Essential Mortgage Terms Every Kentucky Homebuyer Should Know
Buying a home in Kentucky can feel overwhelming when mortgage jargon starts flying.
This glossary breaks down common mortgage terms in plain English so you can make informed decisions.
Educational only. This information is not a commitment to lend. All loans are subject to credit approval and program guidelines.
Interest Rate
The percentage charged to borrow money for your mortgage loan.
APR (Annual Percentage Rate)
The true yearly cost of the loan, including interest and certain lender fees.
Loan Term
How long you have to repay the mortgage, commonly 15 or 30 years.
Debt-to-Income Ratio (DTI)
Your monthly debt divided by your gross monthly income. Lenders use this to determine affordability.
Down Payment
Money paid upfront toward the purchase of your Kentucky home.
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Kentucky Mortgage Terms to Know (Plain-English Glossary)
If you’re buying a home in Kentucky, mortgage conversations can feel like a different language.
This page breaks down the most common mortgage terms, jargon, and vocabulary you’ll see in
loan paperwork, the Loan Estimate, and the Closing Disclosure.
Tip: When you see a word you don’t understand, copy it and use your browser search on this page: Ctrl + F (Windows) or Cmd + F (Mac).
Educational only. This glossary explains common terms used in mortgage lending. It is not a loan
approval or a commitment to lend. Programs, rates, and guidelines can change.
Mortgage Glossary
Accrued Interest
Interest that has built up on a loan since the last payment date and hasn’t been paid yet.
Amortization
A repayment schedule that pays the loan down over time with monthly payments that include principal and interest.
Annual Percentage Rate (APR)
The annual cost of borrowing expressed as a percentage. APR includes the interest rate plus certain lender fees, points, and mortgage insurance when applicable.
Application Fee
A fee some lenders charge to cover initial processing costs for a mortgage application.
Appraisal
A written opinion of a home’s market value based on the property condition, location, and recent sales of similar homes.
Appraisal Fee
The cost paid for the appraiser to complete the appraisal report.
Borrower
The person(s) taking out the mortgage loan and agreeing to repay it.
Cap (Adjustable-Rate Mortgage)
A limit on how much an ARM interest rate can change during each adjustment period and/or over the life of the loan.
Certificate of Eligibility (COE)
A document confirming a veteran’s eligibility for a VA home loan benefit.
Certificate of Reasonable Value (CRV)
A VA-related appraisal determination used to support the value for a VA loan.
Closing (Settlement)
The day you sign final loan documents and the property ownership transfers to the buyer.
Closing Costs
Fees and prepaid items due at closing, such as lender fees, title fees, appraisal, recording fees, and prepaid taxes/insurance.
Closing Disclosure (CD)
A five-page form showing your final loan terms, monthly payment, and final closing costs. You typically receive it at least three business days before closing.
Commitment Letter
A lender document stating you’re approved subject to conditions (like appraisal, title, and final verification items).
Comparables (Comps)
Recently sold homes similar to the subject property that help determine market value.
Conventional Loan
A mortgage not insured or guaranteed by the government (not FHA, VA, or USDA).
Debt-to-Income Ratio (DTI)
Your total monthly debts divided by your gross monthly income (before taxes). DTI helps determine how much house you can qualify for.
Deed
The legal document that transfers property ownership from seller to buyer.
Department of Veterans Affairs (VA)
The federal agency that backs VA home loans for eligible service members and veterans.
Down Payment
Money paid upfront toward the purchase price. A larger down payment usually reduces the loan amount and can reduce mortgage insurance costs.
Earnest Money
A deposit made with the purchase contract to show the buyer is serious. It’s typically credited toward cash needed at closing.
Equal Credit Opportunity Act (ECOA)
A federal law that prohibits discrimination in lending based on protected characteristics.
Equity
The difference between the home’s current value and what you still owe on the mortgage.
Escrow
An account used to collect money monthly for property taxes and homeowners insurance, so those bills can be paid when due.
