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.
580 (or 500 with a minimum 10 percent down payment)
VA loan
No official requirement, but typically 620
USDA loan
No official requirement, but typically 640
Conventional loans
Fannie Mae and Freddie Mac each back conventional loans with a lower minimum credit score: 620 and 660, respectively. Both of these loans require just 3 percent down.
FHA loans
The Federal Housing Administration (FHA) insures FHA loans, which allows mortgage lenders to accept a credit score as low as 580 with a 3.5 percent down payment, or 500 with a 10 percent down payment.
VA loans
If you’re a military member, a veteran or married to someone who has served in the armed forces, you could benefit from a VA loan backed by the U.S. Department of Veterans Affairs. You don’t have to meet a specific credit score minimum to qualify, although many lenders do require at least 620.
USDA loans
If you have a lower income and want to buy a home in a particular rural area, look into a USDA loan. While not a hard-and-fast rule, most USDA-approved lenders require a minimum credit score of just 640.
Credit Score Needed to Buy a House and get a Kentucky Mortgage?
Conventional Loan
• At least 3%-5% down• Closing costs will vary on which rate you choose and the lender. Typically, the higher the rate, the lesser closing costs due to the lender giving you a lender credit back at closing for over par pricing. Also, called a no-closing costs option. You have to weigh the pros and cons to see if it makes sense to forgo the lower rate and lower monthly payment for the higher rate and less closing costs.
Fico scores needed start at 620, but most conventional lenders will want a higher score to qualify for the 3-5% minimum down payment requirements Most buyers using this loan have high credit scores (over 720) and at least 5% down.
The rates are a little higher compared to FHA, VA, or USDA loan but the mortgage insurance is not for life of loan and can be rolled off when you reach 80% equity position in home. Conventional loans require 4-7 years removed from Bankruptcy and foreclosure. Kentucky USDA Rural Housing Program If you meet income eligibility requirements and are looking to settle in a rural area, you might qualify for the KY USDA Rural Housing program. The program guarantees qualifying loans, reducing lenders’ risk and encouraging them to offer buyers 100% loans. That means Kentucky home buyers don’t have to put any money down, and even the “upfront fee” (a closing cost for this type of loan) can be rolled into the financing.
Fico scores usually wanted for this program center around 620 range, with most lenders wanting a 640 score so they can obtain an automated approval through GUS. GUS stands for the Guaranteed Underwriting system, and it will dictate your max loan pre-approval based on your income, credit scores, debt to income ratio and assets.
They also allow for a manual underwrite, which states that the max house payment ratios are set at 29% and 41% respectively of your income.
They loan requires no down payment, and the current mortgage insurance is 1% upfront, called a funding fee, and .35% annually for the monthly mi payment. Since they recently reduced their mi requirements, USDA is one of the best options out there for home buyers looking to buy in a rural area
A rural area typically will be any area outside the major cities of Louisville, Lexington, Paducah, Bowling Green, Richmond, Frankfort, and parts of Northern Kentucky. There is a map link below to see the qualifying areas.
There is also a max household income limits with most cutoff starting at 109,500 for a family of four, and up to $136,000 for a family of five or more.
The income limits change every spring, so make sure and check to see what updated income limits are. USDA requires 3 years removed from bankruptcy and foreclosure There is no max USDA loan limit.
Kentucky FHA Loan
FHA loans are good for home buyers with lower credit scores and no much down, or with down payment assistance grants. FHA will allow for grants, gifts, for their 3.5% minimum investment and will go down to a 580-credit score.
The current mortgage insurance requirements are kind of steep when compared to USDA, VA, but the rates are usually good so it can counteract the high mi premiums. As I tell borrowers, you will not have the loan for 30 years, so don’t worry too much about the mi premiums.
The mi premiums are for life of loan like USDA.
FHA requires 2 years removed from bankruptcy and 3 years removed from foreclosure.
Kentucky VA Loan
VA loans are for veterans and active-duty military personnel. The loan requires no down payment and no monthly mi premiums, saving you on the monthly payment. It does have an funding fee like USDA, but it is higher starting at 2% for first time use, and 3% for second time use. The funding fee is financed into the loan, so it is not something you have to pay upfront out of pocket.
