6 Tips to Boost Your Credit Score for Kentucky Mortgage Loans (FHA, VA, USDA, KHC)

6 Tips to Boost Your Credit Score for Kentucky Mortgage Loans (FHA, VA, USDA, KHC)

If you’re looking to buy a home in Kentucky, having a solid credit score is essential for qualifying for popular mortgage programs like FHA, VA, USDA, or KHC loans. Here are six actionable tips to improve your credit score and increase your chances of getting approved for your dream home loan.

1. Pay Your Monthly Bills on Time

Here are six tips for improving your credit score for a fresh financial start 

1. Pay Your Monthly Bills on Time
Paying monthly bills is a necessary chore that has a definite effect on your credit score. According to the FICO scoring model, your payments account for as much as 35 percent of your total score. Create reminders for due dates or establish a calendar for yourself to ensure you get everything paid on time.

2. Reduce Your Debts
Got credit card debt? Start paying it off now. Part of your credit score is based on the amount of available credit you have, known as your credit utilization ratio. So if you're carrying high balances, you'll want to lower them as soon as possible. Create a personal budget with a goal of reducing your spending so that it's lower than your income. Then, use any monthly surplus for your credit card debts until they're gone for good.

3. Limit Credit Inquiries
Looking for a new apartment? What about a mortgage? In either situation, try and group your applications together as much as possible. Applications for new lines of credit will generate a "hard pull" on your credit, and having too many of them in a short period of time can lower your score. However, credit reporting agencies usually consider a group of applications within a short period of time as one pull, as long as they're in the same category.

Similarly, limit yourself to opening up no more than one or two credit cards per year, which also generate hard pulls. Even if you get a ton of offers in the mail for stellar sign-up bonuses, they're likely to be offset by the damage to your credit. FICO reports that new credit and credit inquiries account for 10 percent of your total score.

4. Don't Cancel Old Cards
Have a card you don't use anymore? Don't close it. This can negatively affect your score as it lowers your amount of available credit. Instead, use it about once per month and don't forget to pay the bills in full, and on time.

5. Request Credit Limit Increase
If you only have one card and you're constantly approaching your spending limit, call the bank and ask for an increase in your credit line. This will raise the amount of available credit, which will eventually improve your score.

6. Take Care of Late Payments Before They Hit Your Score
If you do happen to miss a payment, contact the card issuer immediately. If you have good history built up, the company may agree to not report your late payment. Even if you can't avoid a late-payment fee, be sure to get your account up to date as soon as possible so you can limit the damage.
Your credit score is yours to own. It reflects your financial history and helps lenders predict how you will manage your finances in the future. Due to the lingering effects of credit, you don't want to waste any time to improve your credit.

1 -  Email - kentuckyloan@gmail.com 

2.   Call/Text - 502-905-3708

Joel Lobb
Mortgage Loan Officer - Expert on Kentucky Mortgage Loans

 Website: www.mylouisvillekentuckymortgage.com
 Address: 911 Barret Ave., Louisville, KY 40204

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Evo Mortgage
Company NMLS# 1738461
Personal NMLS# 57916

For assistance with Kentucky mortgage loans, reach out via email, call, or text Joel Lobb directly.

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). Mortgage loans only offered in Kentucky.

How to get approved for a Kentucky Mortgage Loan with Bad Credit

There are several mortgage loans programs for Kentucky Homebuyers that may have had experienced bad credit in the past. 

Below is a summary of programs that borrowers can use to get approved for a mortgage loan with bad credit..

 FHA loans in Kentucky, FHA will go down to a 500 minimum credit score with at least 10% down payment or 10% equity on a refinance. 

If your scores is over 580, then you could use a FHA loan in Kentucky to with just 3.5% down payment or refinance with that much equity. 

If it turns out that you have a 620 credit score or higher, you can look at doing an Conventional loan with just 3 to 5% down payment. Typically on conventional loans if your score is below 660, you would need 5% down payment.

If you happen to be a Veteran and qualify for a Kentucky VA loan,  you could possibly get approved for a VA loan with no minimum credit score. 

In reality, it is very difficult to get for a VA loan with a score below 560 to 580 range, with most VA lenders requiring a 620 credit score. 