Hazard Insurance (Homeowners Insurance)
Insurance that protects your home against certain damages (like fire and storms) in exchange for a premium.
Homeowners Association (HOA)
An organization that manages shared community areas and enforces neighborhood rules. HOA dues may apply.
Interest Rate
The rate charged for borrowing the money. This is not the same as APR.
Loan Estimate (LE)
A three-page form that summarizes estimated loan terms, payments, and closing costs. It is typically provided within three business days after application.
Loan-to-Value (LTV)
The loan amount divided by the appraised value (or purchase price, depending on the loan). Lower LTV generally means lower lender risk.
Rate Lock (Lock-In Rate)
An agreement that holds an interest rate for a set time while the loan is processed (example: 30, 45, or 60 days).
Market Value
The price a home is likely to sell for in the current market based on supply, demand, and comparable sales.
Mortgage Insurance (MI)
Insurance that protects the lender if the borrower defaults. Often required when putting less than 20% down on conventional loans, and also common with FHA loans.
Origination Fee
A lender fee that covers certain administrative costs of underwriting and processing the mortgage.
Prepayment
Paying extra principal ahead of schedule to reduce interest costs and pay the mortgage off sooner.
Prepayment Penalty
A fee some loans charge if you pay off the mortgage early. Many modern mortgages do not have this, but it should always be checked.
Principal
The amount still owed on the loan balance (not including interest).
Realtor
A real estate professional who is a member of the National Association of Realtors.
Real Estate Settlement Procedures Act (RESPA)
A federal law requiring certain loan disclosures and protecting consumers from specific abusive settlement practices.
Second Mortgage
An additional loan secured by the home that is behind the first mortgage in lien priority.
Term
The length of the loan (commonly 15 or 30 years).
Title
Legal ownership rights to the property.
Title Insurance
Insurance that protects the lender and/or homeowner against certain losses related to title defects or ownership disputes.
Want help translating your Loan Estimate or Closing Disclosure?
If you’re buying a home in Kentucky and you want a clear explanation of your numbers (rate, APR, cash to close,
escrow, and closing costs), reach out and I’ll walk through it with you in plain English.
Disclaimer: This website is not endorsed by the VA, FHA, USDA, HUD, or any government agency. It is an independent
educational resource created by a Kentucky mortgage professional. Content is for educational purposes only and does
not constitute a loan offer or guarantee of approval.
Glossary of Mortgage Terms to Know For A Kentucky Mortgage Loan.
ACCRUED INTEREST: Accumulated interest since the principal investment that has not yet been paid. AMORTIZATION: Paying off debt, principal and interest, with a fixed repayment schedule in regular installments over a fixed period of time. ANNUAL PERCENTAGE RATE (APR): The annual rate charged for borrowing money expressed as a percentage. APR takes into account interest, discount points, lender fees and mortgage insurance. APPLICATION FEE: A fee charged by a lender to cover the initial costs of processing a loan application. APPRAISAL: A written estimate of a property’s current market value, based on the current condition of the property and recent sales information from similar properties in the same area. APPRAISAL FEE: The cost to have a licensed, certified appraiser estimate the market value of a property as of a specific date. BORROWER: An individual who receives a loan from…
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.
Joel Lobb specializes in a wide array of mortgage loans, including: – **FHA Loans**: These loans are a great fit for buyers with lower credit scores or those who can afford only a minimal down payment. – **VA Loans**: Tailored for veterans and active military members, offering favorable terms with little to no down payment. – **USDA Loans**: Designed for rural home buyers, providing 100% financing options. – **KHC Loans**: In collaboration with the Kentucky Housing Corporation, these loans come with down payment assistance, making them ideal for first-time buyers.
FHA loans are a popular choice for many first-time homebuyers in Kentucky. This is due to their flexible qualifying criteria. If you’re considering an FHA loan in the Bluegrass State, understanding the key qualifying factors is crucial. Here’s a comprehensive guide to the criteria you need to know:
Credit Score Requirements:
FHA loans are known for accommodating borrowers with lower credit scores. The minimum required credit score can vary. Typically, a credit score of 580 or higher is needed to qualify for the minimum down payment of 3.5%. Borrowers with credit scores between 500 and 579 might still qualify. They will need a higher down payment, usually around 10%.
