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.
Here is a brief summary on getting a mortgage loan while in a Chapter 13 Bankruptcy:
You must have 12 payments paid into the Chapter 13 before you can apply for a mortgage loan.
The payments must be made on time for last 12 months or after 12 months if you have been in longer, so no late payments to the Chapter 13 while in it.
You have to ask permission from the courts to seek a mortgage loan. They usually grants this. I have never not seen them grant it.
You have to qualify with the new house payment along with Chapter 13 payments and other debts listed on credit report. Debt to income ratios usually center around 31 and 43% respectively, meaning the new house payment should not be more than 31% of your gross monthly income and your total house payment and debts listed on credit report along with Chapter 13 payment should not be more than 43% of your total gross monthly income.
Credit scores: Most FHA lenders I work with will want a 620 middle score. You have three fico scores from Experian, Equifax, and Transunion, and they throw out the high and low score and take middle score. For example, if you had a 598, 679, and 590 scores respectively for all three bureaus listed above, your qualifying score would be 598.
There are some FHA investors that I am set up with that will go down to 580, but I have seen in my past experiences 620 will get you a better deal and far greater chance of closing on your loan with FHA.
Down payment: For FHA loans, you will need to have at least 3.5% down payment saved up. It is extremely hard to find a no money down loan program to get you approved for a mortgage while you are in a Chapter 13 plan.
FHA and USDA are really the only two options that I know of that offer financing for a borrower with a current Chapter 13 Bankruptcy plan plan, so keep that in mind.
Conventional loan program offered by Fannie Mae will not allow a mortgage loan for someone in a Chapter 13 Bankruptcy plan.
On USDA loans, it is possible to get 100% Financing after you have paid into the plan for 12 months with a good pay history. The credit scores needed for a USDA loan approval really need to be above 640 in my past experience in getting them approved. A lot of USDA lenders will say they will do down to 620, but it is very difficult getting them approved. Best to get your scores up to increase your changes in qualifying for a USDA loan. There is not much that difference in getting your scores up to that range if you are at a 620 score now.
With USDA loans, they have income and property eligibility requirements that FHA does not have, so below is a rough run down of FHA vs USDA loan for you:
Typically, USDA-eligible properties are located in rural areas. It is a mistake, however, to think that you have to live far out in the country to qualify for a USDA loan. USDA-eligible properties are often located near urban areas.
A property’s eligibility is determined by its location with respect to USDA’s map of eligible locations. The USDA program also places limits on your household income based on median earnings in an area. If you exceed that limit, you can’t obtain a USDA loan.
The FHA, by contrast, does not place limits on household earnings. The FHA, however, does establish a maximum limit on the amount of money that can be borrowed through the program.
So if you were in a hurry to buy, after you have been in your Chapter 13 plan for 12 months, I can look at getting you approved to buy a home if you wish:
How to Get Approved for a Kentucky Mortgage While in A Chapter 13 Bankruptcy:
If you have questions about qualifying as first time home buyer in Kentucky, please call, text, email or fill out free prequalification below for your next mortgage loan pre-approval.
This web site is not the FHA, VA, USDA, HUD or any other government organization responsible for managing, insuring, regulating or issuing residential mortgage loans.
All approvals and rates are not guaranteed, and are only issued based on standard mortgage qualifying guidelines
Remember, we are even available this weekend for pre-qualifications or questions. Call our cell phone or email us. If you miss us, leave a message and we WILL call you back
NMLS 57916 | Company NMLS #1364/MB73346135166/MBR1574
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).
Exciting news on Kentucky FHA guidelines. No more donor bank statements.
The second concerns large deposits. FHA now follows conventional guidelines; a large deposit is over 50% of qualifying income.
