couple of good things about Fannie Mae is that you can buy a larger priced home and have a large loan amount due to FHA only allowing most Kentucky Home Buyers a maximum mortgage loan amount of $356,000 for a max FHA loan and $545,000 for Fannie Mae Conventional loans in Kentucky for 2020. Lastly when it comes to mortgage insurance, FHA mortgage insurance premiums are for life of loan while Fannie Mae mortgage insurance premiums drop off when you develop 80% equity position in your house. But as a tell most people, nobody has a loan for 30 years, and the average mortgage is either refinanced or home sold within the first 5-7 years. VA Loans-
VA loans offer eligible Veterans and Active Duty Personnel to buy a home going no money down with no monthly mortgage insurance. This is probably the best no money down loan out there since the rates are traditionally very low on comparison to other government insured mortgages and no monthly mortgage insurance. The VA loan can be used anywhere in the state of Kentucky with the maximum VA loan limit being removed for 2021 USDA Loans-
USDA loans offer people buying a home in rural areas (typically towns of $20k or less) to buy a home going zero down. You cannot currently own another home and there is household income limits of $90,200 for a household family of four, and up to $119,300 for a household of five or more. You search USDA website for eligible areas and household income limits below at the yellow highlighted link :
KHC or Kentucky Housing- Kentucky First Time Home Buyers typically use KHC for their down payment assistance. KHC currently offers $10,000 for down payment assistance and sometimes throughout the year they will offer low mortgage rates on their mortgage revenue bond program.
The down payment assistance usually never runs out because you have to pay it back in the form of a second mortgage. It helps a lot of home buyers that want to buy in urban areas that cannot utilizer the USDA program in rural areas. Most of the time the first mortgage is a FHA loan tied with the 2nd mortgage fore down payment assistance. All KHC programs require a 620 score and rates are locked for 45 days.
5. What if I have had a bankruptcy or foreclosure in the past?
FHA and VA are the easiest on previous bankruptcies. FHA and VA both require 2 years removed from the discharge date on a Chapter 7. If you are in the middle of a Chapter 13, FHA will allow for financing with a 12 month clean history payment to the Chapter 13 courts, and with trustee permission.
VA requires 2 years removed from a foreclosure (sheriff sale date of home) and FHA requires 3 years.
USDA requires 3 years removed from both a foreclosure and bankruptcy, but on the foreclosure they do not go off the sale date. This may save you a little time if you had a previous foreclosure.
Fannie Mae (Conventional Loan)
Fannie Mae is by far the strictest. They require 4-7 years out of a foreclosure or bankruptcy
If you have questions about qualifying as first time home buyer in Kentucky, please call, text, email or fill out free prequalification below for your next mortgage loan pre-approval.
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 views of my employer. Not all products or services mentioned on this site may fit all people
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Assets are not required; however, any assets disclosed must be supported with appropriate documentation
Satisfactory explanation and documentation should be provided for large deposits or increases in liquid assets
Cash on hand is not acceptable
Bank accounts require Verification of Deposit with average 2 month balance, or 2 consecutive months statements dated within 45 days of loan application
Earnest money deposit may be considered an asset if deposit is not already reflected in liquid assets
Asset amount of retirement accounts is 60% of the vested account balance
Gifts must be documented through gift donor letter and establish that gift does not have to be repaid
For sale proceeds of real property, provide HUD-1 or equivalent closing statement to indicate the actual amount of cash proceeds realized by the borrower
Stocks and bonds must be documented by a statement provide by stockbroker or financial institution managing the portfolio
Households with net family assets of greater than $5,000 require that the actual income derived from all net family assets or a percentage of the value of such assets based on the current passbook savings rate be considered when calculating income.
Give us a try or let us compare your options on your next mortgage transaction. Call me locally at 502-905-3708. Free Mortgage Pre-Qualifications same day on most applications.
I specialize in Kentucky FHA, VA ,USDA, KHC, Conventional and Jumbo mortgage loans. I am based out of Louisville Kentucky. For the first time buyer with little money down, we offer Kentucky Housing or KHC loans with down payment assistance.
This website is not an government agency, and does
not officially represent the HUD, VA, USDA or FHA or any other government agency.
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You are typically considered eligible to apply for first-time home buyer loans and benefits if you haven’t owned your principal residence within the past three years.
Some first-time home buyer assistance programs are even more lenient, offering financial aid in specific areas targeted for redevelopment, even to repeat buyers.
Kentucky First-time home buyer benefits
Benefits can include low- or no-down-payment loans, grants or forgivable loans for closing costs and down payment assistance, as well as federal tax credits with the Kentucky Housing Agency or KHC
Is there an income limit to qualify as a first-time home buyer?
Income limits come into play when you are applying for local, state or federal government assistance. Some national mortgage programs, such as loans issued or backed by the U.S. Department of Agriculture, also have household income limits.
Some low-down-payment conventional loans do, too.
In these cases, your income may be benchmarked to local county limits for low- and moderate-income households.
