Can you buy a house in Kentucky with Bad Credit?

Buying A House with Bad Credit in Kentucky

When in comes to buying a house in Kentucky and getting approved for a mortgage loan a lot of buyers will have to confront their past credit issues. Credit, along with income, work history, and assets determine if you qualify for a mortgage loan. 

Below I will address the main issues you have to address when it comes to getting approved for a mortgage with past credit problems. 

 Mortgage late payments: One late payment in the last 12 months is permitted so long as it can be explained and fully documented if necessary.

• Foreclosure: Thirty-six months from the date of the foreclosure until eligibility to repurchase using the 3.5 percent down payment FHA Loan, 48 months for VA Loans (no money down required), seven years no matter the down payment on a conventional type.

• Short sale: Thirty-six months from the date of the short sale until eligibility to repurchase using the 3.5 percent down payment FHA Loan, 24 months with the VA, 24 months on a conventional money loan with a minimum down payment of 20 percent.

Bankruptcy: Chapter 7 (Chapter 13 is less common), 24 months from the date of discharge until eligibility to repurchase using the 3.5 percent down FHA Loan, 48 months on VA Loans (still no money down required),  48 months on conventional no matter the down payment. All mortgage companies have different thresholds of risk appetite. For example, the FHA (Federal Housing Administration) has no credit score requirement. Why, then, do lenders have a minimum credit score requirement of 620 for an FHA Loan? Unbeknownst to the majority of home buyers, many mortgage companies have a secret ominous business strategy.

Enter “investor overlays.” 
Investor overlays are adjustments to guidelines and/or pricing created in favor of the mortgage company. This is exactly why one lender can do the loan, and another lender cannot do the loan in some instances.
Tip: every mortgage lender has investor overlays, it’s the nature of how mortgage companies operate, key is work with the lender whose overlays are minimal.

Timing

Typically speaking, if you want to get a mortgage after bankruptcy you’ll need to allow time to pass. For conventional mortgages you’ll need to wait four years after Chapter 7 bankruptcy or two years after Chapter 13 bankruptcy. But there are some other mortgage options that require a shorter waits.

Credit Scores 

580 to 620 is the bottom score (again with few exceptions) that lenders will permit. Below a 620, then you have to look at doing a FHA loan or VA loan if you are a veteran. Even at 620, people consider you a higher risk that other folks and are going to penalize you or your borrower with a more expensive loan. 720 is when you really start to get in the “as a lender we love you” credit score. 760 is even better.

 Watch your credit scores carefully. You have three credit scores, and the lender will take your middle score. For example, let's say you have a 590 on Transunion, 679 on Experian, and a 618 on Equifax. Then your middle qualifying credit score will be 618 credits score.

If you absolutely cannot get your credit scores up to 620, then FHA will be a good option for you. FHA states that if your fico credit score is 580 or above, they will allow for a 3.5% down payment, and if below 580, you will need 10% down payment.

There are a lot of mortgage lenders that will not go below 580 to 620 range, so keep that in mind when you are shopping for a mortgage lender, because they create credit overlays.

FHA Mortgage

Two years after your Chapter 7 bankruptcy discharge you may apply for an FHA loan. If you filed Chapter 13 bankruptcy, then you’ll only need to wait until you’ve made twelve months of satisfactory payments, and you’ll need to get the approval of the bankruptcy trustee. But if you want to be given serious consideration, you’ll need to provide a clear explanation for why you filed bankruptcy. For example, maybe you filed Chapter 13 bankruptcy because you had a medical emergency and was unable to pay your medical bills.

VA Mortgage

If you’re a veteran, you can get a VA mortgage two years after your bankruptcy discharge. This VA application process can be challenging, but in some ways it’s more lenient since post-bankruptcy credit issues such as a foreclosure won’t restart the 2-year waiting period. However, credit issues after bankruptcy might affect your interest rate, so take care to keep your credit as clean as possible.

USDA Mortgage

If you live in a rural area, you may qualify for a USDA mortgage three years after your bankruptcy discharge. It’s important to note that while the USDA provides loans to rural residents it’s only for property that will serve as the borrower’s primary residence. The USDA will not finance the purchase of income property or a vacation home.

