A Kentucky Mortgage Loan Officer that has closed over 600 home loans specializing in Kentucky First Time Homebuyer Loans to include the following FHA, VA, USDA, Rural Housing, Down Payment Assistance Loan from Kentucky Housing Corp or KHC and the Fannie Mae Home Path HUD $100 Down Mortgage Program in Kentucky. Call/Text 502-905-3708 with your mortgage questions or email kentuckyloan@gmail.com I try to respond to all requests within minutes during regular business hours. NMLS# 57916 Joel Lobb Loan Originator, American Mortgage Solutions NMLS ID. 1364 Equal Housing Lender
Here’s a summary of the Debt-to-Income (DTI) ratio requirements for Kentucky FHA, VA, USDA, and conventional mortgage loans, along with examples for each:
Kentucky FHA Loan DTI Requirements:
Front-End DTI Ratio: Up to 31%
Back-End DTI Ratio: Up to 43%
Example: Monthly gross income of $5,000, the FHA loan allows a maximum monthly mortgage payment (including principal, interest, taxes, and insurance) of $2,150 (43% of $5,000).
Kentucky VA Loan DTI Requirements:
Generally flexible with DTI ratios, but a common guideline is:
Back-End DTI Ratio: Up to 41%
Example: Monthly gross income of $6,000, the VA loan allows a maximum monthly debt payment (including mortgage, car loans, credit cards, etc.) of $2,460 (41% of $6,000).
Kentucky USDA Loan DTI Requirements:
Front-End DTI Ratio: Up to 29%
Back-End DTI Ratio: Up to 41%
Example: Monthly gross income of $4,000, the USDA loan allows a maximum monthly mortgage payment (including taxes and insurance) of $1,160 (29% of $4,000).
Kentucky Conventional Loan DTI Requirements:
Front-End DTI Ratio: Up to 28%
Back-End DTI Ratio: Up to 36-45% (may vary based on the lender and loan program)
Example: Monthly gross income of $7,000, a conventional loan may allow a maximum monthly debt payment (including mortgage, car loans, credit cards, etc.) of $2,520 to $3,150 (36-45% of $7,000).
How to calculate your front-end DTI for a Kentucky Mortgage Loan Approval
Your front-end DTI is calculated by dividing your monthly housing costs 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 Kentucky 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 when determining our eligibility for financing (e.g., credit score, etc.), your DTI is an important determinant that you should be aware of. By working to improve it, you can make yourself a better credit risk, and thus get more favorable treatment from lenders.
NMLS 57916 | Company NMLS #1364/MB73346135166/MBR1574
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, (www.nmlsconsumeraccess.org).
To determine if you can get approved for a Kentucky mortgage, several factors need to be considered, including your credit score, income, employment history, debt-to-income ratio, and down payment. Here’s a general overview of what lenders typically look for:
Credit Scores : Most Kentucky Mortgage lenders prefer a credit score of 620 or higher for conventional loans. FHA loans may accept lower credit scores, starting around 500, but a higher score (typically 580 or above) can improve your chances and offer better terms.
Here are the general credit score requirements for FHA, VA, USDA, and Fannie Mae mortgage loans in Kentucky:
Loan Program
Minimum Credit Score Requirement
Additional Notes
FHA Loan
500 to 580
A credit score of 500 to 579 requires a 10% down payment; a score of 580 or higher requires a 3.5% down payment.
VA Loan
No minimum score
VA lenders are more flexible with credit scores, but most lenders prefer a score of 620 or higher.
USDA Loan
no minimum score
USDA lenders typically require a minimum credit score of 640 or higher.
Fannie Mae Loan
620 or higher
Fannie Mae loans generally require a credit score of 620 or higher.
Income and Employment History: Lenders evaluate your income stability and 2 year employment history to ensure you have a reliable source of income to make mortgage payments. Consistent employment and sufficient income are crucial.
Here’s a chart outlining the employment and work history requirements for Kentucky FHA, VA, USDA, and Fannie Mae mortgage loans:
Loan Program
Employment History
Work History
Guidelines
Kentucky FHA Loan
2 years of consistent employment with steady income
2 years of stable employment, including gaps explained
Employment can include salaried, self-employed, or contract positions. Gaps in employment may require explanations and documentation.
