Do I qualify as a Kentucky first-time home buyer?
You are typically considered eligible to apply for first-time home buyer loans and benefits if you haven’t owned your principal residence within the past three years.
Some first-time home buyer assistance programs are even more lenient, offering financial aid in specific areas targeted for redevelopment, even to repeat buyers.
Kentucky First-time home buyer benefits
Benefits can include low- or no-down-payment loans, grants or forgivable loans for closing costs and down payment assistance, as well as federal tax credits with the Kentucky Housing Agency or KHC
Is there an income limit to qualify as a first-time home buyer?
Income limits come into play when you are applying for local, state or federal government assistance. Some national mortgage programs, such as loans issued or backed by the U.S. Department of Agriculture, also have household income limits.
Some low-down-payment conventional loans do, too.
In these cases, your income may be benchmarked to local county limits for low- and moderate-income households.
Lenders, even those working with loan programs authorized by a state housing agency, will likely consider your debt-to-income ratio when determining if you qualify.
How to qualify for a first-time home buyer grant
Grants or forgivable loans that typically don’t require repayment are available to low- and moderate-income borrowers through state first-time home buyer programs. Approval standards vary by program and location but often include household income and home sale price limits.
How to qualify for down payment assistance
Just as for grants, down payment and closing cost assistance is often offered by local and state housing authorities. Again, qualifications vary. Look for income and home sale price caps here, too.
Don’t be surprised if a first-time home buyer class is required to qualify for a grant or down payment assistance. These classes are designed to help you navigate the homebuying process, and can be a good idea to take whether they’re mandatory or not.
What are the requirements to qualify for a first-time home buyer loan?
Qualifications required for approval of a loan vary by the type of mortgage — and even by the lender — but here are some general guidelines:
Kentucky Conventional loans:
For a 3% down payment, you’ll need at least a 620 FICO and a debt-to-income ratio below 50%. The higher your credit score or the lower your debt, the better your chances are for approval.
Kentucky FHA loans:
If you want a down payment as low as 3.5%, you’ll need a FICO score of 580 or higher. With 10% down, your required credit score may go as low as 500.
Kentucky VA loans:
Down payments aren’t generally required for a loan backed by the Department of Veterans Affairs. And while VA-backed loans don’t have a minimum FICO score as a part of their official requirements, many lenders look for a score of 620 or better.
KentukcyUSDA loans:
Another no-down-payment option, USDA-backed loans are typically issued for rural or suburban properties. Income limits apply. A FICO score of 640 or better is generally required, though exceptions with documentation can allow a lower score.
Lenders can add additional conditions, called “overlays,” to loan approval. This is another good reason to shop for more than one lender.
Joel Lobb
Mortgage Loan OfficerIndividual NMLS ID #57916American Mortgage Solutions, Inc.Text/call: 502-905-3708
fax: 502-327-9119
email: kentuckyloan@gmail.com
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.
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.
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.
Pros of FHA Loans –
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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.
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Even though these borrowers are considered “subprime” to a traditional lender, they will receive attractive interest rates through the FHA-insured mortgage programs.
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The down payments required from borrowers are lower than those required by traditional mortgage lenders.
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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 –
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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.
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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
Senior Loan Officer
American Mortgage Solutions, Inc.
10602 Timberwood Circle Suite 3
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/
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
How to qualify for a Kentucky FHA Home Loan ?
It’s important to understand the different types of loan programs available to you and what benefits and drawbacks there are to each type.
For example, if you’re looking to find a fixer upper this may not be the right loan program for you. But an FHA loan may be a better fit for you if you have little cash saved up for a down payment or if you don’t have a high credit score.
Kentucky FHA loan requirements:
- At least 18 years old to apply
- No age limit. just must be 18 years of age to apply.
- Must occupy the home as a primary residence, no rental homes or investment property
- An appraisal must be done by an FHA-approved appraiser.Typically FHA appraisal in Kentucky costs anywhere from low-end $325 to $525 with most FHA lenders in KY.
- Home inspection is not required
- Termite inspection not required
- 2 years removed from Chapter 7 bankruptcy, and 1 year in Chapter 13 bankruptcy is possible to get a loan while in bankruptcy
- Foreclosure or short sale on previous home mortgage requires 3 years removal from those dates.
- Mortgage insurance (MIP) is required
- Upfront Mortgage Insurance Premium is 1.75% and monthly mortgage insurance is .85% or .80% depending on loan term and loan to value.
- Mortgage insurance is for life of loan.
- No matter your credit scores, everyone pays the same mortgage insurance premiums.
- Must have 2 years of employment history proving a reliable source of income
- 500 FICO score requirement with at least 10% down payment
- 580 FICO score requirement with at least 3.5% down payment
- Gifts and down payment assistance programs are allowed to meet your down payment requirements. Cannot come from seller, but seller can contribute up to 6% of the sales price toward buyer’s closing costs and prepaids.
- Student loan payments are factored into the debt-to-income ratio when applying. Typically if loans are deferred, or in an income=based repayment plan, the FHA underwriters will use 1% of the outstanding balance, which sometimes can make it difficult to qualify.
- Your debt-to-income ratio must not be higher than 31% or total debt obligation cannot be higher than 43% of your current income. This is for a manual underwriter, meaning that if the AUS underwriting system by mortgage lenders will approve you for a higher debt to income ratio, that is fine.
Joel Lobb (NMLS#57916)
Senior Loan Officer
Senior Loan Officer
American Mortgage Solutions, Inc.
10602 Timberwood Circle Suite 3
If you are an individual with disabilities who needs accommodation, or you are having difficulty using our website to apply for a loan, please contact us at 502-905-3708.
Disclaimer: No statement on this site is a commitment to make a loan. Loans are subject to borrower qualifications, including income, property evaluation, sufficient equity in the home to meet Loan-to-Value requirements, and final credit approval. Approvals are subject to underwriting guidelines, interest rates, and program guidelines and are subject to change without notice based on applicant’s eligibility and market conditions. Refinancing an existing loan may result in total finance charges being higher over the life of a loan. Reduction in payments may reflect a longer loan term. Terms of any loan may be subject to payment of points and fees by the applicant Equal Opportunity Lender. NMLS#57916http://www.nmlsconsumeraccess.org/
— Some products and services may not be available in all states. Credit and collateral are subject to approval. Terms and conditions apply. This is not a commitment to lend. Programs, rates, terms and conditions are subject to change without notice. The content in this marketing advertisement has not been approved, reviewed, sponsored or endorsed by any department or government agency. Rates are subject to change and are subject to borrower(s) qualification.
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Student Loans In Collections, What Can I Do to get Approved For A Kentucky Mortgage ?
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Kentucky FHA Mortgage Lender 