As you prepare to apply for a mortgage after bankruptcy, keep in mind that the mortgage lender will take into account the totality of your financial situation—your finances, credit history, credit score, and any extenuating circumstances

Joel Lobb  Mortgage Loan Officer

EVO Mortgage
911 Barret Ave, Louisville, KY 40204

1 -  Email - kentuckyloan@gmail.com 

2.   Call/Text - 502-905-3708

https://www.mylouisvillekentuckymortgage.com/2010/10/get-approved-for-mortgage-or-home-loan.html

NMLS 57916  | Company NMLS#173846

FHA loans in Kentucky After A Bankruptcy

Kentucky FHA Loan Guidelines for Bankruptcy and Foreclosure

Chapter 7

Chapter 7 bankruptcy discharged more than 24 months prior to the application date may be allowed.

Chapter 7 bankruptcy discharged between 12 and 24 months prior to the application date requires satisfactorily established credit and documentation showing the circumstances which caused the bankruptcy were beyond the borrower's control (i.e. unemployment, medical bills not covered by insurance). In these instances, the file must be manually downgraded to a refer and manually underwritten. It falls upon the underwriter to make a final determination as to the overall quality of the file.

Chapter 7 bankruptcy discharged less than 12 months prior to the application date is not allowed.

Chapter 13

Loans where the borrower is currently in a Chapter 13 bankruptcy or had a Chapter 13 bankruptcy which was discharged within the previous 2 years require manual downgrade and must be underwritten manually. Note that manual underwrites require Underwriting Management approval.


A borrower who is currently in a Chapter 13 bankruptcy may be eligible for FHA financing provided all of the following conditions are met in addition to standard manual underwriting requirements:

Foreclosure / Short Sale

A foreclosure less than 3 years ago is not allowed.

In all instances, the “date of foreclosure” is considered the date of the foreclosure deed. The end date of the time frame is determined by the application date.

You can obtain a copy of your bankruptcy paperwork from the website below:


Bankruptcy Courts 👉    http://www.pacer.psc.uscourts.gov/

Why Kentucky Mortgage Loans Are Denied

When applying for a Kentucky mortgage loan, several factors play a crucial role in the approval and denial process. 

Understanding why Kentucky mortgage loans may not get approved due to credit score, bankruptcy, income ratio, work history, and foreclosure is essential for prospective homebuyers. 

Credit Score of 620 or below:

A credit score reflects an individual's creditworthiness. Lenders use this score to assess the risk of lending money. A lower credit score, typically below 620, can raise concerns for lenders. It may indicate past financial challenges, missed payments, or high levels of debt. To improve mortgage approval chances, borrowers should aim for a higher credit score by paying bills on time, reducing debt, and fixing any errors on their credit report.

Bankruptcy less than 2 years or foreclosure less than 3 years:


Bankruptcy can significantly impact mortgage approval. Depending on the type of bankruptcy (Chapter 7 or Chapter 13) and how long ago it occurred, lenders may view it as a red flag. 

Bankruptcies stay on credit reports for 10 years, affecting credit scores and indicating financial instability. Lenders may require a waiting period after bankruptcy before considering a mortgage application.

 
Chapter 7

If you have filed a Chapter 7  Bankruptcy, the mortgage waiting periods begin after the discharge date:

Fannie Mae (conventional) loan – 4 years from discharge date
FHA loan – 2 years from discharge date
VA loan – 2 years from discharge date
USDA loan – 3 years from discharge date

Chapter 13 Bankruptcy

On the other hand, if you have filed a Chapter 13 Bankruptcy, the mortgage waiting periods are shorter:

Fannie Mae (conventional) loan – 2 years from discharge date, and also 4 years from the dismissal date.
FHA loan – 1 year from the payout period. However, you also need court permission, and proof of satisfactory bankruptcy payment and performance.
VA loan – 1 year from the payout period. Also, court permission, and proof of satisfactory bankruptcy payment and performance.
USDA loan – 1 year of the payout must elapse and payment performance must be satisfactory. In addition, you need court permission to borrow again.