Kentucky VA Loan
Stable income with continuous employment
Stable work history with no significant gaps
VA loans focus on the stability of income rather than specific employment duration. Military service may fulfill employment requirements.
Kentucky USDA Loan
2 years of stable employment with reliable income
2 years of continuous employment, including explanations for gaps
USDA loans prioritize consistent income and employment history. Gaps may require explanations and additional documentation.
Fannie Mae Loan
2 years of employment with steady income and job stability
2 years of stable employment, including explanations for gaps
Fannie Mae loans emphasize a stable work history with a focus on income stability. Gaps in employment may need explanations and additional documentation.
These guidelines provide an overview of the employment and work history requirements for FHA, VA, USDA, and Fannie Mae mortgage loans. Lenders may have specific criteria and may consider factors such as income stability, type of employment, gaps in employment, and documentation of income sources. Borrowers should consult with a mortgage professional or lender to understand the detailed employment and work history requirements for their loan application.
Debt-to-Income (DTI) Ratio: This ratio compares your monthly debt payments to your gross monthly income. Lenders typically prefer a DTI ratio of 31% to 45% on front end ratio and up to 55% on the back-end ratio, although some may accept higher ratios with compensating factors.
Here’s a chart comparing the debt ratio requirements forKentucky FHA, VA, USDA, and Fannie Mae mortgage loans:
Loan Program
Front-End DTI Ratio
Back-End DTI Ratio
Guidelines
Kentucky FHA Loan
Up to 45%
Up to 56.99%
Front-end DTI includes housing-related expenses (mortgage, taxes, insurance). Back-end DTI includes all monthly debts.
Kentucky VA Loan
41% or higher
41% or higher
VA guidelines do not have specific DTI ratio limits but focus on residual income after accounting for housing and debt costs.
Kentucky USDA Loan
Up to 33%
Up to 45%
Front-end DTI includes housing expenses. Back-end DTI includes all monthly debts.
Kentucky Fannie Mae Loan
Up to 40%
Up to 50%
Front-end DTI includes housing expenses. Back-end DTI includes all monthly debts.
Down Payment: The amount of your down payment can also impact your approval chances. A larger down payment can lower your loan-to-value ratio (LTV) and reduce the lender’s risk.
Here’s a down payment chart for Kentucky FHA, VA, USDA, and Fannie Mae mortgage loans:
Loan Program
Minimum Down Payment
Down Payment Source
Kentucky FHA Loan
3.5% of purchase price
Can be from personal savings or gift funds
Kentucky VA Loan
0% (No down payment)
N/A (VA loans offer 100% financing)
Kentucky USDA Loan
0% (No down payment)
N/A (USDA loans offer 100% financing)
Kentucky Fannie Mae Loan
3% to 5% of purchase price
Can be from personal savings or gift funds
Other Factors: Lenders may also consider your savings and assets, existing debts, credit history, and the type of mortgage you’re applying for (e.g., FHA, VA, USDA, conventional).
To get a more accurate assessment of your mortgage approval chances, it’s best to consult with a mortgage lender or broker. They can review your financial situation, credit history, and specific loan requirements to determine your eligibility and help you navigate the mortgage approval process.
Joel Lobb Mortgage Loan Officer
American Mortgage Solutions, Inc. 10602 Timberwood Circle Louisville, KY 40223 Company NMLS ID #1364
NMLS 57916 | Company NMLS #1364/MB73346135166/MBR1574
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, (www.nmlsconsumeraccess.org).
Are you a first-time homebuyer in Kentucky looking to navigate the world of home loans? Understanding the various types of home loan programs available to you can help you make informed decisions about financing your dream home. In this article, we’ll explore different home loan programs, including their credit score requirements, down payment requirements, bankruptcy considerations, debt-to-income ratio requirements, loan limits, and income limits.
Kentucky FHA Loans
Kentucky FHA Credit Score Requirements:
Minimum credit score typically ranges from 500 to 580, depending on the lender.
