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
Kentucky Mortgage Loans with Past Credit Issues: FHA, VA, USDA, Conventional, and KHC Options
Kentucky mortgage loans after credit challenges: your options and next steps
If you’ve had late payments, collections, bankruptcy, or other setbacks, you’re not out of the game. Kentucky homebuyers routinely qualify using the right loan structure, realistic timelines, and clean documentation. Below is a practical breakdown of FHA, VA, USDA, Conventional, and KHC down payment assistance—plus smart internal and external resources.
Program overview
FHA loans in Kentucky
Potential approvals down to 500 with at least 10% down or 10% equity on a refinance.
580+ score typically enables 3.5% down payment.
Gift funds and DPA allowed; flexible underwriting for limited credit depth.
If you’re looking to buy a home in Kentucky, having a solid credit score is essential for qualifying for popular mortgage programs like FHA, VA, USDA, or KHC loans. Here are six actionable tips to improve your credit score and increase your chances of getting approved for your dream home loan.
1. Pay Your Monthly Bills on Time
Here are six tips for improving your credit score for a fresh financial start
1. Pay Your Monthly Bills on Time Paying monthly bills is a necessary chore that has a definite effect on your credit score. According to the FICO scoring model, your payments account for as much as 35 percent of your total score. Create reminders for due dates or establish a calendar for yourself to ensure you get everything paid on time.
2. Reduce Your Debts Got credit card debt? Start paying it off now. Part of your credit score is based on the amount of available credit you have, known as your credit utilization ratio. So if you're carrying high balances, you'll want to lower them as soon as possible. Create a personal budget with a goal of reducing your spending so that it's lower than your income. Then, use any monthly surplus for your credit card debts until they're gone for good.
3. Limit Credit Inquiries
Looking for a new apartment? What about a mortgage? In either situation, try and group your applications together as much as possible. Applications for new lines of credit will generate a "hard pull" on your credit, and having too many of them in a short period of time can lower your score. However, credit reporting agencies usually consider a group of applications within a short period of time as one pull, as long as they're in the same category.
Similarly, limit yourself to opening up no more than one or two credit cards per year, which also generate hard pulls. Even if you get a ton of offers in the mail for stellar sign-up bonuses, they're likely to be offset by the damage to your credit. FICO reports that new credit and credit inquiries account for 10 percent of your total score.
4. Don't Cancel Old Cards
Have a card you don't use anymore? Don't close it. This can negatively affect your score as it lowers your amount of available credit. Instead, use it about once per month and don't forget to pay the bills in full, and on time.
5. Request Credit Limit Increase
If you only have one card and you're constantly approaching your spending limit, call the bank and ask for an increase in your credit line. This will raise the amount of available credit, which will eventually improve your score.
6. Take Care of Late Payments Before They Hit Your Score
If you do happen to miss a payment, contact the card issuer immediately. If you have good history built up, the company may agree to not report your late payment. Even if you can't avoid a late-payment fee, be sure to get your account up to date as soon as possible so you can limit the damage.
Your credit score is yours to own. It reflects your financial history and helps lenders predict how you will manage your finances in the future. Due to the lingering effects of credit, you don't want to waste any time to improve your credit.
Credit Repair Tips for Kentucky Homebuyers
Frequently Asked Questions (FAQs)
Can I buy a house in Kentucky with a 580 credit score?
Yes. With a 580 score, you may qualify for an FHA loan in Kentucky with just 3.5% down. If your score is below 580, some lenders may still approve you with a 10% down payment. VA and USDA loans may also work with flexible credit guidelines, but additional documentation or manual underwriting may be required.
How long after bankruptcy can I get a mortgage in Kentucky?
Chapter 7 Bankruptcy: Generally, you must wait 2 years from discharge for FHA and VA loans, and 3 years for USDA.
Chapter 13 Bankruptcy: Borrowers may qualify after 12 months of on-time payments with court approval. Conventional loans require a longer waiting period.
What credit score do I need for a USDA loan in Kentucky?
Most lenders look for a 640 minimum credit score for USDA automatic approval through the Guaranteed Underwriting System (GUS). Lower scores may still be approved with manual underwriting, but stronger compensating factors (like low debt-to-income ratios or extra savings) are often required.
What credit score is needed for a VA loan in Kentucky?