After Short Sale/Deed-in-Lieu of Foreclosure

The mortgage waiting periods after a short sale begin after the completion date:Fannie Mae (conventional) loan – 4 years
FHA loan – 3 years
VA loan – 2 years
USDA loan – 3 years



Debt to Income Ratio over 50% 

Lenders assess income ratios to determine if borrowers can afford mortgage payments. The debt-to-income ratio (DTI) compares monthly debt payments to gross monthly income. A high DTI suggests financial strain and may lead to loan denial. Lenders typically prefer a DTI below 50% for conventional loans. Increasing income or reducing debt can help improve this ratio and enhance loan approval chances.


Work History less than 2 years with job gaps: 

2 year Stable employment and consistent income are vital for mortgage approval. Lenders evaluate work history to ensure borrowers have a reliable source of income to repay the loan. Job changes, gaps in employment, or irregular income can raise concerns. Ideally, borrowers should demonstrate a steady work history with consistent or increasing income over time.











Joel Lobb Mortgage Loan Officer

Text/call: 502-905-3708

email: kentuckyloan@gmail.com


http://www.mylouisvillekentuckymortgage.com/








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).

WHAT IS THE MINIMUM CREDIT SCORE FOR A KENTUCKY FHA MORTGAGE HOME LOAN APPROVAL?

Kentucky FHA Mortgage Credit Score Requirements

FHA is introducing new guidelines on loan to value ratios and the minimum credit score required for FHA borrowers in Kentucky. As detailed in a Mortgagee Letter from the Department of Housing and Urban Development (HUD), the following credit requirements will apply for FHA borrowers, effective October 4, 2010.

To be eligible for maximum financing, borrowers will need a minimum credit score of 500 or higher.

Kentucky FHA Borrowers with a credit score between 500 and 579 will be limited to a loan to value of 90%. A sub 580 FICO credit score borrower will henceforth need to make a 10% minimum down payment on a purchase transaction.


All Kentucky FHA borrowers with a credit score below 500 will not be eligible for FHA-insured mortgage financing in Kentucky.


The new credit requirements are not expected to dramatically change the number of Kentucky FHA mortgage approvals.


Get used to the term credit overlays. You may call several FHA lenders and a lot of them will tell you that even though FHA will insure lower credit scores, most lenders had already imposed a minimum credit score requirement of 580 to 620 or higher for Kentucky FHA borrowers.


In limited cases, borrowers with scores between 580 and 639 could still obtain mortgage approval with compensating factors such as large down payment (more than 3.5% minimum), low debt to income ratios, and substantial reserves in the bank with a verifiable pay history of no late payments in the last 12 months of rent and on credit report. A late is considered 30 days late in the credit rating world.

Ultimately, there is no singular credit score that can guarantee you a mortgage approval. Each lender is free to set their own credit score requirements.

But many loan types are insured by government organizations. And lenders cannot accept borrowers with credit scores below the minimum these organizations set. The four most popular home loan types are:


Conventional: Not backed by any government agency, but must meet the Fannie Mae and Freddie Mac underwriting guidelines

FHA: Loans backed by the Federal Housing Administration


VA: Loans backed by the US Department of Veterans Affairs (for military members)USDA: Loans backed by the US Department of Agriculture (for low- to moderate-income families who buy homes in rural areas)

The minimum credit score requirements for each of these loan types:

Conventional:

620 SCORE NEEDED. BUT TO GET APPROVED FOR A FANNIE MAE LOAN MOSTLY LIKE YOU WILL NEED A 720 SCORE OR HIGHER IF YOU HAVE LESS THAN 20% EQUITY POSITION OR LESS THAN 20% DOWN PAYMENT DUE TO PRIVATE MORTGAGE INSURANCE

FHA:

580 for a 3.5% down payment
500 for down payments of at least 10%
**MOST FHA LENDERS WILL WANT A 580 to 620 CREDIT SCORE NOWADAYS

VA:

No minimum BUT MOST VA LENDERS WILL WANT A 580 to 620 CREDIT SCORE

USDA:

No minimum, but with a credit score of at least 620 to 640 you could qualify for streamlined credit analysis and chances of approval goes way down if score is below 640...