Down Payment:
The minimum down payment for an FHA loan in Kentucky is 3.5% of the home’s purchase price. This is advantageous for buyers who may not have substantial savings for a larger down payment, making homeownership more accessible.
Work History:
Lenders typically look for a steady 2 year employment history when considering FHA loan applications. A consistent work history is beneficial. It is preferable to have worked with the same employer or within the same field. This helps demonstrate financial stability and the ability to repay the loan.
Debt-to-Income Ratio (DTI):
The debt-to-income ratio is a crucial factor in mortgage approval. For FHA loans, the maximum allowable DTI ratio is typically around 40% to 45% of your gross monthly income. It can go higher up to 56% with good credit scores, a large down payment, or a shorter-term loan. Lenders may also consider higher ratios in certain cases if compensating factors are present.
Bankruptcy and Foreclosure:
FHA loans have lenient guidelines regarding bankruptcy and foreclosure. Generally, borrowers with a past bankruptcy may qualify for an FHA loan after two years. This is possible if they have re-established good credit and demonstrated responsible financial behavior. For foreclosures, the waiting period is usually three years.
Mortgage Term:
FHA loans offer various mortgage term options, including 15-year, 20 year, 25 year and 30-year fixed-rate loans. The choice of term depends on your financial goals and ability to manage monthly payments.
Occupancy: Primary residences with 1-4 units. Not for investment properties or second homes.
Mortgage Insurance on the loan for life of loan. Larger down payments and shorter terms will reduce the upfront mi and monthly mi premiums
can be used for refinances, not only for purchases.
No income limits nor property restrictions on where home is located
Can close within 30 days typically with good appraisal and title work
FHA Loan Requirements in Kentucky for Credit scores, Down payment, Debt Ratio and work history below
Requirement
Details
Credit Score
– 580+: Eligible for a 3.5% down payment. – 500-579: Requires a 10% down payment.
Down Payment
Minimum of 3.5% for qualified buyers; 10% for lower credit scores below 580 to 500 score range
Debt-to-Income Ratio (DTI)
– Ideal: 45% or lower on front end ratio or housing ratio. – Acceptable: Up to 57% with compensating factors. There are two ratios. Front end and back end with front end being maxed at 45% and the backed end ratio being 56.99% with an AUS approval. If manually underwritten, see guidelines here
Employment History
Must provide at least **2 years of consistent employment—College transcripts can supplement with a less than 2 year work history
Key Benefits of FHA Loans in Kentucky
Low Credit Score Requirements
FHA loans accept borrowers with credit scores as low as 500. However, a score of 580+ qualifies you for the lowest down payment option.
Low Down Payment Options
You can purchase a home with as little as 3.5% down if you meet credit requirements, making FHA loans more accessible than conventional loans.
Competitive Interest Rates
FHA loans typically offer rates comparable to conventional mortgages. They may even offer lower rates. This could save you money over the life of the loan.
Flexible Loan Uses
With an FHA 203(k) loan, you can bundle home purchase and renovation costs into a single mortgage.
Assumable Loans
FHA loans can be transferred to a new buyer. This feature is especially valuable if you sell your home when interest rates are higher.
Understanding these qualifying criteria can help you navigate the FHA loan application process in Kentucky more effectively. Working with an experienced mortgage professional can provide valuable guidance. They offer assistance tailored to your specific financial situation and homeownership goals.
Joel Lobb Mortgage Loan Officer
Any questions, please don’t hesitate to reach out via, text, email, or call. Advice is always free.
One of Kentucky’s highest rated mortgage loan officers for FHA, VA, USDA, Kentucky Housing KHC and conventional mortgage loans.
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For assistance with Kentucky mortgage loans, reach out via email, call, or text Joel Lobb directly.
