Lenders continue to lower FICO requirements for new homebuyers

Fico Score Requirements for Mortgage Lenders in Kentucky


The average agency FICO score for banks is high at 745, compared to 713 at nonbank lending institutions.  Both show FICO requirements are on the way down, but it’s more pronounced at the nonbanks. Here’s why.

Source: Lenders continue to lower FICO requirements for new homebuyers


The nation’s major banks are continuing to walk away from FHA-backed mortgages, according to the Urban Institute’s Housing Finance Policy Center February Chartbook.

And not only are nonbanks stepping in to take over the space, overall, they are continuing to ease access to credit.

“Bank and nonbank FICO scores reveal that nonbanks brought the Agency median FICO down four points to 726 between November 2018 and January 2019,” the Urban Institute said in an email.

The average agency FICO score for banks is high at 745, compared to 713 at nonbank lending institutions.  Both show FICO requirements on the way down, but it’s more pronounced at the nonbanks. Why?

Nonbanks are also more accommodating for increasing debt-to-income ratios, even as mortgage rates overall inch upward, driving up monthly mortgage payments for borrowers.

“The median LTV for nonbank and bank originations are comparable, while the median DTIs for nonbank loans are higher,” the report states.




What factors influence how long it takes to repair your credit?

When a new client comes into our office to first go over their credit repair plan, they always ask the question, “How long will it take to bring my score back up?”

Of course, it’s an important thing to know, but the answer has a lot to do with a multitude of factors. The good news is that you can control most of these factors by employing a responsible and effective credit repair with Blue Water Credit. Together, we can make sure that we bring your FICO to top form as quickly as possible!

Before we dig into these factors, let’s take a look at what we do know for sure. According to Vantage Score, here are some general timelines for how long it typically takes to improve your credit score after certain events or items report. Of course, individual cases may vary.


Applying for new credit

Average recovery time: 3 months

Negative impact on your credit score: Light


Closing an existing account

Average recovery time: 3 months

Negative impact on your credit score: Light


Maxing out your credit card

Average recovery time: 3 months

Negative impact on your credit score: Medium


Missing payments/defaulting

Average recovery time: 18 months

Negative impact on your credit score: Heavy


Chapter 7 or 11 Bankruptcy

Average recovery time: 6-7 years

Negative impact on your credit score: Heavy


Here are some factors that help determine the timeframe for credit repair:


  1. The severity of the damage

Of course, different negative items that hit your credit report hold different weight, lowering your score accordingly. For instance, one late payment on a credit card will ding your score far less than a collection, foreclosure, or bankruptcy. The bigger the damage to your score, the longer it may take to bring it back up to your previous high.


  1. How you handle your credit repair (and WHO is handling it!)

Fixing your credit is all based on disputing negative items, duplicates, incorrect information, mistakes, and anything else that’s acting like an anchor. The process involves writing and submitting formal dispute letters, and you have to do that with each of the credit bureaus for each negative item you want to flag. Once those disputes are registered, the credit bureaus are mandated to get back to you within a certain timeframe, either with evidence that the credit item is accurate, or to remove it. Therefore, you need to be incredibly organized, diligent, and persistent when handling your credit repair in order for it to move as quickly and efficiently as possible. Too many people try to do it on their own, only to fall off very quickly and see no progress (or even hurt their credit more!) Using a reputable and established credit repair company like Blue Water Credit is the best path to a better credit score!


  1. How many accounts you need to repair

If you have one negative account on your report, you’ll probably be able to repair your credit and improve your score much faster than if you have two, five, or even ten negative items to dispute. Not only is it more work, but we may have to resubmit dispute letters more than once for some accounts, which stretches out the timeline.


  1. Your credit score when you start

The higher your score when the negative reporting hits, the more difficult it is to recover, and therefore takes longer.) FICO offers some useful information regarding how long it may take to rebuild your credit score based on where it started:


Late payment on mortgage

Starting score:

780 FICO 3-7 years

720 FICO 3 years

680 FICO 9 months


Short sale of home

Starting score:

780 FICO 7 years

720 FICO 7 years

680 FICO 3 years


Foreclosing on home

Starting score:

780 FICO 7 years

720 FICO 7 years

680 FICO 3 years


Chapter 7 or 11 Bankruptcy

Starting score:

780 FICO 7 to 10 years

720 FICO 7 to 10 years

680 FICO 5 years


  1. Doing everything right during the process

You may think it goes without saying, but you’ll have to make manage your credit correctly during the repair process to avoid adding any other black marks on your report. For instance, you should pay all of your payments on time without fail and avoid maxing out credit cards or opening new accounts that may hurt you. Why is this so important? These days, identity theft, data hacks, and financial fraud affects about one out of every seven people, so you’ll want to monitor your credit and protect your score from sinking like a stone because of foul play.


  1. Your ability (and desire) to pay down debt

Your credit utilization makes up about 30% of your FICO score, which is just the ratio of debt you owe versus your total available balance (second only to payment history at 35%). So, you should pay down your credit cards and revolving accounts, optimally to about 10% of your total balance if you want to improve your score (but at least below 30%). However, be careful not to pay off certain accounts completely, close older accounts that are helping you, or pay off collections – all of which will hurt your score.


  1. Adding new positive tradelines

When we open some credit files, we see that consumers actually need more credit. Keeping a good mix of revolving, installment, and mortgage debts accounts for about 10% of your score, so we will advise you what you need to optimize that factor and improve your score as quickly as possible. Additionally, some people who have seen their score bottom out need to add new accounts using secured credit cards just to get started and become creditworthy again.

More Information below about Credit Scores and Qualifying for a Mortgage Loan in Kentucky below:


see links



I can answer your questions and usually get you pre-approved the same day. 

Call or Text me at 502-905-3708 with your mortgage questions.
Email Kentuckyloan@gmail.com

Joel Lobb (NMLS#57916)
Senior  Loan Officer
American Mortgage Solutions, Inc.
10602 Timberwood Circle Suite 3
Louisville, KY 40223
Company ID #1364 | MB73346

Text/call 502-905-3708


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). I lend in the following states: Kentucky

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

What is the minimum credit score I need to qualify for a Kentucky mortgage currently?