If you are looking to purchase a home in a rural area, you can look at doing a Kentucky USDA loan because they have no minimum credit score but most lenders will want a 620 to 640 credit score. 

Kentucky FHA Loan are your best bet you have a lower fico score or credit score.

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 580 credit score. You can go down to a 500 credit score potentially with a 10% down payment. 

1 -  Email - kentuckyloan@gmail.com 

2.   Call/Text - 502-905-3708

Joel Lobb
Mortgage Loan Officer - Expert on Kentucky Mortgage Loans

 Website: www.mylouisvillekentuckymortgage.com
 Address: 911 Barret Ave., Louisville, KY 40204

---

Evo Mortgage
Company NMLS# 1738461
Personal NMLS# 57916

For assistance with Kentucky mortgage loans, reach out via email, call, or text Joel Lobb directly.

What is the minimum Credit Score Needed to Buy a House and get a Kentucky Mortgage Loan?

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.
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 KY 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 a 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 below to see the qualifying areas.

There is also a max household income limits with most cutoff starting at 109,500 for a family of four, and up to $136,000 for a family of five or more.

The income limits change every spring, so make sure and check to see what updated income limits are.
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 580-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 counteract 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. 

 

Kentucky VA Loan

VA loans are for veterans and active-duty military personnel. The loan requires no down payment and no monthly mi premiums, 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 no max loan limits in Kentucky

 
Most VA lenders I work with will want a 580-credit score, even though VA says in their guidelines there is no minimum score, good luck finding a lender
VA requires 2 years removed from bankruptcy or foreclosure
Clear Caviars needed to for a VA loan.

 

Kentucky Down Payment Assistance

This type of loan is administered by KHC in the state of Kentucky. They typically have $10,000 down payment assistance year around, that is in the form of a second mortgage that you pay back over 10 years.

Sometimes they will come to market with other down payment assistance and lower market rates to benefit lower income households with not a lot of money for down payment.

KHC offers FHA, VA, USDA, and Conventional loans with their minimum credit scores being set at 620 for all programs. The conventional loan requirements at KHC requires 660 credit score.
The max debt to income ratios is set at 40% and 50% respectively.

Joel Lobb (NMLS#57916)
Senior Loan Officer
Text/call 502-905-370

kentuckyloan@gmail.com


If you are an individual with disabilities who needs accommodation, or you are having difficulty using our website to apply for a loan, please contact us at 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/

Kentucky FHA Mortgage Loans vs Kentucky USDA Rural Housing Loans Compared

Here are the important points about Kentucky USDA Rural Housing Loans:

• USDA loan are only available in certain counties of Kentucky.
• There are two types of USDA loans available: Direct and Guaranteed. 
• 100% financing. No down payment 
• USDA will go down to a no score and uses and  automated underwriting pre-approval system called GUS-Guarantee Underwriting System. The GUS findings will dictate your loan pre-approval.
• Kentucky USDA Rural Housing Income limits based on county and number of people in household.
• Must be 3 years removed from bankruptcy and foreclosure
• No purchase price limit
• Upfront funding fee of 1% of loan amount paid to RD at closing 
• Annual mi fee of .35% paid each month for life of loan. 
• Takes on average 30-45 days to close. 
• 30 year fixed rate is the only term available and rates are usually comparable to FHA and VA government mortgage insured rates.
• Do not have to be a first time home buyer and can currently own another home if USDA deems the current living situation not suitable. 
• Appraisal has to meet FHA minimum standards
• You can buy a home with land on USDA Loans as long as the property does not have any agricultural characteristics or income producing capabilities. 
• There is no set max acreage but the appraisal will dictate approval of property by USDA. 
• You can only use USDA loans to purchase property or refinance an existing USDA loan
• Pools are okay and homes in a flood zone are okay. This is a recent change 

Here are some important facts about Kentucky FHA Loans:

