I specialize in Kentucky First Time Homebuyers FHA, VA, USDA & Rural Housing, KHC and Fannie Mae mortgage loans. I have helped over 1300 Kentucky families buy their first home or refinance their current mortgage for a lower payment; Kentucky First time buyers we still how available down payment assistance with KHC. Free Mortgage applications/ same day approvals. Web site is not endorsed by the FHA, VA, USDA govt agency. Text/call 502-905-3708 kentuckyloan@gmail.com NMLS 57916 NMLS 1738461
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
The Debt-to-Income (DTI) ratio is a critical factor in determining whether you qualify for a mortgage along with credit, work history and assets. It measures how much of your gross monthly income is used to cover your monthly debt obligations.
For Most Kentucky Mortgage loans ,the debt to income ratio is centered around the front end ratio and back end ratio. The front end ratio will vary according to the different types of loans, and I will show them below. The backend ratio, which measures the new house payment along with your current monthly payments on the credit report along with any court ordered payments like child support, DTI limit is typically 45 to 50%
From a Kentucky Mortgage lender's perspective, your ability to purchase a home depends largely on the following factors:
Front-End Ratio
The front-end ratio is the percentage of your yearly gross income dedicated toward paying your mortgage each month. Your mortgage payment consists of four components: principal, interest, taxes and insurance (often collectively referred to as PITI) A good rule of thumb is that PITI should not exceed 31% of your gross income. If you make $100,000 a year, then your max house payment to include escrows for home insurance, mortgage insurance, property taxes would be $2583.00
Back-End Ratio
The back-end ratio, also known as the debt-to-income ratio, calculates the percentage of your gross income required to cover your debts. Debts include your mortgage, credit-card payments, child support and other loan payments. Most lenders recommend that your debt-to-income ratio does not exceed 45% of your gross income. To calculate your maximum monthly debt based on this ratio, multiply your gross income by 0..45 and divide by 12. For example, if you earn $100,000 per year, your maximum monthly debt expenses should not exceed $3,750 with new mortgage payment. Utility bills, car insurance, cell phone bills, insurance payments does not factor into this ratio. Only bills listed on credit report and 401k loan and child support payment
If you are looking to purchase your first home, you have probably been doing your research about properties in your area, where you might be able to obtain a loan and how to qualify for it. A key term you may recognize from all that research is "debt-to-income ratio," which refers to the figure you get when you add up all your monthly debt payments and then divide that number by your monthly income. In laymen's terms, the debt-to-income ratio gives potential mortgage lenders an idea of how much your expenses are each month in comparison to how much you actually earn.
Depending on where you are in the home-buying process, you may have a good idea of where your credit score lands. As important as a strong credit score is, however, a favorable debt-to-income ratio is arguably of equal importance, and it may be just as closely scrutinized by any potential mortgage lender.
When you try and obtain a loan, expect possible lenders to review two types of debt-to-income ratio. The front-end ratio, or "housing" ratio, gives them an idea of what percentage of your monthly income would have to go toward home-related expenses, such as the mortgage, associated taxes and any additional fees, such as homeowner's association expenditures, that may apply.
The back-end ratio, on the other hand, takes a more cumulative approach and compares your monthly income to all your expenses, from the housing-related ones to school tuition, child support, car payments and any other financial obligations you may have.
The exact percentage your lender will look for will likely vary based on factors such as your credit score, how much you have in your savings account and how much you have to put down for your down payment. Most standard lenders, however, prefer to see something in the ballpark of 28 percent for a front-end ratio. For a back-end ratio, they will likely look for a percentage that does not exceed 36 percent. Federal Housing Authority lenders typically look for a front-end ratio of about 31 percent and a back-end ratio that does not exceed 43 percent.
Simply put, the most effective way to lower a high debt-to-income ratio and therefore make yourself more appealing to lenders is to pay off some of your debt. If you have a cosigner who may be willing to help you out with a loan, that could serve as an additional method of getting around a high ratio.
To calculate the debt-to-income (DTI) ratio for the scenario you provided, you'll need to figure out both the front-end and back-end DTI ratios.
Front-end DTI ratio: This ratio only includes the mortgage payment (including principal, interest, taxes, and insurance) divided by your gross monthly income.
Back-end DTI ratio: This ratio includes all monthly debts (mortgage, credit cards, auto loans, student loans, etc.) divided by your gross monthly income.
(DTI) ratio requirements for different types of mortgage loans in Kentucky, including FHA, VA, USDA, Fannie Mae, and Kentucky Housing loans:
When it comes to securing a home loan, having a knowledgeable and reliable mortgage broker by your side is crucial. Joel Lobb has been serving the Kentucky community for over 20 years, assisting countless families in achieving their dream of homeownership. Let’s take a closer look at what makes Joel stand out in the mortgage industry.
