Category: Kentucky FHA HUD Homes for $100 Down

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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.

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FHA, VA, USDA, and Kentucky Housing Corporation (KHC) down payment assistance programs with Joel Lobb’s expertise

How to get approved for a mortgage in Kentucky as a first-time homebuyer
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What are the Kentucky FHA Credit Score Requirements for Mortgage Loan Approvals?

The Best Kentucky Mortgage Loan Options When Looking for your first house in Kentucky Kentucky First-time Home Buyer Programs👀💯👇‼

Kentucky Mortgage Requirements for FHA, VA, USDA and Fannie Mae

FHA loan in Kentucky you will be confronted with minimum credit score requirements set forth by FHA and the lender. Even though FHA will insure the mortgage loan at a certain credit score, you will see that lenders will create  “credit-overlays” to protect their risk and ask for a higher credit score.

So keep in mind when you are getting an FHA  lenders will have higher credit score minimums in addition to the FHA Mortgage Insurance program.

For a Kentucky Homebuyer wanting to purchase a home or refinance their existing FHA loan, FHA requires a 3.5% down payment and the borrower must have a 580 FICO Credit Score. If the score is below 580, then you would need 10% down and still qualify on a manual underwrite.

You must have a FICO score of at least 500 to be eligible for a Kentucky  FHA loan. If your FICO score is from 500 to 579, your down payment on the loan is 10 percent of the loan.

If your FICO score is 580 or higher, your down payment is only 3.5 percent. If your credit score is less than 580, it may be more cost-effective to take the necessary steps to improve your score before taking out the loan, rather than putting the money into a larger down payment.

How do they get the credit score:  There are three main credit bureaus in the US. Equifax, Experian, and Transunion. The three scores vary but should be relatively close as long as the same creditors are reporting to the same bureaus.

You will get a variation in the scores due to all creditors or collection companies don’t report to all three bureaus. This is why they take the mid score.  So if you have a 590 Experian, 680 Equifax, and 620 TransUnion, your qualifying credit score would be 620

Based on my experience with lenders that I deal with in Kentucky on FHA loans,  most lenders require 620 middle credit score for consideration for loan approval.

How do they get the score:  They take the mid score, so if you have a 590 Experian, 680 Equifax, and 620 TransUnion, your qualifying score would be 620.

Kentucky FHA Loans with less than 620 Score

If your score is below 620, a manual underwrite is where the AUS (Automated Underwriting System) refers your loan to a human being, and they look at the entire file to see if they can overturn and approve the mortgage loan because the Desktop Underwriting Automated Software could not approve you.

With scores below 620, they typically will want to verify your rent history, have no bankruptcies in the last two years, and no foreclosures in the last 3 years.

If you have had any lates since the bankruptcy this will probably result in a denial on a refer manual underwrite file.

Your max house payment will be set at 31% of your gross monthly income,  and your new house payment plus the bills you are paying on the credit report cannot be more than 43%.

Typically, on scores below 620 for FHA loans, they will also look at reserves or money you have saved up after the loan is made to try and qualify you. For example, if you have a 401k or savings account that has at least 4 months reserves (take your mortgage payment x 4) and this would equal your reserves. They look at this as a rainy day fund and could help you keep up on your bills if you were unemployed or could not work.

 

What credit score do you need to qualify for a Kentucky mortgage loan?

The first thing to keep in mind is that qualifying for a mortgage involves a lot more than just a credit score. While your FICO score is a very important ingredient, it is just one factor. Lenders also look at your income and level of debt, among other things.

As a rule of thumb, however, a credit score below 620 will make buying a home very difficult. A FICO score below 620 is considered sub-prime. In the past, there were mortgage companies that specialized in sub-prime mortgages. Because of the challenges in the credit market over the last year or so, however, sub-prime loans have become difficult if not impossible to obtain.

A FICO score between 600 and 640  is considered fair to good credit. But keep in mind, this range of credit scores does not guarantee you will qualify for a mortgage, and if you do qualify, it won’t get you the lowest interest rate possible. Still, to buy a home aim for a score of at least 620, recognizing that other factors weigh in the decision and that some banks may require a higher score.

What credit score do you need to get a low rate mortgage?

It uses to be that a score of about 720 would yield the lowest mortgage rates available. Today, the best rates kick in with a FICO score of 760. And interest rates go up significantly as your credit score drops. To give you an idea, the following table shows current rates by credit score and calculates a monthly principal and interest payment based on a $300,000 loan:

 
lenders will pull what they call a “tri-merge” credit report which will show three different fico scores from Transunion, Equifax, and Experian. The lenders will throw out the high and low scores 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.
 
 
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.
 
Lastly, 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.
 
 
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, 
 
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:
 
 
As you can see, different government-backed loan programs have different minimum score requirements with most lenders for an FHA, VA, or Fannie Mae loan, and 620  is required for the no down payment programs offered by USDA and KHC in Kentucky for First Time Home Buyers wanting to go no money down.
 
 
 

By paying down your credit card balances (credit utilization) and having a good pay history (payment history) ,this is the best way to raise your score. 

 The credit bureaus don’t update immediately, so I would not add to the balance or open any new bills or have any other lender do an inquiry on your credit report while we wait for the scores to hopefully go up in the next 30 days. Try to keep everything status quo and make your payments on time and keep your balances low or lower than what is now reporting on the credit report. 

FICO-Score-usage-by-industry@2x.png

How to improve your credit score!

Pay Every Single Bill on Time, or Early, Every Month

Please understand one thing; paying your bills on time each month is the single most important thing you can do to increase your credit scores.

Depending on the credit bureau, there are 4 or 5 main items that determine everyone’s credit score. Of those items, your history of paying bills makes up about 35% of the score. THIS IS HUGE!

Paying your bills on time shows lenders that you are responsible. It will also spare you from paying late fees whether it is a charge from a credit card or an added fee from your landlord.

