Category: Grants And Down payment Assistance

Kentucky Mortgage Broker Offering FHA, VA, USDA, Conventional, and KHC Down Payment Assistance Home Loans 7500 down payment assistance KHC, Down payment assistance, down payment grant, first time buyer, first time buyer kentucky, First Time Home Buyer, Grants And Down payment Assistance, Homeownership Assistance Programs: Kentucky, Kentucky Housing, khc, khc down payment assistance

How to Access KHC’s $12,500 Down Payment Assistance

Kentucky Down Payment Assistance

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 Lobb, Mortgage Broker FHA, VA, KHC, USDA

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.”

When you’re ready to purchase a home in Joel’s area, contact him at:
Phone: 502-905-3708
Email: Kentuckyloan@gmail.com
Website: www.mylouisvillekentuckymortgage.com

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2026 FHA Loan Options for Kentucky Homebuyers

Kentucky FHA Loan Requirements – Updated for 2026

Kentucky FHA loan guidelines are established by the U.S. Department of Housing and Urban Development (HUD). FHA loans remain one of the most flexible mortgage options available to Kentucky homebuyers, particularly first-time buyers, borrowers rebuilding credit, and households using down payment assistance.

Employment and Income Requirements

Borrowers must demonstrate a stable employment history covering the most recent two years. This does not require the same employer, but the work history must show consistency in the same industry or line of work.

Recent college graduates may satisfy the two-year work history requirement by providing college transcripts, provided the current employment aligns logically with the education received.

Self-employed borrowers must document a minimum two-year history of self-employment and provide the most recent two years of federal tax returns filed with the IRS. FHA underwriting uses a two-year average of qualifying income, adjusted for business stability and trends.

All income must be verifiable through acceptable documentation such as pay stubs, W-2s, or tax returns. Cash income, undocumented deposits, or bank-statement-only income is not permitted for FHA qualifying purposes.

Down Payment Requirements

FHA loans require a minimum down payment of 3.5 percent for borrowers with credit scores of 580 or higher.

Borrowers with credit scores between 500 and 579 are limited to a maximum loan-to-value of 90 percent, requiring a minimum 10 percent down payment. In practice, most lenders apply overlays requiring higher credit scores, typically between 580 and 620, even though HUD technically allows lower scores.

Down payment funds must come from an approved source. Acceptable sources include personal savings, retirement account loans or withdrawals, and properly documented gift funds. Large or undocumented cash deposits are not allowed and remain one of the most common reasons for FHA loan delays or denials in underwriting.

Occupancy and Property Use

FHA loans are for primary residences only. The borrower must occupy the property as their primary home and move in within 60 days of closing. FHA financing may not be used for rental properties or investment homes.

Appraisal and Property Standards

The property must be appraised by a Kentucky-licensed, FHA-approved appraiser. The home must meet HUD’s minimum property standards, meaning it must be safe, sound, and secure.

Common appraisal concerns include peeling paint, exposed wiring, missing handrails, roof condition, and health or safety hazards. Most FHA appraisal issues are correctable prior to closing.

Debt-to-Income Ratio Guidelines

FHA evaluates two debt ratios:

The housing ratio (front-end), which includes principal, interest, property taxes, homeowners insurance, mortgage insurance, and HOA dues, is typically capped at 31 percent of gross monthly income.

The total debt ratio (back-end), which includes the housing payment plus all other monthly obligations reported on credit, is typically capped at 43 percent.

However, borrowers receiving an “Approve/Eligible” finding through FHA’s automated underwriting system may qualify with higher ratios, depending on credit scores, cash reserves, and other compensating factors.

Credit Score and Credit History Requirements

The minimum FHA credit score for maximum financing remains 580 in 2026. This does not guarantee approval, as lenders apply additional underwriting standards and overlays.

Borrowers must demonstrate acceptable recent payment history. FHA places significant weight on the most recent 12 months of credit performance.

Bankruptcy and Foreclosure Guidelines

Chapter 7 bankruptcy requires a minimum waiting period of two years from discharge, with re-established good credit and on-time payments afterward.

Chapter 13 bankruptcy may be eligible after at least 12 months of on-time plan payments, with trustee approval, and the borrower must qualify including the Chapter 13 payment.

Foreclosure generally requires a three-year waiting period from the date of foreclosure completion. Exceptions may be considered only for documented extenuating circumstances beyond the borrower’s control. Job relocation alone does not qualify as an extenuating circumstance.

