MINIMUM CREDIT SCORES REQUIRED FOR KENTUCKY FHA, VA, USDA MORTGAGE LOANS


KENTUCK YFHA/VA/USDA LENDER
FHA 620+ MIN FICO –
聽NO OVERLAYS!!!!

FHA CREDIT SCORES IN KENTUCKY CURRENTLY
路 Minimum credit score
路 620 AUS approved
路 640 manual
路 Non-Credit Qualifying Streamline refinances allowed
路 Gift funds allowed for down payment and closing costs
路 Cash out 80% LTV

VA CREDIT SCORES IN KENTUCKY CURRENTLY
路 Minimum credit score
路 620 AUS approved
路 640 manual/640 High BA
路 Cash-out up to 90% LTV
路 Foreclosure/Short Sale/Bankruptcy <2 years allowed with AUS Approval

USDA CREDIT SCORES IN KENTUCKY CURRENTLY
路 Minimum credit score: 640
路 100% maximum LTV
路 Manual Underwrites
路 No maximum loan amount
路 USDA Streamlined, Streamlined-Assist, and Rate/Term refinances allowed

Louisville Kentucky Mortgage Lender for FHA, VA, KHC, USDA and Rural Housing  Kentucky Mortgage: WHAT IS THE MINIMUM CREDIT SCORE FOR A KENTUCKY FHA  MORTGAGE HOME LOAN APPROVAL?

What are the Kentucky FHA Credit Score Requirements for 2020 Mortgage Loan Approvals?


If you are looking to refinance your mortgage loan, you鈥檒l want to be prepared to meet your lender鈥檚 criteria and educate yourself about your FICO庐 Scores as they are the credit scores most commonly used in the mortgage refinancing process.

As there are different versions of the FICO Score, it鈥檚 important that you focus on the FICO Score versions used in mortgage lending. It鈥檚 highly likely that the following FICO Score versions will be pulled on all mortgage loan applicants and from all three credit bureaus:

FICO Score 5 based on Equifax data
FICO Score 2 based on Experian data
FICO Score 4 based on TransUnion data
You can access the scores along with the top reasons why the scores are not higher at myFICO. Focusing your credit actions on these top reasons could help you to understand your scores and gain access to more attractive rates.

You can now focus on those mortgage-related versions in your FICO Score explanation report with confidence knowing they are the same versions your mortgage lender will likely access in the refinance loan review process.

1. Based on $300,000 mortgage loan with fixed interest rate of 4.5% and 30-yr term

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Louisville Kentucky Mortgage Loans

via What are the Kentucky FHA Credit Score Requirements for 2020 Mortgage Loan Approvals?

If you are looking to refinance your mortgage loan, you鈥檒l want to be prepared to meet your lender鈥檚 criteria and educate yourself about your FICO庐 Scores as they are the credit scores most commonly used in the mortgage refinancing process.

As there are different versions of the FICO Score, it鈥檚 important that you focus on the FICO Score versions used in mortgage lending. It鈥檚 highly likely that the following FICO Score versions will be pulled on all mortgage loan applicants聽and from all three credit bureaus:

FICO Score 5 based on Equifax data
FICO Score 2 based on Experian data
FICO Score 4 based on TransUnion data
You can access the scores along with the top reasons why the scores are not higher at myFICO. Focusing your credit actions on these top reasons could help you鈥

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Kentucky Mortgage Loan Info in regards to Credit Score, Down payments and debt to income ratios.


Loan Info in regards to Credit Score, Down payments and debt to income ratios.

 

Here are a few Kentucky mortgage misconceptions in regards to qualifying for a Mortgage loan in 2020

Credit Score Myth For Kentucky Mortgage Loans

53% of people surveyed believe they need a minimum credit score of 650 to qualify for a mortgage.

 

Credit Score Facts For Kentucky Mortgage Loans

There are many loan programs available for credit scores as low as 580 for government backed loans like FHA, VA, and USDA.

Down Payment Myths for Kentucky Mortgage Loans

The minimum down payment required is 3% (or even 20%).

 

Down Payment Fact

Many loan programs, including conventional loans, are available with down payments as low as 3%. USDA, VA, and Kentucky Housing Corp with their down payment assistance offer zero down payment options.聽

Debt-to-Income Myths for Kentucky Mortgage Loans

Most people think 40 to 45%% (percent of your monthly income that goes to debt payments) is the max.

 

Debt-to-Income Fact

Lenders may accept higher ratios depending on things like credit score and down payment amount. FHA and VA will allow over 50% debt to income ratios on the back-end, but Conventional and USDA restrict their back-end debt to income ratios to 45% or less.

 

Think back to the last time you financed a purchase 鈥 be it a home, automobile, or what have you鈥 You may remember having heard the term 鈥debt-to-income ratio.鈥 Today I want to spend some time going over exactly what this ratio is, and to also touch on how it can effect your personal finances.

What is your debt-to-income ratio?

Commonly referred to as your 鈥淒TI,鈥 your debt-to-income ratio is a personal finance benchmark that relates your monthly debt payments to your monthly gross income.
As an example鈥 Let鈥檚 say that your gross monthly salary is $5,000 and you are spending $2,800 of it toward monthly debt payments. In that case, your DTI would be an unhealthy 56%.
This version of your DTI is sometimes referred to as your 鈥渂ack-end鈥 DTI. This is often broken down further to give a聽front-end debt-to-income ratio, which is a component of your back-end DTI.