Use a calendar, or a phone app, or some other organized system to make sure that you pay your bills on time every single month.

MAIN TIP: Do not pay ANY bill late!

Credit Cards: Lower Balances Are Always Better 

 

( If you don’t have a credit card, I suggest getting a secured credit card through Capital one Secured  Card Or Open Sky Credit card...click this link here 

 

Another big factor in calculating a credit score is the amount of credit card debt. Credit bureaus look at two things when analyzing your credit cards.

First, they look at your available credit limit. Second, they look at the existing balance on each card. From these two figures an available ratio is developed. As the ratio goes higher, so too will your credit score increase.

Here is one simple example. Suppose a person has the following credit cards, corresponding balances, and credit limits

Credit Card Current Balance Credit Limit
Chase Visa $105 $1,000
MarterCard from local bank $236 $1,500
BP MasterCard $87 $500
Totals $428 $3,000

From these numbers, we get the following calculation

$428/$3,000 = 14%

In other words, the person is using 14% of their available credit and they have 86% available credit. The closer that ratio is to 100%, the better the credit score will be.


MAIN TIP: Keep all credit card balances as low as possible.In this particular example, if they had a problem with their car, or needed medical attention or some other emergency, the person would have the money necessary to handle the situation without incurring new debt. This is wise on the consumer’s part and lenders like to see this kind of money management.

Credit Cards Part 2: 1 or 2 is Better Than a Wallet Full

The previous example showed a person that utilized just three credit cards. This is much better than someone who has 5+ credit cards, all with available balances. Why? Lenders do not like to see someone that has the potential to get too far in debt in a short amount of time.

Some people have 5, 10 or more credit cards and they use many of them. This shows a lack of restraint and control. It is much better, and neater, to have only 2 or 3 cards with low rates that handle all of your transactions. A lower number of cards are easier to manage and it does not give a person the temptation to go on a huge shopping spree that could take years to payoff.

MAIN TIP: Try to limit yourself to no more than 2-3 credit cards.

Keep the Good Stuff Right Where it is

Too many people make the mistake of paying off old debts, such as old credit cards, and then closing the account. This is actually a bad idea.

A small part of the credit score is based on the length of time a person has had credit. If you have a couple of credit cards with a long track history of making payments on time and keeping the balance at a manageable level, it is a bad idea to close out the card.

Similarly, if you have been paying on a car or motorcycle for a long time, do not be in a hurry to pay off the balance. Continue to make the payments like clockwork each month.

An account that has a good record will help your scores. An account that has a good record and multiple years of use will have an even better impact on your score.

MAIN TIP: Keep old accounts open if you have a good payment history with them.

Stop Filling Out Credit Applications

Multiple credit inquiries in a short amount of time can really hurt your credit scores. Lenders view the various inquiries as someone that is desperate and possibly on the verge of making a bad financial choice.Too many people make the mistake of getting more credit after they are approved for a loan. For example, if someone is approved for a new credit card, they feel good about their finances and decide to apply for credit with a local furniture store. If they get approved for the new furniture, they may decide to upgrade their car. This requires yet another loan. They are surprised to learn that their credit score has dropped and the interest rate on the new car loan will be much higher. What happened?

If you currently have 2 or 3 credit cards along with either a car loan or a student loan, don’t apply for any more debt. Make sure the payments on your current debt are all up to date and focus on paying them all down.

In a few months of making timely payments your scores should noticeably go up.

MAIN TIP: Limit your new loans as much as possible

Which credit scores do mortgage lenders use to qualify people for a mortgage?

While it’s common knowledge that mortgage lenders use FICO scores, most people with a credit history have three FICO scores, one from each of the three national credit bureaus (Experian, Equifax, and TransUnion). 

  • Which FICO Score is Used for Mortgages

Most lenders determine a borrower’s creditworthiness based on FICO® scores, a Credit Score developed by Fair Isaac Corporation (FICO™). This score tells the lender what type of credit risk you are and what your interest rate should be to reflect that risk. FICO scores have different names at each of the three major United States credit reporting companies. And there are different versions of the FICO formula. Here are the specific versions of the FICO formula used by mortgage lenders:

  • Equifax Beacon 5.0
  • Experian/Fair Isaac Risk Model v2
  • TransUnion FICO Risk Score 04

Lenders have identified a strong correlation between Mortgage performance and FICO Bureau scores (FICO score). FICO scores range from 300 to 850. The lower the FICO score, the greater the risk of default.

Which Score Gets Used?

Since most people have three FICO scores, one from each credit bureau, how do lenders choose which one to use?

For a FICO score to be considered “usable”, it must be based on adequate, concrete information. If there is too little information, or if the information is inaccurate, the FICO score may be deemed unusable for the mortgage underwriting process. Once the underwriter has determined if a score is usable or not, here’s how they decide which score(s) to use for an individual borrower:

  • If all three scores are different, they use the middle score
  • If two of the scores are the same, they use that score, regardless of whether the two repeated scores are higher or lower than the third score

Lenders have identified a strong correlation between Mortgage performance and FICO Bureau scores (FICO score). FICO scores range from 300 to 850. The lower the FICO score, the greater the risk of default.

If it helps to visualize this information:

Identifying the Underwriting Score
Example Score 1 Score 2 Score 3 Underwriting Score
Borrower 1 680 700 720 700
         

Joel Lobb

Mortgage Loan Officer

Individual NMLS ID #57916

 

Text/call:      502-905-3708

email:          kentuckyloan@gmail.com

https://www.mylouisvillekentuckymortgage.com/

 

email me at kentuckyloan@gmail.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 view of my employer. Not all products or services mentioned on this site may fit all people. NMLS ID# 57916, (www.nmlsconsumeraccess.org). USDA Mortgage loans only offered in Kentucky.

