How to Get Approved for a Kentucky Mortgage Loan with Bad Credit and Improve Your Credit Scores

Buying a home in Kentucky with bad credit can be done with the right mortgage loan officer to guide you through the process. I  can help you do that.  There are various loan programs, including Kentucky FHA, VA, USDA, and conventional mortgages, have different criteria and offer opportunities for individuals with less-than-perfect credit to become homeowners. 

In this blog post, we'll explore the options available for Kentucky homebuyers with bad credit and provide tips on improving your credit scores to enhance your chances of loan approval to buy your first house in Kentucky

Understanding Your Credit Score or Fico Score 

Your credit score is a critical factor in determining your eligibility for a mortgage loan. It reflects your creditworthiness and helps lenders assess the risk of lending you money.  Credit scores range from 300 to 850, with higher scores indicating better credit health. Scores below 620 are generally considered "bad" credit, but don't be discouraged.There are still options available.

Loan Options for Kentucky Homebuyers with Bad Credit

Kentucky FHA Loans

Federal Housing Administration (FHA) loans are popular among Kentucky first-time homebuyers and those with bad credit. They offer more lenient credit requirements and lower down payment options.

• Credit Score Requirement: As low as 500 with a 10% down payment, or 580 with a 3.5% down payment.
• Benefits: Flexible credit requirements, low down payment, and competitive interest rates.
• Drawbacks: Mortgage insurance premiums (MIP) are required, which increase the overall cost of the loan. A lot of sellers view FHA buyers as weaker buyers vs Conventional loans and may hold that against you if you are making an offer with a FHA loan. 
• Bankruptcy: 2 years removed from Chapter 7 and 1 year in Chapter 13 pan with on time pay history and trustee approval is possible for FHA loans

Kentucky VA Loans

Veterans Affairs (VA) loans are available to veterans, active-duty service members, and eligible surviving spouses. These loans offer significant benefits, including no down payment and no private mortgage insurance (PMI).

• Credit Score Requirement: No official minimum, but most lenders prefer a score of at least 580 to 620.
• Benefits: No down payment, no PMI, competitive interest rates.
• Drawbacks: VA funding fee, which can be financed into the loan or waived for some eligible veterans. 
• Bankruptcy: 2 years removed from Chapter 7 and 1 year in Chapter 13 pan with on time pay history and trustee approval is possible for FHA loans

Kentucky USDA Loans

The United States Department of Agriculture (USDA) loans are designed for rural and suburban homebuyers with low to moderate incomes. These loans offer zero down payment options and low-interest rates.

• Credit Score Requirement: Generally, 640, but exceptions can be made for lower scores with compensating factors down to a 580 credit score. 
• Benefits: No down payment, low mortgage insurance, competitive interest rates.
• Drawbacks: Geographic and income restrictions apply and harder to qualify for vs FHA loans and VA loans when it comes to government backedmortgae loans. Much more restrictive on debt to income ratio and income limits for household see here 

Kentucky Conventional Mortgage Loans

Conventional loans are not backed by the government and typically require higher credit scores. However, there are programs available for those with lower scores.

• Credit Score Requirement: Generally, at least 620. Typically 720 or higher preferred--
• Benefits: Potentially lower overall costs compared to government-backed loans if you have a higher credit score and substantial down payment. No maximum purchase price or loan amount-Mortgage insurance not for life of loan and can recast your mortgage loan and remove mi unlike government backed loans via FHA, VA USDA ---Can be done anywhere and no income limits
• Drawbacks: Stricter credit requirements, higher down payments, and PMI required for down payments less than 20%. 

Improving Your Credit Scores for Kentucky Mortgage Loan Approval with Bad Credit

Improving your credit score can significantly enhance your chances of getting approved for a Kentucky mortgage loan. Kentucky mortgage loan. Here are some steps you can take to boost your credit:

1. Check Your Credit Report: Obtain a free copy of your credit report from each of the three major credit bureaus (Equifax, Experian, and TransUnion) at AnnualCreditReport.com. 

2. Pay Your Bills on Time: Payment history accounts for 35% of your credit score. Make sure to pay all your bills on time, including credit cards, loans, and utilities.

3. Reduce Your Debt: Lower your credit card balances and pay down debt. Aim to keep your credit utilization ratio (the amount of credit you're using compared to your credit limit) below 30%.

4. Avoid New Credit Inquiries: Each time you apply for credit, a hard inquiry is recorded on your credit report, which can lower your score. Limit new credit applications while you're working to improve your score.