Specializations
Joel specializes in a variety of mortgage programs, catering to the unique needs of Kentucky residents:
FHA Loans: As an expert in Federal Housing Administration (FHA) loans, Joel helps first-time homebuyers and others qualify for affordable financing.
VA Loans: Veterans and active-duty military personnel can benefit from VA loans, which offer favorable terms and low or no down payment options.
USDA & Rural Housing Loans: For those living in rural areas, Joel assists with USDA and Rural Housing loans, making homeownership accessible even in less densely populated regions.
KHC Loans: The Kentucky Housing Corporation (KHC) provides down payment assistance, and Joel guides buyers through the process.
Conventional Loans: Whether you’re a first-time buyer or looking to refinance, Joel offers conventional loan options tailored to your financial situation.
Why Choose Joel Lobb?
Personalized Attention: Unlike mega banks, where borrowers can feel like mere numbers, Joel treats each client as an individual. He listens to your needs, answers your questions, and ensures a smooth loan process.
Access to Multiple Lenders: Joel has access to over 10 different mortgage companies across the country. This advantage allows him to search and negotiate for the best loan options, considering credit, income, and other factors.
Transparent and Honest: Joel delivers on his promises. You can trust him to provide straightforward information and guide you through every step of the mortgage journey.
Joel Lobb Mortgage Loan Officer Expert on Kentucky Mortgage Loans
Gaps in Employment and getting approved for a KY FHA and Conventional Mortgage Loan
A borrower who has no verifiable employment for 6 months or longer is deemed to have a gap in employment.
Fannie: Fannie does not address gaps in employment in their guidelines. We must ensure that DU’s income documentation can be met. This will typically require the borrower’s most recent paystub and a W-2 from the most recent year.
FHA: borrower must be employed at their current job for 6 months or more at the time of case number assignment and a 2 year work history prior to the gap can be documented.
Can income from employment that has not begun be considered effective income?
Expected income refers to income from cost-of-living adjustments, performance raises, a new job, or retirement that has not been, but will be received within 60 days of mortgage closing. The Mortgagee must verify and document the existence and amount of expected income with the employer in writing and that it is guaranteed to begin within 60 days of mortgage closing. Income is calculated in accordance with the standards for the type of income being received. The Mortgagee must also verify that the borrower will have sufficient income or cash reserves to support the mortgage payment and any other obligations between mortgage closing and the beginning of the receipt of the income. For additional information see Handbook 4000.1 II.A.4.c.xii.(L) or II.A.5.b.xii.(L) available at https://www.hud.gov/program_offices/administration/hudclips/handbooks/hsgh
How does FHA view borrowers who change jobs frequently?
If the borrower has changed jobs more than three times in the previous 12-month period, or has changed lines of work, the Mortgagee must take additional steps to verify and document the stability of the borrower’s employment income. The Mortgagee must obtain: • transcripts of training and education demonstrating qualification for a new position; or • employment documentation evidencing continual increases in income and/or benefits. For additional information see Handbook 4000.1 II.A.4.c.xi.(A) or II.A.5.b.xi.(A) available at https://www.hud.gov/program_offices/administration/hudclips/handbooks/hsgh
How does FHA view borrowers who change jobs frequently?
If the borrower has changed jobs more than three times in the previous 12-month period, or has changed lines of work, the Mortgagee must take additional steps to verify and document the stability of the borrower’s employment income. The Mortgagee must obtain: • transcripts of training and education demonstrating qualification for a new position; or • employment documentation evidencing continual increases in income and/or benefits. For additional information see Handbook 4000.1 II.A.4.c.xi.(A) or II.A.5.b.xi.(A) available at https://www.hud.gov/program_offices/administration/hudclips/handbooks/hsgh
On September 19, 2024, a Proposed Rule was published in the Federal Register to amend the Single-Family Housing Guaranteed Loan Program (SFHGLP) regulation to implement changes related to the consideration of a previous USDA loss as significant derogatory credit and the seasoning and payment history requirements for refinance transactions. Specifically, this rule proposes to:
Establish a timeframe of seven-years following a previous Agency loan that resulted in a loss to the government for the loss to be considered significant derogatory credit.
Eliminate the seasoning requirement for borrowers to refinance their existing Rural Development Single-Family Housing mortgage using the streamlined and non-streamlined refinance Borrowers must have no delinquencies greater than 30 days on the mortgage account within 180 days prior to loan application (or since origination, if the account has not been open 180 days).
Establish a six-month seasoning period requirement for borrowers to refinance their existing Rural Development Single-Family Housing mortgage using the streamlined-assist refinance Borrowers must have no delinquencies greater than 30 days on the mortgage account within 180 days prior to loan application.