All loans and lines are subject to credit approval, verification, and collateral evaluation

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How to Qualify for an FHA Mortgage Loan in Kentucky: A Guide for First-Time Homebuyers

There are many ways to get the mortgage to buy your first home. The FHA is one option. If you are a first-time homebuyer in Kentucky, an FHA loan could be the perfect option for you. There are many flexible requirements, low down payments, and financial assistance options available. These are just a few of the many things that can help make homeownership more accessible.

What is an FHA Loan?

An FHA loan is a government-backed mortgage insured by the Federal Housing Administration (FHA). It’s designed for low-to-moderate-income borrowers, offering relaxed qualification standards compared to conventional loans. Here are the main advantages:

  • Low down payment: As little as 3.5% of the purchase price.
  • Lower credit score requirements: Minimum score of 500 with 10% down or 580 with 3.5% down.
  • Seller-paid closing costs: Sellers can contribute up to 6% of the purchase price.
  • Flexible qualifying criteria: Higher debt-to-income (DTI) ratios and options for non-occupant co-signers.

How to Qualify for a Kentucky FHA Loan

1. Credit Score Requirements

  • 580 or higher: You’ll need a minimum credit score of 580 to qualify for the 3.5% down payment option.
  • 500-579: You can still qualify with a 10% down payment, but many lenders prefer a score of 580 or higher.
  • Bankruptcy or Foreclosure:
    • Chapter 7 bankruptcy: Must be 2 years removed, with good credit since.
    • Chapter 13 bankruptcy: Can qualify after 1 year of on-time payments with trustee approval.
    • Foreclosure: Must be 3 years removed, unless there are extenuating circumstances.

2. Income and Debt-to-Income Ratio

  • DTI ratio: Typically, up to 45%% of your income can go toward your mortgage payment, and up to 56.9% can go toward all debts, depending on your credit and financial history.
  • Work history: You must have a stable employment history of at least 2 years in the same field. Recent graduates can use college transcripts as a substitute.

3. Down Payment and Gift Options

  • 3.5% down payment: This can be gifted by a family member, employer, or nonprofit organization, drawn off a retirement account like a 401k or money saved up.
  • Cash deposits: Cash cannot be used as proof of funds for your down payment—only traceable sources are allowed.

4. Property Requirements

  • Must be your primary residence. FHA loans are not for investment properties or second homes.
  • Eligible property types: Single-family homes, townhomes, condos (must be approved condo development on HUD approved list), duplexes, and some manufactured homes (if affixed to a permanent foundation).
  • Appraisal: The property must be appraised by an FHA-approved appraiser to meet HUD standards.

5. Mortgage Insurance Premium (MIP)

  • Upfront MIP: 1.75% of the loan amount, which can be rolled into the loan.
  • Annual MIP: 0.45%-1.05% of the loan amount, depending on the down payment and loan term.

Kentucky FHA Loan Limits for 2025

In all Kentucky counties, the FHA loan limit is $524,225 for a single-family home up to $1,008,300 for a four-unit property

Why Choose an FHA Loan as a Kentucky First-Time Buyer?

Pros

  • Lower credit thresholds: You can qualify with a credit score as low as 500.
  • Smaller down payments: With as little as 3.5% down with a 580 credit score
  • Seller-paid costs: The seller can pay a significant portion of your closing costs.
  • Higher debt to income ratios
  • Lenient on past bankruptcies and foreclosures.

Cons

  • Mortgage insurance: You’ll pay MIP for the life of the loan if your down payment is less than 10%.
  • Property requirements: Homes must meet specific standards, which may limit your options.
  • a lot of sellers will not accept an FHA mortgage as a offer due to property may need work to meet FHA HUD minimum standards
  • Purchase price limits and only can be used for primary residence

FHA Loans vs. Conventional Loans

Feature FHA Loan Conventional Loan
Credit Score 500+ 620+
Down Payment 3.5% (580+ credit score) 3%-20%
Mortgage Insurance Required for life of loan Can be removed at 20% equity
Debt-to-Income Ratio Up to 55% Up to 45%
Property Standards Strict requirements More flexibility

Other Kentucky First-Time Homebuyer Programs

1. Kentucky Housing Corporation (KHC)

  • Down payment assistance up to $10,000.
  • Tax credit programs for first-time buyers.

2. USDA Loans

  • Zero-down-payment option for eligible rural areas.
  • Minimum credit score of 620-640 preferred.

3. VA Loans

  • No down payment or private mortgage insurance required for eligible veterans. No minimum credit score, higher debt to income ratios allowed and no monthly mortgage insurance and low 30 year fixed rates

Need Help Getting Approved for an FHA Loan in Kentucky?

As an experienced mortgage loan officer specializing in FHA loans for Kentucky first-time homebuyers, I’m here to guide you every step of the way.

Contact Me Today:

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

Equal Housing Lender

www.nmlsconsumeraccess.org

For assistance with Kentucky mortgage loans, reach out via email, call, or text Joel Lobb directly.

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Kentucky FHA Loans: Your Complete Guide to FHA Loans in Kentucky

 

Are you considering a home purchase in Kentucky ? If so, then a Kentucky FHA loan might be for you. This Kentucky FHA Mortgage  guide will provide you with all the FHA loan information you need to buy a home in Kentucky using the FHA loan program

What Is A Kentucky FHA Loan?

If you’re looking to buy a home but have limited funds for a down payment or a lower credit score, then an Kentucky  FHA loan might be a good option for you. This is a type of a  Kentucky mortgage insured by the Federal Housing Administration (FHA), which allows Kentucky FHA  lenders to be more flexible with their requirements for borrowers who may not meet traditional criteria. 

How do Kentucky FHA loans work?