Kentucky Local Home Loan Lender Services
First-Time Home Buyers Welcome FHA, Rural Housing (USDA), VA, and Kentucky Housing Corporation (KHC) Loans Conventional Loan Options Available Fast Local Decision-Making Experienced Guidance Through the Home Buying Process
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The view and opinions stated on this website belong solely to the authors, and are intended for informational purposes only. The posted information does not guarantee approval, nor does it comprise full underwriting guidelines. This does not represent being part of a government agency. The views expressed on this post are mine and do not necessarily reflect the view of my employer. Not all products or services mentioned on this site may fit all people. (www.nmlsconsumeraccess.org).
Kentucky First Time Homebuyers FHA, VA, USDA & Rural Housing, KHC and Fannie Mae mortgage loans
Kentucky FHA Loans: Kentucky FHA loans are known for their lenient credit score requirements, making them accessible to borrowers with lower credit scores. However, a minimum score of 500 to 580 is typically required, depending on the down payment.
Kentucky VA Loans: VA loans offer flexible credit score requirements, while on paper VA states they don’t require a minimum score to insure the mortgage loan, most lenders preferring a FICO score of 620 or higher. Veterans, active-duty service members, and eligible spouses can benefit from VA loan options.
Kentucky USDA Loans: USDA loans are designed for rural homebuyers and require no minimum FICO score , but most lenders will want a credit score of 640 or higher. These loans offer zero down payment options for eligible properties.
KHC Mortgage Loans: Kentucky Housing Corporation (KHC) mortgage loans may vary in credit score requirements depending on the lender. It’s essential to work with a knowledgeable mortgage broker like Joel Lobb to understand specific lender guidelines. KHC requires a minimum 620 credit score for FHA, VA, USDA and 660 for Conventional loan programs
What Credit Score Do You Need to Buy a House in Kentucky?
There is no single “magic number.” The credit score needed depends on the loan program (Conventional, USDA, FHA, VA, or Kentucky Housing Corporation down payment assistance). Here’s how it works in the real world for Kentucky buyers.
Quick guide: typical credit score ranges and key highlights by Kentucky mortgage program.
Conventional Loans in Kentucky
Minimum credit score generally starts at 620.
Most lenders prefer higher scores for 3%–5% down options.
Best pricing and easier approvals are typically with strong credit (often 700+).
Mortgage insurance (PMI) usually improves as scores increase.
USDA Rural Housing Loans in Kentucky
Many lenders target around 640 for automated approval through GUS (Guaranteed Underwriting System).
Manual underwriting may be possible when automated approval is not available.
0% down payment required (eligible rural/suburban areas).
Typical fees include a 1% upfront guarantee fee and 0.35% annual fee (paid monthly).
USDA can be one of the best value options for Kentucky buyers with limited cash, provided the property is in an eligible area and the file meets income and underwriting requirements.
Kentucky FHA Loans
As low as 580 credit score with 3.5% down (typical baseline).
Gift funds, grants, and down payment assistance may be allowed.
Mortgage insurance is generally higher than USDA or VA, but rates can still be competitive.
Common waiting periods: 2 years after bankruptcy and 3 years after foreclosure (standard guideline).
Kentucky VA Loans
VA does not set a minimum credit score in its guidelines, but most lenders do.
Many VA lenders target around 580+ (lender overlay varies).
0% down and no monthly mortgage insurance.
Clear CAIVRS is required (for federal delinquency screening).
Kentucky Down Payment Assistance (KHC)
Kentucky Housing Corporation (KHC) often offers up to $12,500 down payment assistance (program terms and funding can change).
Typically structured as a second mortgage paid back over 15 years.
Minimum credit score is commonly 620 across many KHC options; KHC conventional often requires 660.
Maximum debt-to-income ratios are commonly around 50/50 (program and investor rules apply).
Next step: get a clear pre-approval target
If you share your approximate credit score range, income type, and whether you’re looking in Louisville, Lexington, or rural Kentucky, I can point you to the most realistic program and the exact score threshold that will matter for approval.
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What Credit Score Do You Need to Buy a House in Kentucky?