Lenders, even those working with loan programs authorized by a state housing agency, will likely consider your debt-to-income ratio when determining if you qualify.
How to qualify for a first-time home buyer grant
Grants or forgivable loans that typically don’t require repayment are available to low- and moderate-income borrowers through state first-time home buyer programs. Approval standards vary by program and location but often include household income and home sale price limits.
How to qualify for down payment assistance
Just as for grants, down payment and closing cost assistance is often offered by local and state housing authorities. Again, qualifications vary. Look for income and home sale price caps here, too.
Don’t be surprised if a first-time home buyer class is required to qualify for a grant or down payment assistance. These classes are designed to help you navigate the homebuying process, and can be a good idea to take whether they’re mandatory or not.
What are the requirements to qualify for a first-time home buyer loan?
Qualifications required for approval of a loan vary by the type of mortgage — and even by the lender — but here are some general guidelines:
Kentucky Conventional loans:
For a 3% down payment, you’ll need at least a 620 FICO and a debt-to-income ratio below 50%. The higher your credit score or the lower your debt, the better your chances are for approval.
Kentucky FHA loans:
If you want a down payment as low as 3.5%, you’ll need a FICO score of 580 or higher. With 10% down, your required credit score may go as low as 500.
Kentucky VA loans:
Down payments aren’t generally required for a loan backed by the Department of Veterans Affairs. And while VA-backed loans don’t have a minimum FICO score as a part of their official requirements, many lenders look for a score of 620 or better.
KentukcyUSDA loans:
Another no-down-payment option, USDA-backed loans are typically issued for rural or suburban properties. Income limits apply. A FICO score of 640 or better is generally required, though exceptions with documentation can allow a lower score.
Lenders can add additional conditions, called “overlays,” to loan approval. This is another good reason to shop for more than one lender.
FHA stands for the Federal Housing Administration which is a government agency created to increase home-ownership across the United States all the way back in 1934. The agency itself doesn’t offer home loans but insures loan that are offered by private lenders (i.e. mortgage companies).
It’s important to understand the different types of loan programs available to you and what benefits and drawbacks there are to each type.
For example, if you’re looking to find a fixer upper this may not be the right loan program for you. But an FHA loan may be a better fit for you if you have little cash saved up for a down payment or if you don’t have a high credit score.
No age limit. just must be 18 years of age to apply.
Must occupy the home as a primary residence, no rental homes or investment property
An appraisal must be done by an FHA-approved appraiser.Typically FHA appraisal in Kentucky costs anywhere from low-end $325 to $525 with most FHA lenders in KY.
Home inspection is not required
Termite inspection not required
2 years removed from Chapter 7 bankruptcy, and 1 year in Chapter 13 bankruptcy is possible to get a loan while in bankruptcy
Foreclosure or short sale on previous home mortgage requires 3 years removal from those dates.
Mortgage insurance (MIP) is required
Upfront Mortgage Insurance Premium is 1.75% and monthly mortgage insurance is .85% or .80% depending on loan term and loan to value.
Mortgage insurance is for life of loan.
No matter your credit scores, everyone pays the same mortgage insurance premiums.
Must have 2 years of employment history proving a reliable source of income
500 FICO score requirement with at least 10% down payment
580 FICO score requirement with at least 3.5% down payment
Gifts and down payment assistance programs are allowed to meet your down payment requirements. Cannot come from seller, but seller can contribute up to 6% of the sales price toward buyer’s closing costs and prepaids.
Student loan payments are factored into the debt-to-income ratio when applying. Typically if loans are deferred, or in an income=based repayment plan, the FHA underwriters will use 1% of the outstanding balance, which sometimes can make it difficult to qualify.
Your debt-to-income ratio must not be higher than 31% or total debt obligation cannot be higher than 43% of your current income. This is for a manual underwriter, meaning that if the AUS underwriting system by mortgage lenders will approve you for a higher debt to income ratio, that is fine.
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.
ARE YOU CURRENTLY IN A CHAPTER 13 BANKRUPTCY OR HAD A CHAPTER 7 BANKRUPTCY IN THE PAST?
Qualifying For A Kentucky Mortgage After Bankruptcy
Home Buyers can qualify for a Kentucky mortgage after bankruptcy:
2 year waiting period to qualify for FHA Loan to qualify for a FHA Loans after discharge of Chapter 7.
One year into a Chapter 7 Bankruptcy to qualify for a Chapter Loan into a Chapter 13 Bankruptcy repayment plan.
No waiting period after a Chapter 13 Bankruptcy discharge date.
4 year waiting period to qualify for a Chapter 7 Bankruptcy discharge date to qualify for a Conventional Loan.
Two year waiting period to qualify for a Chapter 13 after Chatper 13 discharged date to qualify for a Conventional Loan.
Four year waiting period to qualify for a Conventional Loan if you had a mortgage part of bankruptcy but the foreclosure needs to be be finalized
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.
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