KEntucky FHA loans are a government-backed program which makes homeownership more accessible through more lenient lending requirements. With an FHA loan, a borrower could put down as little as 3.5% if their credit score is at least 580, or 10% if their credit score is at least 500. Nevertheless, there is a trade-off; regardless of the amount you put down, there is a requirement to pay for mortgage insurance upfront and monthly  premiums and it is for life of loan 

The FHA collects a one-time upfront mortgage insurance premium (UFMIP). This premium needs to be entirely financed into the mortgage or paid in full at closing. Additionally, there is an annual mortgage insurance premium, also called monthly MIP, which is collected in monthly installments.

The annual mortgage insurance amount depends on factors such as the loan-to-value ratio (LTV), down payment size, and mortgage term length. Lenders calculate the annual payment as a percentage of the base loan value.

 
 

Benefits Of Kentucky FHA Loan 

There are several key benefits that make Kentucky FHA loans an attractive option. Here are a few of the benefits: 

  • Low to zero down Down Payments: FHA loans are designed to help borrowers with limited funds for down payments. Specifically, if your credit score is above 580, you could qualify for a down payment of 3.5%.  
  • Flexible Credit Requirements: FHA loans have lower credit score requirements compared to conventional loans. Even with a credit score as low as 500, you may qualify with a 10% down payment. 
  • Lower Debt-to-Income Ratio (DTI): Compared to conventional loans, FHA loans typically allow borrowers with higher levels of debt to still qualify by allowing a higher Debt-to-Income Ratio (DTI). 
  • Gift Funds and Grants: You could leverage gift funds and grants from family or approved organizations to contribute towards your down payment.  

Kentucky FHA Loan Requirements 

To be eligible for an Kentucky FHA loan there are some specific requirements you must meet. Here is an overview of these requirements:   

FHA Loan Down Payment  

The amount you’ll need to pay as a down payment on an FHA loan depends on your credit score. If your credit score is 580 or higher, then you could pay as little as 3.5% of the loan amount. However, if your credit score falls between 500 and 579, you’ll need to pay a larger down payment of 10%. If you’re short on funds, there are several DPA programs available which could help for Kentucky Homebuyers with zero down payments to get into a house.! 

Kentucky FHA Mortgage Insurance Premiums 

All FHA borrowers, no matter how much of a down payment they make, must purchase both upfront and annual mortgage insurance. 

What does Kentucky FHA mortgage insurance cover on your home loan? 

Kentucky FHA mortgage insurance protects lenders in case you, the borrower, default on your mortgage. This allows lenders to offer FHA loans with lower down payments and potentially less strict credit score requirements. Essentially, it mitigates the lender’s risk, making Kentucky FHA loans more accessible to first-time homebuyers or those with limited savings. 

How much is FHA mortgage insurance? 

FHA mortgage insurance has two components – an upfront premium and an annual premium. The upfront premium is a one-time payment that you need to make at the time of loan closing, and it amounts to 1.75% of the loan amount. 

On the other hand, the annual premium is a recurring cost that you need to pay as a part of your monthly mortgage payment. The amount of the annual premium may vary depending on factors such as the loan term, loan amount, and loan-to-value ratio (LTV). 

Oftentimes, with credit improvement and an increase in home equity (at least 80% loan-to-value), borrowers with FHA loans opt to refinance to a conventional loan program. This helps eliminate the monthly mortgage insurance premium portion of the monthly mortgage payment. 

How To Calculate Kentucky FHA Mortgage Insurance 

To calculate your Kentucky  FHA Mortgage Insurance, you can either use the HUD Calculator or follow these simple steps using your specific information: 

  1. Determine the amount of your loan. 
  2. Calculate your loan-to-value (LTV) ratio by dividing the loan amount by the appraised value of the home. 
  3. Find the annual MIP rate based on your LTV ratio and loan term. You can find this information on the HUD website
  4. Multiply the loan amount by the annual MIP rate to get the annual MIP amount. 

 

Can I remove KEntucky FHA mortgage insurance? 

If you have an FHA loan, you can’t remove the Mortgage Insurance Premium (MIP) as easily as you can with Private Mortgage Insurance (PMI). To remove MIP from your FHA loan, you could refinance into a Conventional Loan. Once your home has at least 20% equity, you typically won’t have to pay PMI with a conventional loan. 

Kentucky FHA Minimum Credit Score 

 To qualify for an Kentucky FHA loan, your FICO credit score needs to be at least 580. IF below 580, you will need 10% down payment and few lenders will do this honestly so it is best to raise your score above 580

Kentucky  FHA Mortgage Debt to Income Ratios 

Your debt-to-income ratio is the percentage of your gross income used to cover your mortgage and other debt payments. 

Debt to income  ratio for FHA loans is 3o to 45%  on the front end although this may vary based on your credit score and may go up to 57% with an AUS approval though Fannie Mae DO or Freddie Mac LP underwriting system. 

Calculating Your DTI for kentucky FHA Mortgage 

To calculate your Debt-to-Income Ratio (DTI) you could either use our mortgage calculator or follow these simple steps:  

  1. Add up all your monthly debt payments, including car loans, student loans, credit card debt, and the estimated monthly mortgage payment for the FHA loan you are considering. 
  1. Calculate your pre-tax gross monthly income. 
  1. Once you have these numbers, use the following formula to calculate your DTI Ratio: DTI Ratio = Total Monthly Debt Payments / Gross Monthly Income. 

Kentucky FHA Loan Income Requirements 

Kentucky HA loans don’t have any specific minimum or maximum income requirements.

 
 

Kentucky FHA Loan Limits 

The maximum amount you can borrow on an FHA loan (which is set by The Federal Housing Administration)  As of May 2024, the Federal Housing Administration (FHA) loan limits for single-family homes in Kentucky are $498,257

Kentucky FHA Mortgage Rates 

Kentucky FHA loans typically have lower interest rates than conventional loans but inline with other government backed loans like Kentucky VA and USDA loans . This is because the Federal Housing Administration (FHA) or HUD , which manages the FHA loan program in Kentucky , insures these mortgages. This insurance protects private lenders from the risk of borrower default, which enables them to offer lower rates with a government guarantee if loan defaults

Types Of Kentucky FHA Loans 

 FHA loans available, each with unique requirements and benefits. Here are some of the most common options. 

