Kentucky First Time Home Buyer Questions to Ask Your Lender?

 KHC's First Mortgage Government Loan Products

Kentucky First Time Home Buyer Questions to Ask Your Lender?

∘ What kind of credit score do I need to qualify for different first time home buyer loans in Kentucky?

Answer. Most lenders will wants a middle credit score of 640 for KY First Time Home Buyers looking to go no money down. The two most used no money down home loans in Kentucky being USDA Rural Housing and KHC with their down payment assistance will want a 640 middle score on their programs.

If you have access to 3.5% down payment, you can go FHA and secure a 30 year fixed rate mortgage with some lenders with a 580 credit score. Even though FHA on paper says they will go down to 500 credit score with at least 10% down payment, you will find it hard to get the loan approved because lenders will create overlays to protect their interest and maintain a good standing with FHA and HUD.

Another popular no money down loan is VA. Most VA lenders will want a 620 middle credit score but like FHA, VA on paper says they will go down to a 500 score, but good luck finding a lender for that scenario.

A lot of times if your scores are in the high 500’s or low 600’s range, we can do a rapid rescore and get your scores improved within 30 days.


Does it costs anything to get pre-approved for a mortgage loan?

Answer: Most lenders will not charge you a fee to get pre-approved, but some lenders may want you to pay for the credit report fee upfront. Typically costs for a tri-merge credit report for a single borrower runs about $50 or less. Maybe higher if more borrowers are included on the loan application.
∘ How long does it take to get approved for a mortgage loan in Kentucky?

Answer: Typically if you have all your income and asset documents together and submit to the lender, they typically can get you a pre-approval through the Automated Underwriting Systems within 24 hours. They will review credit, income and assets and run it through the different AUS (Automated Underwriting Systems) for the template for your loan pre-approval. Fannie Mae uses DU, or Desktop Underwriting, FHA and VA also use DU, and USDA uses a automated system called GUS. GUS stands for the Guaranteed Underwriting System.

If you get an Automated Approval, loan officers will use this for your pre-approval. If you have a bad credit history, high debt to income ratios,  or lack of down payment,  the AUS will sometimes refer the loan to a manual underwrite, which could result in a longer turn time for your loan pre-approval answer

Are there any special programs in Kentucky that help with down payment or no money down loans for KY First Time Home Buyers?

Answer: There are some programs available to KY First Time Home Buyers that offer zero down financing: KHC, USDA, VA, Fannie Mae Home Possible and HomePath, HUD $100 down and City Grants are all available to Kentucky First Time Home buyers if you qualify for them. Ask your loan officer about these programs
∘ When can I lock in my interest rate to protect it from going up when I buy my first home?

Answer: You typically can lock in your mortgage rate and protect it from going up once you have a home picked-out and under contract. You can usually lock in your mortgage rate for free for 90 days, and if you need more time, you can extend the lock in rate for a fee to the lender in case the home buying process is taking a longer time. The longer the term you lock the rate in the future, the higher the costs because the lender is taking a risk on rates in the future.

Interest rates are kinda like gas prices, they change daily, and the general trend is that they have been going up since the Presidential election in November 2016.
∘ How much money do I need to pay to close the loan?

Answer: Depending on which loan program you choose, the outlay to close the loan can vary. Typically you will need to budget for the following to buy a home: Good faith deposit, usually less than $500 which holds the home for you while you close the loan. You get this back at closing; Appraisal fee is required to be paid to lender before closing. Typical costs run around $400-$450 for an appraisal fee; home inspection fees. Even though the lender’s programs don’t require a home inspection, a lot of buyers do get one done. The costs for a home inspection runs around $300-$400. Lastly, termite report. They are very cheap, usually $50 or less, and VA requires one on their loan programs. FHA, KHC, USDAS, Fannie Mae does not require a termite report, but most borrowers get one done.

There are also lender costs for title insurance, title exam, closing fee, and underwriting fees that will be incurred at closing too. You can negotiated the seller to pay for these fees in the contract, or sometimes the lender can pay for this with a lender credit.

The lender has to issue a breakdown of the fees you will incur on your loan pre-approval.
How long is my pre-approval good for on a Kentucky Mortgage Loan?

Answer: Most lenders will honor your loan pre-approval for 60 days. After that, they will have to re-run your credit report and ask for updated pay stubs, bank statements, to make sure your credit quality and income and assets has not changed from the initial loan pre-approval.


How much money do I have to make to qualify for a mortgage loan in Kentucky?

Answer: The general rule for most FHA, VA, KHC, USDA and Fannie MAe loans is that we run your loan application through the Automated Underwriting systems, and it will tell us your max loan qualifying ratios.

There are two ratios that matter when you qualify for a mortgage loan. The front-end ratio, is the new house payment divided by your gross monthly income.  The back-end ratio, is the new house payment added to your current monthly bills on the credit report, to include child support obligations and 401k loans.

Car insurance, cell phone bills, utilities bills does not factor into your qualifying rations.

If the loan gets a refer on the initial desktop underwriting findings, then most programs will default to a front end ratio of 31% and a back-end ratio of 43% for most government agency loans that get a refer. You then take the lowest payment to qualify based on the front-end and back-end ratio.

So for example, let’s say you make $3000 a month and you have $400 in monthly bills you pay on the credit report. What would be your maximum qualifying house payment for a new loan?

Take the $3000 x .43%= $1290 maximum back-end ratio house payment. So take the $1290-$400= $890 max house payment you qualify for on the back-end ratio.