• FHA loans can be made in any county of Kentucky. 
• FHA loans require 3.5% down payment
• FHA Mortgage terms are available in 30, 20, 15, 10 year terms.
• Credit score down to 500 are acceptable but subject to investor approval. will need 10% down payment
• Most lenders will want a 620 score, with some going down to 580 with conditions will need 3.5% down payment
• FHA loans are pre-approved using DU, an online automated underwriting system that will dictate your loan approval conditions. 
• FHA has max income limits in Kentucky with the maximum being $498,257 for most Kentucky Counties
• There are no income limits on the household for FHA loans
• There is a upfront mi premium of 1.75% and a monthly fee of .85% payable each month. 
• If you finance over 90% of the homes value, the monthly mi factor of .85% is for life of loan. If less than 90%, 11 year term for annual mi fee.
• FHA, USDA rates are really comparable on paper, no big difference except for the mi
• FHA requires 3 years out on a short-sale or foreclosure
• FHA requires 2 years out on Chapter 7 and 1 year out on a Chapter 13 with good clean history for the last 12 months with no lates. 
• Not required to be a first time home buyer
• Can refinance an existing FHA loan to another without appraisal, income, a processed call FHA streamline refinance
• Can go no money down potentially with a 620 credit score with a grant. We offer these. 

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

kentuckyloan@gmail.com

If you are an individual with disabilities who needs accommodation, or you are having difficulty using our website to apply for a loan, please contact us at 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#57916http://www.nmlsconsumeraccess.org/

What are the requirements to buy a house in Kentucky in 2023?

Credit Score and Income Requirements to Buy a Home in Kentucky in 2023

KENTUCKY CONVENTIONAL

Get your fixed interest rates for eligible buyers.620 minimum credit score

3% down payment 

4-7 years removed from Bankruptcy Depending of if Chapter 7 or 13 

Max Loan is $647,200  in Kentucky
2 Year work history but does not have to be same job





KENTUCKY FHA MORTGAGES

Government-backed loans with flexible guidelines.

500 minimum credit score with 10% down payment

3.5% down payment with 580 credit score

2 years removed from bankruptcy

Can be combined with down payment grants for $0 down payment
Max loan for FHA in Kentucky is $420,680

2 year work history with no gaps over 6 months




KENTUCKY USDA MORTGAGES

Government-backed loans with flexible guidelines.

Zero Down Payment

No Minimum Credit Score, 640 is preferred with most USDA Kentucky Lenders

3 years removed from Bankruptcy

Max Income and Property Map Eligibility Requirements
2 year work history with no gaps over 60 days





KENTUCKY VA MORTGAGES

Government-backed loans for those who’ve served our nation.

Zero Down Payment Loan

No minimum credit score, 580 and higher is preferred with most VA lenders in KY with some wanting a 620

2 years removed from bankruptcy

Active Duty --like to see a least a year left in service or 6 months reserves and a job relatable

Have Questions or Need Expert Advice? Text, email, or call me below:

Joel Lobb
Mortgage Loan Officer
Individual NMLS ID #57916


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



Text/call: 502-905-3708
fax: 502-327-9119
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).

Kentucky FHA Loans with Bad Credit in 2023.

How to get approved for a Kentucky FHA Mortgage Loan with Bad Credit in 2023.

Below details the DTI requirements The maximum Front and Back ratios applicable to manually underwritten Kentucky FHA Mortgages are detailed below. 

Maximum DTI allowed for Manual UW is 40/50 

**IMPORTANT – any loan where ALL borrowers have No Fico Score, the Maximum DTI is 31/43 per HUD DTI and Compensating Factor Requirements: 

560 FICO and Above – DTI up to 31/43.Comp Factors Required - NONE. 

560 FICO and Above - DTI up to 37/47Comp Factors Required– 1 Required 

560 FICO and Above – DTI up to 40/50Comp Factors Required– 2 Required

ACCEPTABLE COMPENSATING FACTORS:

RESERVES – 3 mo (1-2 Unit) 6 Mo (3-4 Unit)

HOUSING DECREASE – new PITI is no more than $100 or 5%, the lesser of the two

RESIDUAL – Meet VA residual requirements

ADDITIONAL INCOME – Income not reflected in DTI (this comp factor is only permitted when DTI is over 37/47 and if income were used, it would decrease DTI under 37/47)

MANUAL UNDERWRITE REQUIREMENTS ON ALL LOANS

12 Months verified housing history OR rent free letter,

Reserves, AND

1 month reserves for 1-2 Unit

3 month reserves for 3-4 Unit

NOTE: If you use reserves as a compensating factor, then you do not need these reserves in addition

Letter of explanation for all derogatory credit, including any NSFs and/or overdrafts in bank accountIf applicable, 2 months for all bank statements in the file (60 days activity)

Maximum DTI 40/50 (HUD guideline, no exceptions

Instructions for Residual Income as Compensating Factor

Residual income may be used as compensating factor when it meets or exceeds the stated amounts in

the table below. Note that all household members must be counted for ‘family size’ except for individuals

who are fully supported from a verified source of income not included in the effective income of the loan.