Home Purchase  

Kentucky FHA loans are commonly used to finance the purchase of a single-family house, townhouse, or condominium, 2-4 units homes in Kentucky. 

FHA Rate Term Refinance 

A Kentucky FHA Rate Term Refinance enables you to refinance your current Kentucky FHA loan and potentially obtain a lower interest rate or adjust the loan term.  

Kentucky FHA Streamline Refinance

The Kentucky FHA Streamline option allows refinancing without an appraisal, providing a fast and simple process for borrowers with existing FHA-insured mortgages that can reduce closing costs due to not having to do an appraisal and skipping a lot of verifications that was done when you use the FHA loan the first time to buy the house. 

Kentucky FHA Cash Out Refinance  

An Kentucky FHA Cash Out Refinance allows you to leverage the equity you’ve built up in your home by letting you finance up to 80% of the home’s value to use the cash home equity –Refinance must be in a 1st lien position due to FHA does not allow for second mortgages

Kentucky FHA Cash Out Refinance 

These loans cater to homebuyers interested in purchasing a fixer upper. FHA 203k loans combine financing for both the purchase and renovation of a property, allowing you to roll renovation costs into your mortgage payment. This eliminates the need for a separate renovation loan, simplifying the financing process. 

Kentucky FHA 100% Financing 

This program provides homebuyers with 100% financing for Kentcky FHA loans, without requiring a down payment (closing costs are still required). This is achieved through a combination of a 1st and 2nd mortgage. 

This DPA program through KHC, 5% grant, and 3.5% grant from Federal Agency  can be used to obtain an FHA loan. The 2nd mortgage can be up to 3.5% of the sales price or the appraised value, whichever is less. The term for the 2nd mortgage is 10 years. 

Kentucky FHA vs Kentucky  Conventional Loan 

Kentucky FHA and Kentucky conventional loans are two popular options for financing a home. Nevertheless, there are some differences between the two

Kentucky FHA loans are provided by lenders approved by the Federal Housing Administration and guaranteed by the government. These loans usually have more relaxed eligibility requirements compared to conventional loans, and FHA loans may require smaller down payments. However, you will need to pay mortgage insurance premiums (MIPs) for at least 11 years, or the full term of the loan. 

On the other hand, conventional loans are not backed by any government agency and may have stricter lending standards. They may require larger down payments than FHA loans, and if you provide less than 20% as a down payment, you will have to pay for private mortgage insurance (PMI). However, you can request to cancel PMI when your balance reaches 80% of the original home value. 

How To Apply For A Kentucky FHA Loan 

 

Find an approved- FHA Lender in Kentucky 

To apply for an Kentucky FHA loan,  contact me below 


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

http://www.mylouisvillekentuckymortgage.com/

Documents Needed for a FHA loan in Kentucky

Kentucky FHA Mortgage Application Checklist of Documents Needed below 👇

W-2 forms (previous 2 years)
Paycheck stubs (last 30 days – most current)
Employer name and address with phone number to verify employment (2 year history including any gaps)
Bank accounts statement (recent 2 months – all pages
Statements for 401(k)s, stocks and other investments (most recent)
federal tax returns (previous 2 years)
Residency history (2 year history)
Photo identification for applicant and co-applicant (valid Driver’s License

Can You Have Two Kentucky FHA Loans at One Time?

 
 
FHA will not insure more than one Property as a Principal Residence for any Borrower, except as noted below. FHA will not insure a Mortgage if it is determined that the transaction was designed to use FHA mortgage insurance as a vehicle for obtaining Investment Properties, even if the Property to be insured will be the only one owned using FHA mortgage insurance.

Properties previously acquired as Investment Properties are not subject to these restrictions.

Listed below are the only circumstances in which a Borrower with an existing FHA-insured Mortgage for a Principal Residence may obtain an additional FHA-insured Mortgage on a new Principal Residence:

RELOCATION – A Borrower may be eligible to obtain another FHA-insured Mortgage without being required to sell an existing Property covered by an FHA-insured Mortgage if the Borrower is:
– relocating or has relocated for an employment-related reason; and
– establishing or has established a new Principal Residence in an area more than 100 miles from the Borrower’s current Principal Residence.

If the Borrower moves back to the original area, the Borrower is not required to live in the original house and may obtain a new FHA-insured Mortgage on a new Principal Residence provided the relocation meets the two requirements above.

INCREASE IN FAMILY SIZE – A Borrower may be eligible for another house with an FHA-insured Mortgage if the Borrower provides satisfactory evidence that:
– the Borrower has had an increase in legal dependents and the Property now fails to meet family needs; and
– the Loan-to-Value (LTV) ratio on the current Principal Residence is equal to or less than 75% or is paid down to that amount, based on the outstanding Mortgage balance and a current residential appraisal.
  
VACATING A JOINTLY-OWNED PROPERTY – A Borrower may be eligible for another FHA-insured Mortgage if the Borrower is vacating (with no intent to return) the Principal Residence which will remain occupied by an existing co-Borrower.

NON-OCCUPYING CO-BORROWER – A non-occupying co-Borrower on an existing FHA-insured Mortgage may qualify for an FHA-insured Mortgage on a new Property to be their own Principal Residence.

Can you buy a Kentucky duplex with an Kentucky FHA loan? 

FHA loans are a great way to finance the purchase of a duplex. Remember, you must live in one of the units as your primary residence for at least one year in order to be eligible for an FHA loan. This requirement is in place because FHA loans are intended to help people buy homes they will live in, not as investment home opportunities. Buying a duplex allows you to earn rental income while also enjoying the experience of being a homeowner. 

Can you get an Kentucky FHA loan twice? 

