How to get a Kentucky mortgage loan with bad credit through FHA, VA, USDA, or the Kentucky Housing Corporation (KHC)

 To get a Kentucky mortgage loan with bad credit through FHA, VA, USDA, or the Kentucky Housing Corporation (KHC), you'll need to take specific steps tailored to each program:

1. Kentucky FHA Loan with Bad Credit:

   • Credit Score Requirement: FHA loans typically accept lower credit scores than conventional loans. While the minimum credit score can vary, aiming for at least a 580 score can increase your chances.
   • Down Payment: With a credit score below 580, a 10% down payment may be required. If your score is 580 or above, you can qualify with a 3.5% down payment.
   • Work on Your Credit: Prioritize improving your credit score by paying bills on time, reducing debt, and disputing any errors on your credit report.

2. Kentucky VA Loan with Bad Credit:

   • Credit Score Requirement: VA loans are known for being flexible with credit requirements. While there's no set minimum score, lenders often look for scores around 620 or higher.
   • VA Loan Guaranty: The VA doesn't directly issue loans but guarantees a portion of the loan, making lenders more willing to approve applicants with lower credit scores.
   • Proof of Financial Stability: Highlight stable income and employment history to strengthen your application.
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3. Kentucky USDA Loan with Bad Credit:

   • Credit Score Requirement: USDA loans typically require a minimum credit score of 640. However, some lenders may consider scores as low as 580 with compensating factors.
   • Income Limits: Ensure your income falls within USDA's income limits for the area where you're buying.
   • Compensating Factors: Emphasize factors like a steady job, low debt-to-income ratio, and a history of making timely payments to offset a lower credit score.

4. Kentucky Housing Corporation (KHC) Loan with Bad Credit:

   • Credit Score Requirement: KHC loans may have varying credit score requirements depending on the specific program. Aim for a score of at least 620 for better chances of approval.
   • Down Payment Assistance: KHC offers down payment assistance programs that can help lower-income and first-time homebuyers. Check eligibility and requirements for these programs.
   • Prequalification: Consider getting prequalified to understand your options and improve your negotiating position.

Hope your day is full of sunshine

Joel Lobb  Mortgage Loan Officer

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/

NMLS 57916  | Company NMLS #1364/MB73346135166/MBR1574

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).

For all these loans, working with a knowledgeable mortgage broker like Joel Lobb can be beneficial. They can guide you through the specific requirements, help you understand your options, and assist in improving your chances of approval despite bad credit.

Kentucky Mortgage Loan Programs

FHA Pricing Improvements Any FICO (down to 550) Conventional Pricing Improvements Any FICO ( down to 580) Non-Traditional Credit/ No Score Options Available on FHA, VA and USDA FreddieMac ChoiceRenovation Down to 580 Fico EasyPath FHA 203K Limited and standard Down to 620 FICO Purchase and Refinance options LOWER FICO OPTIONS Down to 550 FICO on FHA and VA Down to 580 FICO on USDA and Conventional MANUAL UW OPTIONS FHA, VA & USDA CASH OUT REFINANCES FHA and VA down to 550 FICO VA cash-out up to 100 LTV Manual Underwrite options Manufactured housing options MANUFACTURED HOMES Single and multi-wide options Available for FHA, VA, USDA and conventional Options for manufactured homes built after June 15th 1976 USDA 97% of the USA is eligible 100% LTV available USDA Streamline NO FICO allowed Escrow holdbacks allowed DACA and EAD allowed FICOs down to 580 Temporary Buydowns Currently available on FHA, VA and Conventional loans

The Credit Report and Credit Scores Used For A Kentucky Mortgage Loan Approval FHA, USDA, Fannie Mae and VA

A lot of buyers are hesitant about having their credit pulled because they think it will go down, whereas in most cases, scores are really the same with most mortgage lenders. Below I will try to explain to you what mortgage lenders use for credit qualifying scores and why you may have a different credit score and why some lenders may require a higher score than other lenders.

Lastly, each lender must pull their own credit report and cannot use another lender's credit report or the consumer's credit report. I will explain the reasoning below. 

Does shopping around for a mortgage hurt my credit?

No. Within a 45-day window, multiple credit checks from mortgage lenders are recorded on your credit report as a single inquiry. This is because other lenders realize that you are only going to buy one home. 