Residual Income Calculation When Needed as a Compensating Factor

Gross Monthly Income1 2

- (State income taxes3)

- (Federal income taxes3)

- (Municipal or other taxes3)

- (Retirement deductions and/or Social Security deductions)

- (Total monthly housing payment)

- (Estimated maintenance and utilities4)

- (Job related expenses (e.g., childcare)5)

= Monthly Residual Income for Family Support.

[When using Residual Income as a compensating factor, the “Monthly Residual Income for Family Support” must

meet or exceed the dollar amount in the “Residual Income Table” above.

1 Income from occupying borrowers only

2 Non-taxable income may not be grossed up

3 Federal and state taxes must be used to determine appropriate deductions or paystub if taxes are not available

4 Multiply total living area (sq ft) x 14

5 Childcare letter is not required (as it is for VA) and should not be requested

Exceptions to the Required Residual Income

You may reduce the residual income figure from the above tables by 5% if:

1. The borrower(s) is an active duty or retired serviceperson, OR

2. There is a clear indication that a borrower will receive the benefits resulting from use of military-based

facilities located near the property.

Examples of military service for reduced residual income are:

Guard and Reserve military retirees, 100% disabled Veterans and their family members, or Medal of Honor

recipient.

Joel Lobb
Mortgage Loan Officer
Individual NMLS ID #57916


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



Text/call: 502-905-3708
fax: 502-327-9119
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 a good FICO Score for Mortgage Loan Approval?

 What is a good FICO Score for Mortgage Loan Approval?

FICO Scores generally range from 300 to 850, where higher scores demonstrate lower credit risk and lower scores demonstrate higher credit risk (note: some types of FICO® Scores have a slightly broader range). 

What’s considered a “good” FICO® Score varies, since each lender has its own standards for approving credit applications, based on the level of risk it finds acceptable. So one lender may offer its lowest interest rates to people with FICO® Scores above 730, while another may only offer it to people with FICO® Scores above 760.

The chart below provides a breakdown of ranges for FICO® Scores found across the U.S. consumer population. Again, each lender has its own credit risk standards, but this chart can serve as a general guide of what a FICO® Score represents.

Louisville Kentucky Mortgage Lender for FHA, VA, KHC, USDA and Rural Housing Kentucky Mortgage: Credit Scores Required For A Kentucky Mortgage Loa...

Louisville Kentucky Mortgage Lender for FHA, VA, KHC, USDA and Rural Housing Kentucky Mortgage: Credit Scores Required For A Kentucky Mortgage Loa...:  What kind of credit score do I need to qualify for different first time home buyer loans in Kentucky? Answer. Most lenders will wants ...

What is a Good Credit Score for a Kentucky FHA, VA, USDA, Fannie Mae Conventional KHC Mortgage Loan Approval?

What is a Good Credit Score

What is a Good Credit Score?

An established credit history and credit score often stands between potential home or car buyers and their dream. But What is a good credit score? What exactly is a credit score? What makes a credit score “good?” How to improve your credit score? If you’re new to building credit there are a few things you need to know in order to keep your credit looking stellar.

What is a credit score?
Your credit score is a numerical representation of your credit report. This three-digit number is like a badge that predicts risk, credit responsibility and determines your interest rates if you borrow money from lenders much like your CLUE Report. While you will be able to get a copy of your credit report you may not find this numerical key listed. Think of your credit score like the cliff notes version of your credit report. There are a few different measures of credit scores between divisions. Based on their own systems different scorers might view certain numbers in many ways.

what is a good credit score

Deciphering your three-digit credit score is quite easy if you know the levels. The range usually runs from 300-850. Good to excellent credit is considered anything from 700 to 850. If your credit score falls in this range you’re going great! Fair credit runs from 625-699, poor runs from 550-624, and anything below 550 is bad. Some finance experts would classify anything over 720 a good credit rating. Experts will disagree depending on their preferred credit rating systems, and in most cases the criteria you use to determine whether or not your credit score is good will not be far off.