 
 
FHA will not insure more than one Property as a Principal Residence for any Borrower, except as noted below. FHA will not insure a Mortgage if it is determined that the transaction was designed to use FHA mortgage insurance as a vehicle for obtaining Investment Properties, even if the Property to be insured will be the only one owned using FHA mortgage insurance.

Properties previously acquired as Investment Properties are not subject to these restrictions.

Listed below are the only circumstances in which a Borrower with an existing FHA-insured Mortgage for a Principal Residence may obtain an additional FHA-insured Mortgage on a new Principal Residence:

RELOCATION – A Borrower may be eligible to obtain another FHA-insured Mortgage without being required to sell an existing Property covered by an FHA-insured Mortgage if the Borrower is:
– relocating or has relocated for an employment-related reason; and
– establishing or has established a new Principal Residence in an area more than 100 miles from the Borrower’s current Principal Residence.

If the Borrower moves back to the original area, the Borrower is not required to live in the original house and may obtain a new FHA-insured Mortgage on a new Principal Residence provided the relocation meets the two requirements above.

INCREASE IN FAMILY SIZE – A Borrower may be eligible for another house with an FHA-insured Mortgage if the Borrower provides satisfactory evidence that:
– the Borrower has had an increase in legal dependents and the Property now fails to meet family needs; and
– the Loan-to-Value (LTV) ratio on the current Principal Residence is equal to or less than 75% or is paid down to that amount, based on the outstanding Mortgage balance and a current residential appraisal.
  
VACATING A JOINTLY-OWNED PROPERTY – A Borrower may be eligible for another FHA-insured Mortgage if the Borrower is vacating (with no intent to return) the Principal Residence which will remain occupied by an existing co-Borrower.

NON-OCCUPYING CO-BORROWER – A non-occupying co-Borrower on an existing FHA-insured Mortgage may qualify for an FHA-insured Mortgage on a new Property to be their own Principal Residence.

. 

Are Kentucky FHA loans assumable? 

 

Assumable Mortgages are a type of financing arrangement in which the outstanding mortgage and its terms can be transferred from the current owner to a buyer.
 
By assuming the previous owner’s remaining debt, the buyer can avoid having to obtain his or her own mortgage. Buyers are typically attracted to homes with existing assumable mortgages during times of rising interest rates. This is because they can assume the seller’s mortgage, which was created when interest rates were lower, and use it to finance their purchase.
 
If the home’s purchase price exceeds the mortgage balance by a significant amount, the buyer will either need to provide a sizable down payment or obtain a new mortgage anyway.
 
For example, if a buyer is purchasing a home for $250,000, and the seller’s assumable mortgage only has a balance of $110,000, the buyer would need a down payment of $140,000 to cover the difference, or would have to get a separate mortgage to secure the needed funds.

fha assumable homes in louisville

Joel Lobb  Mortgage Loan Officer

American Mortgage Solutions, Inc.
10602 Timberwood Circle
Louisville, KY 40223
Company NMLS ID #1364

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

http://www.mylouisvillekentuckymortgage.com/

NMLS 57916  | Company NMLS #1364/MB73346135166/MBR1574The view and opinions stated on this website belong solely to the authors, and are intended for informational purposes only. The posted information does not guarantee approval, nor does it comprise full underwriting guidelines. This does not represent being part of a government agency. The views expressed on this post are mine and do not necessarily reflect the view of my employer. Not all products or services mentioned on this site may fit all people.
NMLS ID# 57916, (www.nmlsconsumeraccess.org).

Kentucky Mortgage Broker Offering FHA, VA, USDA, Conventional, and KHC Down Payment Assistance Home Loans Employment Gaps, Fannie Mae Homepath, FHA, FHA Approved Condo Kentucky, FHA Back to Work Program Ky, FHA Co-signors, FHA Guidelines, fha mortgage insurance premiums, FHA Refund Upfront MIP, FHA Streamline Refinance, fico score, fico score used for mortgages, fico scores FHA loan, first time buyer kentucky, First Time Home Buyer, Frequently Asked Questions, Kentucky FHA HUD Homes for $100 Down, Kentucky FHA Mortgage Forbearances Guidelines, Kentucky Housing, khc, khc down payment assistance, KY FHA LOANS

Kentucky Conventional Loan versus Kentucky FHA Loan comparison chart

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.

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Conventional loan rates today

FHA Loan Advantages

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.

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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

CONFIDENTIALITY NOTICE: This message is covered by the Electronic Communications Privacy Act, Title 18, United States Code, §§ 2510-2521. This e-mail and any attached files are deemed privileged and confidential, and are intended solely for the use of the individual(s) or entity to whom this e-mail is addressed. If you are not one of the named recipient(s) or believe that you have received this message in error, please delete this e-mail and any attached files from all locations in your computer, server, network, etc., and notify the sender IMMEDIATELY at 502-327-9770. Any other use, re-creation, dissemination, forwarding, or copying of this e-mail and any attached files is strictly prohibited and may be unlawful. Receipt by anyone other than the named recipient(s) is not a waiver of any attorney-client, work product, or other applicable privilege. E-mail is an informal method of communication and is subject to possible data corruption, either accidentally or intentionally. Therefore, it is normally inappropriate to rely on legal advice contained in an e-mail without obtaining further confirmation of said advice.

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Kentucky FHA Mortgage Loans with Private Flood Insurance

HUD INCREASES FLOOD INSURANCE OPTIONS FOR KENTUCKY HOMEOWNERS WITH KENTUKY FHA MORTGAGES LIVING IN FLOOD AREAS

Federal Housing Administration to allow private flood insurance policies on insured single-family mortgages in special flood hazard areas

WASHINGTON – The U.S. Department of Housing and Urban Development (HUD), through the Federal Housing Administration (FHA), is announcing today that effective December 21, 2022, it will allow homeowners with FHA-insured mortgage financing to obtain flood insurance policies that conform to FHA requirements from private insurance providers. The change was announced through a final rule published in the Federal Register today and in a companion Mortgagee Letter, also published today, that provides implementation guidance for FHA-approved lenders.

