There are 4 basic things that a Kentucky First Time Home buyers in 2019 needs to show a lender in order to get approved for a mortgage. Each category has so many what ifs and sub plots that each box can read as it’s own novel. In other words, each category has so many variables that can affect what it takes to get approved, but without further adieu here are the four categories in no particular order as each without any of these items, you’re pretty much dead in the water:
You need income. You need to be able to afford the home. But what is acceptable income? Let’s just say that there are two ratios mortgage underwriters look at to qualify you for mortgage payment:
First Ratio – The first ratio, top ratio or housing ratio. Basically that means out of all the gross monthly income you make, that no more that X percent of it can go to your housing payment. The housing payment consists of Principle, Interest, Taxes and Insurance. Whether you escrow or not every one of these items are factored into your ratio. There are a lot of exceptions to how high you can go, but let’s just say that if your ratio is 33% or less, generally, across the board, you’re safe.
Second Ratio- The second ratio, bottom ratio or debt ratio includes the housing payment, but also adds all of the monthly debts that the borrower has. So, it includes housing payment as well as every other debt that a borrower may have. This would include, Auto loans, credit cards, student loans, personal loans, child support, alimony….basically any consistent outgoing debt that you’re paying on. Again, if you’re paying less than 45% of your gross monthly income to all of the debts, plus your proposed housing payment, then……generally, you’re safe. You can go a lot higher in this area, but there are a lot of caveats when increasing your back ratio.
What qualifies as income? Basically, it’s income that has at least a proven, two year history of being received and pretty high assurances that the income is likely to continue for at least three years. What’s not acceptable? Unverifiable cash income, short term income and income that’s not likely to continue like unemployment income, student loan aid, VA education benefits,or short term disability are not allowed for a mortgage loan.
What the mortgage underwriter is looking for here is how much can you put down and secondly, how much will you have in reserves after the loan is made to help offset any financial emergencies in the future.
Do you have enough assets to put the money forth to qualify for the down payment that the particular program asks for. The only 100% financing or no money down loans still available in Kentucky for home buyers are available through USDA, VA, and KHC or Kentucky Housing Loans. Most other home buyers that don’t qualify for the no money down home loans mentioned above, will turn to the FHA program. FHA loans currently requires a 3.5% down payment.
Kentucky Home buyers that have access to putting down at least 5% or more, will usually turn to Fannie Mae or Freddie Mac mortgage programs so they can get better pricing when it comes to mortgage insurance.
These assets need to be validated through bank accounts, 401k or retirements account and sometimes gifts from relatives or employer.. Can you borrow the down payment? Sometimes. Generally if you’re borrowing a secured loan against a secured asset you can use that. But rarely can cash be used as an asset. FHA will allow for gifts from relatives for down payments with little as 3.5% down but Fannie Mae will require a 20% down payment when a gift is being used for the down payment on the home.
The down payment scenarios listed above are for Kentucky Primary Residences only. There are stricter down payment requirements for investment homes made in Kentucky.
- Kentucky FHA Mortgage loan credit score requirements:
- The minimum credit score is 500 for Kentucky FHA loans. However please keep in mind these two things: 1. Lenders credit their own overlays to increase the credit score threshold, most being 620, and secondly, if your credit score is below 580, you would need 10% minimum down payment, and if the credit score is over 580, then you can go with the minimum 3.5% down payment.
- Obviously if you have a higher credit score, this will increase your chances of getting approved for a Kentucky FHA Mortgage and possibly better rates and closing costs options.
- Kentucky VA Mortgage loans requirements :
- VA does not have a minimum credit score requirement, but if the credit score is below 620 few lenders will do the loan, but I am set up with several Kentucky VA lenders where I have closed them down to a 560 credit score, but the borrower had good compensating factors such as: large down payment, low dti ratios, good job history and good residual income with no previous bankruptcies or foreclosures.
- I would suggest if your credit scores are below 580, I would suggest on working on getting the scores up before you applied for a VA mortgage loan.
- A lot of lenders will do a rapid rescore which in some cases can increase your credit scores in as little as 7-10 working days.
- The federal Department of Veterans Affairs (VA) guarantees loans for current and former members of the military and their families. VA loans provide very favorable terms to eligible borrowers and have limited qualifying requirements. You can get a VA loan with no down payment so long as the home isn’t worth more than you pay for it, and there’s no minimum credit score to qualify. You also don’t have to pay for mortgage insurance, although you do have to pay an up-front funding fee of of between .5% and 3.3% of the loan amount unless you fall within an exception for disabled vets or military widows or widowers.