Which credit score is used to qualify for a Mortgage loan in Kentucky?

For example if you have a 598, 625, 604 on each of the main three reporting agencies, then your qualifying fico score would be 604. 

If you’re planning to apply for a mortgage, be aware that the credit score you see on your application might differ slightly from the one you’re used to. 

It might even be different than what comes up when you monitor your credit, or even when you apply for a car loan.

Banks use a slightly different credit score model when evaluating mortgage applicants. Below, we go over what you need to know about credit scores you’re looking to buy a home.

The scoring model used in mortgage applications

While the FICO® 8 model is the most widely used scoring model for general lending decisions, banks use the following FICO scores when you apply for a mortgage:

FICO® Score 2 (Experian)
FICO® Score 5 (Equifax)
FICO® Score 4 (TransUnion)

As you can see, each of the three main credit bureaus (Equifax, Experian and TransUnion) use a slightly different version of the industry-specific FICO Score. That’s because FICO tweaks and tailors its scoring model to best predict the creditworthiness for different industries and bureaus. You’re still evaluated on the same core factors (payment history, credit use, credit mix and age of your accounts), but the categories are weighed a little bit differently.


The FICO 8 model is known for being more critical of high balances on revolving credit lines. Since revolving credit is less of a factor when it comes to mortgages, the FICO 2, 4 and 5 models, which put less emphasis on credit utilization, have proven to be reliable when evaluating good candidates for a mortgage.

Mortgage lenders pull all three reports,from all three bureaus, but they only use one when making their final decision.

“A bank will use all three bureaus,”--- “It’s called a tri-merge.”

If all three of your scores are the same, then their choice is simple. But what if your scores are different?


If two of the three scores are the same, lenders use that one, regardless of whether it’s higher or lower than the other one.

And if you are applying for a mortgage with another person, such as your spouse or partner, each applicant’s FICO 2, 4 and 5 scores are pulled. The bank identifies the median score for both parties, then uses the lowest of the final two.

Joel Lobb  Mortgage Loan Officer NMLS 57916

Text/call: 502-905-3708

email: kentuckyloan@gmail.com

http://www.mylouisvillekentuckymortgage.com/

NMLS 57916  | Company NMLS #173846

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).

 

How to Get Approved for a Kentucky Mortgage While in A Chapter 13 Bankruptcy:

Can you get a mortgage loan while in a Chapter 13 Bankruptcy?

Here is a brief summary:

You must have 12 payments paid into the Chapter 13 before you can apply for a mortgage loan.

The payments must be made on time for last 12 months or after 12 months if you have been in longer, so no late payments to the Chapter 13 while in it.

You have to ask permission from the courts to seek a mortgage loan. They usually grant this. I have never not seen them grant it.

You have to qualify with the new house payment along with Chapter 13 payments and other debts listed on credit report. Debt to income ratios usually center around 31 and 43% respectively, meaning the new house payment should not be more than 31% of your gross monthly income and your total house payment and debts listed on credit report along with Chapter 13 payment should not be more than 43% of your total gross monthly income.

Credit scores: Most FHA lenders I work with will want a 620-middle score. You have three fico scores from Experian, Equifax, and Transunion, and they throw out the high and low score and take middle score. For example, if you had a 598, 679, and 590 scores respectively for all three bureaus listed above, your qualifying score would be 598.

There are some FHA investors that I am set up with that will go down to 580, but I have seen in my past experiences 620 will get you a better deal and far greater chance of closing on your loan with FHA.

Down payment: For FHA loans, you will need to have at least 3.5% down payment saved up. It is extremely hard to find a no money down loan program to get you approved for a mortgage while you are in a Chapter 13 plan.

FHA, VA and USDA are really the only two options that I know of that offer financing for a borrower with a current Chapter 13 Bankruptcy plan, so keep that in mind.

Conventional loan program offered by Fannie Mae will not allow a mortgage loan for someone in a Chapter 13 Bankruptcy plan.

On USDA loans, it is possible to get 100% Financing after you have paid into the plan for 12 months with a good pay history. The credit scores needed for a USDA loan approval really need to be above 640 in my past experience in getting them approved. 