Rural Development invites the public to submit comments on all aspects on the proposed rule. Comments to the proposed rule may be submitted via the Federal e Rulemaking Portal located at www.regulations.gov. While the public comment period is open for 60 days, Rural Development encourages all interested parties to submit comments as soon as feasible. Comments must be submitted on or before November 18, 2024.
Mortgage Employment or Job History Requirements for a VA Loan Approval in Kentucky
Gaps in Employment
A borrower who has no verifiable employment for 6 months or longer is deemed to have a gap in employment.
VA: VA does not address gaps in employment and generally does not consider non military employment less than 12 months as stable and reliable. Any exceptions based on the loan as a whole is underwriter discretion.
Medical or Temporary Leave Income
The borrower has taken a temporary leave of absence from work typically for medical leave such as maternity, illness, surgery, or on the job injury. This leave is short term in nature and the borrower is still employed with their same employer prior to the leave of absence.
VA: Borrower’s on temporary leave are not eligible for a loan transaction.
Frequent Job Changes
Frequent job changes may indicate instability in a borrower’s income.
VA: the borrower must demonstrate the ability to maintain an income at a constant level over the recent 2-year period even if he or she has worked for a variety of employers.
Seasonal Employment
Seasonal Employment refers to employment that is not year round typically due to weather conditions. Seasonal Employment can be full time or part time.
VA: Borrower must have worked the same job (or same line of seasonal work) for the past 2 years and the borrower’s employer must state there is a reasonable expectation that the borrower will be rehired for the next season. Tax returns will be required if unemployment compensation will be used to qualify the borrower.
*Income calculation will follow calculation guidelines. These guidelines are for employment history and profile only.
Are you a veteran or active-duty service member in Kentucky looking to buy a home? VA mortgage loans could be your key to homeownership. In this guide, we'll explore everything you need to know about VA loans in the Bluegrass State.
What Are VA Mortgage Loans?
VA loans are mortgage options backed by the U.S. Department of Veterans Affairs. These loans offer numerous benefits to eligible veterans, active-duty service members, and certain military spouses.
Benefits of VA Loans for Kentucky Veterans
No Down Payment: Unlike conventional loans, VA loans often require no down payment, making homeownership more accessible.
Competitive Interest Rates: VA loans typically offer lower interest rates compared to conventional mortgages.
No Private Mortgage Insurance (PMI): This can save you hundreds of dollars each month.
Flexible Credit Requirements: VA loans often have more lenient credit score requirements than conventional loans.
VA Loan Eligibility in Kentucky
To qualify for a VA loan in Kentucky, you must:
Be a veteran, active-duty service member, or eligible surviving spouse
Meet the VA's service requirements
Have a valid Certificate of Eligibility (COE)
Meet the lender's credit and income requirements
Key Requirements for VA Loans in Kentucky
Credit Score Requirements
While the VA doesn't set a minimum credit score, most lenders in Kentucky typically look for a score of at least 580. However, some may accept lower scores, especially if you have a strong overall financial profile.
Work History Requirements
Lenders generally prefer to see:
2 years of steady employment
If self-employed, 2 years of successful business operation
Recent college graduates or those recently discharged from military service may have more flexible requirements
VA Second Tier Entitlement Use
If you've used your VA loan benefit before, you may still be eligible for another VA loan through second-tier entitlement. This allows you to:
Purchase another home while keeping your current VA-financed property
Buy a more expensive home if you've already paid off a previous VA loan
Bankruptcy and Foreclosure Requirements
After a bankruptcy or foreclosure, waiting periods typically apply:
Chapter 7 Bankruptcy: 2-year waiting period
Chapter 13 Bankruptcy: 1 year of on-time payments in the bankruptcy
Foreclosure: 2-year waiting period
These periods may be shorter if you can prove extenuating circumstances.
Debt-to-Income (DTI) Ratio Requirements
The VA prefers a DTI of 41% or less or manually underwritten loans, but lenders may accept higher ratios with compensating factors such as excellent credit or substantial assets.
The Kentucky Housing Market and VA Loans
Kentucky's housing market offers great opportunities for VA loan users. With a mix of urban areas like Louisville and Lexington, and beautiful rural regions, there's something for everyone. The median home price in Kentucky is often below the national average, making it an attractive market for VA loan recipients.
Steps to Secure a VA Loan in Kentucky
Obtain Your Certificate of Eligibility (COE)
Find a VA-Approved Lender in Kentucky
Get Pre-Approved for Your Loan
House Hunting in Kentucky
VA Appraisal and Home Inspection
Closing on Your Kentucky Home
VA Loan Limits in Kentucky
As of 2024, there are no VA loan limits for borrowers with full entitlement. This means you can borrow as much as a lender is willing to lend without a down payment, subject to your income and credit qualifications.