The impact on your credit is the same no matter how many lenders you consult, as long as the last credit check is within 45 days of the first credit check. Even if a lender needs to check your credit after the 45-day window is over, shopping around is usually still worth it. The effect of an additional inquiry is small, while shopping around for the best deal can save you a lot of money in the long run.

Why do some mortgage lenders require a certain credit score whereas other mortgage lenders may not?

One Word Mortgage Overlays. Some lenders will institute a higher credit score than the minimum below to lessen their risk of having to buy the loan back from the government agencies if they get too many mortgage defaults. In order to protect their lending portfolio and hedging their risk, they will require say a 640 credit score or higher for a FHA loan, whereas the guidelines clearly state you can do a FHA loan with a minimum credit score of 580 To understand mortgage overlays, it helps to have a foundation of how the mortgage approval process works. Mortgage lenders always have underwriting guidelines—standards to determine the amount and terms you qualify for.

Credit Score Minimum guidelines are typically set based on the mortgage program, e.g., FHA, VA, or USDA. FHA, --

What score does the Mortgage Lender Use? Why may it be different than the one you are seeing?

The reason mortgage lenders use older FICO Scores is because they don’t have a choice. They are essentially forced to use them.

For a bank to sell a mortgage to Fannie Mae or Freddie Mac, FHA VA, USDA, Etc, the loan has to meet certain guidelines. Some of these guidelines require borrowers to have a minimum credit score under specific FICO Score generations.

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?

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.

How do you increase your score to qualify for a Kentucky Mortgage Loan

By paying down your credit card balances (credit utilization) and having a good pay history (payment history) ,this is the best way to raise your score. 

 The credit bureaus don't update immediately, so I would not add to the balance or open any new bills or have any other lender do an inquiry on your credit report while we wait for the scores to hopefully go up in the next 30 days. Try to keep everything status quo and make your payments on time and keep your balances low or lower than what is now reporting on the credit report. 

How to improve your credit score!

Pay Every Single Bill on Time, or Early, Every Month

Please understand one thing; paying your bills on time each month is the single most important thing you can do to increase your credit scores.

Depending on the credit bureau, there are 4 or 5 main items that determine everyone’s credit score. Of those items, your history of paying bills makes up about 35% of the score. THIS IS HUGE!

Paying your bills on time shows lenders that you are responsible. It will also spare you from paying late fees whether it is a charge from a credit card or an added fee from your landlord.

Use a calendar, or a phone app, or some other organized system to make sure that you pay your bills on time every single month.

MAIN TIP: Do not pay ANY bill late!

Credit Cards: Lower Balances Are Always Better 

Another big factor in calculating a credit score is the amount of credit card debt. Credit bureaus look at two things when analyzing your credit cards.

First, they look at your available credit limit. Second, they look at the existing balance on each card. From these two figures an available ratio is developed. As the ratio goes higher, so too will your credit score increase.

Here is one simple example. Suppose a person has the following credit cards, corresponding balances, and credit limits

Credit Card	Current Balance	Credit Limit
Chase Visa	$105	$1,000
Mastercard from local bank	$236	$1,500
BP MasterCard	$87	$500
Totals	$428	$3,000

From these numbers, we get the following calculation

$428/$3,000 = 14%

In other words, the person is using 14% of their available credit and they have 86% available credit. The closer that ratio is to 100%, the better the credit score will be.

MAIN TIP: Keep all credit card balances as low as possible.In this particular example, if they had a problem with their car, or needed medical attention or some other emergency, the person would have the money necessary to handle the situation without incurring new debt. This is wise on the consumer’s part and lenders like to see this kind of money management.

Credit Cards Part 2: 1 or 2 is Better Than a Wallet Full

The previous example showed a person that utilized just three credit cards. This is much better than someone who has 5+ credit cards, all with available balances. Why? Lenders do not like to see someone that has the potential to get too far in debt in a short amount of time.

Some people have 5, 10 or more credit cards and they use many of them. This shows a lack of restraint and control. It is much better, and neater, to have only 2 or 3 cards with low rates that handle all of your transactions. A lower number of cards are easier to manage and it does not give a person the temptation to go on a huge shopping spree that could take years to payoff.

MAIN TIP: Try to limit yourself to no more than 2-3 credit cards.

Keep the Good Stuff Right Where it is

Too many people make the mistake of paying off old debts, such as old credit cards, and then closing the account. This is actually a bad idea.

A small part of the credit score is based on the length of time a person has had credit. If you have a couple of credit cards with a long track history of making payments on time and keeping the balance at a manageable level, it is a bad idea to close out the card.

