Understanding Credit Score Requirements for Mortgage Loans in Kentucky

Credit Score Requirements in Kentucky

Securing a mortgage loan is a crucial step in the homebuying process, and one of the key factors lenders evaluate is your credit score. Understanding the credit score requirements for mortgage loan approval in Kentucky can help you prepare and improve your chances of securing financing for your dream home.

Importance of Credit Scores for a Kentucky Mortgage Loan Approval.

Your credit score is a numerical representation of your creditworthiness based on your credit history. Lenders use this score to assess the risk of lending to you. A higher credit score typically indicates lower risk to lenders, making you more likely to qualify for a mortgage loan and secure better terms and interest rates.

Credit Score Requirements in Kentucky

While specific credit score requirements can vary among lenders and mortgage programs, there are some general guidelines to consider when applying for a mortgage loan in Kentucky.

1. Conventional Loans: Conventional mortgage loans are not insured or guaranteed by the government. Many lenders prefer borrowers to have a credit score of at least 620 to qualify for a conventional loan. However, some lenders may require higher scores, especially for competitive interest rates.

2. FHA Loans: The Federal Housing Administration (FHA) offers loans with more lenient credit score requirements compared to conventional loans. In Kentucky, borrowers may be eligible for an FHA loan with a credit score as low as 500, provided they can make a 10% down payment. A credit score of 580 or higher may qualify for a lower down payment option of 3.5%.

3. VA Loans: If you're a veteran, active-duty service member, or eligible spouse, you may qualify for a VA loan guaranteed by the Department of Veterans Affairs. VA loans typically have more flexible credit score requirements, and some lenders may consider borrowers with lower credit score. VA does not have a minimum credit score, but most lenders will want a 620 credit score...

4. USDA Loans: The U.S. Department of Agriculture (USDA) offers loans to eligible rural and suburban homebuyers with low to moderate incomes. Credit score requirements for USDA loans in Kentucky can vary, but many lenders prefer scores of 640 or higher, however, on paper they don't have a minimum credit score requirement

Tips for Improving Your Credit Score for a Kentucky Mortgage Loan

If your credit score is below the desired threshold for a mortgage loan, don't despair. There are steps you can take to improve your creditworthiness over time:

• Check Your Credit Report: Obtain a free copy of your credit report from each of the three major credit bureaus—Equifax, Experian, and TransUnion—and review them for errors or discrepancies.
• Pay Bills on Time: Your payment history is one of the most significant factors affecting your credit score. Make sure to pay all your bills, including credit cards, loans, and utilities, on time.
• Reduce Credit Card Balances: Aim to keep your credit card balances low relative to your credit limits. High credit utilization can negatively impact your credit score.
• Avoid Opening New Credit Accounts: While having a mix of credit accounts can be beneficial, opening multiple new accounts within a short period can lower your credit score.

Conclusion

In Kentucky, credit score requirements for mortgage loans can vary depending on the type of loan and lender you choose. While higher credit scores generally improve your chances of loan approval and favorable terms, there are loan programs available for borrowers with less-than-perfect credit.

Before applying for a mortgage loan, it's essential to review your credit report, understand your credit score, and take steps to improve it if necessary. By demonstrating responsible financial behavior and maintaining a good credit history, you can increase your likelihood of securing a mortgage loan and achieving your homeownership goals in Kentucky.

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

Get Approved Now Click Here

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 First Time Home Buyer Programs

Kentucky First Time Home Buyer Programs

If you are a potential Louisville Kentucky First Time home buyer first time home buyer in Louisville Kentucky, we welcome you! It is our utmost desire to assist you in reaching the goal of buying your first home. 

We've gathered the most helpful, beneficial resources together on this page to make things as easy as possible for you.


We have access to all the Louisville Kentucky First Time home Buyers programs including, FHA, VA, KHC, and USDA, Rural Housing Zero Down home loans--

What is available for first time home buyer financial programs in Kentucky?

The first place to start in that search is the Kentucky Housing Corporation. They provide generous assistance to first time home buyers in the form of grants to help with the down payment as well as closing costs.

The Kentucky Housing Corporation has a down payment assistance program for eligible homebuyers who meet specific moderate-income limits to help with down payment and/or closing costs. Check and see what is available and if you qualify....



There are other Louisville, Kentucky first time homeownership programs available through the Kentucky Housing Corporation. 

In addition to the state programs, there are federal funds and grants available to residents and first time home buyers in Kentucky through the Homes and Communities program of the US Department of Housing and Urban Development. 