What Does a Good Credit Score Mean?
Having a good credit score is great, but if you don’t know how to use it you could be missing out on some crucial credit building. Credit scores are used in varying ways by lenders and banks. One thing your credit score implies is how likely you are to pay back debt. Basically it announces how reliable you are as a borrower. People with good credit scores are more likely to pay back funds that they borrow while those with lower scores aren’t so reliable. Lenders like reliable borrowers, and good credit points them out.

But a credit score does much more than predict whether or not you’ll pay a loan back. When it comes to buying a house or car, there is an interest charge. Higher credit scores usually have a lower interest rate than those with bad to fair credit. Lenders not only base whether or not they’ll approve a loan by your credit score, but also how much interest to charge. If your credit is in good standing your interest rate won’t be as high as someone with bad credit. Your credit score saves you money with lower interest rates.

How is a Credit Score Calculated?
In order to build and maintain good credit you must first know how your score is determined. Once you know what goes into a credit score you can begin building your credit or nursing your score towards higher digits. Credit scores are based on your financial history only, and laws prevent your score being affected by things like race, gender, age and where you live. What is included are items such as your payment history, your current credit debts, age of your credit history, new credit items added to your accounts and types of credit used.

These five basic areas are where the bulk of your credit score is formed. All criteria have varying degrees of involvement in your score. For example:

• Payment history (35%) – How many on-time payments you’ve made, missed, defaulted and past due items
• Current amount owed (30%) – How much you currently owe – if you owe a large amount this could negatively affect your score
• Age of credit history (15%) – The average length of your credit accounts and time since last activity
• New credit (10%) – The number of new credit items on your accounts
• Types of credit (10%) – The kinds of credit accounts are you currently maintain

How to Improve Your Credit Score?
Many people avoid credit based on all the negatives they’ve heard against it, but neglecting your credit score hurts your chances of being able to make major purchases in the future. The best way to build credit is to use credit, and forming the following good credit habits early will pull your low score to higher ground.

• Pay bills on time – This is the easiest and best way to boost your credit score. Since the bulk of your credit score comes from your payment history, paying bills on time will pull you up quickly. Not only will that help, but a recent and consistent history of paying bills on time overshadow a period long in the past where you may have missed payments.
• Budget – Setting up a budget and staying within its parameters will keep you from overspending and using credit for frivolous things. Although using credit builds credit not being able to pay it off hurts more in the future.
• Use all your credit cards regularly – If you have a few credit cards try to use them from time to time in order to show that you use all of your accounts. Remember that the last usage of an account is 15% of your score.

Track a key aspect of your financial profile with your personal FICO® Score history graph. Simply navigate over any point of your score history and view the date the score was calculated. Check back each month to stay on top of changes.

Important items to note:

• We may not receive a new score for you each month. You won’t see a score if we did not receive one for a given month.
• Remember, FICO® Scores are based on data in your credit report, so changes to your score may be a result of changes in your credit report. You can request a free annual credit report from Equifax at www.annualcreditreport.com.

Please refer to our FAQs or Useful Links sections for more information.

FICO® Scores: What You Need to Know

Score Deciding Factors

35% payment history, 30% amount you owe, 15% length of credit history, 10% new credit opened, 10% type of credit.

 

Understanding Credit Reports and Credit Scores

When it comes to getting a home loan, does your credit report and credit score really matter? Can you use the free credit score you got off the internet to apply for a loan?  What if your credit score is low, can you get a mortgage? What if it is high, will you get a better interest rate? And what the heck is FICO?

So many questions. You’ve searched the internet and are still confused. If you are new to getting a mortgage and are overwhelmed by understanding your credit score you are not alone. Your credit score has a big  impact on your ability to qualify for a loan and get a favorable interest rate. Therefore, you should take the time now to understand it.

Here’s the good news. We’re here to explain things simply and clearly. Step by step we will walk you through all things credit. When we’re done, you’ll know what you need to know to understand how credit impacts your ability to get a mortgage so you can make smart home buying decisions.

Below are the important items we will discuss:

• What is a credit report?
• What do mortgage lenders use to determine my credit score?
• What does FICO stand for?
• What determines my FICO score?
• What’s a good FICO score?
• What if my FICO score is below 620?
• Can I get a copy of my credit report?
• Ah Ha! Now I understand all things credit and I’m this much closer to owning my home!