FHA requires that insured mortgages for properties in Federal Emergency Management Agency (FEMA)-designated Special Flood Hazard Areas (SFHAs) have flood insurance. Previously, only flood insurance obtained through the National Flood Insurance Program (NFIP) was permissible for FHA-insured mortgages, which limited choices for consumers.

“Today, HUD is increasing the flood insurance choices available to individuals and families with FHA-insured loans in areas that FEMA has designated to be at special risk for flooding,” said HUD Secretary Marcia L. Fudge. “Flood insurance is required to ensure families and individuals are prepared if disaster strikes. Increasing consumer options for this important protection is one way we are building more resilient communities in the face of climate change.”

“We know borrowers face affordability challenges right now, yet a flood can be devastating to a family who is not properly insured,” said Federal Housing Commissioner Julia Gordon. “The choice to select a private flood insurance option may enable some borrowers to obtain policies that are less expensive or provide enhanced coverage.”

As part of its implementation, as of December 21, 2022, FHA will require lenders to provide detailed flood insurance coverage information when electronically submitting mortgages for FHA insurance on properties in SFHAs. This data collection is an objective included in HUD’s Climate Action Plan and will allow FHA to capture and analyze flood insurance information on mortgages in its portfolio at a more granular level than has been possible previously.

Ensuring that borrowers are protected against flood risk is a key component of HUD’s Climate Action Plan. In 2021, HUD released its Climate Action Plan in response to President Biden’s Executive Order on Tackling the Climate Crisis at Home and Abroad. HUD has been implementing this broad approach to the climate crisis that reduces climate pollution; increases resilience to the impacts of climate change; protects public health; delivers environmental justice; and spurs well-paying union jobs and economic growth. The action today further guides the integration of climate resilience and environmental justice into HUD’s core programs and policies. For more information about HUD’s work to advance sustainable communities and address climate change, visit hud.gov/climate.

#fha #fhaloans #fhaloan #floodinsurance #mortgage #homeloan #homebuying #homebuyingtips

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Kentucky FHA Mortgage Loan Lender Guidelines

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 Buying a Kentucky Home with a FHA Mortgage

Is an Kentucky FHA loan right for you?

Here are some benefits of Kentucky FHA loans 🤩
✅ Low down payment options
✅ Down payment assistance programs available
✅ Higher DTI ratios accepted

FHA requires you to establish that the income is in fact stable. I am covering Time on Job, Part Time Income, Seasonal Income and Job Gaps below.
 
Time on Job
There is not a minimum length of time a borrower must have held a position for the income to be eligible. However, the application must identify the most recent 2 years of employment.
If the borrower’s employment history indicates that they were in school or in the military, then the borrower must provide evidence supporting this such as college transcripts or discharge papers.
The current type of employment has to be supported by the college transcripts or discharge papers showing that he borrower’s training enabled them to gain employment in their field of training.
 
Part Time Income 

Part-time and second job income can be used to qualify if documentation is obtained to prove that the borrower has worked the part-time job uninterrupted for the past two years, and plans to continue.
For Qualifying purposed, “part-time” income refers to jobs taken to supplement the borrower’s main income from regular employment, such as a second job that is less than 40 hours per week.
Income: Is averaged over the previous 2 years. If there was a pay rate increase and we can document the increase in pay, you can average the new pay rate over 12 months.
 
Seasonal Income
Seasonal income may be acceptable for qualifying. It is not unusual to have out-of-season income from unemployment income. If the borrower has a 2 year history and continuance is probable, this type of income may be allowed to qualify the borrower.
The key here is history and continuance.
 
Job Gaps
The borrower must provide a signed explanation for gaps in employment as follows:
Income can be considered effective if the following can be verified:
1. Borrower has been employed in the current job for at least six months at the time of the case number assignment AND
2. A two year work history prior to the absence from employment.
 

What does FHA stand for?

FHA stands for Federal Housing Administration, and the FHA is a government agency that insures mortgages. It was created just after the Great Depression, at a time when homeownership was prohibitively expensive and difficult to achieve because so many Americans lacked the savings and credit history to qualify for a loan. The government stepped in and began backing mortgages with more accessible terms. Approved lenders began funding FHA loans, which offered more reasonable down payment and credit score standards.

Today, government-backed mortgages still offer a safety net to lenders—because a federal entity (in this case, the FHA) is guaranteeing the loans, there’s less financial risk if a borrower defaults on their payments. Lenders are then able to loosen their qualifying guidelines, making mortgages available to middle and low income borrowers who might not otherwise be approved under conventional standards.

What’s the difference between FHA and conventional loans?

Home loans fall into two broad categories: government and conventional. A conventional loan is any mortgage that is not insured by a federal entity. Because private lenders assume all the risk in funding conventional loans, the requirements to qualify for these loans are more strict. Generally speaking, FHA loans might be a good fit if you have less money set aside to fund your down payment and/or you have a below-average credit score. While low down payment minimums and competitive interest rates are still possible with a conventional loan, you’ll need to show a strong credit score to qualify for those advantages.

Each loan type has advantages and disadvantages—including different mortgage insurance requirements, loan limits, and property appraisal guidelines—so choosing the one that works best for you really depends on your financial profile and your homebuying priorities.

