Conventional loans follow guidelines set by government-sponsored enterprises Fannie Mae and Freddie Mac.
FHA loans are insured by the Federal Housing Administration.
VA loans are guaranteed by the U.S. Department of Veterans Affairs.
USDA loans are backed by the U.S. Department of Agriculture to finance homes in USDA-eligible rural area
When it comes to get a mortgage loan in Kentucky, lenders will look at your credit, income and work history, and assets (money in the bank, 401k etc)
Debt to Income Ratio For Mortgage Loans.
DTI ratio. Lenders divide your total debt by your pretax income to determine your DTI ratio. It’s an important measure used to determine whether you can repay the loan.
Most mortgages loans in the Secondary Market are ran through an Automated Underwriting System called Desktop Underwriting for Conventional, FHA, VA mortgage loans and GUS for USDA loans for a pre-approval (GUS, DU, DO LP) and it will state your max house payment in relation to your gross monthly income vs. monthly payments on the credit report. Car insurance, utilities bills, cell phone, internet, net flix etc, is not part of the debt to income requirements.
Most ratios have a front end and back end requirement, with 40% to 45% on the high-end and 55% on the backend ratio if you get a underwriting recommendation of Approved Eligible.
Lower the credit score, reserves, job history, the lower the debt to income ratio will need to be.
If you get a Refer/Eligible automated underwriting , recommendation which is called a manual underwrite , the debt to income ratios will need to be around 29-31% on the front end ratio (house payment with piti) and the back end ratio will need to be no more than 43% (new house payment plus monthly payments on the credit report, and child support if applicable).
- Kentucky FHA Mortgage loan credit score requirements:
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- 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 :
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- 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 between .5% and 3.3% of the loan amount unless you fall within an exception for disabled vets or military widows or widowers.
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- Kentucky USDA Mortgage credit score requirements:
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- 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.
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- 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%.
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- Kentucky Fannie Mae and Freddie Mac Conventional Credit Score Requirements
These are considered “conventional loans’ 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
Freddie Mac and Fannie Mae loans in Kentucky 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 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 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.
The most common minimum credit score requirement to get approved today is a 620 FICO
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’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.
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| Conventional |
You want to make a 3% down payment and have a credit score of at least 620 |
| FHA |
You have a credit score of 580 and can make a 3.5% down payment
You have a credit score of 500 and can make a 10% down payment |
| VA |
You’re an eligible active-duty service member, veteran or eligible spouse
You don’t have money for a down payment
You don’t want to pay mortgage insurance
You want the flexibility of a program with no minimum credit score |
| USDA |
You want to buy a home in a rural area with no down payment
You earn a low-to-moderate income |
THINGS YOU SHOULD KNOW
A quick guide to loan types
- 30-year fixed-rate loans allow you to pay a loan over a 30-year payment schedule
- 15-year fixed-rate loans allow you to pay a loan off in 15 years
- Conventional loans follow guidelines set by government-sponsored enterprises Fannie Mae and Freddie Mac.
- FHA loans are insured by the Federal Housing Administration.
- VA loans are guaranteed by the U.S. Department of Veterans Affairs.
- USDA loans are backed by the U.S. Department of Agriculture to finance homes in USDA-eligible rural area
Joel Lobb
Mortgage Loan OfficerIndividual NMLS ID #57916
American Mortgage Solutions, Inc.10602 Timberwood Circle Louisville, KY 40223Company NMLS ID #1364
Text/call: 502-905-3708
email: kentuckyloan@gmail.com
http://www.mylouisvillekentuckymortgage.com/
Text/call 502-905-3708 kentuckyloan@gmail.com
Disclaimer: No statement on this site is a commitment to make a loan. Loans are subject to borrower qualifications, including income, property evaluation, sufficient equity in the home to meet Loan-to-Value requirements, and final credit approval. Approvals are subject to underwriting guidelines, interest rates, and program guidelines and are subject to change without notice based on applicant’s eligibility and market conditions. Refinancing an existing loan may result in total finance charges being higher over the life of a loan. Reduction in payments may reflect a longer loan term. Terms of any loan may be subject to payment of points and fees by the applicant Equal Opportunity Lender. NMLS#57916 http://www.nmlsconsumeraccess.org/— Some products and services may not be available in all states. Credit and collateral are subject to approval. Terms and conditions apply. This is not a commitment to lend. Programs, rates, terms and conditions are subject to change without notice. The content in this marketing advertisement has not been approved, reviewed, sponsored or endorsed by any department or government agency. Rates are subject to change and are subject to borrower(s) qualification.
Kentucky First-Time Homebuyer Loan Programs for FHA, VA, KHC and USDA Mortgage Loans in Kentucky 