How to calculate your front-end DTI for a Kentucky Mortgage Loan Approval

Your front-end DTI is calculated by dividing your聽monthly housing costs聽by your monthly gross income. Front-end DTI for renters is simply the amount paid in rent, whereas for homeowners it is the sum of mortgage principal, interest, property taxes, and home insurance (i.e., your PITI) divided by gross monthly income.
From above, if that $2,800 in debt payments is attributable to $1,500 in housing costs and $1,300 in non-housing costs, then your front-end DTI is $1,500/$5,000 = 30% (and your back-end ratio is still 56%, as calculated above).

How lenders use your DTI for a Kentucky Mortgage Loan Approval

Kentucky Mortgage lenders typically use DTI (along with other variables) to determine whether or not you qualify for a loan, and to help determine your聽Kentucky聽mortgage rate. A high front-end DTI raises red flags with lenders because it is commonly associated with borrower default. In fact, reducing front-end DTI to reduce the risk of homeowner default was one of the main objectives of the loan modification programs introduced by the government in 2009.
There are specific limits for DTI that are used as cut-off points when evaluating borrowers. Current DTI limits for conventional conforming mortgage loans are typically 28% on the front end and 36% on the back end, though these limits are slightly higher for government subsidized Kentucky FHA loans.
While there are certainly other factors to consider
Acceptable Ratios
Housing Debt to Income
Conventional 28% 41-50%
FHA 29% 41-56.5%
VA
USDA/RHS
KHC聽
29%
29%
40%
41-65%
41-45%
50%
Higher ratios may be accepted with compensating factors: low loan value, large cash reserves after closing, high credit scores, etc,

 

The bottom line:聽When it comes to home loans, one size definitely does not fit all, and it can be hard to determine what’s best for your situation on your own. Speaking to a mortgage professional about your unique circumstances is usually your best bet.

Ready to get started? Contact us at 502-905-3708.

 

 

 

Credit Scores for Kentucky VA, FHA, USDA , Fannie Mae Home Loans


What is the minimum credit score I need to qualify for a Kentucky FHA, VA, USDA and KHC Conventional mortgage loan in 2020?

 

Credit Score Requirements for Mortgage Loan

Kentucky First Time Home Buyer Loan Programs

Kentucky First Time Home Buyer Loan


Kentucky First Time Home Buyer Loan Programs

There are 4 basic things that a Kentucky First Time Homebuyers in 2021聽 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 its 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:


1. Income

You need income. You need to be able to afford the home. 聽But what is acceptable income? Let鈥檚 just say that there are two ratios mortgage underwriters look at to qualify you for mortgage payment:

First Ratio聽鈥 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 is factored into your ratio. There are a lot of exceptions to how high you can go, but let鈥檚 just say that if your ratio is 33% or less, generally, across the board, you鈥檙e safe.

Second Ratio-聽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鈥.basically any consistent outgoing debt that you鈥檙e paying on. Again, if you鈥檙e paying less than 45% of your gross monthly income to all of the debts, plus your proposed housing payment, then鈥︹enerally, you鈥檙e 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鈥檚 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鈥檚 not acceptable? Unverifiable cash income, short term income and income that鈥檚 not likely to continue like unemployment income, student loan aid, 聽VA education benefits, or short term disability are not allowed for a 聽mortgage loan.

2. Assets

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 require 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鈥檙e 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 聽down payment requirements for investment homes made in Kentucky.

聽3. Credit


  • Kentucky FHA Mortgage loan credit score requirements:
  • The minimum credit score is 500 for聽Kentucky FHA loans.聽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,聽 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聽VA Mortgage聽 loans聽requirements :聽
  • 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聽several Kentucky VA lenders聽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聽rapid rescore聽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聽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 between .5% and 3.3% of the loan amount unless you fall within an exception for disabled vets or military widows or widowers.
  • Kentucky聽USDA Mortgage credit score requirements:聽
  • 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.聽 Two or more eligible tradelines are necessary to validate an applicant鈥檚 credit report score.聽 Eligible tradelines consist of credit accounts (revolving, installment etc.) with at least 12 months of repayment history reported on the credit report.聽 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聽Kentucky USDA loans require no down payment.聽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
These are considered 鈥渃onventional loans鈥 that can be often be obtained with a 3% to 5% down payment. Of course, there are higher standards for conventional home financing. The most common minimum credit score requirement to get approved today is a 620 FICO. This type of score is typical for people that have high credit card balances or a few delinquent payments in their past. The general consensus on聽Freddie Mac and Fannie Mae loans in Kentucky聽is that a 620 score is the entry-point to qualify, but you will need thorough documentation of income with credit scores in the 620 to 640 range. You will have a better shot to be approved for a mortgage-backed by Fannie or Freddie with a 680-credit score and less strenuous underwriting.
  • 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 聽FHA Mortgage Loans currently requires 3 years removal from a foreclosure or short sale 聽and 2 years on a bankruptcy with good re-established credit.

Kentucky Fannie Mae Mortgage Loans currently requires 4 years removal from bankruptcy, and 7 years on a foreclosure.

Kentucky VA Mortgage Loans currently requires 2 years of removal from bankruptcy or foreclosure with good re established credit.

Kentucky USDA loans require 3 years of removal from bankruptcy and foreclosure with good reestablished credit.

4. Appraisal

Generally, there鈥檚 nothing you can do to affect this. The bottom line here is鈥..鈥 is the value of the house at least the value of what you鈥檙e paying for it?鈥 If not, then not good things start to happen. Generally, you鈥檒l find fewer 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鈥.Talk to your loan officer.

For each one of these boxes, there are over 1,000 things that can affect if a borrower has reached the threshold to complete that box. So..talk to a great loan officer. There are so many loan officers that don鈥檛 know what they鈥檙e doing. But, conversely, there鈥檚 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!

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