FHA vs. Conventional Loans: Which Is Better for Kentucky Homebuyers?
Compare FHA and conventional loans for Kentucky homebuyers. Learn credit requirements, down payments, mortgage insurance, and which loan fits your situation.
When comparing FHA loans vs conventional loans in Kentucky, the decision comes down to four core factors: credit score, down payment, debt-to-income ratio, and mortgage insurance. Both loan programs are widely used across Louisville, Lexington, Northern Kentucky, and rural areas, but they serve very different borrower profiles.
FHA Loans: Built for Flexibility
Kentucky FHA loans are designed for buyers who need more flexibility. FHA financing is often a strong option for borrowers with credit scores under 680, limited savings, or little to no cash reserves after closing. FHA also allows buyers to qualify sooner after major credit events, including foreclosures that are three to seven years old and short sales that occurred two to four years ago.
Another major advantage of FHA loans in Kentucky is gifting. The entire down payment and most closing costs can be covered with gift funds from approved sources. This makes FHA especially popular with first-time homebuyers and buyers using down payment assistance programs.
FHA Mortgage Insurance (MIP) Breakdown:
Upfront mortgage insurance premium: 1.75% of loan amount (rolled into the loan)
30-year loans with less than 5% down: 0.85% annually
30-year loans with 5%+ down: 0.80% annually
15-year loans: 0.45% to 0.70% annually (depending on down payment)
Conventional Loans: For Stronger Credit
Kentucky conventional loans are best suited for borrowers with stronger credit and more money saved. Conventional financing generally favors buyers with credit scores above 680, at least five percent down, and reserves remaining after closing. Borrowers with foreclosures over seven years old or short sales that occurred five to seven years ago typically fit conventional guidelines more easily.
One of the biggest advantages of conventional loans is mortgage insurance flexibility. Unlike FHA, there is no upfront mortgage insurance premium. Monthly private mortgage insurance can be lower for borrowers with strong credit, and PMI automatically drops off once the loan reaches roughly 80 percent loan-to-value. FHA mortgage insurance, by contrast, usually lasts for the life of the loan when the down payment is less than ten percent.
Quick Comparison Table
Factor
FHA Loans
Conventional Loans
Credit Score Required
580+ 3.5% down payment (some lenders 500+ 10% down payment)
720+ typically
Down Payment
3.5% (with 580+ score)
3-5% minimum, typically 5%
Mortgage Insurance
Required on all loans (lifetime with <10% down)
Only if less than 20% down; drops at 80% LTV
Upfront Insurance Premium
1.75%
None
Gift Funds
100% of down payment allowed
Limited or restricted
Max Debt-to-Income
Up to 56.99% (with compensating factors)
Typically 45%
Property Types
Owner-occupied only
Owner-occupied and investment
Appraisal Standards
Stricter
More flexible
The Bottom Line
FHA loans are ideal for Kentucky buyers rebuilding credit, using gift funds, or purchasing with limited savings. Conventional loans reward borrowers with stronger credit, larger down payments, and long-term equity goals.
Most homeowners do not keep a mortgage for 30 years. Because many refinance or sell within five to seven years, FHA’s lifetime mortgage insurance is often less of a concern than it appears on paper. In many cases, the lower interest rate and easier approval standards outweigh the insurance cost.
Joel Lobb
Mortgage Broker – FHA, VA, USDA, KHC, Fannie Mae
EVO Mortgage • Helping Kentucky Homebuyers Since 2001
The mortgage process can often be a confusing one — whether you’ve bought a home before or not. There’s a lot of prep work and moving parts, and most of the terminology is unfamiliar to the average consumer.
Fortunately, that last part is an easy fix.
Are you getting ready to buy a home or refinance your current mortgage? Take a look at some of the lesser-known terms you might want to know.
Annual Percentage Rate (APR): This number reflects the total annual cost of taking out your mortgage loan. It’s different from your mortgage interest rate and includes some extra fees.