On their website you'll find complete grant information, application forms, description of available funds, as well as many other helpful tools.

Every potential first time home buyer should investigate what they have to offer. 

You can visit the website by clicking on US Dept. of Housing and Urban Development. 

Finally, there is a website that lists all grant programs available through the federal government, Grants.gov. 

Louisville, Kentucky First time home buyers should plan to spend the required time investigating to determine how many specific grants they may qualify for.

You can visit the website by clicking here.


Kentucky First Time Home Buyer Grants and Loan Programs

Your household income and expenses

Lenders look at your income in ways other than the total amount; how you earn it is also important. For example, income from bonuses, commissions and overtime can vary from year to year. If these sources make up a large percentage of your income, your lender will want to know how reliable they are.

Your lender will also consider the relationship between your income and expenses. Generally, your fixed housing expenses (mortgage payment, insurance, and property taxes, but not repairs or maintenance) should not be more than 28 percent of your gross monthly income, although this is not an absolute rule. Your lender will also consider other long-term debts, such as car loans or college loans. It is a good idea to bring the following when you meet with your lender:

Income

Employment, salary and bonuses, and any other source of income for the past two years (bring your most recent pay stub, previous year’s W-2 forms, and tax returns if possible)
The most recent account statement showing the amount of any dividend and interest income you received during the past two years 

Official documentation to support the amount of any other regular income you may receive (alimony, child support, etc.) Job stability is a factor that a mortgage lender will look for, and two years at your current job helps, but this also is not an absolute requirement. If you change jobs but stay in the same line of work, you should not have a problem — especially if the job change is an advancement or increase in income.

Credit score

Your credit score also helps to predict how likely you are to repay the mortgage debt. Credit scores will determine if you qualify for the loan, what your rate is, and mortgage insurance payments each month. Typical fico scores wanted for an automated approval run around 580 for an FHA loan and VA loan, 620 for a USDA, 620 for a KHC Loan with Down Payment Assistance, and 620 for an AU approval for Fannie Mae Loan.

Personal assets

Current balances and recent statements for any bank accounts, including checking and savings
Most recent account statement showing current market value of any investments you may have, such as stocks, bonds or certificates of deposit
Documentation showing interest in retirement funds
Face amount and cash value of life insurance policies
Value of significant pieces of personal property, including automobiles
Debt Information
The balances and account numbers of your current loans and debts, including car loans, credit card balances and any other loans you may have 

Underwriting

The lender does the best possible job of ensuring that a borrower qualifies for a loan. The final decision, however, rests with the lender's underwriter, who measures the total risk that the specific investor, who backs up the loan, is taking. Each investor (or investment company) has its own underwriting guidelines (often using statistical models), so while the underwriters evaluate many of the same factors as the lenders, they may look more closely at some areas than others, depending on the guidelines.

 For example, while the lender may have pre-approved you before you chose a home, by the time you get to underwriting, you will have chosen the property you want to buy, and the underwriter will review the property details closely. 

However, most of the information used is the same as that used by the lender, but it may be evaluated differently. The underwriter will evaluate the borrower's ability to pay (income), willingness to pay (credit history), and the collateral (property). As underwriters analyze each of these risks (although this is not a complete list), here are some possible guidelines they may use:

Income

Is the income sufficient to repay the loan? Ratio guidelines of 31 percent payment-to-income and 43 percent total debt-to-income are standard, but some programs allow for higher ratios. This is the typical manual underwrite for a score that does not fit the current Automated Underwriting Engines used for Fannie Mae (DO), FHA, VA, USDA and Rural Housing (GUS) 

Is the income stable from month to month and year to year? 

Has the borrower been on his/her current job and in the same industry for a sufficient amount of time? 

A minimum of two years is the standard guideline, but exceptions can be made.

Can the income be verified? 

2 years taxes, last 30 days of paystubs 

Credit

Does the borrower have a good credit score-Typically 760 or higher will yield the best rates and lowest mortgage insurance for a conventional loan? FHA mortgage insurance and VA mortgage insurance is the same no matter what your credit score is. 

 

Does the borrower have late payments, collections, or a bankruptcy? 

If so, is there an explanation that can be provided for the late payments/collections/bankruptcy? 

FHA, VA requires 2 years removed from bankruptcy and USDA requires 3 years removed from bankruptcy. 

 
Fannie Mae requires 4-7 years after a bankruptcy. 

