Qualifying for a home loan in Kentucky as a first-time homebuyer

Buying a home is a major financial decision, and it's important to make sure you're financially qualified before you start shopping for homes. Here are some key things to consider when qualifying for a home loan in Kentucky as a first-time homebuyer:

* Credit score: Your credit score is one of the most important factors in determining your eligibility for a home loan and the interest rate you'll be offered. Aim for a credit score of 580 or higher to get the best rates.

* Debt-to-income ratio: Your debt-to-income ratio (DTI) is the amount of your monthly debt payments divided by your gross monthly income. A lower DTI ratio is better, and most lenders prefer a DTI ratio of 50% or lower.

* Down payment: While a 20% down payment is traditional, there are many loan programs available that allow you to put down as little as 3% or even 0% down. However, keep in mind that a larger down payment will result in a lower monthly mortgage payment and may help you avoid paying private mortgage insurance (PMI).

* Income: Your income will need to be sufficient to cover your monthly mortgage payment, property taxes, homeowners insurance, and other housing costs. Use Gross income and not net income to qualify for a mortgage payment

* Employment: Lenders will want to see that you have a steady job history and sufficient income to make your mortgage payments. Stable 2 year work history 

In addition to the above, there are also a number of down payment assistance programs available for first-time homebuyers in Kentucky. These programs can help you reduce the amount of money you need to come up with upfront for a down payment.

Here are some of the down payment assistance programs available in Kentucky:

* Kentucky Housing Corporation (KHC) Down Payment Assistance Programs: KHC offers a variety of down payment assistance programs for first-time homebuyers, including the KHC Conventional Preferred Program, the KHC FHA Advantage Program, and the KHC USDA Rural Development Guaranteed Loan Program.

* Federal Housing Administration (FHA) Loans: FHA loans are government-insured loans that allow for down payments as low as 3.5%.

* Veterans Administration (VA) Loans: VA loans are available to eligible veterans and active duty service members and allow for 0% down payments.

If you're thinking about buying a home in Kentucky, be sure to do your research and talk to a lender to get pre-approved for a mortgage. This will help you determine how much you can afford to spend on a home and give you a better idea of what loan options are available to you.

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Kentucky First Time Home Buyer Loan Programs

Kentucky First Time Home buyer Down Payment Assistance for $7,500

KHC is increasing the down payment assistance program amount from $6,000 to $7,500. This is for both Regular

Down Payment and for Affordable Down Payment assistance programs

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Kentucky First Time Home Buyer Programs For Home Mortgage Loans

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).

Kentucky First Time Home Buyer Programs

Conventional Loan

 

• At least 3%-5% down

 

• Closing costs will vary on which rate you choose and the lender. Typically the higher the rate, the lesser closing costs due to the lender giving you a lender credit back at closing for over par pricing. Also, called a no-closing costs option. You have to weigh the pros and cons to see if it makes sense to forgo the lower rate and lower monthly payment for the higher rate and less closing costs.

 

Fico scores needed start at 620, but most conventional lenders will want a higher score to qualify for the 3-5% minimum down payment requirements Most buyers using this loan have high credit scores (over 720) and at least 5% down.

 

The rates are a little higher compared to FHA, VA, or USDA loan but the mortgage insurance is not for life of loan and can be rolled off when you reach 80% equity position in home.

 

Conventional loans require 4-7 years removed from Bankruptcy and foreclosure.

 

Max Conventional loan limits are set at $647,200 for 2022 in Kentucky

 

 

Kentucky USDA Rural Housing Program

 

 

If you meet income eligibility requirements and are looking to settle in a rural area, you might qualify for the Kentucky USDA Rural Housing program. The program guarantees qualifying loans, reducing lenders’ risk and encouraging them to offer buyers 100% loans. That means Kentucky home buyers don’t have to put any money down, and even the “upfront fee” (a closing cost for this type of loan) can be rolled into the financing.

