Kentucky FHA Loans

 

How to get approved for a Kentucky FHA Loan?

Are you looking to buy a house in Kentucky with little to no down payment and credit scores not the best,  a  Kentucky  FHA loan may be right for you. 

FHA is part of HUD and the federal government. FHA promotes housing opportunities for borrower that may have access to little or no down payment for a house and have had some past credit troubles that has lowered their credit score and shut them out of the Kentucky housing market. 

Kentucky FHA loans with their minimum down payment requirements and loan limits, are a good choice for  for Kentucky first-time homebuyers. 

You can compare the different home buying options for Kentucky home buyers using the FHA, VA, USDA and KHC down payment assistance program  here.

Kentucky  FHA Loan 

Kentucky FHA loans are popular with Kentucky  homebuyer’s because of their many benefits. 

Here are some of the benefits of Kentucky FHA loans.

• Very low  Down Payments: Having a low down payment option is one of the main reasons FHA loans appeal to first-time homebuyers. In some cases, borrowers can qualify for a down payment as low as 3.5% with a 580 credit score or higher and if credit score is below 580, 10% down payment would be needed. You can also use Down Payment Assistance Programs to cover your down payment and closing costs
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• Down Payment Assistance Programs: Down payment assistance programs are available throughout Kentucky. Some of the Down payment Assistance Programs listed below and their links:

• Kentucky offers several down payment assistance programs to help first-time homebuyers. These programs can provide funds to cover the down payment and closing costs. Some popular programs include:

  • Kentucky Housing Corporation (KHC) Programs: khce options, including repayable and forgivable loans. $10,000 available at 3.75% rate currently over 10 year pay back period. Changes periodically. Check your lenders requirements with income limits, loan limits, debt to income ratio requirements
  • Local Government Programs: Many local governments offer grants and loans for down payment assistance.

  • Federal Loan Programs for First-Time Homebuyers in Kentucky

    In addition to KHC programs, several federal loan options are available to Kentucky residents, including:

    • Kentucky Federal Housing Administration (FHA) Loans: FHA loans are insured by the U.S. Department of Housing and Urban Development (HUD) and cater to borrowers with lower credit scores (minimum 580 with a 3.5% down payment).
    • Kentucky Department of Veterans Affairs (VA) Loans: Active-duty military personnel, veterans, and eligible family members can qualify for VA loans with no down payment required. These loans typically offer lower interest rates than conventional mortgages.
    • Kentucky USDA Loans: Guaranteed by the U.S. Department of Agriculture (USDA), these loans are available to moderate-income borrowers in designated rural areas, with no down payment required.

    • You may qualify for one of these programs.

      • HUD Community Development Block Grants (CDBG) – Kentucky contacts – HUD provides grant money to communities and those funds may be used to assist homebuyers
        • Ashland
        • Bowling Green
        • Elizabethtown
        • Hopkinsville
        • Lexington
        • Louisville
        • Owensboro
      • HUD HOME Program – Kentucky contacts – HUD provides grant money to communities designated as participating jurisdictions for assisting homebuyers, rental assistance, and other housing initiatives
      • Community Ventures Corporation Kentucky Home Financing
      • The Kentucky Housing Corporation offers:
        • Homeownership Programs
        • Counseling Resources
      • Habitat for Humanity – Through volunteer labor and donations of money and materials, Habitat builds and rehabilitates simple, decent houses with the help of the homeowner (partner) families
      • Federal Home Loan Bank of Cincinnati – serves Kentucky residents by offering various homebuying programs including Welcome Home grants. For more information, you may call 1 (888) 345-2246
      • Kentucky Association for Community Action – helps to fund housing programs for low-income residents
      • Federal Appalachian Housing Enterprise (FAHE) – provides housing assistance in rural, low-income, Appalachian communities
      • Housing Partnership, Inc. – provides affordable housing services for residents of Jefferson County
      • Secondary financing/down payment assistance programs are listed by state
      • USDA Rural Development – programs that reduce the cost of homeownership for low and moderate-income families.