Federal Debt and CAIVRS Requirements

Borrowers may not have delinquent federal debt, defaulted federal student loans, unpaid federal judgments, or unresolved FHA claims.

Lenders are required to check the CAIVRS (Credit Alert Interactive Voice Response System) database for all federally backed loans, including FHA, VA, USDA, and SBA loans. Title 31 of the U.S. Code prohibits delinquent federal debtors from receiving federal loan insurance or guarantees.

If a CAIVRS alert appears, the debt must be resolved or paid in full before closing.

FHA Gift Fund Rules for Down Payments

FHA permits gift funds for down payments and closing costs, provided there is no expectation of repayment.

Acceptable gift sources include relatives, employers, labor unions, close friends with a documented relationship, charitable organizations, and government or public entities.

Unacceptable gift sources include the seller, real estate agents, brokers, builders, or any party with a financial interest in the transaction.

A proper gift letter is required, stating that repayment is not expected. The donor must provide identifying information and documentation showing the transfer of funds from their account to the borrower.

Government and Employer Assistance Programs

Borrowers without access to family gift funds may qualify for state, local, or employer-assisted housing programs that provide down payment or closing cost assistance. In Kentucky, FHA loans can often be paired with Kentucky Housing Corporation (KHC) down payment assistance programs, subject to income limits and program availability.

How FHA Loans Are Used in Kentucky

FHA does not directly lend money. Instead, it insures loans made by FHA-approved lenders. These loans are designed for borrowers with limited down payment funds, past credit challenges, or non-traditional credit profiles.

Many Kentucky borrowers who do not qualify for conventional financing are still able to achieve homeownership through FHA-insured loans at competitive interest rates.

Pros and Cons of FHA Loans

Advantages include low down payment requirements, flexible credit standards, and the ability to combine FHA loans with down payment assistance programs.

Disadvantages include mandatory mortgage insurance. FHA charges an upfront mortgage insurance premium of 1.75 percent of the loan amount, which can be financed, and an annual mortgage insurance premium that ranges from approximately 0.45 percent to 1.05 percent depending on loan term, loan-to-value, and origination date. This annual premium is paid monthly and, in most cases, remains for the life of the loan unless refinanced.

Final Thoughts for Kentucky Homebuyers in 2026

FHA loans continue to be a practical, reliable option for Kentucky homebuyers who need flexibility without sacrificing long-term stability. While FHA guidelines are forgiving compared to conventional loans, preparation matters. Clean documentation, stable income, responsible credit behavior, and proper sourcing of funds are essential to a smooth approval.

Working with an experienced Kentucky FHA lender can help you navigate overlays, improve credit positioning, and pair FHA financing with available assistance programs.

Joel Lobb
NMLS #57916
Text or Call 502-905-3708
kentuckyloan@gmail.com
www.mylouisvillekentuckymortgage.com

Company NMLS #1738461
Equal Housing Lender

Information is provided for educational purposes only and does not guarantee loan approval. All loans are subject to underwriting guidelines, program availability, and lender approval.

Kentucky Mortgage Broker Offering FHA, VA, USDA, Conventional, and KHC Down Payment Assistance Home Loans 2024 Income Limits Kentucky Welcome Home Grant, 2024 Welcome Home Grant Program for Kentucky Home Buyers $20,000, 2025 include Conventional Loans, FHA, VA, USDA, and Kentucky Housing Corporation (KHC) Down Payment Assistance programs, down payment grant, Grants And Down payment Assistance

The income limits for the Kentucky Welcome Home Grant

2025 Income Limits Kentucky Welcome Home Grant 


1 –  Email – kentuckyloan@gmail.com 2.   Call/Text – 502-905-3708

Joel Lobb
Mortgage Loan Officer – Expert on Kentucky Mortgage Loans


🌐 Website: www.mylouisvillekentuckymortgage.com
🏢 Address: 911 Barret Ave., Louisville, KY 40204

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 Welcome Home Grant
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5 Things I Wish I’d Knew Before Getting an FHA Mortgage

FHAdownpaymentsKentucky FHA Loan Requirements

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Home Buying Grants in Kentucky: A Guide for Prospective Homeowners

How to buy a house in Kentucky with Zero Down Payment Mortgage Loan

Kentucky offers several grant programs

Kentucky offers several grant programs to help residents achieve their dream of homeownership. These programs provide financial assistance to eligible buyers, making the purchase of a home more affordable. Here’s an overview of the current grant options available to Kentucky homebuyers:

1. Kentucky Housing Corporation (KHC) Down Payment Assistance Program

The KHC offers up to $10,000 in down payment assistance to eligible first-time homebuyers. This program can be used in conjunction with KHC’s first mortgage loans.