Kentucky FHA Down Payment Requirements:
A down payment as low as 3.5% of the purchase price is required. 10% down payment required for scores below 580
Kentucky FHA Bankruptcy Requirements:
Chapter 7 bankruptcy: Generally, two years must have passed since the discharge date.
Chapter 13 bankruptcy: Typically, one year of on-time payments and approval from the bankruptcy court are required.
Kentucky FHA Debt-to-Income Ratio Requirements:
Front-end ratio (housing expenses): Up to 31% of gross monthly income.
Back-end ratio (total monthly debt payments): Up to 43% of gross monthly income.
Up to 45% and 56% respectively for borrowers with higher credit scores, down payment and reserves along with good residual income
Kentucky FHA Loan Limits and Income Limits:
Loan limits vary by county and property type. Currently $498,257 in all Kentucky Counties
Income limits—-No income limits just loan limits.
Kentucky VA Loans
Kentucky VA Credit Score Requirements:
While there is no official minimum credit score requirement, most lenders prefer a score of 580 to 620 or higher.
Kentucky VA Down Payment Requirements:
No down payment is required for eligible veterans, active-duty service members, and certain spouses.
Kentucky VA Bankruptcy Requirements:
Chapter 7 bankruptcy: Generally, two years must have passed since the discharge date.
Chapter 13 bankruptcy: Typically, one year of on-time payments and approval from the bankruptcy court are required.
Kentucky VA Debt-to-Income Ratio Requirements:
Flexible debt-to-income ratio requirements, with consideration given to residual income.
Kentucky VA Loan Limits and Income Limits:
VA loan limits do not apply, but lenders may have their own limits.
No specific income limits, but income must be sufficient to cover monthly expenses.
Kentucky USDA Loans
Kentucky USDA Credit Score Requirements:
No minimum score, but credit score typically ranges from 580 and above, depending on the lender.
Kentucky USDA Down Payment Requirements:
No down payment is required for eligible properties in designated rural areas.
Kentucky USDA Bankruptcy Requirements:
Chapter 7 bankruptcy: Generally, three years must have passed since the discharge date.
Chapter 13 bankruptcy: Typically, one year of on-time payments and approval from the bankruptcy court are required.
Kentucky USDA Debt-to-Income Ratio Requirements:
Maximum total debt-to-income ratio is usually 45%.
Kentucky USDA Loan Limits and Income Limits:
Loan limits vary by county.
Income limits are based on area median income and household size.
Kentucky Conventional Loans
Kentucky Conventional Credit Score Requirements:
Minimum credit score typically ranges from 620 to 680, depending on the lender and loan type.
Kentucky Conventional Down Payment Requirements:
Down payment requirements can range from 3% to 20% or more, depending on the loan type and borrower qualifications.
Kentucky Conventional Bankruptcy Requirements:
Chapter 7 bankruptcy: Generally, four years must have passed since the discharge date.
Chapter 13 bankruptcy: Typically, two years of on-time payments and approval from the bankruptcy court are required.
Debt-to-Income Ratio Requirements:
Maximum total debt-to-income ratio is typically 43% to 50%, depending on the loan type and borrower qualifications.
Loan Limits and Income Limits:
Loan limits vary by property type and location.
No specific income limits, but income must be sufficient to qualify for the loan amount.
Conclusion
As a first-time homebuyer in Kentucky, you have several home loan programs to choose from, each with its own requirements and benefits. Whether you opt for an FHA loan, VA loan, USDA loan, or conventional loan, it’s essential to understand the credit score requirements, down payment requirements, bankruptcy considerations, debt-to-income ratio requirements, loan limits, and income limits associated with each program. Working with a knowledgeable lender can help you navigate the process and find the best loan program for your financial situation and homeownership goals.
Joel Lobb Mortgage Loan Officer
American Mortgage Solutions, Inc. 10602 Timberwood Circle Louisville, KY 40223 Company NMLS ID #1364
NMLS 57916 | Company NMLS #1364/MB73346135166/MBR1574The 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, (www.nmlsconsumeraccess.org).
