How to Qualify For a Kentucky FHA Mortgage Loan
Qualifying for an FHA mortgage loan in Kentucky is a great option for first-time homebuyers in Kentucky. It's also beneficial for those with lower credit scores. FHA loans are supported by the Federal Housing Administration.
They offer flexible credit score requirements, low down payment options, and competitive interest rates. Whether you’re looking to buy your first home, FHA loans provide an accessible pathway to homeownership in Kentucky. They also offer a second chance after financial setbacks like bankruptcy or foreclosure.
In this guide, we’ll break down FHA loan requirements. You'll learn about credit scores and down payments. We will also cover work history and debt-to-income ratios. This will help you navigate the process with confidence.
1. Low Down Payment
2.Flexible Credit Qualifying
3.The Seller Can Pay Your Closing Costs
4.Flexible Income Qualifying
5.Qualify Without Your Spouse’s BAD Credit –
What are Kentucky FHA Loans?
FHA stands for Federal Housing Authority. FHA Loans provide low-cost insured Home Mortgage Loans that suit a variety of purchasing options. Whether you’re buying a home or want to refinance your mortgage, FHA loans might be right for you. If you’re unsure about your credit rating, or have concerns about a down payment, FHA loans can give you piece of mind with super low closing costs and flexible payment options.
What factors determine if I am eligible for an FHA Loan in Kentucky?
To be eligible for FHA Mortgage Loans, your monthly housing costs (mortgage principal and interest, property taxes, and insurance) must meet a specified percentage of your gross monthly income. Your credit background will be fairly considered. You must be able to make a down payment, cover closing costs and have enough income to pay your monthly debt.
What is the maximum amount that I can borrow?
The maximum amount for an FHA Mortgage is determined by:
Maximum Loan Amount in Kentucky: The Maximum FHA Loan amount allowed for FHA Home Mortgages varies from county to county in Kentucky. The highest maximum FHA Home Loan right now in Kentucky county is $498,257.00
To see what the limit is in the county in which you’re interested, please refer to the Kentucky FHA Loan Limit chart at the bottom of this page.
Maximum financing: In Kentucky, the maximum FHA financing will be 97.75% of the appraised value of the home or its selling price, whichever is lower.
How much money will I need for the down payment and closing costs?
Kentucky FHA loans require the home buyer to invest at least 3.5% of the sales price in cash for the down payment and closing costs. If the sales price is $100,000 for example, the home buyer must invest at least $3,500. However, the home buyer can use gifts from family, funds from local, state or government agencies, or other sources for the down payment.
What property types are allowed for FHA Loans in Kentucky?
While FHA Guidelines do require that the property be Owner Occupied (OO), they do allow you to purchase condos, planned unit developments, manufactured homes, and 1-4 family residences, in which the borrower intends to occupy one part of the multi-unit residence.
There are three main types of FHA Refinance loans available in KY.
FHA Rate/Term Refinance
The FHA Rate/Term Refinance is for borrowers who currently have a conventional fixed rate or ARM mortgage and wish to refinance into an FHA Mortgage. This program helps borrowers who wish to have a stable, fixed rate FHA Insured Loan.
Cash-Out Refinance
An FHA Cash Out Refinance is perfect for the homeowner who wants to access the equity that they have built up in their home. This program is beneficial to homeowners whose property has increased in value since it was purchased.
Streamline Refinance
The FHA Streamline Refinance is designed to lower the interest rate on a current FHA House Loan or convert a current FHA adjustable rate mortgage into a fixed rate. An FHA Streamline Refinance can be performed quickly and easily. It requires much less hassle and paperwork than a normal refinance including no appraisal, no qualifying debt ratios and no income verification.
Employment and Income for a Kentucky FHA Loan
You must have an employment history that is steady for the last two years. Does not have to be same employer.
Your income has to be verifiable in some way, whether that be through pay stubs, your income tax returns. No bank statements or cash deposits , or undocumented income can be used for income qualifying purposes.
Debt-to-Income Ratio Requirements –
Depending on the automated underwriting system from Desktop Originator, your Debt-to-income ratio is the percentage of your income before taxes that you spend on monthly debt.
Taking into account the proposed mortgage payment as well as the other debts, the FHA requires that these debts all total less than 43 percent of your pretax income in order to qualify for the loan.
If your debt load is too high, you will struggle to pay all of your bills and mortgage expenses and care for yourself and your family.
