: One of the most important requirements necessary to qualify for a home loan is an acceptable credit score. Without knowing yours it’s difficult for me to know whether or not you can qualify. Here is some information on the scores required to obtain a loan.
The FHA has their own guidelines for loans they will accept and may be your best bet. Keep in mind that FHA is not a bank; it’s a government agency that insures loans from FHA approved lenders. While the FHA will have its rules, a bank will also have its own rules as well. Most banks today are only willing to finance FHA loans with credit scores of 640 and above. The FHA however will allow loans with credit scores as low as 540 with 20% down. Also, the FHA will require that you put down a minimum of 3.5%.
Conventional loans are typically for borrowers with money to put down (10-20%) and good credit scores. Most lenders in today’s market require a middle credit score of 660 or better to qualify for a conventional loan. To get your best deal you will need a credit score of at least 720. Since conventional loans are approved through underwriting engines created by Freddie Mac and Fannie Mae, the higher your credit scores are the better terms (rate) you will get. Conventional loans currently require a minimum of 5% down.
The good news is that you have some money reserved for a down payment. Your debt however is a big concern. Go ahead and start interviewing mortgage brokers and obtain recommendations from them to find the loan that works best for you. Your new mortgage broker will then be able to show you an entire suite of loan options and pre-qualify you for a home that you can afford with your income. In the mean time work with your broker on improving your debt/equity ratio and credit score if necessary. You’d be surprised how much improvement you can make in a year or so.
- Kentucky FHA Loan Qualifying Summary (louisvillekymortgage.net)
- Frequently Asked Questions about FHA Kentucky Home Loans (louisvillekymortgage.net)
- FHA Loan Qualifying Summary (kentuckyfhaloan.wordpress.com)
- Type of Kentucky FHA loans available (louisvillemortgageguide.com)