What is a credit report?

A credit report record’s your credit history including information about:

• Your identity: name, social security number, date of birth and possibly employment information.
• Your existing credit: credit card accounts, mortgages, car loans, students loans etc.including credit terms, how much you owe, and your payment history.
• Your public record: Judgments against you, tax liens or bankruptcies.
• Recent Credit Inquiries: Requests for your information from companies extending credit such as credit card companies, auto loans, etc.

Be aware, credit card companies, car companies and mortgage lenders use slightly different models to determine credit risk. Today we are focusing on Mortgage related credit.

How do lenders calculate my credit score?

Your credit score is the key to your castle. Your home is most likely the most expensive purchase you will ever make. Therefore, when buying a home, lenders use a different system for assessing risk than credit card companies or even auto loan companies use.

Mortgage lenders use a comprehensive system of checking credit called a Residential Mortgage Credit Report (RMCR), commonly called a “Tri-Merge” report. The RMCR report combines your three credit reports from the three national credit bureaus, Equifax, Experian, and TransUnion. Each credit reporting agency calculates your credit score or FICO Score differently. Therefore, pulling from all three bureaus gives lenders a more complete picture of your credit behavior.

Once pulled, lenders use the average of these three scores, usually the middle score, to determine loan qualification and interest rate. For example, if Equifax gives you a 720, Experian a 730 and TransUnion a 740, the lender will use the 730 FICO Score to help determine the terms of your mortgage. If you are applying for a loan jointly, your partner’s three reports will also be pulled.

What does FICO stand for?

FICO stands Fair, Isaac and Company. Over 25 years ago, lenders began using FICO’s scoring model, or algorithm, to fairly and more accurately determine a person’s credit risk. Since it’s inception, FICO’s continually updates its’ algorithms to reflect more current lending trends and consumer behaviors. Today, FICO Scores are used by over 90% of enders. Importantly, your FICO score can impact your loan interest rates, terms, approvals and more.

What determines my FICO score?

A Mortgage FICO score is determined by an algorithm that generally looks at five credit factors including payment history, current level of indebtedness, types of credit used, length of credit history and new credit accounts.

What’s a good FICO score?

To qualify for a conventional loan, most Mortgage lenders require a FICO score of 620+. The best interest rates go to borrowers with a 740+ FICO score. For each 40 point drop, borrowers can expect to see a slightly higher interest rates by about 0.2 percentage points.  If a borrower drops below 660, the increase is likely to be twice as big, a 0.43 percentage point increase. If your credit score is below 620, it is very difficult to get a conventional loan in today’s marketplace. However, don’t be discouraged. You may still be able to buy a home.

What if my FICO or credit score is below 620?

If your score is below 620, you may still be able to buy a home. There are several options:

• Put more money down. Some lenders offset a weak credit score with a higher down payment. A higher down payment gives you more equity in your home, lowering the lender’s risk.  
• You may qualify for a non conventional government issued loan such as an FHA, Veterans Affairs and/or U.S. Department of Agriculture loan which have less stringent lending requirements.
• You may work to get that credit score up!
  • Correct any errors on your report. Analyze your credit items line by line. If you notice a mistake, dispute it right away with either the credit bureau providing the report or the company that providing the incorrect information to the credit bureau.
  • Make all your payments on time. Late payments are the No. 1 way to lower  your credit score.
  • Pay down revolving debt. Keeping your credit balances low helps to raise your score.  
  • Sit back and relax. As long as you're paying down debt and making payments on time, your credit score will eventually rise on its own.

Can I get a copy of my credit report after a lender has pulled it?

Yes! In fact, you can get one free credit report every twelve months from each of the nationwide credit bureaus—Equifax, Experian, and TransUnion. You may also purchase your credit score at any time from any of the credit bureaus. Some Mortgage lenders will tell you your score when you apply for a loan or even give you a copy of your report but they are not required to do so. However, if a lender denies you credit, under the Fair Credit Reporting Act (FCRA) you are entitled to a free copy of your personal credit report if you have received notice that in the past 60 days you have been declined credit

Joel Lobb
Mortgage Loan Officer

Individual NMLS ID #57916

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/

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.