    Additional Resources

    • City and County Programs: Some Kentucky cities and counties offer their own down payment assistance programs or resources for first-time homebuyers. It’s recommended to research programs available in your target location.
    • HUD Homeownership Programs: The U.S. Department of Housing and Urban Development provides resources for homeownership assistance programs across the country. You can explore their website for additional options.

Kentucky Homebuyer assistance programs have their own sets of requirements for eligibility. It is up to the borrower to research these programs and organize with them independently of their lender.

• Gift funds can be used for down payment: You can use financial gifts from friends and family to pay for the down payment on your home.
• Debt-To-Income Ratios can be much higher vs other loan programs: Kentucky FHA loans can have a DTI of as much as 57%. This makes FHA loans easier to qualify for than Conventional loans where the DTI can only be up to 45%.

• No maximum income Requirement: Income must be verifiable and consistent for the last two years. However, there is no minimum amount a borrower must make in order to qualify for an FHA loan.
•  Loan Types to Choose From: There are several FHA loan options for homebuyers. Streamline Refinance and the FHA 203(k) are two of the more popular Kentucky FHA loans available. Check out all FHA loans offered by HUD and FHA government entities.

• Seller Concessions : Kentucky FHA loans allow the seller to contribute up to 6% of the sales price to cover the buyer’s closing costs and prepaids.

• FHA Assumable Loans: The borrower can assume an existing mortgage. The mortgage will be transferred to the buyer from the seller. The homebuyer will be subject to the terms, conditions, and rates of the original FHA loan and may have to come up with the difference between the loan balance and the new sales price. 
• Eligible Properties: They are available for single-family detached homes, 2-4 unit homes, condos, townhomes, and manufactured homes that meet HUD standards for foundation requirements

Kentucky FHA Mortgage Loan Requirements

Here are some general Kentucky FHA loan requirements for Kentucky.

• A credit score of 580 or higher: A lender may accept credit scores of 500-579 under certain conditions. A credit score lower than 580 will require a larger down payment.
• The ability to pay a 3.5%-10% down payment: The percentage you will pay will be calculated according to your credit score. The borrower’s credit score must be 580 or higher to have a down payment of 3.5%
• Minimum of two years employment: Must have verifiable, steady, and consistent income. You will need documentation. It can include tax returns, pay stubs, or W-2s. This requirement is the same for borrowers who are employees and those who are self-employed.
• Mortgage insurance: The ability to pay the mortgage insurance premium (MIP) is required. The dollar amount of MIP will be calculated based on the amount of the loan. However, all FHA loans will require borrowers to pay an upfront MIP of 1.75%. This is in addition to monthly mortgage insurance, which is required for the life of the loan. 
• Higher home inspection standards: Property must pass an FHA-specific appraisal.
• Loan must be for a principal residential property: FHA loans cannot be used for rentals, investing in properties, or vacation homes. They are also not available for business properties.
• A debt-to-income ratio of less than 57% on the backed end ratio: A person’s debt-to-income (DTI) ratio is the percentage of their gross monthly income they spend to cover debts. Debts can include student loans, credit cards, and any type of federal debt.
• There are two ratios on mortgage loans to be aware of. Front end ratio (consist of total mortgage payment with piti) and the backend ratio (consist of new mortgage payment plus monthly payments on the credit report in addition to child support and other . Cell phone bill, car insurance, utilities are not included in this calculation.

To qualify for an FHA loan, you cannot spend more than half of your gross income on debt. There are some exceptions. In general, your debt-to-income ratio be no greater than 45% on front end ratio and max back end ratio can vary but cannot go over 57% on a AUS approval.

How Do I Qualify for An FHA Loan in Kentucky?

To qualify for an Kentucky loan in  Kentucky,  you must meet the above requirements. 