A lot of USDA lenders will say they will do down to 620, but it is very difficult getting them approved. Best to get your scores up to increase your changes in qualifying for a USDA loan. There is not much that difference in getting your scores up to that range if you are at a 620 score now.

With USDA loans, they have income and property eligibility requirements that FHA does not have, so below is a rough run down of FHA vs USDA loan for you:


Typically, USDA-eligible properties are located in rural areas. It is a mistake, however, to think that you have to live far out in the country to qualify for a USDA loan. USDA-eligible properties are often located near urban areas.

A property’s eligibility is determined by its location with respect to USDA’s map of eligible locations. The USDA program also places limits on your household income based on median earnings in an area. If you exceed that limit, you can’t obtain a USDA loan.

The FHA, by contrast, does not place limits on household earnings. The FHA, however, does establish a maximum limit on the amount of money that can be borrowed through the program.

So, if you were in a hurry to buy, after you have been in your Chapter 13 plan for 12 months, I can look at getting you approved to buy a home if you wish:

So, if you were in a hurry to buy, after you have been in your Chapter 13 plan for 12 months, I can look at getting you approved to buy a home if you wish:




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.


Joel Lobb
Senior Loan Officer

(NMLS#57916)


Text or call phone: (502) 905-3708

email me at kentuckyloan@gmail.com

http://www.mylouisvillekentuckymortgage.com/

Can You Buy A House After Bankruptcy in Kentucky?

Mortgage Loan Options After Bankruptcy in Kentucky

In some cases, you have exhausted your emergency fund, and have decided there is no option other than to file for bankruptcy to pay off your debt. You may decide to work with a bankruptcy attorney. Plus, you should know all real estate agents and mortgage lenders who have experience working with people with bankruptcy on their credit score.

When you declare bankruptcy, you may find it hard to improve your credit score and financial condition. Even worse, you may think you will never be able to buy a house again, but the reality is different.

Who wants bankruptcy? Of course, no one wants to fall into this drastic situation. But people dealing with financial troubles may think it is the only way to get out of debts and start from the beginning.

However, bankruptcy may minimize financial stress and allow you to focus on making positive financial decisions for your future. So are you ready to move forward and make your dream of owning a home come true? So, adopt the following strategies to achieve the goal.

How Long after a Bankruptcy Can I Qualify for a Kentucky Mortgage?

You can buy a house approximately one or two years after filing for bankruptcy, only if you restore your credit and avoid new debt. Filing a Chapter 7 or Chapter 13 bankruptcy will impact your credit report and put a negative score on your credit. But it does not mean that you cannot buy your own house.

Chapter 7 Bankruptcy

The standard type of bankruptcy is Chapter 7, in which the court wipes down your qualifying debts. In this case, your credit score is affected. If you file Chapter 7 bankruptcy, you have to wait for about four years after the court dismisses your bankruptcy to make you eligible for a conventional loan.

However, government-backed mortgage loans are more complex. You have to wait for about three years after your bankruptcies' dismissal to qualify for a USDA loan. At the same time, you have to wait for about two years in order to qualify for a VA or FHA loan.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy involves the restructuring of your debts. That means you have to make scheduled payments to your creditors. It does not have a substantial effect on your credit score. Moreover, you can keep your assets as well. While regulations for chapter 13 are less severe than Chapter 7, these loans also have a waiting period.

Conventional loans after chapter 13 bankruptcy usually require a waiting period depending on the court’s choice to handle your bankruptcy. Generally, the waiting period is about four years from the date you file bankruptcy and two years from your dismissal date.

While chapter 7 bankruptcy standards are relaxed for government-backed loans, USDA loans have a 1-year waiting period after filing for Chapter 13 bankruptcy. FHA and VA loans need a court to dismiss or discharge approval of your loan before your apply. However, the waiting period remains the same in both cases, whether dismissal or discharge.

How Long after a Kentucky Bankruptcy Can I Qualify for a Mortgage Loan in Kentucky?