Underwriting: When a loan professional evaluates your application and verifies all your financial details, that’s underwriting. It’s important to ensure that you have the means to manage your new monthly payment.
Escrow: An escrow account is used to hold funds prior to closing, including your earnest money deposit. You might also pay into an escrow account to cover property taxes, homeowners insurance and private mortgage insurance (if you have it).
Closing Disclosure: This is a document that you’ll be given at least three days before your closing date. It should detail all the final costs of your loan, as well as what you’ll be expected to pay on closing day.
Mortgage Note: You’ll sign this document at closing.It outlines the terms of your home loan and includes how much you’re borrowing, whether it’s a fixed-rate or adjustable-rate mortgage and more.
Prepaid Costs: These also come up at closing and will go into your escrow account. They usually cover mortgage interest, property taxes and homeowners insurance expenses that occur between your closing date and the date your first mortgage payment is due.
If you need help understanding any part of the mortgage process, get in touch today.
No matter what you must provide a 2 year employment history. Conventional or Kentucky FHA Mortgage Loan. Conventional does not always need to be verified with a written work verification form
if you do not have a complete 2 year history you must explain any large gaps. Typically I have seen this to be greater than 30 days.
you must have a 2 year history prior to the gap as well. (two underwriters from two different lenders have recently told me the same thing)
also check your AUS-Automated Underwriting Findings because that can help when speaking with your potential borrower.
Exception to the 2 year history is college or HS graduation
need official college transcripts or they can be unofficial if you get them with the web URL just like bank activity.
good idea to snag their diploma as well.
you probably don’t even need to use this exception if the person was a student but also worked and had a 2 year job history.
if there are any job gaps greater than 6 months in their two year history the borrower must be on their current job for at least 6 months before the FHA case number can be assigned.
again you must then get a 2 year employment history prior to the 6 month or more gap. however far you must go back.
W2s / 1099s
even if you are not using the income to qualify from a part time job please get every single w2 / 1099 from your borrowers.
–
Kentucky FHA Mortgage Work History and Income Requirements.
Comparing Kentucky VA loans to Kentucky USDA, FHA, and Fannie Mae loans in Kentucky
Kentucky VA loans Compared to Kentucky USDA, FHA, and Fannie Mae loans in Kentucky
When comparing Kentucky VA loans to Kentucky USDA, FHA, and Fannie Mae loans in Kentucky, several factors come into play. These factors include credit score requirements, income considerations, work history, and debt ratios. They also involve how each loan type treats bankruptcy and foreclosure. Let’s delve into the benefits and differences of each loan type:
Kentucky Mortgage Credit Score Requirements:
Kentucky VA Loan: VA loans typically have more flexible credit score requirements compared to conventional loans. While there’s no specific minimum score set by VA , most Kentucky VA lenders often look for a credit score of 620 or higher. I can do VA loans down to a 580 credit score.
Kentucky USDA Loan: USDA loans also offer flexibility, with no minimum score required per USDA guidelines, but most Kentucky USDA lenders will want a 640 score or higher. I Can do Kentucky USDA loans down to a 580 credit score on a manual underwrite.
Kentucky FHA Loan: FHA loans are known for accommodating borrowers with lower credit scores, often accepting scores as low as 500 with a 10% down payment or 580 with a 3.5% down payment.
Kentucky Fannie Mae Loan: Fannie Mae loans usually require a minimum credit score of 620 or higher, although some lenders may have slightly different requirements.
