How does Kentucky FHA Mortgage Loans Work for Kentucky First Time Home Buyers?

How does Kentucky  FHA Mortgage Loans Work for Kentucky First  Time Home Buyers?


An Kentucky FHA loan is backed by the Federal Housing


Administration, which means if a borrower defaults on the


loan, the FHA guarantees it will pay the lender. As a result,


lenders will issue larger loan amounts and give you lower rates.


Can anyone get an FHA Loan?


Practically everyone can get an FHA loan. Typically, it does


not matter how much or how little you make. What does matter is how much you wish to borrow. There are limits to how much you can borrow, and these depend on your county or state. To check how much you can borrow in your area, visit the HUD’s Web site:


What are the benefits of an Kentucky FHA Loan?


• Low down payment: It can be as low as 3.5% of the purchase price.


• Looser credit standards: You do need decent credit, but you do not need perfect credit.


• Low closing costs: Most can be included in the loan!


• Easier to qualify for than a conventional loan





How does an Kentucky FHA Loan work?


An FHA loan is a home loan backed by the


Federal Housing Administration

. This means that the FHA promises to pay the lender if a borrower defaults on their FHA loan.



In order to fund this guarantee, the FHA requires that you


pay mortgage insurance. Usually if a borrower is putting less than 20% down, he or she will be required to pay mortgage


The minimum down payment required for an Kentucky FHA loan is




(as of April 2011), and most borrowers choose to put less money down.

The borrower pays the mortgage insurance every month at a low rate of



1.15% of the loan amount. The FHA also requires an upfront mortgage insurance premium (MIP), which is 1.0%

of the loan amount. This fee is paid at closing and can be financed into the loan.



Does my income matter?


Generally, people of all income levels may qualify for an FHA mortgage loan. However, your


debt -to -income ratio

is an integral part of qualification.



These rules are established in order to ensure you are not taking on a bigger load than


you can handle. In other words, they want to make sure that you can afford your monthly

mortgage payment.




: Our Specialists will divide your FHA mortgage by your gross monthly income to get the first ratio. This ratio should not exceed 29%.

The second ratio is your FHA mortgage payment and other liabilities, such as car payments, credit card payments and any other monthly obligations you have that are present on your credit report, which are added up and divided by your gross monthly income. This ratio should not exceed






There are some exceptions to this rule. For example, if you are able to make a down


payment of more than 3.5% of the purchase price, then a ratio higher than 29/41% might

be accepted. Just ask your Kentucky FHA Specialist if you have any questions about your debt -to -income ratio — we are here to help!



Where does my job stability factor in?


It is important to the FHA that you show you




maintain consistent employment


Typically, to qualify for an Kentucky FHA loan you


have to have two years of consistent work in




the same field or with the same employer, or


maintain a steady income.


If you recently started a new job, you may still


qualify. You either need past experience in that


field, or the job should be in the same field as


your previous job.


How does credit come into play?


Although you do not need perfect credit, you


do need decent credit history

. By looking at several areas of your past credit, the lender can determine whether you are able to make timely mortgage payments.

First, the FHA likes to see



two lines of credit

on your credit report. Examples of credit report items are a credit card issued through MasterCard or Visa or a credit card for a department store such as JCPenny or Younkers.

If you do not have any credit lines established, the Kentucky FHA will allow substitute payments such




as car insurance, utility, telephone or cell phone, previous rental or mortgage, etc.

The second area is



late payments. The underwriter will look at the overall pattern of your

credit payments, instead of focusing on specific late payments.

So if you had a period of financial difficulty, you should be fine as long as you have



maintained a good pattern since then.



The good news is that if you have filed for


Chapter 7 Bankruptcy in the past, you are not

automatically disqualified from getting an FHA loan. The Kentucky FHA requires that at least two years must have passed since the discharge date rather than the filing date.

If you are still paying on a



Chapter 13 Bankruptcy

, you may still qualify as long as you have made good payments for at least a year.



In both situations, you also must have re-established good credit, have good job stability and qualify financially.


Typically, persons who have a



upon their property within the past three years will not qualify for an FHA loan. However, if the foreclosure was caused by extenuating circumstances out of your control, you may still be eligible. The underwriter may grant an exception if you have good credit and submit a letter of explanation.

However, you may still qualify for an FHA loan if it is not yet paid off, but you will not be able to close until it is.




If you have


debt in collections, whether medical or non-medical, you may still be eligible for an FHA loan. Medical accounts in collections do not have to be paid in full in order to get

an FHA loan.

Non-medical debts may be overlooked if you show substantial documentation explaining the reasons for the debts.




In order to get an FHA loan, you cannot have any


delinquent federal debts, such as a student loan or tax lien. In order to be eligible, you must make sufficient arrangements to pay

off the debts and submit the plan in writing.

Whether you have any



judgments, collections or federal debts

will also factor into approval.




judgment, which is a court ordered lien against a home you may own, must be paid in full before you close on your home.







11 thoughts on “How does Kentucky FHA Mortgage Loans Work for Kentucky First Time Home Buyers?

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