If you’re planning to buy a home in Kentucky in 2024, here are some essential steps to consider:
1. Focus on improving your credit score to qualify for a mortgage with a low interest rate.
2. Manage your debt-to-income ratio by repaying existing debt, increasing your income, or both.
3. Ensure timely payments on all accounts to maintain a good credit score.
4. Get pre-approved for a mortgage before searching for a home to know your affordability.
5. Keep credit card utilization below 30% and seek down payment assistance programs if needed.
Here are action steps you can take right now to buy a home in Kentucky in 2024
1. Focus on your credit score
FICO credit scores are among the most frequently used credit scores, and range from 350-800 (the higher, the better). A consumer with a credit score of 750 or higher is considered to have excellent credit, while a consumer with a credit score below 620 is considered to have poor credit.
To qualify for a mortgage and get a low mortgage rate, your credit score matters.
Each credit bureau collects information on your credit history and develops a credit score that lenders use to assess your riskiness as a borrower. If you find an error, you should report it to the credit bureau immediately so that it can be corrected.
2. Manage your debt-to-income ratio
Many lenders evaluate your debt-to-income ratio when making credit decisions, which could impact the interest rate you receive.
A debt-to-income ratio is your monthly debt payments as a percentage of your monthly income. Lenders focus on this ratio to determine whether you have enough excess cash to cover your living expenses plus your debt obligations.
Since a debt-to-income ratio has two components (debt and income), the best way to lower your debt-to-income ratio is to:
repay existing debt;
earn more income; or
do both
3. Pay attention to your payments
Simply put, lenders want to lend to financially responsible borrowers.
Your payment history is one of the largest components of your credit score. To ensure on-time payments, set up autopay for all your accounts so the funds are directly debited each month.
FICO scores are weighted more heavily by recent payments so your future matters more than your past.
In particular, make sure to:
Pay off the balance if you have a delinquent payment
Don’t skip any payments
Make all payments on time
4. Get pre-approved for a mortgage before you start shopping for a home loan.
Too many people find their home and then get a mortgage.
Switch it.
Get pre-approved with a lender first. Then, you’ll know how much home you can afford.
To get pre-approved, lenders will look at your income, assets, credit profile and employment, among other documents.
5. Keep credit utilization low on your credit cards
Lenders also evaluate your credit card utilization, or your monthly credit card spending as a percentage of your credit limit.
Ideally, your credit utilization should be less than 30%. If you can keep it less than 10%, even better.
For example, if you have a $10,000 credit limit on your credit card and spent $3,000 this month, your credit utilization is 30%.
Here are some ways to manage your credit card utilization:
set up automatic balance alerts to monitor credit utilization
ask your lender to raise your credit limit (this may involve a hard credit pull so check with your lender first)
pay off your balance multiple times a month to reduce your credit utilization
6. Look for down payment assistance in Kentucky
There are various types of down payment assistance, even if you have student loans.
Here are a few:
FHA loans – federal loan through the Federal Housing Authority
USDA loans – zero down mortgages for rural and suburban homeowners
VA loans – if military service
Kentucky Housing Down Payment Assistance of $10,000
There are federal, state and local assistance programs as well so be on the look out.
If you want a personalized answer for your unique situation call, text, or email me or visit my website below:
Joel Lobb Mortgage Loan Officer Individual NMLS ID #57916
American Mortgage Solutions, Inc. 10602 Timberwood Circle Louisville, KY 40223 Company NMLS ID #1364
Top 4 reasons why mortgage applications are denied
1. Debt-to-income ratio
Whether you go through a traditional bank or a mortgage lender, your debt-to-income ratio is one of the most important elements of your mortgage application. This ratio is a simple measure of how much debt you carry expressed as a percentage of the amount of money you earn before taxes and deductions each month.
To figure out your debt-to-income ratio, add up all of your monthly debts (including student loans, car payments, credit card bills, and other loans with fixed payments, but not including utilities bills and other variable monthly expenses) and divide it by your gross—or pre-tax—monthly earnings. Most mortgage lenders are looking for a debt-to-income ratio that doesn’t exceed 45 to 50 %, and that includes the mortgage payment you are applying to take on.
If your debt-to-income ratio is too high to consider taking out a mortgage at the moment, that’s a good sign that it’s time to focus on paying down debt before doing any serious house-hunting.”