There are bankruptcy lenders who can help with your mortgage application even just one day out of chapter 7 or chapter 13 bankruptcy. You will likely need a larger down payment and show that you are taking financial steps to improve your credit.

Below, we will take you through some mortgage after bankruptcy options and then connect you with some of the best bankruptcy lenders. We understand that you area dealing with a lot and having a bankruptcy is not easy. Let us help guide you through this process.

Type of Loan	Chapter 7	Chapter 13
Conventional	4 years	2 years
FHA	2 years	1 year
VA	2 years	1 year
USDA	3 years	1 year

* Mortgage after bankruptcy waiting period chart

Kentucky Mortgage after Bankruptcy Waiting Period

Every type of loan has different waiting period requirements. Here are some of the basics:

• Kentucky VA Loans after bankruptcy– 2 year waiting period 
• Kentucky FHA Loans after bankruptcy – 2 year waiting period
• Kentucky USDA Loans after bankruptcy – 3 year waiting period
• Conventional mortgages after bankruptcy – 4 year waiting period after chapter 7 and 2 years after chapter 13
• Non-QM Subprime Mortgages – Available just one day out of bankruptcy.

Depending upon your scenario, we can find a mortgage for you just ONE DAY after your bankruptcy has been discharged. The rules for applying for a mortgage is the same regardless as to whether you filed a chapter 7 bankruptcy or chapter 13 bankruptcy.

Joel Lobb  Mortgage Loan Officer

American Mortgage Solutions, Inc.
10602 Timberwood Circle
Louisville, KY 40223
Company NMLS ID #1364

Text/call: 502-905-3708

email: kentuckyloan@gmail.com

http://www.mylouisvillekentuckymortgage.com/

NMLS 57916  | Company NMLS #1364/MB73346135166/MBR1574

Kentucky FHA Loan Lender Requirements for Approval

How to Qualify for a Kentucky FHA Loan Approval:

If you're looking to buy a home in Kentucky and are considering a Kentucky FHA loan, it's essential to understand the qualifying criteria and the necessary steps. This article covers all the crucial aspects you need to know, from credit scores, bankruptcy, work history, collections, closing, home insurance, title, debt ratio , down payment and other required documents for pre-approval for a Kentucky FHA loan pre-approval letter.

Credit Score for Kentucky FHA loan

For an FHA loan in Kentucky, the minimum credit score requirement is typically 580 for maximum financing with a 3.5% down payment. If your score is between 500 and 579, you may still qualify, but you will need a higher down payment of at least 10%.

• Any judgments or collections on the credit report must be resolved or satisfactorily explained. Collections do not have to be paid but they will count them in your debt to income ratio. If they are judgements, they will have to be paid off because they could effect the clear title of the home
• Cosigners are allowed. Family members or close associates okay. They don't have to live in the home with you. Cosigner are used to for income purposes only or work history that does not meet FHA  lender requirements .Not used to compensate for the primary borrowers bad credit. They always take the lowest credit score of both borrowers. 

Bankruptcy and Foreclosures for Kentucky FHA loans

• Bankruptcy: You can qualify for an FHA loan two years after a Chapter 7 bankruptcy discharge, provided you have re-established good credit or have not incurred new debt. For a Chapter 13 bankruptcy, you need one year of the payout period completed and permission from the court to enter into a new mortgage.
• Foreclosures: You must wait three years after a foreclosure before you can qualify for an FHA loan. This period can be reduced if the foreclosure was due to extenuating circumstances beyond your control.

Debt-to-Income Ratio (DTI)

The FHA guidelines typically require a front-end DTI (monthly mortgage payment divided by gross monthly income) of no more than 31% and a back-end DTI (total monthly debt payments divided by gross monthly income) of no more than 43%. However, higher ratios may be accepted with compensating factors, such as significant cash reserves or high credit scores. Can be much higher with AUS approval with 45% and 57% respectively on the front end and back end.

Down Payment for Kentucky FHA loans

The standard down payment for a Kentucky FHA loan is 3.5% of the purchase price, which is feasible for many first-time homebuyers. This down payment can come from savings, a gift from a family member, or an approved down payment assistance program. 10% down payment needed with scores below 580.