 

Fico scores usually wanted for this program center around 620 range, with most lenders wanting a 640 score so they can obtain an automated approval through GUS. GUS stands for the Guaranteed Underwriting system, and it will dictate your max loan pre-approval based on your income, credit scores, debt to income ratio and assets.

 

They also allow for a manual underwrite, which states that the max house payment ratios are set at 29% and 41% respectively of your income.

 

They loan requires no down payment, and the current mortgage insurance is 1% upfront, called a funding fee, and .35% annually for the monthly mi payment. Since they recently reduced their mi requirements, USDA is one of the best options out there for home buyers looking to buy in an rural area.

 

A rural area typically will be any area outside the major cities of Louisville, Lexington, Paducah, Bowling Green, Richmond, Frankfort, and parts of Northern  Kentucky .

 

There is a map link  see the qualifying areas.

 

New Income limits for most counties (*) in Kentucky are $91,900 for a  4 unit household and household families of five or more + can make up to  $121,300.

The Northern Kentucky Counties (***) of Boon, Kenton, Campbell, Bracken, Gallatin, and Pendleton are $99,250 for a household of four or less and up to $130,000 for a family of five or more.

Remember,  Jefferson County Kentucky, Fayette County Kentucky are not eligible for USDA loans.

 

USDA requires 3 years removed from bankruptcy and foreclosure.

 

There is no max USDA loan limit.

 

 

Kentucky FHA Loan

 

 

FHA loans are good for home buyers with lower credit scores and no much down, or with down payment assistance grants. FHA will allow for grants, gifts, for their 3.5% minimum investment and will go down to a 500 credit score.

 

The current mortgage insurance requirements are kind of steep when compared to USDA, VA , but the rates are usually good so it can counteracts the high mi premiums. As I tell borrowers, you will not have the loan for 30 years, so don’t worry too much about the mi premiums.

 

The mi premiums are for life of loan like USDA.

 

FHA requires 2 years removed from bankruptcy and 3 years removed from foreclosure.

 

Maximum FHA loan limits in Kentucky are set at $420,680 for 2022…If you are looking at a larger loan amount, then you would need to look at doing a conventional loan which has a max loan amount of $647,200.00

Kentucky VA Loan

 

 

VA loans are for veterans and active duty military personnel. The loan requires no down payment and no monthly mi premiums, and no minimum credit score , saving you on the monthly payment. It does have an funding fee like USDA, but it is higher starting at 2% for first time use, and 3% for second time use. The funding fee is financed into the loan, so it is not something you have to pay upfront out of pocket.

 

VA loans can be made anywhere, unlike the USDA restrictions, and there is no income household limit and there is no max loan in Kentucky for 2022, but it does now carry higher mortgage insurance premiums in the form of New

Kentucky Down Payment Assistance

• Regular DAP

  • Purchase price up to $346,644 with Secondary Market.
  • Assistance in the form of a loan up to $6,000 in $100 increments.
  • Repayable over a ten-year term at 5.50 percent.
  • Available to all KHC first-mortgage loan recipients.

  Affordable DAP

  • Purchase price up to $346,644​ with Secondary Market.
  • Assistance up to $6,000.
  • Repayable over a ten-year term at 1.00 percent.
  • Borrowers must meet Affordable D​AP income limits.

  ​MORE ABOUT DOWN PAYMENT AND CLOSING COSTS

  • No liquid asset review and no limit on borrower reserves.
  • Specific credit underwriting standards may apply to down payment programs
  •  
  •  

Louisville Kentucky Mortgage Lender for FHA, VA, KHC, USDA and Rural Housing Kentucky Mortgage: Zero Down Kentucky Mortgages

Louisville Kentucky Mortgage Lender for FHA, VA, KHC, USDA and Rural Housing Kentucky Mortgage: Zero Down Kentucky Mortgages: ZERO DOWN HOME LOANS IN KENTUCKY There are a few programs that feature zero down payment in Kentucky For Home buyers : USDA and ...