There are some exceptions to the 45% to 50% rule, but in general, this is the number you want to keep in mind when you do your initial debt-to-income ratio calculations. Not only does this tell you whether you are carrying more debt than most lenders are willing to work with, it will also tell you how much mortgage you can realistically hope to borrow. By paying off any one (or more) of your debts, you’d free up more money to go toward a potential mortgage.
If your debt-to-income ratio is too high to consider taking out a mortgage at the moment, that’s a good sign that it’s time to focus on paying down debt before doing any serious house-hunting.
2. Credit score
This is another biggie. As you probably know, credit scores are used by lending institutions to assess each individual’s creditworthiness based on their financial history, including payment history (on-time versus late or missed payments), total amount of debt, length of credit history, and other factors. Credit scores, which are measured slightly differently across three major reporting agencies, range from 300 to 850 and are considered to be an at-a-glance measure of the trustworthiness of individual borrowers.
In general, credit scores below 620 are typically considered subprime and may make it more challenging to get a mortgage, especially with the most competitive interest rates. (If your credit score is in the subprime category, you aren’t alone: as of 2015, a little over half of American consumers—56%—were found to have subprime scores.)
Those with lower credit scores may still be able to get a mortgage—it will likely just require more shopping around (and having more cash on hand for a down payment is helpful, too). While Fannie Mae and Freddie Mac each require a minimum credit score of 620, the FHA has more forgiving parameters, making FHA loans a better bet if you are in credit-repairing mode.
FHA loans were created in the 1930s to make homeownership more widely accessible, and their guidelines stipulate that credit scores as low as 500 may be accepted with a 10% down payment. Credit scores of 580 or above, meanwhile, may be eligible with as little as 3.5% down. Remember, though, that you will need to identify lenders that don’t apply additional credit score overlays on top of these minimum requirements in order to actually score a mortgage with the lowest required scores.
Keep in mind, also, that anytime you apply for a new loan, you’ll typically accrue a “hard inquiry” on your credit report as your potential lender checks out your credit history. Too many hard inquiries can negatively impact your credit score, so if you know you will be applying for a mortgage soon—or if you’ve already been pre-approved for a mortgage—you’ll want to avoid applying for any other loans (like credit cards or car loans) until after you’ve secured your mortgage.
3. Employment history
Your employment history is another major factor when it comes to your mortgage application. In general, most lenders want to see at least two years of consistent of employment history at the time you apply for your mortgage.
Requirements may differ depending on whether you are paid a salary versus hourly wages, work part-time versus full-time, and whether you are employed or self-employed. Note, too, that different lenders may handle income from things like a second job and overtime differently; these sources of income may not always be allowed to count toward your overall income on your mortgage application. Given these variables, you should be sure to tell potential lenders the details of your employment situation at the outset to make sure you don’t hit any unforeseen bumps in the road.
If, after approaching a handful of lenders, you find that your employment history is a little too spotty, now may be the time to focus on remaining consistently employed for a year or two before applying for a mortgage.
4. Appraisal issues
Occasionally, a mortgage application may be denied because of issues with the property itself and how it is valued rather than your own personal information.
Remember that the sale price of a home may not always correspond with the appraised value of the home. The appraised value is based on local comps, or other comparable houses that have recently sold in the same area, and other factors. Because the house you are buying will be used as collateral against your home loan, lenders use appraisals to confirm that the mortgage amount you are requesting is in line with the actual value of the house. If the appraised value is significantly lower than the agreed-upon sale price, you’ll either need the seller to come down off their price, or you would need to pay the difference out of pocket.
Note that especially unique properties—think geodesic domes and other, less striking examples—may come up against appraisal issues because of a lack of relevant comps.
Have Questions or Need Expert Advice? Text, email, or call me below:
Joel Lobb Mortgage Loan Officer Individual NMLS ID #57916
American Mortgage Solutions, Inc. 10602 Timberwood Circle Louisville, KY 40223 Company NMLS ID #1364
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, (www.nmlsconsumeraccess.org).
Kentucky First-Time Homebuyer Loan Programs for FHA, VA, KHC and USDA Mortgage Loans in Kentucky 