VA loans can be made anywhere, unlike the USDA restrictions, and there is no income household limit and no max loan limits in Kentucky
Most VA lenders I work with will want a 580-credit score, even though VA says in their guidelines there is no minimum score, good luck finding a lender VA requires 2 years removed from bankruptcy or foreclosure Clear Caviars needed to for a VA loan.
Kentucky Down Payment Assistance
This type of loan is administered by KHC in the state of Kentucky. They typically have $10,000 down payment assistance year around, that is in the form of a second mortgage that you pay back over 10 years.
Sometimes they will come to market with other down payment assistance and lower market rates to benefit lower income households with not a lot of money for down payment.
KHC offers FHA, VA, USDA, and Conventional loans with their minimum credit scores being set at 620 for all programs. The conventional loan requirements at KHC requires 660 credit score. The max debt to income ratios is set at 40% and 50% respectively.
Joel Lobb Mortgage Loan Officer
American Mortgage Solutions, Inc. 10602 Timberwood Circle Louisville, KY 40223 Company NMLS ID #1364
The requirements for Kentucky FHA loans are set by HUD.
Borrowers must have a steady employment history of the last two years within the same industry or line of work. Recent college graduates can use their transcripts to supplant the 2-year work history rule as long as it makes sense.
Self-Employed will need a 2-year history of tax returns filed with IRS. They will take a 2-year average.
FHA requires a 3.5% down payment. Can be gifted from a family member or from a retirement savings plan, or money saved up. Any type of cash deposits is not allowed for down payments. No exceptions to this rule!! This is one of the biggest issues I see in FHA underwriting nowadays.
FHA loans are for primary residence occupancy. Not rental houses.
Borrowers must have a property appraisal from an FHA-approved appraiser.
Borrowers’ front-end ratio (mortgage payment plus HOA fees, property taxes, mortgage insurance, homeowners insurance) needs to be less than 31 percent of their gross income, typically. You may be able to get approved with as high a percentage as 43 percent. If the Automated Underwriting System gives you an Approved Eligible you can go higher on the debt ratios
Borrowers must have a minimum credit score of 580 for maximum financing with a 3.5% down payment
Borrowers must have a minimum credit score of 500-579 for maximum LTV of 90 percent with a minimum down payment of 10 percent. Most lenders will not go below 580 to 620 score, and very few lenders will go to 580 score. It’s best to work on getting your scores up before you apply or work with a loan officer to improve them.
2 years removed from Chapter 7 is required with good pay history after bankruptcy
1 year removed from Chapter 13 is okay with an excellent pay history with the Chapter 13 plan and permission from the trustee. You will need to qualify with the Chapter 13 payment along with a new house payment. Again, scores will play into your loan pre-approval.
Typically borrowers must be three years out of foreclosure and have re-established good credit. Exceptions can be made if there were extenuating circumstances and you’ve improved your credit. If you were unable to sell your home because you had to move to a new area, this does not qualify as an exception to the three-year foreclosure guideline.
The property must be safe, sound and secure, in compliance with minimum property standards as defined by the U.S. Department of Housing and Urban Development, or HUD.
You may not have delinquent federal debt or judgments, or debt associated with past FHA loans. Caivrs Alert System will show up if you owe the government money.
Why Lenders Use CAIVRS
It is true that your CAIVRS report can help lenders to predict the risk of doing business with you, just like a traditional consumer credit report. But the primary reason lenders check your CAIVRS report is because they are generally required to do so for any applications that involve a federal loan (FHA, VA, USDA, SBA, etc.). Lenders are required to conduct a CAIVRS search because of Title 31 of the United States Code (Section 3720B) bars “delinquent federal debtors from obtaining federal loans or loan insurance guarantees.”