The VA itself does not set a minimum score. However, many lenders in Kentucky require 580–620 or higher. Since VA loans are more flexible, they are often a good option for veterans or active-duty service members with less-than-perfect credit.
Does Kentucky Housing Corporation (KHC) require good credit?
KHC offers down payment assistance programs tied to FHA, VA, USDA, or Conventional loans. In most cases, a minimum 640 score is required for KHC’s down payment assistance options, although individual loan program requirements still apply.
How long does it take to repair credit enough to buy a house?
It depends on your starting point. For some borrowers, 3–6 months of consistent on-time payments and reduced balances can move the needle significantly. For others with major derogatory items (like collections or bankruptcy), it may take longer. Working with a mortgage professional early can help you build a timeline and strategy.
Credit Repair Tips for Kentucky Homebuyers
Buying a home in Kentucky can feel out of reach if your credit isn’t where it needs to be. Whether you’re looking at FHA, VA, USDA, or Kentucky Housing Corporation (KHC) loans, your credit score is a key factor in approval and interest rate. The good news? You can take action today to improve your score and position yourself for homeownership.
Here are six proven strategies to repair and strengthen your credit.
1. Pay Your Bills on Time
Payment history accounts for about 35% of your FICO score. Even a single late payment can have lasting consequences. Setting up autopay, digital reminders, or a simple calendar system will keep you consistent.
2. Reduce Credit Card and Loan Balances
High balances relative to your credit limit increase your credit utilization ratio—a major factor in your score. Aim to bring balances below 30%, or ideally under 10%, for the strongest results. Build a monthly budget that prioritizes paying down debt before discretionary spending.
3. Limit New Credit Inquiries
Each time you apply for new credit, a hard inquiry is added to your report. Too many inquiries in a short time frame can drop your score. If you’re shopping for a mortgage, group applications within 30–45 days to minimize the impact. Limit opening new credit cards unless absolutely necessary.
4. Keep Old Credit Cards Open
Closing old accounts reduces available credit and shortens your credit history. Both lower your score. Keep older accounts active by making a small monthly purchase and paying it off in full to maintain positive history.
5. Request a Credit Limit Increase
If you regularly use most of your available credit, request a limit increase. This lowers your utilization ratio, which can improve your score. Be cautious: this only helps if you avoid increasing your spending along with the new limit.
6. Address Late Payments Immediately
Missed a payment? Contact your creditor right away. Some lenders will work with you and avoid reporting it if your history is otherwise strong. Even if a late fee applies, catching up quickly reduces long-term damage.
How Long Does Bad Credit Stay on Your Report?
Late payments, charge-offs, and collections: 7 years
Chapter 7 bankruptcy: 10 years
Chapter 13 bankruptcy: 7 years
Foreclosure: 7 years
While negative marks remain for years, their impact lessens over time as you add new, positive credit history.
Next Steps for Kentucky Homebuyers
Your credit score is important—but it’s not permanent. By taking steps now, you can improve your financial position and qualify for programs like FHA loans with credit scores as low as 580, VA loans with flexible guidelines, USDA zero-down financing, and KHC down payment assistance programs.
If you’re ready to explore your options and take the next step toward homeownership in Kentucky, I can help you map out a personalized path.
EVO Mortgage – Company NMLS #1738461
Joel Lobb – Personal NMLS #57916
Disclaimer: The views and opinions expressed are for informational purposes only and do not guarantee loan approval or represent full underwriting guidelines. This is not a government agency. Loan programs may not be available to all borrowers. Visit www.nmlsconsumeraccess.org for more information.
Evo Mortgage Company NMLS# 1738461 Personal NMLS# 57916
For assistance with Kentucky mortgage loans, reach out via email, call, or text Joel Lobb directly.
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). Mortgage loans only offered in Kentucky.
Kentucky Home Buyers: What Credit Score Do You Need?
Buying a home in Kentucky? Your credit score plays a crucial role in determining which mortgage loans you qualify for and how much you’ll pay in interest rates. Understanding the minimum credit score requirements for FHA, VA, USDA, and Conventional loans can help you prepare for homeownership and secure the best loan options.
While there's no single, simple answer, this guide will break down the minimum credit score requirements for various Kentucky mortgage options, empowering you to understand where you stand and how to achieve your homeownership goals. We'll cut through the confusion and give you the straight facts!