Kentucky FHA Mortgage has announced changes to its guidelines for gifts and deposits for mortgage loan approval.The two changes are: 1) Donor bank statements are no longer required. 2) FHA now follows conventional guidelines for large deposits; a large deposit is over 50% of qualifying income.Kentucky FHA Mortgage Changes on Gifts and Deposits for Mortgage Loan Approval
Kentucky FHA Mortgage has announced changes to its guidelines for gifts and deposits for mortgage loan approval.The two changes are: 1) Donor bank statements are no longer required. 2) FHA now follows conventional guidelines for large deposits; a large deposit is over 50% of qualifying income.Kentucky FHA Mortgage Changes on Gifts and Deposits for Mortgage Loan Approval
Joel Lobb Mortgage Loan Officer
American Mortgage Solutions, Inc. 10602 Timberwood Circle Louisville, KY 40223 Company NMLS ID #1364
Joel has worked with KHC for 14 of his 25 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 $10,000 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.”
I have helped over 1300 Kentucky families buy or refinance their home over the last 20 years. Realizing that this is one of the biggest, most important financial transactions a family makes during their lifetime, I always feel honored and respected when I am chosen to originate their personal home loan. You can count on me to deliver on what I say, and I will always give you honest, up-front personal attention you deserve during the loan process. I have several advantages over the large banks in town. First, I can search and negotiate for your loan options through several different mortgage companies across the country to get you the best deal locally. Where most banks will offer offer you their one set of loan products. I have access to over 10 different mortgage companies to broker your loan through to get you the best pricing and loan products that may not fit into the bank’s program due to credit, income, or other underwriting issues. You will not get lost in the shuffle like most borrowers do at the mega banks; you’re just not a number at our company, you are a person and we will treat you like one throughout the entire process.
Buying your first house in Kentucky involves several steps, which can vary depending on the type of loan program you choose. Here’s a detailed guide on the steps and requirements for various Kentucky First Time Home Buyer loan programs:
Minimum credit score typically required is 580 for 3.5% down payment.
Scores between 500-579 may qualify with a 10% down payment.
Income:
Stable and sufficient income to cover the mortgage payments.
Work History:
At least 2 years of consistent employment history.
Down Payment:
3.5% of the purchase price if the credit score is 580 or higher.
FICO Score:
Minimum FICO score of 580 for maximum financing.
Bankruptcy and Foreclosure:
Chapter 7 bankruptcy: 2 years from discharge with reestablished good credit.
Chapter 13 bankruptcy: 1 year of the payout period with satisfactory payment history.
Foreclosure: 3 years from completion date.
Debt Ratio:
Typically, a maximum debt-to-income (DTI) ratio of 56.9% on backend and 45% on the front end debt ratio.
Collections:
Must be addressed if they affect the borrower’s ability to repay the loan. Collections not required to be paid but must count in debt to income ratio sometimes if aggregate total on credit report is over $1000 total…Non-medical bills only, medical bills don’t count and usually not required to be paid or figure a payment unless you have a judgement of garnishment against your paystubs.
Mortgage Insurance:
Required for all FHA loans. Includes an upfront mortgage insurance premium (UFMIP) and monthly mortgage insurance premiums (MIP).
Time to Close:
Approximately 30-45 days.
Appraisal Requirements:
Property must meet minimum property standards set by HUD.
Mortgage Documents Needed for Pre-Approval Letter in Kentucky to Buy a House using a Kentucky FHA loan:
Proof of income (pay stubs, last two years W-2s, tax returns).
Proof of employment. Last two years
Proof of assets (last two bank statements). 401k or retirement account and stocks and bonds.
Kentucky Mortgage Credit report for all three credit bureaus Experian, Equifax and Transunion
Minimum credit score of 640 is preferred for automated underwriting. No minimum score required.
Scores below 640 may qualify with manual underwriting down to a 580 credit score
Income:
Must meet USDA income eligibility guidelines (typically low to moderate income). 2 year history of income.
Work History:
Stable employment history, usually for the past 2 years.
Down Payment:
No down payment required (100% financing).
FICO Score:
Minimum FICO score of 640 for automated underwriting. can go down to 580 possible
Bankruptcy and Foreclosure:
Chapter 7 bankruptcy: 3 years from discharge.
Chapter 13 bankruptcy: 1 year of the payout period with satisfactory payment history.