Eligibility:

  • Must be a first-time homebuyer or not have owned a home in the past three years
  • Meet income and purchase price limits, which vary by county
  • Complete a homebuyer education course

2. Kentucky Affordable Housing Trust Fund

This program provides funds to create or preserve affordable housing for low-income households. While not a direct grant to homebuyers, it can help create affordable housing opportunities.

3. USDA Rural Development Grant

Although not specific to Kentucky, this federal program is available in many rural areas of the state.

Key features:

  • Provides loans and grants for low-income individuals in rural areas
  • Can be used for home purchases or repairs
  • Income limits and location restrictions apply

4. Louisville Metro Down Payment Assistance Program

Specific to Louisville, this program offers forgivable loans of up to $25,000 to help with down payment and closing costs.

Eligibility:

  • Must be a first-time homebuyer
  • Income must be at or below 80% of the area median income
  • Property must be located within Louisville Metro

5. Lexington Homeownership Assistance Program

This program, specific to Lexington, provides up to $15,000 in down payment and closing cost assistance.

Eligibility:

  • Must be a first-time homebuyer
  • Income must be at or below 80% of the area median income
  • Property must be located within Lexington-Fayette Urban County

6. Individual Development Account (IDA) Program

While not exclusive to homebuying, this program can help prospective homeowners save for a down payment.

Key features:

  • Provides matching funds for savings (typically $2 for every $1 saved)
  • Can be used for homeownership, education, or starting a small business
  • Income and asset limits apply

How to Apply

To apply for these grants, contact the respective program administrators:

  1. For KHC programs: Visit www.kyhousing.org
  2. For USDA Rural Development: Visit www.rd.usda.gov/ky
  3. For city-specific programs: Contact your local housing authority or visit the city’s official website

Remember that grant availability and terms may change, so it’s essential to check with the program administrators for the most up-to-date information. Additionally, many of these programs require participants to complete homebuyer education courses, which can provide valuable information about the homebuying process.

By taking advantage of these grant programs, Kentucky residents can make their dream of homeownership more attainable. Be sure to explore all options and consult with housing counselors or financial advisors to determine the best path to homeownership for your specific situation.

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5 Things to Know about buying a house and getting a Mortgage Loan approval in Kentucky for 2023


1. Do Mortgage Rates Change Daily?

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.

Bankruptcy Requriements for a FHA, VA, USDA, and Fannie Mae Loan Approval in Kentucky
click on link to apply for free mortgage quote

Joel Lobb
Senior Loan Officer
(NMLS#57916)

Text or call phone: (502) 905-3708

email me at kentuckyloan@gmail.com

http://www.mylouisvillekentuckymortgage.com/

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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Down Payment Assistance

$6000 Down for Your Dream Home with Down Payment Assistance

An exciting new program is making it easier for you to get your dream home faster and with more money in your pocket. Geared toward homebuyers who may need help coming up with down payment or closing costs, the Mortgage Down Payment Assistance Program (DPA) can turn you into a homebuyer today!

You do not need to be a first time homebuyer

Down payment assistance programs normally require you to be a first time homebuyer; however, this new program does not have this requirement. There are also various first mortgage options this program can be tied to, including FHA and USDA loans.

KHC recognizes that down payments, closing costs, and prepaids are stumbling blocks for many potential home buyers. Here are several loan programs to help. Your KHC-approved lender can help you apply for the program that meets your need.

Regular DAP

  • Purchase price up to $346,644 with Secondary Market.
  • Assistance in the form of a loan up to $6,000 in $100 increments.
  • Repayable over a ten-year term at 5.50 percent.
  • Available to all KHC first-mortgage loan recipients.

Affordable DAP

  • Purchase price up to $346,644 with Secondary Market.
  • Assistance up to $6,000.
  • Repayable over a ten-year term at 1.00 percent.
  • Borrowers must meet Affordable DAP income limits.
 