Similarly, if you have been paying on a car or motorcycle for a long time, do not be in a hurry to pay off the balance. Continue to make the payments like clockwork each month.

An account that has a good record will help your scores. An account that has a good record and multiple years of use will have an even better impact on your score.

MAIN TIP: Keep old accounts open if you have a good payment history with them.

Stop Filling Out Credit Applications

Multiple credit inquiries in a short amount of time can really hurt your credit scores. Lenders view the various inquiries as someone that is desperate and possibly on the verge of making a bad financial choice.Too many people make the mistake of getting more credit after they are approved for a loan. For example, if someone is approved for a new credit card, they feel good about their finances and decide to apply for credit with a local furniture store. If they get approved for the new furniture, they may decide to upgrade their car. This requires yet another loan. They are surprised to learn that their credit score has dropped and the interest rate on the new car loan will be much higher. What happened?

If you currently have 2 or 3 credit cards along with either a car loan or a student loan, don’t apply for any more debt. Make sure the payments on your current debt are all up to date and focus on paying them all down.

In a few months of making timely payments your scores should noticeably go up.

MAIN TIP: Limit your new loans as much as possible

Joel Lobb  Mortgage Loan Officer

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/

NMLS 57916  | Company NMLS #1364/MB73346135166/MBR1574

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).

 

Louisville Kentucky Mortgage Lender for FHA, VA, KHC, USDA and Rural Housing Kentucky Mortgages: WHAT IS THE MINIMUM CREDIT SCORE FOR A KENTUCKY FH...

Louisville Kentucky Mortgage Lender for FHA, VA, KHC, USDA and Rural Housing Kentucky Mortgages: WHAT IS THE MINIMUM CREDIT SCORE FOR A KENTUCKY FH...: Kentucky FHA Mortgage Credit Score Requirements FHA is introducing new guidelines on loan to value ratios and the minimum credit score requ...

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)

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.

Student-Loan Freeze Led to Big Credit-Score Gains

 

Student-Loan Freeze Led to Big Credit-Score Gains, N.Y. Fed Says

• Some 30 million student borrowers saw scores rise, study says
• Freeze is set to expire on Aug. 31 but Biden may extend it

Share of Borrowers by Credit Score

Credit scores for student loan borrowers increased dramatically

Here are some key takeaways from the New York Fed report.

Better Credit Scores

The share of student-loan balances held by subprime borrowers fell to 26% in 2021, from 36% in 2019. That’s primarily because loans owed to the federal government that were delinquent before the pandemic were marked as current under the forbearance policy, putting millions of households on a sounder financial footing. 

“The end of forbearance will have impacts on credit scores, borrowing, and household cash flow over the coming year for the 38 million federal borrowers that have benefited from the pause,” the New York Fed researchers wrote. “Some borrowers will enter delinquency or default.”

Growing Balances

With repayments on hold, about two-thirds of student-debt holders had balances that were growing or flat at the end of 2021, compared with just 48% in 2019. That’s an increase of roughly 3.2 million borrowers.  

There was also a shift in the typical size of debts, with larger loans accounting for a bigger share of the total. At the same time, 5.4 million people who were recorded as having student debt outstanding at the end of 2019 no longer owed anything by the end of 2021.

Loan Shifts

Since the pandemic, larger debts have increased as a share of total loans

Source: Federal Reserve Bank of New York Consumer Credit Panel / Equifax

DC Debt Leader

On average, student borrowers in and around the nation’s capital owed the most at the end of 2021. Washington DC topped the list, with an average debt of $53,769, while Maryland ranked second and Virginia fifth. 

Student Loans by State

Average balances vary widely across states

Source: Federal Reserve Bank of New York Consumer Credit Panel / Equifax

Note: As of Q4 2021, average balance

“Of the ten states (not including D.C.) with the largest median balance, seven belong to the Southern Census region (Georgia, Maryland, Virginia, North Carolina, South Carolina, Alabama, and Tennessee),” the report found.

Top 10 Student Loan Debt

Seven of top-10 largest belong to the Southern Census region

Source: Federal Reserve Bank of New York Consumer Credit Panel / Equifax

Note: Ranked by median loan amount

Once the forebearence period ends, loan amounts are anticipated to rise and delinquency rates across states in the South are expected to have worse outcomes.

 

 

https://www.bloomberg.com/news/articles/2022-08-09/student-loan-freeze-raised-credit-scores-dramatically-ny-fed