- Kentucky USDA Mortgage credit score requirements:
- According to their guidelines, USDA will go down to a 580 credit score, but most lenders will want a 640 credit score. USDA uses an online system to underwrite the risk of the loan, and scores under 640 are very difficult to get approved.
- Validating the Credit Score. Two or more eligible tradelines are necessary to validate an applicant’s credit report score. Eligible tradelines consist of credit accounts (revolving, installment etc.) with at least 12 months of repayment history reported on the credit report. At least one applicant whose income or assets are used for qualification must have a valid credit report score
- The Rural Housing Service (RHS) operates under the federal Department of Agriculture to guarantee loans for rural home-buyers with limited income who can’t obtain conventional financing. The upside is that Kentucky USDA loans require no down payment. The downside is that they charge a steep up-front fee of 1% of the loan amount (which can be paid off over the entire loan term) and an annual fee of 0.35%.
- Kentucky Fannie Mae and Freddie Mac Conventional Credit Score Requirements
- Competitive Mortgage Rates and Fees
- Monthly Mortgage Insurance Is Not Always Required
- Ideal for First Time Home Buyers with Good Credit
As far as previous Bankruptcies and foreclosures:
Kentucky FHA Mortgage Loans currently requires 3 years removal from a foreclosure or short sale and 2 years on a bankruptcy with good re established credit.
Kentucky Fannie Mae Mortgage Loans currently requires 4 years removal from a bankruptcy, and 7 years on a foreclosure.
Kentucky VA Mortgage Loans currently requires 2 years removal from a bankruptcy or foreclosure with good reestablished credit.
Kentucky USDA loans require 3 years removal from bankruptcy and foreclosure with good reestablished credit.
Generally, there’s nothing you can do to affect this. Bottom line here is…..”is the value of the house at least the value of what you’re paying for it?” If not, then not good things start to happen. Generally you’ll find less issues with values on purchase transactions, because, in theory, the realtor has done an accurate job of valuing the house prior to taking the listing. The big issue comes in refinancing. In purchase transactions, the value is determined as the
Lower of the value or the contract price!!!
That means that if you buy a $1,000,000 home for $100,000, the value is established at $100,000. Conversely, if you buy a $200,000 home and the value comes in at $180,000 during the appraisal, then the value is established at $180,000. Big issues….Talk to your loan officer.
For each one of these boxes, there are over 1,000 things that can effect if a borrower has reached the threshold to complete that box. Soooooooooooo…..talk to a great loan officer. There are so many loan officers that don’t know what they’re doing. But, conversely, there’s a lot of great ones as well. Your loan is so important! Get a great lender so that you know, for sure, that the loan you want, can be closed on!
When a homeowner with a FHA-insured mortgage can no longer make their payment, the lender forecloses on the home. FHA pays the lender what’s owed on the home, and the U.S. Department of Housing and Urban Development (HUD) takes ownership of the home. HUD then turns around and offers these properties for sale.
The FHA $100 Down Payment program is a special program in which you can purchase a HUD foreclosed home with as little as $100 for a down payment. To qualify you must:
- Be approved for the program.
- Purchase a HUD foreclosure home.
- Use FHA financing.
- Live in the home as your primary residence. You can’t use the home as a rental property.
- Have a minimum credit score of 620 and meet standard FHA credit guidelines.
- Still provide earnest money of $500 to $2,000 depending upon the property. Earnest money will be returned to you at closing as a credit.
Additionally, the purchase price of the home must be equal to or less than the appraised value of the home. However, you likely won’t need to obtain an appraisal since HUD will already have one from their foreclosure process. But if a new appraisal is needed, it must be an “as is” appraisal without repairs included in the cost.
If repairs are needed to the home, they cannot exceed $5,000. However, many properties have a repair escrow set aside to make repairs to the home that the FHA has already identified as eligible repairs. All repairs must be completed within 90 days. The home must be in a livable condition before the loan can be approved.
Other features of the program include:
- Upfront mortgage insurance is required on all loans. You can pay for all of it in cash or have it entirely financed into the loan amount.
- FHA will pay all closing costs – up to 3% of purchase price.
However, there are some drawbacks to the program:
- It may be difficult to take advantage of all the features of the program since your loan amount is limited to a specified percentage of the FHA appraisal. So if you decide to utilize the $100 down payment and the repair escrow, you may end up exceeding the maximum loan-to-value (LTV) ratio (the ratio of the loan to the value of the property), depending on the price of property.