5. Maintain a Healthy Mix of Credit: Having a mix of credit accounts, such as credit cards, auto loans, and mortgages, can positively impact your score.

6. Keep Older Accounts Open: The length of your credit history also affects your score. Keep older accounts open and use them occasionally to maintain a longer credit history

Pay Every Single Bill on Time, or Early, Every Month Credit Cards: Lower Balances Are Always Better

Conclusion

Getting approved for a mortgage loan in Kentucky with bad credit is challenging but achievable. FHA, VA, USDA, and conventional loans each offer unique benefits and have different requirements.

For personalized guidance and assistance, consider reaching out to a reputable mortgage broker like Joel Lobb Mortgage Loan Officer with great reviews and mortgage expert in FHA, VA, USDA and Fannie Mae Home loans in Kentucky. 

With 20+ years of experience helping Kentucky families buy their first house or refinance , Joel can provide expert mortgage  advice and help you navigate the loan approval process for a Kentucky Home loan. 

---

If you have questions or need assistance, contact Joel Lobb at

 https://www.blogger.com/profile/14742291613632757087

Joel Lobb
Mortgage Loan Officer

Individual NMLS ID #57916

American Mortgage Solutions, Inc.

10602 Timberwood Circle 

Louisville, KY 40223

Company NMLS ID #1364

click here for directions to our office

Text/call:      502-905-3708

fax:            502-327-9119
email:          kentuckyloan@gmail.com

https://www.mylouisvillekentuckymortgage.com/

NMLS Consumer Access

Accessibility Statement


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/

What credit score do mortgage lenders use?

Which FICO Score Generation Do Mortgage Lenders Use?

The best-known credit scores are going to fall under either the FICO or VantageScore brands. There are multiple generations of each score brand, as every few years, the score developers create newer versions. So, for example, there’s a VantageScore 1.0, 2.0, 3.0, and 4.0.

In most lending environments outside of mortgages, it’s hard to know which specific credit score a lender will use to evaluate your application. And, even if you knew your lender used a FICO Score or a VantageScore credit score, you still would not know which generation of the score it is using.

For example, you may apply for an auto loan with one lender that checks your FICO Auto Score 8 based on your Experian credit report. Yet, if you apply for financing with a different auto lender, it may opt to check your VantageScore 3.0 score based on TransUnion data.

The only way to know for sure is to ask the lender which credit report and which credit score version it plans to check, but that isn’t a guarantee that they’ll tell you.

The mortgage industry is different. Because of the aforementioned FHFA mandate, mortgage lenders must use the following versions of FICO’s scoring models:

FICO Model	Description
FICO 9	Newest version. Not widely used.
FICO 8	Most common. Used for Auto and Bankcard lending.
FICO 5	Used by mortgage lenders. Built on data from Equifax.
FICO 4	Used by mortgage lenders. Built on data from TransUnion.
FICO 2	Used by mortgage lenders. Built on data from Experian.

• Experian: FICO Score 2, sometimes referred to as FICO V2 or FICO-II
• TransUnion: FICO Score 4, sometimes referred to as FICO Classic 04
• Equifax: FICO Score 5, sometimes referred to as BEACON 5.0

Why Do Mortgage Lenders Use Older FICO Scores?

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

Unlike every other industry, mortgage lenders don’t have the flexibility to choose the scoring model brand or generation they want to use. Mortgage lenders must follow the direction of the government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, as it pertains to scoring models.

The GSEs play an important role in mortgage lending. These publicly traded companies buy mortgages from banks, bundle them together, and sell them to investors. This frees up funds so that banks can offer new mortgages to additional homebuyers.

For a bank to sell a mortgage to Fannie Mae or Freddie Mac, 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 a lender uses a different scoring model other than what the GSEs approve when it underwrites a mortgage, it probably won’t be able to sell that mortgage after it issues the loan. This limits the lender’s ability to write new loans because it will have less money available to lend to future borrowers

Link to article below

https://www.badcredit.org/how-to/which-fico-score-do-mortgage-lenders-use/

Current Credit Score Requirements for Kentucky FHA, VA, USDA and Conventional Mortgages Loans in Kentucky!