Why Your Credit Score Matters: More Than Just a Number
Think of your credit score as your financial reputation. Lenders use it to assess the risk of lending you money. A higher score signals lower risk, translating to better interest rates, more favorable loan terms, and potentially lower down payment requirements.
Here's the credit score impact on interest rates and your wallet (in general terms):
760-850: The Gold Standard! Expect the lowest interest rates and the most attractive loan options.
700-759: Excellent! You'll still qualify for very competitive rates and favorable terms.
640-699: Good. You'll likely be approved, but interest rates will be slightly higher.
620-639: Acceptable. This range is often the minimum for conventional loans, but be prepared for less favorable rates.
As the guide shows, aiming for a 740+ score can lead to best rates and closing costs on mortgage loans, especially Conventional Mortgage Loans,.
Let's explore the minimum credit score requirements for different Kentucky mortgage types:
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. 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 KY 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 a 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 below to see the qualifying areas.
There is also a max household income limits with most cutoff starting at 109,500 for a family of four, and up to $136,000 for a family of five or more.
The income limits change every spring, so make sure and check to see what updated income limits are. 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 580-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 counteract 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.
Kentucky VA Loan
VA loans are for veterans and active-duty military personnel. The loan requires no down payment and no monthly mi premiums, 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 no max loan limits in Kentucky
Most VA lenders I work with will want a 580-credit score, even though VA says in their guidelines there is no minimum score, good luck finding a lender VA requires 2 years removed from bankruptcy or foreclosure Clear Caviars needed to for a VA loan.
Kentucky Down Payment Assistance
This type of loan is administered by KHC in the state of Kentucky. They typically have $10,000 down payment assistance year around, that is in the form of a second mortgage that you pay back over 10 years. Current terms are $10,000 over 10 years at 3.75%
Sometimes they will come to market with other down payment assistance and lower market rates to benefit lower income households with not a lot of money for down payment.
KHC offers FHA, VA, USDA, and Conventional loans with their minimum credit scores being set at 620 for all programs. The conventional loan requirements at KHC requires 660 credit score. The max debt to income ratios is set at 50% and 50% respectively.
FHA Loans – Best for First-Time Homebuyers with Low Credit
500-579 Credit Score – Requires 10% down payment 580+ Credit Score – Requires 3.5% down payment Flexible credit guidelines & lower down payments Easier approval for first-time buyers & those with past credit issues
VA Loans – Best for Veterans and Active Military
No official minimum credit score Most lenders require 580-620+ 0% down payment – No mortgage insurance required Best for veterans, active-duty military & eligible spouses
USDA Loans – Best for Rural & Suburban Homebuyers
Minimum 620 to 640+ Credit Score (for automatic approval through GUS ) Some lenders may approve below 640 with manual underwriting with a minimum score of 581 and above 0% down payment required Best for low-to-moderate-income homebuyers in rural areas Income limits and property locations restrictions
Conventional Loans – Best for Borrowers with Good Credit
Minimum 620+ Credit Score-Truthfully, if scores are 620 and less than 20% down payment look at going to the government loan programs like FHA, USDA and VA Higher scores (760+) qualify for better interest rates Down payment: 3%-5% or more Best for buyers with strong credit & stable income
Minimum 620+ Credit Score, Income limits and max dti is 50% usually used for the down payment and closing costs on a FHA, VA, USDA or Conventional loan with the $10k DAP assistance Offers down payment assistance for eligible buyers Best for first-time homebuyers needing financial help
Non-QM Loans – Alternative Financing for Unique Situations
Minimum 500-620 Credit Score (Varies by lender) Includes Bank Statement Loans, DSCR Loans, Asset-Based Loans Best for self-employed borrowers, real estate investors & those with non-traditional income sources
Why Choose Non-QM? These non-traditional loans are great for borrowers who don’t qualify for conventional or government-backed loans due to income verification challenges.
How Credit Scores Affect Mortgage Interest Rates
Your credit score doesn’t just determine loan eligibility—it also affects the interest rate you receive.