Then take the $3000 x .31%=$930 maximum qualifying house payment on front-end ratio.

So now your know! The max house payment you would qualify would be the $890, because it is the lowest payment of the two ratios.





Joel Lobb
Senior  Loan Officer
text or call my phone: (502) 905-3708
email me at
The view and opinions stated on this website belong solely to the authors, and are intended for informational purposes only. The posted information does not guarantee approval, nor does it comprise full underwriting guidelines. This does not represent being part of a government agency. The views expressed on this post are mine and do not necessarily reflect the view of my employer. Not all products or services mentioned on this site may fit all people. NMLS ID# 57916, ( Mortgage loans only offered in Kentucky.
All loans and lines are subject to credit approval, verification, and collateral evaluation and are originated by lender. Products and interest rates are subject to change without notice. Manufactured and mobile homes are not eligible as collateral.


Louisville Kentucky Affordable Housing

U.S. Federal Housing Budget 1976-2007
U.S. Federal Housing Budget 1976-2007 (Photo credit: Wikipedia)

Report: 92,000 Louisvillians Can’t Afford Housing; $450,000 Raised for Trust to Help Them

Leaders with the Louisville Affordable Housing Trust Fund have secured about $500,000, but the fund’s advocates are urging Mayor Greg Fischer to do more to secure annual funding.

The trust fund is meant to give grants and loans for affordable housing activities, such as new construction, home rehabilitation, payment assistance and emergency repair.

About 92,000 Louisville families cannot afford their rent or mortgage, according to a report assessment compiled by the group. The report noted that that number is more than four times the capacity of the KFC Yum Center.

(Read the report here.)

The city made a one-time contribution of $100,000 to the fund that was matched from the business community, in addition to another $250,000 from Kentucky’s National Mortgage Settlement.

The Metro Council created the trust fund in 2008 with a $10 million goal per year, but the initiative has struggled to gain a financial foothold as the housing crisis spreads. According to a report assessment compiled by the group, around 92,000 Louisville families cannot afford their rent or mortgage, noting that number is more than four times the capacity of the KFC Yum Center.

Fischer said investing in affordable housing is important, but stressed that due to large budget deficits Metro Government will have to find other revenue streams to meet its goals.

“It’s this type of public-private partnership that are making almost everything happen in today’s world,” he said. “There’s just not enough money in the public coffers — and that’s us — and the public is not racing up to me saying, ‘We need to raise taxes for our general fund.’ So until that happens we’re going to need to continue to have partnerships to get this done.

Instead of money from the general fund, Fischer outlined his push for the state to adopt a local option sales tax, which he said could provide the city with necessary revenue to fully fund the initiative.

The blue ribbon tax commission formed by Governor Steve Beshear endorsed that ideathis week, saying local communities should have the ability to fund specific projects.

Mayor’s Proposal Criticized

But leaders with the grassroots organization Citizens of Louisville Organized and United Together, which has been a critic of Fischer’s and heavily involved in the affordable housing movement, argue that the mayor’s funding idea faces several hurdles, namely a change to the state constitution.

CLOUT President Chris Kolb said Fischer misled the group about securing permanent annual funding and is avoiding tough decisions as housing problems deepen, adding that a local option would be a regressive tax on low-income residents.

“Mayor Fischer knows this,” Kolb said. “So it’s a mystery to us why he’s stalling while every year thousands more working people, school children and families in Louisville suffer. That’s not very compassionat, Mr. Mayor. In fact, it’s callousness toward working people, families, seniors and veterans in our community who desperately need a place to call home.”

Among the several housing needs noted in the report, the trust fund’s board said they still lack a source of dedicated and ongoing public funding. The board recommends a one-percent increase to the city’s insurance premium tax as a dedicated public source that would generate an estimated $9.7 million annually,  and warns that without proper funding it will not be able to meet its goals.

Other city officials have said Fischer’s proposal to use the local option sales tax to pay for the trust fund is not a bad idea, but that the city needs to address the housing crisis now.

“It’s not going to be happening out of our general fund dollars, folks. Because they’re depleted.” – Mayor Greg Fischer

“Let’s look at are there ways we can immediately on a local level, without having to go to Frankfort, that you and the administration and we on the Metro Council can fill in the gaps until we get there,” Councilwoman Tina Ward-Pugh, D-9, who sits on the trust fund board, told Fischer. “Because as you said, we don’t have time to waste and we don’t have people to waste. And affordable housing is a desperate need.”

The Problem, at a Glance

Other key findings in the report:

  • 1 in 10 Jefferson County Public School students were homeless in the 2011-12 school year, indicating a 44 percent increase.
  • Louisville Metro needs to develop nearly 58,000 new affordable apartments in order to meet market demand.
  • 37 percent of Louisville’s workforce has a median income below what is needed to afford rent and utilities for a two-bedroom apartment at market rate in Louisville.
  • Homeownership rates in Louisville have declined to the lowest rate in five years, 63 percent.

Fischer says he remains supportive of the trust fund, but that more creative and alternative revenue streams have to be obtained first.

“It’s not going to be happening out of our general fund dollars, folks. Because they’re depleted,” he said. “We have to think of better ways that we’re more efficient but also raise revenue at the same time.”

Joel Lobb (NMLS#57916)
Senior  Loan Officer
502-905-3708 cell
502-813-2795 fax

Key Financial Mortgage Co. (NMLS #1800)*
107 South Hurstbourne Parkway*
Louisville, KY 40222*