Kentucky_First_Time_Home_Buyer_Programs

Kentucky Conventional mortgages

How to qualify for a Kentucky conforming loan

A conforming loan meets the borrowing limits set by the Federal Housing Finance Agency (FHFA). Here are the requirements:

• Credit score: 620-but to get an approval need a 720 or higher usually...
• DTI: 36% to 50%, depending on the lender and how strong other parts of your financial profile are-if you have mortgage insurance max debt to income ratio is 45% backend ratio
• Down payment: You may need up  5% minimum for standard Fannie Mae loans, but if your mortgage is backed by government-sponsored mortgage companies Freddie Mac or Fannie Mae, you'll only need 3% for their Homepath or Homepossible mortgage loans.
• Max loan limits of $548,000 in 2021 

There are three main types of government mortgages: Kentucky FHA, VA, and USDA loans.

How to qualify for an Kentucky  FHA loan

A loan from the Federal Housing Administration is for buyers who don't have the best credit scores or DTIs, but still want to buy a home. Here's what you'll need for an FHA loan:

• Credit score: 580
• DTI: 56% max approval usually with good scores and a AUS approval through Fannie Mae or Freddie Mac, and money down. DTI is lower on a  manual underwrite loan. 
• Down payment: 3.5%; or if your score is between 500 and 579, you can qualify with a 10% down payment
• Other requirements: The FHA restricts how much you can borrow, and your limit depends on where you live in the US and whether you're buying a single- or multi-family place. Your home must meet certain property standards. You can use an FHA loan to buy a home with normal wear and tear, but not one with major structural or safety issues.
• Max loan limits of $356,000 for 2021 in Kentucky 

How to qualify for a Kentucky VA loan

A Veterans Affairs loan is for military families. Here are the requirements:

• Credit score: no minimum score but most lenders will want a 620 minimum credit score 
• DTI: 41% for a manual underwrite, can be much higher on AUS approval through Fannie Mae or Freddie Max
• Down payment: No down payment is necessary
• Residual Income Requirements by state and household size.
• Other requirements: You must be an active-duty military member or a veteran who served for a certain amount of time. You'll also qualify if you're a spouse of someone who died in active duty or another military-related incident, or if your spouse is a prisoner of war or MIA. The home you're buying should meet safety standards and be used as your primary residence, but there are no strict borrowing limits set by the VA.

How to qualify for a USDA loan

A loan from the United States Department of Agriculture is for low-to-moderate income borrowers buying homes in rural or suburban areas. You'll need the following to be eligible:

• Credit score: 581 minimum score, but most lenders will want a 620 to 640 credit score
• DTI: 45% for a GUS USDA loan approval, on a manual underwriter 41%
• Down payment: No down payment is necessary
• Other requirements: Your home must be in a rural or suburban part of the US. If you already know the address of the home you want to buy, enter the information into the USDA Property Eligibility Site to see if it qualifies for a USDA loan. You also must earn a low-to-moderate income, and the limit varies based on where you live. 

Knowing which mortgage types you qualify for can help you determine which one is the best fit. There may be some flexibility, though. For instance, a lender may approve you with a high DTI if you have an excellent credit score and sizeable down payment. If you're set on a certain type of mortgage but don't qualify, call a lender to ask about your options.

--

Joel Lobb
Mortgage Loan Officer

Individual NMLS ID #57916

American Mortgage Solutions, Inc.

10602 Timberwood Circle 

Louisville, KY 40223

Company NMLS ID #1364

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Text/call:      502-905-3708

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Kentucky First Time Home Buyer Programs For Home Mortgage Loans: KENTUCKY DOWN PAYMENT ASSISTANCE PROGRAMS FOR 2021

Kentucky First Time Home Buyer Programs For Home Mortgage Loans: KENTUCKY DOWN PAYMENT ASSISTANCE PROGRAMS FOR 2021: