Kentucky first-time homebuyer programs
- KHC Regular Down Payment Assistance: Receive a loan of up to $6,000 and repay it over 10 years at a 5.5% interest rate.
- KHC Affordable Down Payment Assistance: If you have a low-to-moderate income, you can get a loan of up to $6,000 and pay it back over 10 years at a 1% rate.
- Conventional Mortgage Loan- 3% down payment credit scores should be at least 680, but preferably 720 or higher with
- Federal Housing Administration FHA Kentucky mortgage: You can get a down payment of 3.5% with a credit score of at least 580, or get a mortgage with a credit score between 500 and 580 with 10% down using this loan, which is also called an FHA loan.
- United States Department of Agriculture mortgage Kentucky USDA Mortgage loan: These loans, also called USDA loans, can be useful if you are a low-to-moderate income borrower looking to buy a home in a rural or suburban area.
- Veterans Affairs mortgage Kentucky VA Mortgage : These mortgages, also called VA loans, are for active-service military members or veterans, or spouses of members who have died and can provide lower interest rates than conventional mortgages.
- Am I an active or former member of the armed forces? If not, right away you can remove VA loans from consideration.
- Is my home located in a rural area? People living in more urban and suburban neighborhoods won’t qualify for a USDA loan, so you can scratch that one if that’s the case.
- How much can I afford for a down payment? FHA loans offer plenty of flexibility with their down payment options, but you will need to put up some money up front. That may not be the case with either VA or USDA loans.
- How strong is my credit score? You’ll need a 620 credit score at minimum to qualify for USDA loans. FHA and VA programs tend to be a bit more lenient on credit history.
- Which loan offers the lowest interest rate? All three government loan programs tend to offer lower interest rates than conventional mortgages, but among them, VA might have a slight edge. Mortgage rates constantly fluctuate, no matter what type of home loan you’re considering. So, be sure to take a look at the latest interest rates before making a decision.
Loan types of credit score requirements for First Time Home Buyers in Kentucky
Loans insured by the government, such as VA loans, USDA loans and FHA loans, tend to have more flexible qualification requirements than conventional mortgage loans, which are not government-backed.
To get approved for a mortgage, whether conventional or government-backed, you’ll have to meet your lender’s minimum FICO score for that particular loan type.
Type of Loan Minimum FICO Score
Conventional 620
KHC Down Payment Assistance 620
FHA 500 with 10% down 580 3.5% down payment
VA no minimum score (depends on the lender)
USDA no minimum score (depends on the lender
Most lenders will require a DTI ratio of less than 45-50 %, but this will depend on the type of loan you’re applying for.
To determine your DTI, lenders take into account your front-end and back-end DTI.
Front-end DTI
Your front-end ratio consists of your monthly housing expenses divided by your monthly gross income. Housing-related expenses include your future mortgage payment, taxes and mortgage insurance.
Back-end DTI
The back-end DTI is the percentage of your gross income spent on monthly debts.
The items detailed in your credit report often comprise your back-end DTI. This includes monthly obligations such as credit cards, car loans, student loans, child support and personal loans.
Private mortgage insurance (PMI)
When purchasing a property with a conventional loan, some buyers have to factor in private mortgage insurance (PMI).
PMI is generally required for homebuyers who offer less than 20% down and is designed to protect the lender if you default on your loan.
The cost of PMI is rolled into your mortgage payment as an added fee and often accounts for 0.2% to 2% of the mortgage amount. According to Freddie Mac, you can expect to pay between $30 to $70 per month for every $100,000 borrowed.
Once you build your equity to 20% of the property’s appraised value, your loan servicer is required to drop PMI. According to Freddie Mac, PMI will automatically terminate on the date your principal balance reaches 78% of the original appraised value of your home.
Mortgage insurance premiums (MIP)
Government-backed loans don’t have PMI. Instead, you’ll have to factor in mortgage insurance premiums, which are paid both at closing and as part of your monthly payment.
Both FHA and USDA loans require mortgage insurance.
FHA loans require an upfront premium of 1.75% of the loan amount. FHA borrowers also pay an annual premium of 0.45% to 1.05% of the loan amount — unless they put 10% down. Some FHA borrowers can remove MIP, but that will depend on their loan’s origination date.
On the other hand, USDA loans require an upfront mortgage premium of 1% and an annual premium of 0.35%. The drawback of USDA loans is that there’s no way to eliminate your mortgage insurance premium.
If you have a VA loan, the VA guarantee replaces mortgage insurance. However, you’ll still have to pay an upfront funding fee of 1.4% to 3.6% of the loan amount at closing.
If you don’t have the money upfront, VA, FHA and USDA loans allow you to roll the fee into your mortgage, but your loan amount and overall loan cost will increase
Conventional Loans 3%-20%
620
45%
PMI required for down payments of less than 20%. Depends on loan type, credit score and down payment.
KHC Down payment Assistance
zero down $6k dap assistance in form of second mortgage
620 and above score
50% maximum debt to income ratio
VA Loans
Not required for down payment
Varies by lender, no minimum credit score
no max debt ratio but residual income is important.
No mortgage insurance but a one-time funding fee (1.25%-3.3% of the loan amount).
FHA Loans
3.5% to 580 credit score and 10% down with a 500 credit score.
56.9% max debt to income ratio but lower required on manual underwrites.
Mortgage insurance required. MIP can be removed after 11 years if you put down 10%.
USDA Loans
No required down payment
no minimum score varies by lender
45%
No mortgage insurance, but a one-time guarantee fee (1% of loan amount) and an annual fee (0.35% of loan amount).