 

 

KENTUCKY FHA MORTGAGE LOANS 👈👈👈 Read more at link

·         Minimum credit score: 620 AUS approved, 640 manuals

·         Non-Credit Qualifying Streamline refinances allowed

·         Gift funds allowed for down payment and closing costs

·         Cash out 80% LTV

 

 

KENTUCKY VA MORTGAGE LOANS 👈👈👈 Read more at link 

·         Minimum credit score: 620 AUS approved, 640 manuals

·         Cash-out up to 90% LTV

·         Foreclosure/Short Sale/Bankruptcy <2 years allowed with AUS Approval

 

 

KENTUCKY USDA MORTGAGE LOANS 👈👈👈 Read more at link

·         Minimum credit score: 640

·         100% maximum LTV

·         No maximum loan amount

·         Rate/Term refinances allowed

 

 

KENTUCKY CONVENTIONAL MORTGAGE LOANS 👈👈👈 Read more at link

·         620 min score

·         Fannie Mae

·         Freddie Mac

·         Standard and High Balance

·         HomeReady

·         HomePossible

***KEEP IN MIND..ALL MORTGAGE LENDERS HAVE DIFFERENT CREDIT SCORE REQUIREMENTS SO CHECK WITH YOUR LENDER FIRST. 

How Do Mortgage Companies Average the Score on All 3 Credit Reports?

How Do Mortgage Companies Average the Score on All 3 Credit Reports?







Your credit score measures your risk of paying late or defaulting on a loan. Lenders use credit scores along with the rest of your loan information to measure your likelihood of paying back the debt on time. Credit scores allow mortgage companies to use software programs called automated underwriting systems, or AUS, to determine if the amount of risk is acceptable for the loan program requested.

Credit Bureaus

The three major credit bureaus are Equifax, Experian and TransUnion. Lenders are encouraged to report loans and payment history to the credit bureaus on a monthly basis. When companies need to examine a potential borrower's payment history, they buy a credit report using the borrower's name, address and Social Security number. Each credit bureau calculates the credit score differently. This is why the exact same information can be on all three credit reports and they all report a different credit score.

Factors that Affect Credit Scores

Many factors affect your credit score. Making your payments on time every month is one important factor. Payments made more than 30 days late will lower your credit score. Collections, judgments, tax liens, bankruptcy and foreclosure can have devastating effects on your credit score. Each time you authorize someone to look at your credit that can lower your credit score as well. 

Raising Your Credit Score

One misconception is the belief that paying off credit cards will raise your credit score. The credit bureaus want to see your ability to manage ongoing credit without missing payments or using the entire credit line. Pay down your credit cards so the balances are between 30 to 45 percent of the total available credit line. The older the credit line, the better. If you close a credit card, close the newest ones first and keep the older ones.

Finding the Middle Score

Mortgage lenders require access to all three credit bureaus for each borrower. They use the mid-credit score. If your three scores were 780, 776 and 790 they would use the middle of the three scores, in this case 780. They would not average the scores by adding the three numbers together and dividing the sum by three.

Minimum Credit Score Requirement

In January 2010, the Federal Housing Authority, or FHA, began requiring a minimum 580 credit score for any FHA loan with less than a 10 percent down payment or equity if the loan is a refinance. Conventional loans require a minimum credit score of 620. Lenders are allowed to require their own minimum credit score requirements beyond what the mortgage investors and insurers require. Having the required score does not guarantee loan approval; it is only one factor that lenders consider when approving a loan.


References
Consumer Federation of America: Your Credit Scores
Credit Report.com: Credit Scores
Consumer Credit Help: Do They Add All Three Credit Score Points Together?

Kentucky USDA credit score and mortgage requirements

 Credit Scores and the Kentucky USDA Rural Development Loan Program 

The Kentucky USDA Rural Development Loan Program is by far the most credit score friendly loan program currently available. While USDA is willing to work with scores lower than 640 most lenders won't. Thus, pragmatically the minimum credit score required by USDA is 581.

For Kentucky homebuyers with a minimum credit score of 640 lenders may streamline the credit approval process normally required as part of the underwriting process. This means that a borrower:

	With a lack of credit "depth" will not have to document non-traditional credit items such as utility or insurance payments
	A negative past credit history may allow the Underwriter to not request letters of explanation for the cause of the past challenges
	Collection accounts can remain open provided the Underwriter believes it unlikely that the account will eventually turn into a judgment

However, USDA is not willing to overlook certain overtly negative credit items even when the credit scores are over 640. For instance borrowers with any of the following adverse past credit should not expect to obtain credit approval using the USDA loan program:

	Foreclosure or short sale within the last 3 years
	Chapter 7 bankruptcy discharged within the past 3 years
	Chapter 13 bankruptcy debt restricting plan completed within the last 12 months
	Late mortgage payments within the last 12 months
	Applicant or co-applicant delinquent on a federal debt; such as taxes, student loans, or previous agency loan (i.e. VA loan in which the eligibility was forfeited due to a foreclosure)

USDA may be willing to give a borrower an exception to a past bankruptcy or foreclosure prior to the three year period provided the borrower can document the cause of the past negative credit experience as being related to an illness or job loss and unlikely to reoccur.