Foreclosure: 3 years from completion date.
Debt Ratio:
Typically, 33% for housing expenses and 45% for total DTI.
Collections:
Must be resolved if they impact the ability to repay the loan. Collections typically don’t have to be paid but may have to count a payment in your debt to income ratio if aggregate is over 1k and non-medical
Mortgage Insurance:
Annual fee and upfront guarantee fee. Currently 1% upfront and .35% month
Time to Close:
Approximately 30-45 days, including USDA processing time.
Appraisal Requirements:
Must meet HUD FHA standards.
Mortgage Documents Needed for Pre-Approval:
Proof of income (pay stubs, last two years W-2s, tax returns).
Proof of employment. Last two years
Proof of assets (last two bank statements). 401k or retirement account and stocks and bonds.
Kentucky Mortgage Credit report for all three credit bureaus Experian, Equifax and Transunion
Varies depending on the program; typically, a minimum of 580 for some programs and with KHC it requires a 620 score. .
Income:
Must meet specific program income limits.
Work History:
Stable employment history. Last two years
Down Payment:
Assistance provided to cover down payment and closing costs. 25k welcome home grant, 10k down payment assistance loan from KHC and 5% grant used available toward closing costs and down payment
FICO Score:
Minimum FICO score requirement varies by program.
Bankruptcy and Foreclosure:
Varies by program.
Debt Ratio:
Typically aligns with Kentucky FHA, VA, or USDA requirements.
Collections:
Must be addressed if they impact the ability to repay the loan.
Mortgage Insurance:
Depends on the primary loan program (FHA, VA, USDA).
Time to Close:
Approximately 45-60 days.
Appraisal Requirements:
Must meet the requirements of the primary loan program.
Varies depending on the program; typically, a minimum of 620-640.
Income:
Must meet specific program income limits.
Work History:
Stable employment history.
Down Payment:
No down payment required (100% financing).
FICO Score:
Minimum FICO score requirement varies by program.
Bankruptcy and Foreclosure:
Varies by program; typically 2-3 years from discharge or completion.
Debt Ratio:
Varies by program, typically around 41-45%.
Collections:
Must be addressed if they impact the ability to repay the loan.
Mortgage Insurance:
Depends on the primary loan program (FHA, VA, USDA).
Time to Close:
Approximately 30-45 days.
Appraisal Requirements:
Must meet the requirements of the primary loan program.
Mortgage Documents Needed for Pre-Approval:
Proof of income (pay stubs, W-2s, tax returns).
Proof of employment.
Proof of assets (bank statements).
Credit report.
General Steps for Buying Your First Home in Kentucky
Check Your Credit Score:
Obtain a copy of your credit report and check your credit score.
Determine Your Budget:
Use a mortgage calculator to estimate your monthly payments and determine a comfortable budget.
Get Pre-Approved:
Contact a mortgage lender to get pre-approved for a loan. Provide necessary documents for income, employment, and assets.
Choose a Real Estate Agent:
Select a knowledgeable real estate agent to help you find a home that meets your needs and budget.
Start House Hunting:
Visit properties, attend open houses, and narrow down your choices.
Make an Offer:
Once you find a home, work with your real estate agent to make a competitive offer.
Home Inspection:
Hire a professional inspector to check the condition of the home.
Finalize Your Loan:
Work with your lender to finalize the loan application and submit all required documents.
Appraisal:
The lender will order an appraisal to determine the home’s value.
Closing:
Review and sign all closing documents. Pay any remaining closing costs and receive the keys to your new home.
Following these steps and meeting the specific requirements of your chosen loan program will help you successfully purchase your first home in Kentucky.
Joel Lobb Mortgage Loan Officer
American Mortgage Solutions, Inc. 10602 Timberwood Circle Louisville, KY 40223 Company NMLS ID #1364
NMLS 57916 | Company NMLS #1364/MB73346135166/MBR1574
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).
Website: www.mylouisvillekentuckymortgage.com
Address: 911 Barret Ave., Louisville, KY 40204
Kentucky FHA Mortgage Lender 