- FHA deadlines are tight, so you must be able to move quickly with all required paperwork.
Kentucky Home Buyers
Hardest Hit Fund (HHF) DAP For Kentucky 2019
Available to Christian County only 11/15/2018
- Zero percent interest rate for first-time home buyers.
- A non-repayalbe second mortgage for $10,000.
- Forgiven after five years.
- Home purchase must be located in Christian county.
- No other counties will be eligible.
- New construction properties are not allowed.
- Property has to have been previously occupied.
- Applicants must meet Secondary Market Income and Purchase Price Limit.
Regular DAP for Kentucky Home Buyers in 2019
- Purchase price up to $301,294 with Secondary Market.
- Assistance in the form of a loan up to $6,000 in $100 increments.
- Repayable over a ten-year term at 5.50 percent.
- Available to all KHC first-mortgage loan recipients.
Affordable DAP for Kentucky Home Buyers in 2019
- Purchase price up to $301,294 with Secondary Market.
- Assistance up to $6,000.
- Repayable over a ten-year term at 1.00 percent.
- Borrowers must meet Affordable DAP income limits.
More about down payment and closing costs
- No liquid asset review and no limit on borrower reserves.
- Specific credit underwriting standards may apply to down payment programs.
We just moved here the first of January in 2017 from Ohio to the Louisville, KY area and we found Joel’s website online. He was quick to respond to us and got back the same day on our loan approval. He was very knowledgeable about the local market and kept us up-to date throughout the loan process and was a pleasure to meet at closing. Would recommend his services.
“We were searching online for mortgage companies in Louisville, Ky locally to deal with and found Joel’s website, and it was a godsend. He was great to work with, and delivered on everything he said he would do. I ended up referring my co-worker at UPS, and she was very pleased with his service and rates too. Would definitely vouch for him.” September 2016
“We contacted Joel back in July 2011 to refinance our Mortgage and he was great to work with. We contacted several lenders locally and online, and most where taking almost 60 days to close a refinance, Joel got it done in 23 days start to finish,I would definetly recommmend him. He got us 3.75% with just $900 in closing costs on our FHA Streamline loan.
“Joel is one of the best Mortgage Brokers I have ever worked with in my sixteen years in the real estate and mortgage business.” May 25, 2010
“Joel has always worked very hard to keep his word and to work out seasonable solutions to difficult problems. He is truly an expert in FHA and other type loans.”
September 1, 2010 Nancy Nalley
“I have worked with Joel since 1998. He is a great loan professional.” I refer most of my Louisville, Kentucky area home buyers to him and he always take special care of them.
August 23, 2012 Jon ClarK
“Joel Lobb is a real professional in the lending industry, with many years of experience, he is the one to go to for any mortgage lending needs.” August 22, 2011
RICHARD VOLZ , Residential Sales , Remax Foursquare Realty
“When looking to purchase our new home in 2006, I had the pleasure of meeting Joel Lobb. Not only was he personable and easy to reach, he was extremely knowledgeable in his field and made sure to find us the best rate and a top notch mortgage company. We were able to complete the process in less than 3 weeks with his expertise. I find Joel to have the utmost high integrity and I recommend him to anyone who say’s they are need of mortgage assistance. He is also fantastic and keeping everyone up to date on the latest in the housing industry through his twitter posts. He provided great results for our family and we still communicate to this day!”
August 21, 2010
“We first use Joel on our new home purchase in 2007 in St Matthews, Kentucky area and he was great to work with. We have since refinanced our home with him in 2010 when rates got really low and he has always delivered on what he says. I could not imagine using anyone else.”
Melody Glasscock March 2014
Contacted him about buying a home and he was great to work with. I was moving to Louisville Ky to take a new job and he walked me through the entire process. He explained to me all the different options for FHA, VA, USDA mortgage loans and credit score requirements versus Fannie Mae. Since I was a first time home buyer I needed alot of help and guidance. I would definitely recommend him. Fast to respond and available to answer questions that I or my realtor had after hours.
Anderson Johnson April 2018
We moved from Michigan to Northern Kentucky area and we were really impressed. We got a USDA loan no money down and closed in less than 3.5 weeks. We shopped around online with other lenders but Joel was always first to respond and his rates were just a little better than other lenders. He kept us informed through the process along with our realtor and there was absolutely no surprises like we heard from other co-workers and friends that they experienced in their loan process. We have already referred another co-worker to Joel . He’s AWESOME!