On Mon, Jan 10, 2022 at 1:26 PM Joel Lobb, Mortgage Loan Officer <kentuckyloan@gmail.com> wrote:

Secondary Market Interest Rates — 45 Day Lock

Loan Type
Rate without Down
Payment Assistance
Rate with Down
Payment Assistance
FHA, VA & RHS 3.25% 4.00%
     
HFA Preferred Plus 80 3.75% 4.00%
 

—

Joel Lobb
Mortgage Loan Officer
Individual NMLS ID #57916
 
American Mortgage Solutions, Inc.
 

Text/call:      502-905-3708

fax:            502-327-9119
email:          kentuckyloan@gmail.com
 
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Kentucky HUD Homes for Sale with the FHA $100 Down Program

Buying A HUD Home in Kentucky $100 Down FHA loan

KENTUCKY HUD HOMES SALES INCENTIVES

For a limited time, FHA offers sales incentives on HUD homes that will make these homes more affordable for home buyers when purchasing a property using FHA-insured financing. The incentives VARY from State to State but may include low down payments; sales allowances that can be used to pay closing costs, make repairs, or pay down the mortgage amount; broker bonuses for owner-occupant sales. The benefits of FHA financing are low down payments; competitive interest rates; flexible credit qualifying. To find a HUD-Approved Lender, and for the latest sales incentives in your areas, visit HUDhomestore.com The program incentives are subject to change without prior notice.

Sales Incentives

(subject to change without prior notice)

Participating States

$100 Down Payment! Available to Owner Occupant Homebuyers when purchasing a property using FHA-insured financing.

Kentucky HUD Homes for Sale By FHA

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Joel Lobb
Mortgage Loan Officer
Individual NMLS ID #57916

Text/call:      502-905-3708
fax:            502-327-9119
email:          kentuckyloan@gmail.com

https://www.mylouisvillekentuckymortgage.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. 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.

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Kentucky FHA Mortgage Insurance Requirements and Down Payments

FHA mortgage insurance, typically referred to as MIP, is the one closing cost that is unique to FHA mortgage programs. 

**Every FHA mortgage must have mortgage insurance regardless

of the amount of the down payment.**


There are two types of mortgage insurance for FHA insured loans – Up-front Mortgage Insurance Premiums and Monthly Mortgage Insurance Premiums.

Up-front Mortgage Insurance Premium (UFMIP)


UFMIP is calculated at 1.75% of the base loan amount on all loans, regardless of the down payment amount.  This insurance protects the lender against losses in the event that the borrower defaults on the loan. 

**The entire amount of the UFMIP can be financed into the loan amount!**


For example:

  • If the FHA loan amount is $100,000 (base loan amount)
  • The mortgage insurance premium would be $1,750 ($100,000 x 1.75%)
  • The mortgage amount including MIP would be $101,750 ($100,000 + $1,750)

What really happens during an FHA mortgage transaction is that the borrower owes FHA a lump sum mortgage insurance premium.  The lender making the FHA loan will actually lend the money for the premium to the borrower and send the money to FHA so that the mortgage will be insured. 

Monthly Mortgage Insurance Premium


In addition to the UFMIP, there may be a monthly premium due as well.  The monthly premium is .80% of the base loan amount if the loan amount is less than or equal to 95% of the value of the home.  If the loan amount is over 95% of the value of the home, the monthly premium is .85% of the base loan amount..


On a 30 year fixed loan, the monthly payment would be calculated as follows:


$100,000 x .80% = $800 / 12 months = $66.67 per month

FHA Minimum Down Payment

Effective January 1, 2009, the minimum down payment required on an FHA loan is 3.5% of the purchase price. 


Any deposit (usually called earnest money) that you are required to give to your realtor at the time of an accepted purchase contract will count towards your 3.5% down payment. The appraisal fee collected at the time of inspection will also count towards your 3.5% down payment. 

 
If, for example, you are purchasing a $100,000 house, your minimum down payment required would be $3,500.  If your seller/realtor required you to put down $500 in earnest money on top of the $300 for your appraisal, your down payment would be lowered to $2,700 ($3,500 – $500 – $300 = $2,700). 


Down Payment As A Gift


If a borrower does not have 3.5% of his or her own money to put down towards the home purchase, FHA allows that amount to be in the form of a gift to the borrower. The gift must be from a qualified source, such as a family member, employer or significant other. The source of the gift must be able to provide proof that they have the money in an account registered in their name prior to transfer to the borrower.


In some areas, this gift may also be grant money from a state or local municipality, if such funds are available.