General Kentucky FHA loan requirements include:

• The loan must be for a property used for your primary residence.
• The property must be appraised by an FHA-approved appraiser.
• 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 must have a valid Social Security number and be a legal resident of the U.S.
• You must have a minimum credit score of 580 with a down payment of at least 3.5 percent, or a minimum credit score of 500 with a down payment of at least 10 percent.
• You may not have delinquent federal debt or judgments, or debt associated with past FHA loans.
• You must have steady employment history.
• You must make a down payment of at least 3.5 percent of the purchase price. If the down payment was gifted by a family member, documentation is required.
• You must have a DTI ratio that does not exceed limits.
• Any judgments or collections on the credit report must be resolved or satisfactorily explained.
• Any required waiting period has passed, as follows:

Event	Waiting period	Waiting period with extenuating circumstances (nonrecurring events beyond your control that result in sudden, significant, prolonged reduction in income or a catastrophic increase in financial obligations)
Chapter 7 or 11 bankruptcy	Four years	Two years
Chapter 13 bankruptcy	Two years from discharge, or four years from dismissal	Two years
Multiple bankruptcies	Five years if more than one filing in last seven years. Most recent bankruptcy must have been caused by extenuating circumstances.	Three years from most recent discharge or dismissal
Foreclosure	Seven years	Three years, with additional requirements after three years up to seven years: 90 percent maximum loan-to-value purchase, principal residence, limited cash-out refinance
Deed-in-lieu of foreclosure, preforeclosure sale (short-sale), or charge-off of mortgage account	Four years	Two years

The property must be your primary residence. The loan amount you want must adhere to the FHA loan limits for your county.

How to apply for FHA loan in Kentucky

 To apply for an FHA loan in Kentucky, contact  me below. 

Documents Needed For All Loan Applications in Kentucky For FHA loan approval

 

 

ALL BORROWERS:

1. Copies of W-2’s for the last two years;
2. Copies of paycheck stubs for the last 30 days (most current);
3. Copies of checking and saving account statements for last three months (all pages);
4. Copies of quarterly or semi-annual statements for checking, savings, IRA’s, CD’s, money market fund, stock, 401k, profit sharing, etc.;
5. Copy of sales contract when ratified;
6. Employment history for the last two years (address any gaps of employment);
7. Residency history over the last two years, with name, phone number, address and account number of Land or Mortgage Company. Rental property copies of leases plus mortgage information.
8. Canceled earnest money check when it clears or corresponding bank statement, if applicable;
9. Commissioned or bonus income — if 25% or more of base, must have tax returns;
10. Check for the expense of appraisal & credit report;
11. Refinance Copy of Note, Deed of Trust, Settlement Statement, Survey, and Insurance information;
12. Any assets used for down payment, closing cost, and cash reserves must be documented by a paper trail;
13. If paid off mortgage in the last 2 years, need copies of HUD1;
14. Copy of drivers license for applicant and co-applicant.

SELF-EMPLOYED BORROWERS:

1. Copies of most recent 2 years tax returns (with all schedules including k-I’s if applicable);
2. Copy of current profit & loss statement and balance sheet;
3. Copy of corporate/partnership tax returns for most recent 2 year period if owning 25% or more of company — copies of W-2’s and/or 1099 forms.

DOCUMENTS WHICH MAY BE REQUIRED:

1. Relocation Agreement if move is financed by employer, i.e. buyout agreement plus documentation outlining company paid closing costs benefits;
2. Previous bankruptcy, need copies of petition for bankruptcy and discharge, including supporting schedules;
3. Divorce Decree if applicable;
4. Documentation supporting moneys received from social security/retirement trust income, i.e. copies of direct deposit bank statements, awards letter, evidence income will continue.

DOCUMENTS NEEDED FOR FHA/VA LOANS:

1. FHA: Copy of social security card and drivers license for each applicant and co-applicants;
2. VA: Original Certificate of Eligibility and copy of DD214 Discharge Paper;
3. VA: Name and address of nearest living relative

Kentucky FHA Loan Limits

Most Kentucky counties  adhere to the standard loan limit of $498,257 for a single-family home. However, there are many counties with higher loan limits due to higher housing prices.

FHA Streamline Refinance in Kentucky

Kentucky FHA Streamline Refinance is designed to let you lower your monthly mortgage payments. It switches your original interest rate to a new one calculated using current market rates. 