Once the credit score exceeds 640, USDA allows this score to be considered as justification for allowing the borrowers debt-to-income-ratio to exceed the target ratios of 29% for the housing costs and 41% for the total debt ratio. Frequently USDA will approve loans where the housing ratios are in the high 30% range and total debt ratios are in the high 40% range.

Bottom line the Kentucky USDA Rural Development Loan Program is more flexible in approving a perspective borrower than any other loan program. But like any loan program today, the Loan Officer shouldn't assume that this level of credit flexibility will result in an automatic positive underwriting decision if the Underwriter doesn't feel strongly that the borrowers chance of success at homeownership is strong.

Credit Scores for a Kentucky Mortgage

Fill out my form!

What Credit Score is needed for a Kentucky Mortgage VA loans Loan in 2013?

 Kentucky Mortgage VA loans are 100-percent financed and set aside for active and retired military, along with their families. There is no minimum credit score to qualify, though a better credit score will get you a better interest rate. Typically to get approved on A  Kentucky Mortgage VA loan, you will need a 620 mid score with no bankruptcies or foreclosures in last 2 years with clean credit since BK or Foreclosures.

The better your score, the better your interest rate is likely to be. If your score is between 620 and 639—considered a risky score by some creditors—you could pay an interest rate of 5.718 percent on a $300,000, 30-year conventional mortgage. As of mid-August, 2010, If your score is at the high end, 760 to 850, your interest rate could be 4.129 percent on the same loan. A score of 650 may net you a rate of 5.172 percent.

I specialize in Louisville, Kentucky FHA, VA ,USDA, KHC, Conventional and Jumbo mortgage loans (Fannie Mae) in Ky. I am based out of Louisville Kentucky. I have helped over 589 Kentucky families buy their first home and refinance their current mortgage for a lower rate; For the first time buyer with little money, Kentucky Housing/KHC offers(zero-down)loans with down payment assistance.Free Mortgage Pre-Qualifications same day on most mortgage applicants



This website is not an government agency, and does
not officially represent the HUD, VA, USDA or FHA or any other government agency.

NMLS# 57916 http://www.nmlsconsumeraccess.org/

Joel Lobb (NMLS#57916)
Senior  Loan Officer
502-905-3708 cell
kentuckyloan@gmail.com

Minimum Credit Score Needed to Buy a House in Kentucky

Minimum Credit Score Needed to Buy a House

Your credit score is just one of the factors your mortgage lender will use to determine whether you qualify for financing. The problem is, every lender uses different methods to determine your credit worthiness. So, in some cases, a minimum score is difficult to determine for conventional loans. In other cases, especially when loans are underwritten or insured by government organizations, there are minimum credit scores to qualify.

Acceptable Scores

The score your lender will accept for a conventional loan can be determined by many factors, including your payment history, your salary history, your current wage, your available credit, the scores other lenders are accepting and the current economic climate. Cornett Communications advises that even in tight economic times, a score of at least 640 will get you in the door for financing.

Fannie Mae

Fannie Mae is one of two government-backed mortgage lending houses; Freddie Mac is he other. Independent lenders take many of their cues from what these two organizations do. According to the "Washington Post," Fannie Mae raised its minimum credit score for conventional loans in 2009 from 580 to 620. Even if you have a 20-percent down payment, you can be rejected if your score is below 620. Fannie Mae will also reject a loan if more than 45 percent of your income goes toward paying debt.

Government-Backed Loans

Home loans backed or financed by the Federal Housing Administration and the Veterans Administration have different views of credit scores. FHA recently changed its minimum credit score to 580, which qualifies you for lending programs that require only a 3.5 percent down payment. VA loans are 100-percent financed and set aside for active and retired military, along with their families. There is no minimum credit score to qualify, though a better credit score will get you a better interest rate.