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Kentucky FHA Mortgage Qualifying Guidelines

Kentucky FHA Loans

The FHA is actually not the lender. They insure the loans that are issued by FHA-approved lenders. FHA loans are gear more toward borrower’s with less than 20% down payment and credit issues in the past.

Qualifying for a FHA Loan Mortgage In Kentucky

Credit Scores and Down Payment Percentages – Each year, the rules for qualifying for these loans changes. For 2020, applicants need a minimum credit score of 580 in order to get the low down payment, which is 3.5 percent.

For those whose credit score is less than 580, they will have to come up with 10 percent for their down payment. This does not guaranteed a mortgage loan approval if you have the certain credit scores, just a the minimum required.

Compensating Factors for FHA loan Approval

The credit score is just one part of the story. The FHA will also evaluate the borrower’s bankruptcies, foreclosures, prior payment history on other debts. They will also want information on difficulties that kept the borrower from making payments on other debts in the past.

Negative strikes against qualifying for the loan include not having any credit history or a bankruptcy.

Someone with a bankruptcy will have to wait for two or more years after their bankruptcy before applying for an FHA-insured loan.

If you have late payments on debt obligations, it is best to wait until you have had a full year of on-time payments before you apply for a FHA-insured loan.

If you have had a foreclosure in the past, you may still be able to get a FHA-insured loan three years after your foreclosure. The lender will be looking at the circumstances behind the foreclosure.

If you have had any civil judgement against you for money owed, collections actions or unpaid/unresolved federal debt, the FHA-approved lender will be required by the FHA to establish that all of these outstanding issues are resolved or paid before you can go through closing.

Watch out for student loans if they are delinquent because sometime this can cause a lien against you in the form of a CAVIRS Alert with HUD

As you can see, many types of borrowers who would not be eligible for a traditional mortgage, or who would face exorbitant interest rates, will be able to qualify for a FHA-insured loan at attractive interest rates.

Employment and Income for a Kentucky FHA Loan

You must have an employment history that is steady for the last two years. Does not have to be same employer.

Your income has to be verifiable in some way, whether that be through pay stubs, your income tax returns. No bank statements or cash deposits , or undocumented income can be used for income qualifying purposes.

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Debt-to-Income Ratio Requirements –

Depending on the automated underwriting system from Desktop Originator, your Debt-to-income ratio is the percentage of your income before taxes that you spend on monthly debt.

Taking into account the proposed mortgage payment as well as the other debts, the FHA requires that these debts all total less than 43 percent of your pretax income in order to qualify for the loan.

If your debt load is too high, you will struggle to pay all of your bills and mortgage expenses and care for yourself and your family.

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Property Requirements for a Kentucky FHA Loan

It must be the place where you intend to reside. You must move into the home within 60 days of closing the loan. The home cannot be an investment. There will be an inspection to ensure that the home is safe and habitable.

It is really not too hard to pass FHA loans and the appraisal process.

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Pros of FHA Loans –

  • New homebuyers and those who have lower credit scores or who have other blemishes on their credit history will often qualify for FHA-insured loans.

  • Even though these borrowers are considered “subprime” to a traditional lender, they will receive attractive interest rates through the FHA-insured mortgage programs.

  • The down payments required from borrowers are lower than those required by traditional mortgage lenders.

  • These loans can be combined with other forms of public assistance for lower income or new borrowers so that the borrower will not need to come up with a down payment of any kind.

Cons of FHA Loans –

  • Since the FHA is not actually the lender, and you have to go through FHA-approved lenders, you may not qualify due to stricter standards that the lender has for the loan.

  • Because you are not paying 20 percent as a down payment, the FHA requires two mortgage insurance premiums to be paid. One is an upfront premium that is 1.75 percent of the loan amount. Lenders often will allow you to make that mortgage insurance premium a part of your loan. The second is an annual mortgage insurance premium that is .45 percent or 1.05 percent. This premium is paid monthly.

 FHA FINANCING

CREDIT REQUIREMENTS FOR KENTUCKY FHA FINANCING

What credit score do I need to qualify for a Kentucky FHA loan is one of the most common questions I hear from Kentucky homebuyers?

The short answer is you must have a minimum credit score of 500 to be eligible for an FHA loan in Kentucky.  Anything lower than 500 disqualifies you from consideration for an FHA loan.

There are two sets of credit score requirements for a Kentucky FHA Loan

One important thing to understand is that the Federal Housing Administration (FHA) does not lend money directly to home buyers. You will fill out an application with a regular lender just as you would if you were applying for any other type of mortgage. What the FHA does is ensure your loan to help protect the lender in case you default.