FHA loans pros and cons

FHA loans are meant to make homeownership more accessible to people with fewer savings set aside and lower credit scores. They can be a great fit for some borrowers, particularly first time homebuyers who often need lower down payment options, but you should weigh the costs and benefits of any mortgage before committing. Here’s a breakdown of the key pros and cons when it comes to FHA loans:

Pros Cons
Low down payment. Down payments make up the majority of cash to close in any purchase loan, and saving up for one can be a significant barrier for some borrowers. FHA loans make it possible to put down as little as 3.5% upfront and still get competitive rates. Mandatory MIP payments. FHA loans are more lenient, but they also come with insurance costs to mitigate risk to the lender. You’ll have to pay Mortgage Insurance Premiums (MIP) no matter what—either for 11 years or for the life of your loan, depending on your down payment.
Lower credit score. Credit scores can be a major hurdle when it comes to conventional loans, but borrowers with credit scores starting at 500 can qualify for FHA loans. Less competitive. Sometimes sellers can be more hesitant to accept FHA loans. In a competitive market, you might not win out against conventional loan bids.
Higher DTI accepted. Your debt-to-income (DTI) ratio gives lenders an understanding of other major financial obligations in your life. This ratio is a key factor in any loan application because it indicates your ability to afford a mortgage based on current household income and existing debt. Again, FHA loans offer more leniency here and borrowers at or below 43% DTI can qualify. Stricter property standards. To offset risk and further protect lenders, FHA loans have strict criteria when it comes to assessing the condition of any property being purchased with an FHA loan. The downside? The house you want to buy might not qualify for an FHA loan. The upside? You’re less likely to be financially burdened by a home that requires expensive repairs or updates.
No income limitations. It’s a common misconception that FHA loans are only available to first-time homebuyers or borrowers with limited income—but they’re not. There’s no maximum income limit that would disqualify you from this type of loan. Loan limits: FHA loan limits are typically lower than conventional loan limits, which means you might not be able to get funding for more expensive houses. This isn’t necessarily a bad thing, since it helps ensure that borrowers get loans they can afford to repay.

How to qualify for an FHA loan

Qualifying for an FHA loan is generally easier than qualifying for a conventional loan, but you’ll still need to meet some basic minimum standards set by the FHA. While the government insures these loans, the funding itself comes through FHA-approved lenders each lending institution may have slightly different qualifying guidelines for its borrowers. Keep in mind that, while these FHA standards offer a basic framework, you’ll need to confirm the individual qualifying rules with your specific lender.

  • Credit score minimum 500. Your exact credit score will play a big role in determining your down payment minimum; typically, the higher your credit score, the lower your down payment and the more favorable your interest rate.

  • Debt-to-income ratio at or below 56.9%. DTI is a standard way of comparing the amount of money you earn to the amount you spend paying off other debts, and FHA loans are more lax on this number.

  • Steady income and proof of employment. Being able to provide at least 2 years of income and employment records is a standard requirement for all loans.

  • Down payment between 3.5%-10%. The down payment minimum for an FHA loan is typically lower than conventional loan, and can be as little as 3.5% depending on your credit score and lender.

  • Property standards apply. You won’t qualify for an FHA loan if the house you want to buy doesn’t pass the appraisal process, which is more strict with this type of loan than conventional mortgages.

  • Maximum FHA loan amount. The amount of money you borrow cannot exceed the FHA loan limits; this number changes based on your county and is determined by how expensive the local market is; the maximum FHA loan limit in 2021 is $420,000 (check HUD resources to confirm the latest limits.)

 
 
Joel Lobb
Senior Loan Officer
(NMLS#57916)

American Mortgage Solutions, Inc.
10602 Timberwood Circle, Suite 3
Louisville, KY 40223

text or call my phone: (502) 905-3708
email me at kentuckyloan@gmail.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 view of my employer. Not all products or services mentioned on this site may fit all people. NMLS ID# 57916, (http://www.nmlsconsumeraccess.org). Mortgage loans only offered in Kentucky.
All loans and lines are subject to credit approval, verification, and collateral evaluation and are originated by lender. Products and interest rates are subject to change without notice.

Joel E Lobb
American Mortgage
5029053708
email us here
Kentucky FHA, VA, USDA & Rural Housing, KHC and Fannie Mae mortgage loans.

Kentucky Mortgage Broker Offering FHA, VA, USDA, Conventional, and KHC Down Payment Assistance Home Loans's avatarLouisville Kentucky Mortgage Loans

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Kentucky FHA Guidelines for 2024

FHA pros and cons

FHA loans are a good option, especially if you have low credit or a lot of debt. But they come with their own set of drawbacks too.

FHA pros

Some of the best reasons to apply for an FHA home loan include:

  • Lenient credit requirements: You can generally qualify for maximum FHA financing with a credit score of 500 to 580 versus a 620 to 640 score for a USDA loan. You might also be eligible with a credit score between 500 and 579 if you can make a 10% down payment.
  • Higher debt-to-income ratios: Your back-end DTI — that is, your total monthly debt obligations — can be as high as 56.9% for FHA loans, but only 45% for USDA loans.
  • Potentially lower interest rates: FHA interest rates can be lower than rates for USDA loans because you have the option to choose shorter repayment terms, including a 15-year fixed interest rate. The USDA only offers 30-year fixed loans, which naturally have higher rates.
  • Multi-family units can qualify: Properties with up to four units can qualify for financing with an FHA loan when one unit is your primary residence. For example, purchasing a duplex with an FHA loan is allowed as long as you live in one half of the property. Like USDA loans, however, second homes and investment properties are ineligible.

FHA cons

  • Higher down payment requirements: Depending on your credit score, you’ll need to make a 3.5% or 10% down payment. USDA loans require no down payment.
  • Higher mortgage insurance premiums: Your upfront and annual mortgage insurance premiums are higher than the USDA guarantee fee and annual fee.
  • Difficult to cancel mortgage insurance: You’ll pay an annual mortgage insurance premium for the life of the loan unless your down payment is at least 10% — in which case, you’ll only pay mortgage insurance for the first 11 years.
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Louisville Kentucky Mortgage Lender for FHA, VA, KHC, USDA and Rural Housing Kentucky Mortgages: What is the difference between Conventional, FHA and VA Mortgage loans in Kentucky?