Kentucky VA Loan: VA loans consider your stable income and employment history but may be more lenient if you have a history of military service or steady employment. 2 years of employment needed for loan application-minimal job gaps
Kentucky USDA Loan: USDA loans often have income limits based on the area’s median income, and you need a stable income source. 2 years of employment needed for loan application-minimal job gaps
Kentucky FHA Loan: FHA loans consider your income stability and work history, with guidelines that vary by lender. 2 years of employment needed for loan application-minimal job gaps
Kentucky Fannie Mae Loan: Fannie Mae loans typically require a stable income and employment history, similar to conventional loans. 2 years of employment needed for loan application-minimal job gaps
Kentucky VA Loan: VA loans generally have more lenient debt-to-income (DTI) ratio requirements, often allowing for a higher DTI compared to conventional loans. VA loans can get approved on much higher debt to income ratios vs FHA, USDA and Fannie Mae loans. 65% or higher in some situations but if manual underwrite, will want the ratios closer to 41% with good residual income for VA loan. VA loans are the only type of loans that require a residual income…FHA, Fannie Mae, USDA does not have residual income requirements
Kentucky USDA Loan: USDA loans have very strict DTI ratio limits, typically around 41% to 45% max on the backend ratio and 33% or less on the front end. By far the most restrictive on debt ratios vs FHA, VA, and Fannie Mae loans
Kentucky FHA Loan: FHA loans also have relatively flexible DTI ratio limits (56% back end ratio possible on a AUS approval), making them accessible to borrowers with moderate levels of debt. Front end ratio max 45%
Fannie Mae Loan: Fannie Mae loans follow standard DTI ratio guidelines similar to conventional loans. TYpically the second most restrictive on debt ratios right behind USDA loans on tighter debt to income ratio requirements, with the max back-end ratio no more than 50% –Front end ratio max 45%
Kentucky VA Loan: VA loans are more forgiving of past bankruptcy or foreclosure, often requiring a waiting period of 2 years for Chapter 7 bankruptcy and 1-2 years for foreclosure.
Kentucky USDA Loan: USDA loans have specific waiting periods after bankruptcy (3 years for Chapter 7) and foreclosure (3 years).
Kentucky FHA Loan: FHA loans have shorter waiting periods after bankruptcy (2 years for Chapter 7) and foreclosure (3 years).
Kentucky Fannie Mae Loan: Fannie Mae loans typically require longer waiting periods after bankruptcy (4-7 years) and foreclosure (7 years).
Advantages and Disadvantages of Kentucky VA loans, USDA, Fannie Mae and FHA:
Kentucky VA Loan Advantages: Zero down payment, competitive interest rates, no private mortgage insurance (PMI) requirement, lenient credit and DTI ratios, and flexible eligibility criteria for veterans and active-duty service members.
Kentucky VA Loan Disadvantages: Funding fee (although it can be rolled into the loan), limited to eligible veterans, service members, and some spouses.
Kentucky USDA Loan Advantages: Zero down payment, lower interest rates, flexible credit requirements, and available in eligible rural areas.
Kentucky USDA Loan Disadvantages: Limited to rural properties, income limits, and property eligibility criteria.
Kentucky FHA Loan Advantages: Low down payment (3.5%), flexible credit requirements, competitive interest rates, and accessible to first-time homebuyers.
Kentucky FHA Loan Disadvantages: Mortgage insurance premiums (MIP), stricter property standards, and limits on loan amounts.
Kentucky Fannie Mae Loan Advantages: Available for a wide range of properties, competitive interest rates, and options for low down payments.
Kentucky Fannie Mae Loan Disadvantages: Stricter credit and DTI requirements, potential for private mortgage insurance (PMI), and limited flexibility for borrowers with past financial challenges.
In summary, choosing the right loan type depends on your specific financial situation, eligibility criteria, and property location. VA loans offer excellent benefits for eligible veterans and service members, while USDA, FHA, and Fannie Mae loans provide alternatives with their own advantages and considerations.
This type of loan is administered by KHC in the state of Kentucky. They typically have $12,500 down payment assistance year around, that is in the form of a second mortgage that you pay back over 15 years at a interest rate of 4.75% depending on your income in the household.
Joel has worked with KHC for 12 of his 20 years in the mortgage lending business. Joel said, “A lot of my clients would not have been able to purchase a home of their own or possibly delayed their purchase due to lack of down payment but with the $6,000 DAP loan program, this gets them into a house sooner and starts their path to homeownership while building equity instead of throwing their money away.”
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Address: 911 Barret Ave, Louisville, KY 40204
Kentucky FHA Mortgage Lender 