You will be required not only to meet the FHA guidelines to qualify for a loan but also meet any additional qualifications required by the lender. This means there are two sets of requirements you have to meet with your credit score.

1. The first set of requirements comes from the Department of Housing and Urban Development (HUD). HUD oversees the FHA and determines what a borrower’s minimum eligibility requirements will be to obtain an FHA loan.

2. The second set of requirements comes from the mortgage lender. The mortgage lender has the right to add its requirements to those mandated by HUD.

What HUD requires of borrowers to be eligible for an FHA loan

The HUD Handbook 4000.1 includes the official guidelines when it comes to the FHA mortgage insurance program.

It states that in 2020 the Kentucky FHA borrowers with credit scores of 580 or higher are eligible for a 96.5% loan with 3.5% down.

Borrowers with credit scores from 500 to 579 are eligible for a 90% loan with 10% down.

Individuals with credit scores below 500 are not eligible for the FHA program.

What lenders may require of borrowers to be eligible for an Kentucky FHA loan

Lenders have the right to add requirements over and above the minimum requirements of HUD. These additional requirements are called overlays. Your lender may or may not require them.

This is not something that should come as a surprise to you, however. Requiring a credit score of 580 to 620 is not unusual. In addition to your credit score, you must have a manageable debt level that lenders are comfortable with and enough income to repay your loan.

What credit score do I need to qualify for FHA loan?

Each month Ellie Mae, the software company processing more than ⅓ of America’s mortgage loans, publishes an insight report for mortgage trends and standards. One of the things they track is average credit scores. The following is their report for November 2019 which shows what percentage of successful borrowers fall into what credit score ranges.

500 – 549    2.14%
550 – 599    5.20%
600 – 649    23.01%
650 – 699    34.74%
700 – 749    21.88%
750 – 799    10.87%
800+     1.89%

These percentages show that the majority of borrowers who successfully qualify for FHA loans fall into the 600 to 799 range. While it is true that some successfully qualify in the low range of 500 to 599, you have a much better chance of being approved for a loan with good terms and a low down payment if you fall into the higher range.

 

 

 

For your free credit report and analysis call us today at 502-905-3708 or email us at kentuckyloan@gmail.com

 
 
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/

 

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Kentucky FHA Down Payment Requirements, Credit Scores and Mortgage Insurance

How Credit Scores Impact Kentucky  FHA Loan Down Payment Requirements


Kentucky Home Buyers credit scores are one of  the largest factors in determining the amount of a down payment for an FHA loan.   A credit score of 580 or higher, 3.5 percent is the minimum required for a down payment. Anyone with a credit score of 500 to 579 will have to save 10 percent for a down payment to obtain an FHA loan.

What Are Mortgage Insurance Requirements on Kentucky FHA Loans?

FHA loans are required to pay mortgage insurance premiums, often known as upfront mortgage insurance premiums and monthly annual premiums.

 
  • Upfront mortgage insurance premium: 1.75 percent of the loan amount and is paid when the borrower gets the loan. The premium can be rolled into the mortgage.
  • Annual mortgage insurance premium: 0.45 percent to 1.05 percent, depending on the term of the loan (15 years vs. 30 years), the loan amount and the initial loan-to-value ratio, or LTV. This premium amount is divided by 12 and paid monthly.

For a homeowner who borrows $150,000, this means the upfront mortgage insurance premium would be $2,625 and your annual premium would range from $675 ($56.25 per month) to $1,575 ($131.25 per month), depending on the length of the mortgage.

Unlike traditional mortgage insurance premiums, homeowners are required to pay FHA premiums for the entire term of the mortgage. The only time you can stop paying them is to refinance into a non-FHA loan or to sell the house.

Down Payment Gifts and Rules for Kentucky FHA Loans Kentucky borrowers choose an FHA loan can receive money as a gift to help towards the total amount of the down payment.

There are several rules that homeowners need to keep in mind. Gifts can come from friends, family members, labor unions and employers, according to data from the Department of Housing and Urban Development (HUD).

Even non-profit organizations can provide money for a contribution toward a down payment.

In addition, each state offers various assistance programs for down payments for both FHA buyers in Kentucky lacking the down payment.

People obtaining an Kentucky FHA loan are also eligible for these programs. I.e. Kentucky Housing Dap Funds, Welcome Grants In Kentucky