What Your Score Gets You

Your credit score is one of the factors that will determine your mortgage loan interest rate. The better your score, the better your interest rate is likely to be. FICO, also known as the Fair Isaac Corporation, posted the differences in interest rate you may pay, depending on your score. If your score is between 620 and 639—considered a risky score by some creditors—you could pay an interest rate of 5.718 percent on a $300,000, 30-year conventional mortgage. As of mid-August, 2010, If your score is at the high end, 760 to 850, your interest rate could be 4.129 percent on the same loan. A score of 650 may net you a rate of 5.172 percent.

Addressing Your Credit Score

If your credit score won’t allow you to get a home loan now, you can so some things you can to improve your score, which are updated on a monthly basis. Make sure all of your bills are paid on time; late payments drive down your score. Pay down your credit balances; maxed-out credit accounts can also hurt your score. Also, check your credit report on a regular basis for errors. This is one of the easiest ways to improve your score. If you find errors on your report and you can prove they are errors, the credit bureau is obligated to remove them.

References

• HUD: FHA Announces Policy Changes to Address Risk and Strengthen Finances
• NavyTimes: Buying a Home Doesn’t Require Perfect Credit
• "Washington Post": Fannie Mae to Tighten Mortgage Lending Standards
• Cornett Communications: How to Improve Your Credit Score
• My Fico: Home Purchase Center

Resources

• BCS Alliance: Mortgages and Credit Scores
• Bankrate: Bump Up Your Credit Score in a Hurry

About the Author

M.C. Postins has been a writer and editor since 1995. His work has appeared in newspapers, magazines and websites across the country, such as the "Charlotte Sun-Herald" and the "Denton Record-Chronicle." He received a Bachelor of Arts degree in journalism from Stephen F. Austin State University.

Joel Lobb (NMLS#57916)Senior  Loan Officer502-905-3708 cell502-813-2795 faxjlobb@keyfinllc.comKey Financial Mortgage Co. (NMLS #1800)*107 South Hurstbourne Parkway*Louisville, KY 40222*

http://mylouisvillekentuckymortgage.com 

Rapid Rescore for A Louisville Kentucky Mortgage Loan Approval

Score Plus/Rescoring


Score Plus – Rapid Rescore – The Score Plus program allows Credit Plus to update credit information with the three national repositories in 5-7 business days. Credit Plus will forward documents supplied by your borrower directly to Equifax, TransUnion and Experian for a rush investigation. The repositories will update credit information and trade lines on their credit reports.

How long does it take to update credit information? While Score Plus is unable to guarantee a completion date, turnaround time to update credit information is typically 5-7 business days from the time your request is received. If the bureau rejects the documents, you will be promptly notified. 

What types of credit information can Score Plus update?
Given a verifiable document from the creditor, Score Plus can:
Remove derogatory information and accounts that were reported in error
Update an account that has been paid in full and closed
Update the status of a collection
Update a balance or paid-in-full status
Update an account to show that it was included in a bankruptcy
What documentation is required for Score Plus?
Bureaus require that all documents submitted:
MUST be typed on the creditor’s letterhead
MUST come from the creditor reporting the account
MUST state specifically how the information should be changed
MUST include the date, complete account number, and the name and contact phone number of the creditor

How to Get a Copy of My Credit Reports

How to Get a Copy of My Credit Reports

By far, the most frequently asked question received at bcsalliance.com is "where do I get a copy of my credit report?"  Many people are confused because so many websites are offering free credit reports, but require consumers to sign up for credit monitoring or other services that cost a lot of money just to get a free credit report.  I will tell you how to get a truly free no strings attached credit report and you can thank former President George W. Bush for your free credit report.  President Bush thought people should receive one free copy of their credit reports each year, so when he was president, he had a law passed requiring the three major credit bureaus -- Equifax, Experian and TransUnion -- to give all consumers a free copy of their credit report once every 12 months.  To comply with this law, the three credit bureaus created a website where consumers could get their free credit reports online.  The website address is http://www.annualcreditreport.com.  Now this doesn't mean that the credit bureaus aren't going to try and get some money from you.  If you visit the site and order your credit reports you will see buttons that try and get you to order your "free credit score" and credit monitoring and other services.  You don't really need any of these services.  The credit scores they offer at this site are the credit bureau credit scores and NOT the FICO credit score that lenders use to approve your home and auto loans and new credit cards, although the credit bureaus' credit scores are probably not that different from the FICO score.  

When you visit http://www.annualcreditreport.com you will have to order your three different credit reports separately.  Each time you finish ordering from one credit bureau you need to click the link that takes you back to the annualcreditreport.com website to order the next one.