What is the current minimum credit scores needed to qualify for a Kentucky mortgage Loan?
The minimum credit score needed to qualify for a Kentucky mortgage depends on the type of loan program you are looking to obtain, this could be the reason that you have received conflicting answers. The most common types of mortgage are Conventional, FHA, USDA, VA, and KHC mortgage loans in Kentucky. I’ll explain each briefly below and the minimum credit score needed to qualify for each loan program. Keep in mind these are continuously changing and can vary by lender do to credit overlays.
Kentucky Conventional or Fannie Mae  
Conventional loans make up the majority of mortgages in the US. They are also known as conforming loans, because they conform to specific guidelines set by Fannie Mae and Freddie Mac.
  • Minimum Credit Score is 620
  • The maximum loan amount varies by Geographical Area , for 2020 it is between $510,400
  • You can use a conventional loan to buy a primary residence, second home, or rental property
  • Conventional loans are available in fixed rates, adjustable rates (ARMs), and offer many loan terms usually from 10 to 30 years
  • Down payments as low as 3% and 5% depending on Home Ready or straight conventional loan.
  • No monthly mortgage insurance with a down payment of at least 20%
  • Max Debt to Income Ratio of 50%
An FHA loan is a mortgage issued by federally qualified lenders and insured by the Federal Housing Administration (FHA). FHA loans are designed for low-to-moderate income borrowers who are unable to make a large down payment.
  • Minimum Credit Score is 500 with at least 10% down
  • Minimum Credit Score is 580 if you put less than 10% down
  • The maximum loan amount varies by Geographical Area, for 2020 it is between $331,760
  • Upfront and Monthly Mortgage Insurance is required regardless of the Loan to Value
  • FHA Loans are only available for financing primary residences
  • Maximum Debt to Income Ratio of 50% (unless mitigating factors justify allowing a higher DTI) up to 57% in some instances with strong compensating factors.
    • 100% Financing
    • Cities and towns located outside metro areas-see link (https://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do?pageAction=sfp
    • Do NOT have to be a Kentucky First Time Home Buyer
    • No Down Payment
    • 30 year low fixed rate loans
    • No Prepayment Penalty
    • Great Low FIXED Interest Rates
    • No max loan limits, just income limits
    • Possible to Roll Closing Costs into Loan if Appraises Higher
    • No Cash Reserves Required
    • UNLIMITED Seller Contribution toward Closing Costs
    • 100% Gifted Closing Costs allowed
    • Primary Residents only (no rentals/investment properties)
    • Debt to income ratios no more than 45% with GUS approval and 29 and 41% with a manual underwrite.
    • Only Need a 580 Credit Score to Apply*** Most USDA loans need a 620 or score higher to get approved through their automated underwriting system called GUS. 640 usually required for an automated approval upfront.
    • No bankruptcies (Chapter 7) last 3 years and no foreclosure last 3 years. If Chapter 13 bankruptcy possible to go on after 1 year
  • KENTUCKY VA Mortgage
  • 100% Financing Available up to qualifying income and entitlement
  • Must be eligible veteran with Certificate of Eligibility. We can help get this for veterans or active duty personnel.
  • No Down Payment Required
  • Seller Can Pay ALL Your Closing Costs
  • No Monthly Mortgage Insurance
  • Minimum 580 typically Credit Score to Apply–VA does not have a minimum credit score but lenders will create credit overlays to protect their interest.
  • Active Duty, Reserves, National Guard, & Retired Veterans Can Apply
  • No bankruptcies or foreclosures in last 2 years and a clear CAVIRS
  • Debt to income ratios vary, but usually 55% back-end ratio with a fico score over 620 will get it done on qualifying income and if it is a manual underwrite, 29% and 41% respectively
  • Can use your VA loan guaranty more than once, and in some cases, can have two existing va loans out at they sametime. Call or email for more info on this scenario.
  • Cost of VA loan appraisal in Kentucky now costs a  minimum $475 with a termite report needed on all purchase and refinance transactions unless a condo.
  • 2 year work history needed on VA loans unless you can show a legitimate excuse, ie. off work due to injury, schooling, education etc.
  • You cannot use your GI Bill for income qualifying for the mortgage payment.

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 views of my employer. Not all products or services mentioned on this site may fit all people

How to boost your credit score for A Mortgage Loan Approval in Kentucky!


Want to increase your credit score before buying a home? It might be easier than you think. Focus on these 6 steps and watch your score climb.

Source: How to boost your credit score

What Can Improve a Credit Score

Keep Your Balances Low

It’s important that you try to keep your balances at 40 percent or lower. Generally speaking, the less you owe, the less you’ll need to pay off. Not to mention, the less you owe to your lenders, the better you look as a borrower, and the higher your credit score will be.

Pay Your Bills on Time (Or Early)

The last thing you want is to get behind on your credit card bills, this is where your balances will start getting out of control, and you’ll be spending more than you like. It’s crucial to your credit score that you make payments on time if not early, to improve your overall score.

Sort Out Accounts in Collection

You can keep on trying to transfer it to new accounts, but we suggest that you simply pay off your balances to avoid the hassle. Once you know who your debt collection agency is, contact them and see what you have to do to pay off the balance and report it as “paid off” on your credit score.

However, if the debt seems inaccurate, you should dispute it immediately with the three credit bureaus. The sooner you get your accounts in collection sorted out and paid off, the quicker your credit score will improve.

Get a Secured Credit Card

A secured credit card is a form of credit card that makes you deposit money into the card itself as the line of credit. However, it’s single-handedly the best type of credit card to help your credit grow because you can get one with even the worst credit.

Don’t Delete Old Debt from Your Credit Report

Old debt that is handled correctly is actually a good thing. It shows creditors that you are responsible with your credit. Many people make the mistake of trying to remove an account from their report as soon as it is all paid off. Leaving good debt on your account will lengthen your credit history and boost your score.