Checklist of Documents Needed for Kentucky FHA loan Pre-Approval

To get pre-approved for a Kentucky FHA loan, you'll need to provide several documents, including:

• Proof of identity (driver’s license or passport)
• Social Security number
• Recent pay stubs
• W-2 forms for the past two years
• Federal tax returns for the past two years
• Bank statements for the last two to three months
• Employment verification letter
• Debt information (credit cards, student loans, auto loans)
• Proof of additional income (alimony, child support, bonuses)

Work History for Kentucky FHA loans

You need to show a stable work history for at least the past two years. If you have changed jobs, the new position should be in the same field or demonstrate career advancement.

Loan Limits Kentucky FHA loan

The FHA loan limits in Kentucky vary by county and are set based on the median home prices in the area. In most counties, the limit for a single-family home is $498,257 for a single-family home. in 2024, but this amount can be higher in more expensive areas.

Income Limits Kentucky FHA loan

There are no specific income limits for FHA loans; however, your income must be sufficient to cover the mortgage payments and other debts. Lenders will assess your ability to repay the loan based on your income, debts, and employment history.

Down Payment Assistance Grants Kentucky FHA loan

Kentucky offers several down payment assistance programs to help first-time homebuyers. These programs can provide funds to cover the down payment and closing costs. Some popular programs include:

• Kentucky Housing Corporation (KHC) Programs: KHC offers several down payment assistance options, including repayable and forgivable loans. $10,000 available at 3.75% rate currently over 10 year pay back period. Changes periodically. Check your lenders requirements with income limits, loan limits, debt to income ratio requirements
• Local Government Programs: Many local governments offer grants and loans for down payment assistance.

• Federal Loan Programs for First-Time Homebuyers in Kentucky

  In addition to KHC programs, several federal loan options are available to Kentucky residents, including:

  • Kentucky Federal Housing Administration (FHA) Loans: FHA loans are insured by the U.S. Department of Housing and Urban Development (HUD) and cater to borrowers with lower credit scores (minimum 580 with a 3.5% down payment).
  • Kentucky Department of Veterans Affairs (VA) Loans: Active-duty military personnel, veterans, and eligible family members can qualify for VA loans with no down payment required. These loans typically offer lower interest rates than conventional mortgages.
  • Kentucky USDA Loans: Guaranteed by the U.S. Department of Agriculture (USDA), these loans are available to moderate-income borrowers in designated rural areas, with no down payment required.

  • You may qualify for one of these programs.

    • HUD Community Development Block Grants (CDBG) - Kentucky contacts - HUD provides grant money to communities and those funds may be used to assist homebuyers
      • Ashland
      • Bowling Green
      • Elizabethtown
      • Hopkinsville
      • Lexington
      • Louisville
      • Owensboro
    • HUD HOME Program - Kentucky contacts - HUD provides grant money to communities designated as participating jurisdictions for assisting homebuyers, rental assistance, and other housing initiatives
    • Community Ventures Corporation Kentucky Home Financing
    • The Kentucky Housing Corporation offers:
      • Homeownership Programs
      • Counseling Resources
    • Habitat for Humanity - Through volunteer labor and donations of money and materials, Habitat builds and rehabilitates simple, decent houses with the help of the homeowner (partner) families
    • Federal Home Loan Bank of Cincinnati - serves Kentucky residents by offering various homebuying programs including Welcome Home grants. For more information, you may call 1 (888) 345-2246
    • Kentucky Association for Community Action - helps to fund housing programs for low-income residents
    • Federal Appalachian Housing Enterprise (FAHE) - provides housing assistance in rural, low-income, Appalachian communities
    • Housing Partnership, Inc. - provides affordable housing services for residents of Jefferson County
    • Secondary financing/down payment assistance programs are listed by state
    • USDA Rural Development - programs that reduce the cost of homeownership for low and moderate-income families.

     

  Additional Resources

  • City and County Programs: Some Kentucky cities and counties offer their own down payment assistance programs or resources for first-time homebuyers. It's recommended to research programs available in your target location.
  • HUD Homeownership Programs: The U.S. Department of Housing and Urban Development provides resources for homeownership assistance programs across the country. You can explore their website for additional options.