Property Requirements for a Kentucky FHA Loan
It must be the place where you intend to reside. You must move into the home within 60 days of closing the loan. The home cannot be an investment. There will be an inspection to ensure that the home is safe and habitable.
It is really not too hard to pass FHA loans and the appraisal process.
Pros of FHA Loans –
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New homebuyers and those who have lower credit scores or who have other blemishes on their credit history will often qualify for FHA-insured loans.
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Even though these borrowers are considered “subprime” to a traditional lender, they will receive attractive interest rates through the FHA-insured mortgage programs.
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The down payments required from borrowers are lower than those required by traditional mortgage lenders.
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These loans can be combined with other forms of public assistance for lower income or new borrowers so that the borrower will not need to come up with a down payment of any kind.
Cons of FHA Loans –
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Since the FHA is not actually the lender, and you have to go through FHA-approved lenders, you may not qualify due to stricter standards that the lender has for the loan.
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Because you are not paying 20 percent as a down payment, the FHA requires two mortgage insurance premiums to be paid. One is an upfront premium that is 1.75 percent of the loan amount. Lenders often will allow you to make that mortgage insurance premium a part of your loan. The second is an annual mortgage insurance premium that is .45 percent or 1.05 percent. This premium is paid monthly.
- Any required waiting period has passed, as follows:
| Event | Waiting period | Waiting period with extenuating circumstances (nonrecurring events beyond your control that result in sudden, significant, prolonged reduction in income or a catastrophic increase in financial obligations) |
| Chapter 7 or 11 bankruptcy | Four years | Two years |
| Chapter 13 bankruptcy | Two years from discharge, or four years from dismissal | Two years |
| Multiple bankruptcies | Five years if more than one filing in last seven years. Most recent bankruptcy must have been caused by extenuating circumstances. | Three years from most recent discharge or dismissal |
| Foreclosure | Seven years | Three years, with additional requirements after three years up to seven years: 90 percent maximum loan-to-value purchase, principal residence, limited cash-out refinance |
| Deed-in-lieu of foreclosure, preforeclosure sale (short-sale), or charge-off of mortgage account | Four years | Two years |
The requirements for Kentucky FHA loans are set by HUD.
- Borrowers must have a steady employment history of the last two years within the same industry or line of work. Recent college graduates can use their transcripts to supplant the 2-year work history rule as long as it makes sense.
- Self-Employed will need a 2-year history of tax returns filed with IRS. They will take a 2-year average.
- FHA requires a 3.5% down payment. Can be gifted from a family member or from a retirement savings plan, or money saved up. Any type of cash deposits is not allowed for down payments. No exceptions to this rule!! This is one of the biggest issues I see in FHA underwriting nowadays.
- FHA loans are for primary residence occupancy. Not rental houses.
- Borrowers must have a property appraisal from an FHA-approved appraiser.
- Borrowers’ front-end ratio (mortgage payment plus HOA fees, property taxes, mortgage insurance, homeowners insurance) needs to be less than 31 percent of their gross income, typically. You may be able to get approved with as high a percentage as 43 percent. If the Automated Underwriting System gives you an Approved Eligible you can go higher on the debt ratios
- Borrowers must have a minimum credit score of 580 for maximum financing with a 3.5% down payment
- Borrowers must have a minimum credit score of 500-579 for maximum LTV of 90 percent with a minimum down payment of 10 percent. Most lenders will not go below 580 to 620 score, and very few lenders will go to 580 score. It's best to work on getting your scores up before you apply or work with a loan officer to improve them.
- 2 years removed from Chapter 7 is required with good pay history after bankruptcy
- 1 year removed from Chapter 13 is okay with an excellent pay history with the Chapter 13 plan and permission from the trustee. You will need to qualify with the Chapter 13 payment along with a new house payment. Again, scores will play into your loan pre-approval.
- Typically borrowers must be three years out of foreclosure and have re-established good credit. Exceptions can be made if there were extenuating circumstances and you’ve improved your credit. If you were unable to sell your home because you had to move to a new area, this does not qualify as an exception to the three-year foreclosure guideline.
- The property must be appraised by a Kentucky FHA-approved appraiser.
- The property must be safe, sound and secure, in compliance with minimum property standards as defined by the U.S. Department of Housing and Urban Development, or HUD.
- You may not have delinquent federal debt or judgments, or debt associated with past FHA loans. Caivrs Alert System will show up if you owe the government money.
Mortgage Loan Officer
email: kentuckyloan@gmail.com