 
Does the borrower have excessive monthly debts to repay? Typical Debt to income ratios for a no money down loan are limited to 45% of your total gross monthly income for a USDA or KHC loan.
Is the borrower maxed out on credit cards? 

Pay down your credit card balances to less than 25% of your credit limits before you apply for a mortgage loan.

The down payment

A down payment is a percentage of your home's value. The type of mortgage you choose determines the down payment you will need. It can range from zero to 20 percent, or more if you wish.

A number of loans are available that do not require high down payments, particularly for first-time home buyers. 

FHA loans, for example, may require less than 5 percent down, and veterans or those on active duty in the military can obtain loans with no down payment at all. 

USDA loans are offered to rural home buyers with a no down payment option just like VA loans.

In addition to down payment assistance offered through Kentucky Housing where you don't have to put a down payment down with income caps for both KHC and USDA loans.

American Mortgage Solutions, Inc.

10602 Timberwood Circle Suite 3

Louisville, KY 40223


Company ID #1364 | MB73346


Text/call 502-905-3708


kentuckyloan@gmail.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). I lend in the following states: Kentucky

Credit Score Requirements for a Kentucky USDA, Fannie Mae, VA, FHA Mortgage Loans

Credit Score Requirements

What’s the Credit Score?

Your credit score is a part of the package of information lenders use to decide whether or not they will lend you money or extend credit. Other factors include things like your employment history and income and their own internal scoring systems.

There are two primary credit scoring models you need to know about: FICO® and VantageScore. Each may be used to determine your creditworthiness: that is, how likely you are to repay your loan. Your score can influence your interest rate, length of loan, and even how much you can borrow.

Your FICO Score is based on information received from the three major credit bureaus, Experian, TransUnion, and Equifax.

Your VantageScore, meanwhile, was actually developed by the three major credit bureaus to compete with FICO.

Calculating Scores

Both scores use a range of 300-850. A higher score indicates to lenders that you are fiscally responsible and the risk of lending to you is low.

Influences on your FICO Score:

FICO Score Ranges

Source: Experian

FICO Fast Facts:

• Is not influenced by current interest rates on loans you already have.

• 45-day window for rate shopping before credit is affected.

• Six months of credit history required to establish a FICO score.

• Has a separate Auto Score specifically for car loans.

Influences on your VantageScore:

VantageScore Ranges

Source: Experian

VantageScore Fast Facts:

• Does not factor in paid-off collections when calculating your score.

• Late mortgage payments are weighted more than other late payments.

• 14-day window for rate shopping before credit is affected.

• Can produce a score just a month or so after credit line is opened.

The average FICO score is 711; the average VantageScore is 688.

What Will My Lender Use?

FICO is used by 90% of lenders, according to myFICO, and has been around since 1989. (VantageScore only hit the scene in 2006.)

If you’re not sure which scoring model a lender will use, just ask!

• USDA loan: Most lenders prefer at least a 620
  The U.S. Department of Agriculture insures for low- to moderate-income homebuyers. The USDA does not set a minimum credit score requirement and does not require a down payment.

• Conventional loan: 620
  Conventional loans aren’t insured by a government agency either, but they are covered by mortgage loan companies Fannie Mae and Freddie Mac. The down payment amount varies.

• VA loan: Most lenders prefer at least a 580
  A Veterans Affairs loan is backed by the U.S. Department of Veterans Affairs and meant for military members and their spouses. These loans don’t require a minimum score or money down.

• FHA loan: 500 (with 10% down payment) or 580 (with 3.5% down payment)
  FHA loans, those guaranteed by the Federal Housing Administration, are for higher-risk borrowers who have poor credit and little money saved for a down payment. The credit requirements can fluctuate based on how much of a down payment you can afford.Most lenders have overlays now wanting a minimum 620 credit score even for FHA loans.

Are you interested in seeing how your current credit score might affect a new mortgage? Let’s take a look together.

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

https://kentuckyloan.blogspot.com/

Kentucky Mortgage Approval Underwriting Myths Debunked for FHA, VA, USDA and Fannie Mae

 Mortgage Approval Underwriting Myths Debunked

Getting approved for a loan is not as hard as some make it. The 3C approach breaks it down in its simplest form so no need to overthink or complicate with “what if’s” or variable situations and these factors are the same in every state. They all have to line up for your loan to be approved but here there are in order of significance

Capacity - No matter if your credit is in 800’s the ability to afford a loan (capacity aka DTI) is the MOST important C and why most applications either get denied or reduced. Income is EVERYTHING.