Refinancing your FHA loan is simple.

• Requires less documentation
• No appraisal required
• No need to document income
• No employment requirement
• No credit check

They can also be used to change an FHA Adjustable-Rate Mortgage to a fixed-rate mortgage.

FHA 203(k) Loans

FHA 203(k) loans help borrowers who are looking to purchase a house that needs repairs. Investing in upgrades and renovations can be costly. FHA 203(k) loans, also known as a rehab loan, are designed to finance the costs of house renovations and repairs. They are not limited to the purchase of a new home. They can also be used by a homeowner to upgrade their current property.

FHA 203(k) Limited Loan

• Good for homes that need renovations (not major structural repairs)
• Can finance mortgage payments during home repairs
• Accepts lower credit scores
• Can be used for energy efficient upgrades

FHA 203(k) Standard Loan

• Can cover more costly renovations like structural repairs
• Can be used by a homeowner to increase accessibility for persons with disabilities
• Can also cover mortgage payments during home repairs
• Can be used to add value to your existing home

Kentucky FHA Loan Frequently Asked Questions

How does a Kentucky FHA loan work?

FHA stands for Federal Housing Authority. FHA Loans provide low-cost insured Home Mortgage Loans that suit a variety of purchasing options. Whether you’re buying a home or want to refinance your mortgage, FHA loans might be right for you. If you’re unsure about your credit rating, or have concerns about a down payment, FHA loans can give you piece of mind with super low closing costs and flexible payment options.

 

What factors determine if I am eligible for an FHA Loan in Kentucky?

To be eligible for FHA Mortgage Loans, your monthly housing costs (mortgage principal and interest, property taxes, and insurance) must meet a specified percentage of your gross monthly income. Your credit background will be fairly considered. You must be able to make a down payment, cover closing costs and have enough income to pay your monthly debt.

What is the maximum amount that I can borrow?

The maximum amount for an FHA Mortgage is determined by:

Maximum Loan Amount in Kentucky: The Maximum FHA Loan amount allowed for FHA Home Mortgages varies from county to county in Kentucky. The highest maximum FHA Home Loan right now in Kentucky county is $498,257.00 

 

To see what the limit is in the county in which you’re interested, please refer to the Kentucky FHA Loan Limit chart at the bottom of this page.

Maximum financing: In Kentucky, the maximum FHA financing will be 97.75% of the appraised value of the home or its selling price, whichever is lower.

How much money will I need for the down payment and closing costs?

Kentucky FHA loans require the home buyer to invest at least 3.5% of the sales price in cash for the down payment and closing costs. If the sales price is $100,000 for example, the home buyer must invest at least $3,500. However, the home buyer can use gifts from family, funds from local, state or government agencies, or other sources for the down payment.

What property types are allowed for FHA Loans in Kentucky?

While FHA Guidelines do require that the property be Owner Occupied (OO), they do allow you to purchase condos, planned unit developments, manufactured homes, and 1-4 family residences, in which the borrower intends to occupy one part of the multi-unit residence.

What credit score do you need for an FHA loan in 2024 for a Kentucky FHA loan approval?

To qualify for an Kentucky FHA loan  borrowers need to have a minimum mortgage specific credit score of 580. A credit score of 580 can qualify you for a 3.5% down payment.

Some Kentucky FHA Mortgage lenders may accept a credit score of 500-579 with a 10% down payment.

What is the max FHA loan in Kentucky?

Kentucky FHA loans have maximum loan limits based on county. Most counties in Kentucky  adhere to the common loan limit of $498,257 for a single-family house.

What qualifies as a first-time homebuyer in Kentucky?

If a homebuyer in Kentucky  has not owned a home in the last three years or more, they qualify as a first-time homebuyer. There are some exceptions to this, so make sure to check with your individual lender.

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Joel Lobb
Senior Loan Officer
NMLS#57916

text or call my phone: (502) 905-3708

email me at 

kentuckyloan@gmail.com