Seller Concessions for Kentucky FHA loans

Sellers can contribute up to 6% of the home's purchase price toward closing costs, prepaid expenses, discount points, and other financing concessions. This can significantly reduce your out-of-pocket expenses.

Appraisals and Inspections Kentucky FHA loan

• Appraisals: An FHA-approved appraiser must conduct an appraisal to ensure the property's value and condition meet FHA standards. Always required for FHA approval and ordered by lender.
• Inspections: While not required by FHA, a home inspection is highly recommended to uncover any potential issues with the property. Not required, and ordered by borrower. Lender never sees the inspection report on home.

Home Insurance for Kentucky FHA loans

Homeowners insurance is mandatory for all FHA loans. You need to secure a policy that covers the property against loss or damage.

Title Report for Kentucky FHA loans

A title report ensures that the property has a clear title with no outstanding liens or claims. This is a crucial step in the home buying process to protect your investment.

Earnest Money Deposit for Kentucky FHA loans

An earnest money deposit is typically required to show the seller that you are serious about purchasing the home. This amount varies but is usually between 1% and 3% of the purchase price. $500 is typical in Kentucky for a deposit on a home you are buying.

Credit Reports for Kentucky FHA loans

Lenders will pull your credit report to assess your creditworthiness. It's important to check your credit report for errors and ensure that all information is accurate before applying for a loan. Some lenders will charge you upfront for the credit report fee and others will pull all three credit reports from Experian, Transunion and Equifax for free. Usually lender will not share the report with you but give you the scores. Scores go from 350 to 850 on each credit bureau.

Time to Close on a Kentucky FHA loan

The time to close an FHA loan can vary but typically ranges from 30 to 45 days. This period can be shorter or longer depending on various factors, including the lender's efficiency and the completeness of your documentation.

Locking in Rate on a Kentucky FHA loan

Once you are approved for a loan, you can lock in your interest rate to protect against rate fluctuations. Rate locks can last from 15 to 180 days or longer, depending on the lender.

CAIVRS Check for FHA loan in Kentucky

The Credit Alert Verification Reporting System (CAIVRS) is used to determine if a borrower has a federal debt or delinquency. If your name appears on this list, you may be ineligible for an FHA loan until the issue is resolved. So if you are delinquent on any student loan debt, back taxes to the IRS or social security overpayments, this can stop your Kentucky FHA loan pre-approval

Student Loan Rules for FHA Kentucky FHA loan

For FHA loans, the monthly payment for student loans is calculated as either .5% of the outstanding balance or the actual documented payment amount, whichever is greater. If your loans are in deferment or forbearance, .5% of the outstanding balance will be used for DTI calculations.

Delinquent Government Debt Kentucky FHA loan

If you have delinquent government debt, such as unpaid federal taxes or a defaulted student loan, you may not qualify for an FHA loan until the debt is resolved.

By understanding these requirements and preparing accordingly, you can increase your chances of qualifying for an FHA loan in Kentucky and successfully purchasing your new home.

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Joel Lobb, American Mortgage Solutions (Statewide)

Joel has worked with KHC for 14 of his 25 years in the mortgage lending business. Joel said, “A lot of my clients would not have been able to purchase a home of their own or possibly delayed their purchase due to lack of down payment but with the $10,000 DAP loan program, this gets them into a house sooner and starts their path to homeownership while building equity instead of throwing their money away.”

When you’re ready to purchase a home in Joel's area, contact him at:
Phone: 502-905-3708
Email: Kentuckyloan@gmail.com
Website: www.mylouisvillekentuckymortgage.com

Any questions, please don't hesitate to reach out via, text, email,  or call.  Advice is always free. 

One of Kentucky's highest rated mortgage loan officers for FHA, VA, USDA, Kentucky Housing KHC and conventional mortgage loans.  

Kentucky Mortgage Application for KHC, FHA, VA, USDA Zero Down Loans

APPLY ONLINE BY CLICKING HERE OR CALL OR TEXT 502-905-3708 OR EMAIL KENTUCKYLOAN@GMAIL.COM

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