To get a conforming (FHA / VA / Conventional) loan you need 2yrs of verifiable Full time income even if it’s pieced together with different employers with 2yrs W2’s and your most recent paystub if you’re an employee and OT and/or bonus cannot be used if you’ve been with your employer for less than 2yrs.

If you have part time employment as well that income cannot be used unless you’ve worked both jobs for at least 2yrs UNLESS your P/T job is the exact same as your F/T job and your hours are not variable then in most cases you can get an exception if you’ve been there for at least 1yr. If you’re self employed 2 most recent tax returns with positive income on line 31 of your schedule C.

If homeownership is your goal, then don’t be cheap and have a certified tax preparer prepare your taxes because it’s likely you’ll need certain docs to get approved only they can provide. Also DO NOT write off all your income to avoid paying the IRS taxes because this will disqualify you from a loan and you’ll have to get a more expensive loan with a bigger down payment.


Credit - many people think this is the most important but it’s not but it is important. With a high enough capacity (low DTI) I’ve seen clients with minimum scores get approved. FHA requires 580, VA does not have a minimum score requirement and while some lenders can do down in the 500’s generally most lenders do not go below 580, and conventional requires 620.

Having said all that just because you meet the minimum score does not mean you’ll get an approval before credit profile (positive tradeline history, collection activity, credit usage) is what matters most. I’ve seen applicants with 680+ get denied for conventional loans because they have a poor credit profile or low capacity (higher DTI).

FHA is a little more forgiving which is why they are easier loans to get than conventional. Obviously the higher the score, the better the chances are for approval but high scores aren’t needed if capacity and collateral are strong.

Collateral - aka down payment. Underwriters request either 1 bank statement for FHA or 2 bank statements for conventional and all they are looking for is verification of cash to close, large deposit (FHA more than 1% of loan amount deposited in 1 deposit) activity and reserves if needed, not spending habits. Large purchases are irrelevant and NSF’s can be explained with an explanation letter. The higher the down payment in percentages (3.5 or 5%, 10%, 15%, 20% etc…) not dollars ($2000 or $5000 more than required) then the lower the risk and higher chance of approval especially for conventional loans. Plus dollars don’t noticeably reduce your monthly payment but percentages do.

Overlays - additional restrictions some lenders have in addition to standard mortgage guidelines. If your lender is telling you anything more is required than what’s posted above it’s because they have overlays which make it more difficult to get approved with them.
Example - Veteran’s United will not take credit scores under 620 = OVERLAY

If you want a personalized answer for your unique situation call, text, or email me or visit my website 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

email: kentuckyloan@gmail.com

https://kentuckyloan.blogspot.com/

CONFIDENTIALITY NOTICE: This message is covered by the Electronic Communications Privacy Act, Title 18, United States Code, §§ 2510-2521. This e-mail and any attached files are deemed privileged and confidential, and are intended solely for the use of the individual(s) or entity to whom this e-mail is addressed. If you are not one of the named recipient(s) or believe that you have received this message in error, please delete this e-mail and any attached files from all locations in your computer, server, network, etc., and notify the sender IMMEDIATELY at 502-327-9770. Any other use, re-creation, dissemination, forwarding, or copying of this e-mail and any attached files is strictly prohibited and may be unlawful. Receipt by anyone other than the named recipient(s) is not a waiver of any attorney-client, work product, or other applicable privilege. E-mail is an informal method of communication and is subject to possible data corruption, either accidentally or intentionally. Therefore, it is normally inappropriate to rely on legal advice contained in an e-mail without obtaining further confirmation of said advice.

Kentucky First Time Home Buyer Programs

Conventional Loan

 

• At least 3%-5% down

 

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

 

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

 

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

 

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

 

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

 

 

Kentucky USDA Rural Housing Program

 

 

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

 

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

 

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

 

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

 

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

 

There is a map link  see the qualifying areas.

 

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

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

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

 

USDA requires 3 years removed from bankruptcy and foreclosure.

 

There is no max USDA loan limit.

 

 

Kentucky FHA Loan

 

 

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

 

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

 

The mi premiums are for life of loan like USDA.

 

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

 

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

Kentucky VA Loan

 

 

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

 

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

Kentucky Down Payment Assistance

• Regular DAP

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

  Affordable DAP

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

  ​MORE ABOUT DOWN PAYMENT AND CLOSING COSTS

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