Pay your bills on time, every time

Your payment history on credit cards, car loans, utilities, etc. is the single biggest factor in your credit score, weighted at about 35 percent. Even a single 30-day-late payment could knock 100 points off your score — and that can really hurt. FICO considers how late you were, how many times, how much was owed, and how recently it happened.

You can’t erase the fact that you were late — that will stay on your credit report for up to seven years – but you can get back on track and move on. The farther slip-ups recede into the past, the less they affect your current score. If your credit history doesn’t have a lot of other problems in it, your score will recover pretty quickly.

So if you’ve missed any recent payments, get current and stay current. We recommend setting up automatic payments or reminders for those times when life gets out of hand.

Pay down debt, especially on credit cards

The size of your debt accounts for about 30 percent of your credit score, so shrinking it is another priority. Your credit cards are the best place to start, especially if you’ve overdone it. Stop using them and start paying more than the minimum monthly payment on the one with the highest interest rate.

Once you pay off an account, you don’t necessarily want to close it. Having unused credit is actually very good, you’re building credit history and demonstrating that you have your financial act together. In mortgage terms, you’re a low risk. But lenders don’t want to see high balances or too much of your income going to monthly debt payments.

The last debt to pay off is medical debt. Even FICO recognizes that medical debt is the pits, so it hurts your credit score less than other kinds. Next-to-last is student loan debt, partly because it’s an installment loan that’s expected to be long-term: paying it off early won’t help your score (although it will help your debt-to-income ratio). It’s also understood as an investment in your future income.


Control your credit utilization ratio (wait, what?)


Your credit utilization ratio reflects how much of your credit you’re using within a monthly billing cycle. Basically, you don’t want the balance on your monthly statement to be more than 30 percent of your limit. Even if you pay it off in full by the due date, your score is getting dinged. The statement balance is what’s being reported to the credit bureaus, and a high one makes it look like you’re “utilizing” the plastic a lot. So try to keep the balance that shows up on your monthly statement under 20 or even 10 percent of your limit.

if you have questions about qualifying as first time home buyer in Kentucky, please call, text, email or fill out free prequalification below for your next mortgage loan pre-approval.

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Does FHA require collections to be paid off for a borrower to be eligible for FHA financing?



Image result for fha guidelines on collection accounts

Does FHA require collections to be paid off for a borrower to be eligible for FHA financing?

A Collection Account refers to a Borrower’s loan or debt that has been submitted to a collection agency by a creditor.
If the credit reports used in the analysis show cumulative outstanding collection account balances of $2,000 or greater, the lender must:
•     verify that the debt is paid in full at the time of or prior to settlement using an acceptable source of funds;
•     verify that the Borrower has made payment arrangements with the creditor and include the monthly payment in the Borrower’s Debt-to-Income ratio (DTI); or
•      if a payment arrangement is not available, calculate the monthly payment using 5 percent of the outstanding balance of each collection and include the monthly payment in the Borrower’s DTI.Collection accounts of a non-borrowing spouse in a community property state must be included in the $2,000 cumulative balance and analyzed as part of the Borrower’s ability to pay all collection accounts, unless excluded by state law.   Unless the lender uses 5 percent of the outstanding balance, the lender must provide the following documentation:
•     evidence of payment in full, if paid prior to settlement;
•     the payoff statement, if paid at settlement; or
•     the payment arrangement with creditor, if not paid prior to or at settlement.For manually underwritten loans, the lender must determine if collection accounts were a result of:
•     the Borrower’s disregard for financial obligations;
•     the Borrower’s inability to manage debt; or
•     extenuating circumstances.

The lender must document reasons for approving a mortgage when the Borrower has any collection accounts. The Borrower must provide a letter of explanation, which is supported by documentation, for each outstanding collection account. The explanation and supporting documentation must be consistent with other credit information in the file.

For additional information see Handbook 4000.1 II.A.4.b.iv.(M); II.A.5.a.iii.(D), II.A.5.a.iv.(O)  at https://www.hud.gov/program_offices/administration/hudclips/handbooks/hsgh

Joel Lobb (NMLS#57916)
Senior  Loan Officer
American Mortgage Solutions, Inc.
Company ID #1364 | MB73346

Text/call 502-905-3708

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.