Kentucky FHA Loan Requirements for 2023
Gift Rules for Down-Payment Sources Guidelines on FHA Mortgage ProgramsOne of the biggest obstacles to buying a home for Americans is the down payment. There was a time when you needed a 20% down payment and a high credit score to buy a home. But in 2022, you can buy a home with average to below-average credit and low down payment in some cases. One of the most popular loan programs for these buyers if the FHA loan. A major advantage of the FHA mortgage loan is you can get approved with only a 3.5% down payment with a 580 or higher credit score. If you have a lower score than that, you need a 10% down payment.Still, there are situations where the borrower is having trouble coming up with the down payment for the loan. What to do then? FHA guidelines do allow other options. Keep reading to learn more.More on FHA Down Payments and Approved SourcesAs we noted above, you are required to have at least a 3.5% down payment to be approved for an FHA loan. The money must be verified by the FHA-approved lender to come from an ‘approved source.’ What is an approved source, anyway? Most people get their down payment from cash reserves, investments, borrow from 401k or IRA, etc. The idea behind verifying where the money came from is to make sure the borrower did not get the down payment from a credit card or payday loan, etc.But there are other options for your down payment. The funds also can come from a gift. The gift and the giver do need to meet FHA requirements, but this flexible guideline makes it possible to get into an FHA loan with, technically, zero money down. To determine if the down payment gift can be used or not, it is necessary to check HUD rules. According to HUD 41.55.1 Chapter 5 Section B, for the funds to be a gift, there cannot be any expected repayment of the money.Also, FHA will scrutinize the giver of the gift. Chapter 5 of the HUD Code states the cash gift is OK if it comes from your relative; employer or labor union; close friend with a defined interest in you; charitable organization; government agency or public entity.FHA also states who cannot give gift funds to you for the down payment. These are the seller; the real estate agent or broker on the deal; the builder or an associated entity.Gift Terms ExplainedThe gift for your down payment cannot be made based upon paying it back later. You are required to get a gift letter from the person or organization. The letter should state that you are not required to pay the money back. It also should provide the contact information for the borrower, such as name, address, and phone number. Also included should be the bank account from which the funds will be sent.The gift donor should be OK with giving a bank statement with the letter. Also, he or she should ensure that the transfer amount matches what is in the gift letter and what is deposited into your account.FHA rules are very specific on these areas to ensure that the home buying process through FHA is fair and just. But as long as you follow the FHA rules, you should be able to get help with your down payment from a friend or relative.Don’t Have Friends or Family Who Can Help?Not every borrower has friends or family who can give them a gift for their down payment. But HUD lists many government programs spread throughout the country in most states that can offer down payment and closing cost help for certain borrowers.It also is worth checking if your employer and state have employer-assisted housing. This program can help people with moderate incomes to get a loan to cover closing costs and down payment. Look up FHA in your state on Google to see what is available.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 KentuckyCredit Scores and Down Payment Percentages – Each year, the rules for qualifying for these loans changes. For 2022, 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 ApprovalThe 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.https://www.youtube.com/embed/iM74Gt0GmMI?version=3&rel=1&showsearch=0&showinfo=1&iv_load_policy=1&fs=1&hl=en&autohide=2&wmode=transparentNegative 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 HUDAs 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 LoanYou 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 LoanIt 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 –
New homebuyers and those who have lower credit scores or who have other blemishes on their credit history will often qualify for FHA-insured loans.
Even though these borrowers are considered “subprime” to a traditional lender, they will receive attractive interest rates through the FHA-insured mortgage programs.
The down payments required from borrowers are lower than those required by traditional mortgage lenders.
These loans can be combined with other forms of public assistance for lower income or new borrowers so that the borrower will not need to come up with a down payment of any kind.
Cons of FHA Loans –
Since the FHA is not actually the lender, and you have to go through FHA-approved lenders, you may not qualify due to stricter standards that the lender has for the loan.
Because you are not paying 20 percent as a down payment, the FHA requires two mortgage insurance premiums to be paid. One is an upfront premium that is 1.75 percent of the loan amount. Lenders often will allow you to make that mortgage insurance premium a part of your loan. The second is an annual mortgage insurance premium that is .45 percent or 1.05 percent. This premium is paid monthly.
FHA FINANCINGCREDIT REQUIREMENTS FOR KENTUCKY FHA FINANCINGWhat 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 LoanOne 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 loanThe HUD Handbook 4000.1 includes the official guidelines when it comes to the FHA mortgage insurance program.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 loanLenders 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.
Joel Lobb (NMLS#57916) Senior Loan OfficerAmerican Mortgage Solutions, Inc.10602 Timberwood Circle Suite 3Louisville, KY 40223Company ID #1364 | MB73346 Text/call 502-905-3708 kentuckyloan@gmail.com
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 LoanIt 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 –
Kentucky FHA Mortgage Lender 