Appraisal and Inspection Requirements
VA Appraisal
A VA-approved appraiser must assess the property to ensure it:
Meets the VA's Minimum Property Requirements (MPRs)
Is worth at least as much as you're paying for it
This typically takes 7-10 days.
Termite Inspection
In Kentucky, a termite inspection is required for all VA loans unless:
The seller usually pays for the termite inspection in Kentucky.
Time Frame to Close
The average time to close a VA loan in Kentucky is 30- 45days, slightly longer than conventional loans. This extra time accounts for the VA appraisal process and additional paperwork.
Potential Pitfalls in VA Loan Closing
Several issues can delay or prevent a VA loan from closing:
Property Condition Issues: The home must meet VA MPRs.
Low Appraisal: If the appraisal comes in lower than the purchase price, you may need to renegotiate or pay the difference.
Change in Employment: Losing your job or changing jobs during the process can jeopardize your loan approval.
New Debts: Taking on new debt during the process can affect your DTI ratio.
Insufficient Funds: Even with no down payment, you'll need funds for closing costs and reserves.
Title Issues: Problems with the property's title can delay or derail the process.
VA mortgage loans offer an excellent opportunity for Kentucky's veterans and active-duty service members to achieve homeownership. With benefits like no down payment, competitive rates, and no PMI, these loans can make your dream of owning a home in the Bluegrass State a reality. Understanding the requirements and potential pitfalls can help ensure a smooth loan process.
Take the Next Step with a Trusted VA Loan Expert
Are you ready to start your VA loan journey in Kentucky? Look no further than Joel Lobb, your local VA loan specialist.
Meet Joel Lobb: Your Kentucky VA Loan Expert
Joel Lobb brings a unique blend of military experience and mortgage expertise to serve Kentucky's veterans:
Army Veteran: Joel understands firsthand the challenges and needs of military service members.
20 Years of Mortgage Experience: With two decades in the industry, Joel has the knowledge to navigate even the most complex VA loan scenarios.
Dedicated to Serving Veterans: Joel's mission is to help fellow veterans achieve their dream of homeownership in Kentucky.
My wife and I have struggled most of our lives with poor choices in marriage or in what I will call lifestyle choices but the one thing that we had to do on our own, and that was to just pay my bills on time and believe it or not that wasn't as easy as one might think. I went through a lot of different banks and/or loan officers,or bank reps. Then thru my researching came across Joel,Jeana and I still believe that God the Father lead us to Joel. You see I'm on a fixed income and was barely able to get from month to month. W ith no money down and on a very short time limit Joel was to get us into home that more than met our needs. It met our wants as well needs and our is more than 2X the size of the house we were renting, And 4X the size of the outside of the house we were renting. And for only $160.oo more a month than what we were paying in rent. A lot of people said it couldn't be done even people in tha thefield . What I know is that Joel Lobb worked extra hard and longer hours to achieve my wife and I's dreams even though we had a lifetime of adverseties I don't think of myself as being special. I do however believe that Mr.Lobb worked as hard for me as he does for any of his other clients. He was always transparent and tanaitous in his work ethics. So in my experiences with people in general I think it would be a good idea to give Joel and the mortgage company he represents a serious try.
Joel did an outstanding job. I am a 100% disabled retired Army Soldier. My wife and I have never bought a house. Joel made this process seem so easy it was scary. We found our 23acre ranch and put a bid on it and Joel did the rest. He made this process easier than buying our truck. We were even out of state at the time of closing and it was still no problem for Joel. My wife and I both highly recommend Joel for your home buying, whether it is your first or retirement. Thank you Joel, we Love our first and retirement home. Dennis and Shannon Jackson
Joel is the best mortgage guru in town. My wife and I were first time homebuyers via VA loan moving from NY to KY. He made the process of buying a home smooth and streamlined. We had no worries and everything went flawless. Thank you Joel!
Absolutely Amazing!! I emailed Joel after I had just got a denial from a bank and just thought i would try to get some advice on what my next steps would be to get a house. I honestly didn't expect to even get a reply because my credit is not great. That was about a week and a half ago. I just signed a contract on a house last night. ONLY because of Joel Lobb. He even worked with us throughout the weekend, which shocked me. Best decision I have ever made. THANK YOU SO MUCH FOR WORKING WITH US THROUGHOUT THE ENTIRE PROCESS.
Contact Joel Lobb Today Army Veteran with 20 years Mortgage Loans in KY
Don't wait to start your journey to homeownership with a VA Mortgage. Contact Joel Lobb now:
Joel is ready to answer your questions, address your concerns, and guide you through the entire VA loan process. With his expertise, you can confidently take the next step towards owning your home in Kentucky.
Schedule your free VA loan consultation with Joel Lobb today and take the first step towards your new home!
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Email - kentuckyloan@gmail.com 
Call/Text - 502-905-3708
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