Here’s how credit scores impact mortgage rates (examples based on typical loan rates):
Credit Score
Estimated Interest Rate
Kentucky Mortgage Loan Options Available
760-850
Best Rate (Lowest Cost)
Kentucky Conventional, FHA, VA, USDA
700-759
Good Rate
Kentucky Conventional, FHA, VA, USDA
640-699
Higher Rate
Kentucky FHA, VA, USDA, Some Conventional
620-639
Even Higher Rate
Kentucky FHA, VA, USDA, Some Conventional
Below 620
Limited Options, Highest Rates
FHA, VA, USDA and (with higher down payment), Non-QM
Evo Mortgage Company NMLS# 1738461 Personal NMLS# 57916
For assistance with Kentucky mortgage loans, reach out via email, call, or text Joel Lobb directly.
Kentucky Local Home Loan Lender Services
First-Time Home Buyers Welcome FHA, Rural Housing (USDA), VA, and Kentucky Housing Corporation (KHC) Loans Conventional Loan Options Available Fast Local Decision-Making Experienced Guidance Through the Home Buying Process
Here are the important points about Kentucky USDA Rural Housing Loans:
USDA loan are only available in certain counties of Kentucky.
There are two types of USDA loans available: Direct and Guaranteed.
100% financing. No down payment
USDA will go down to a no score and uses and automated underwriting pre-approval system called GUS-Guarantee Underwriting System. The GUS findings will dictate your loan pre-approval.
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#57916http://www.nmlsconsumeraccess.org/
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).
How to get approved for a Kentucky FHA Mortgage Loan with Bad Credit in 2023.
Below details the DTI requirements The maximum Front and Back ratios applicable to manually underwritten Kentucky FHA Mortgages are detailed below.
Maximum DTI allowed for Manual UW is 40/50
**IMPORTANT – any loan where ALL borrowers have No Fico Score, the Maximum DTI is 31/43 per HUD DTI and Compensating Factor Requirements:
560 FICO and Above – DTI up to 31/43.Comp Factors Required - NONE.
560 FICO and Above - DTI up to 37/47Comp Factors Required– 1 Required
560 FICO and Above – DTI up to 40/50Comp Factors Required– 2 Required
ACCEPTABLE COMPENSATING FACTORS:
RESERVES – 3 mo (1-2 Unit) 6 Mo (3-4 Unit)
HOUSING DECREASE – new PITI is no more than $100 or 5%, the lesser of the two
RESIDUAL – Meet VA residual requirements
ADDITIONAL INCOME – Income not reflected in DTI (this comp factor is only permitted when DTI is over 37/47 and if income were used, it would decrease DTI under 37/47)
MANUAL UNDERWRITE REQUIREMENTS ON ALL LOANS
12 Months verified housing history OR rent free letter,
Reserves, AND
1 month reserves for 1-2 Unit
3 month reserves for 3-4 Unit
NOTE: If you use reserves as a compensating factor, then you do not need these reserves in addition
Letter of explanation for all derogatory credit, including any NSFs and/or overdrafts in bank accountIf applicable, 2 months for all bank statements in the file (60 days activity)
Maximum DTI 40/50 (HUD guideline, no exceptions
Instructions for Residual Income as Compensating Factor
Residual income may be used as compensating factor when it meets or exceeds the stated amounts in
the table below. Note that all household members must be counted for ‘family size’ except for individuals
who are fully supported from a verified source of income not included in the effective income of the loan.
Residual Income Calculation When Needed as a Compensating Factor
Gross Monthly Income1 2
- (State income taxes3)
- (Federal income taxes3)
- (Municipal or other taxes3)
- (Retirement deductions and/or Social Security deductions)
- (Total monthly housing payment)
- (Estimated maintenance and utilities4)
- (Job related expenses (e.g., childcare)5)
= Monthly Residual Income for Family Support.
[When using Residual Income as a compensating factor, the “Monthly Residual Income for Family Support” must
meet or exceed the dollar amount in the “Residual Income Table” above.
1 Income from occupying borrowers only
2 Non-taxable income may not be grossed up
3 Federal and state taxes must be used to determine appropriate deductions or paystub if taxes are not available
4 Multiply total living area (sq ft) x 14
5 Childcare letter is not required (as it is for VA) and should not be requested
Exceptions to the Required Residual Income
You may reduce the residual income figure from the above tables by 5% if:
1. The borrower(s) is an active duty or retired serviceperson, OR
2. There is a clear indication that a borrower will receive the benefits resulting from use of military-based
facilities located near the property.
Examples of military service for reduced residual income are:
Guard and Reserve military retirees, 100% disabled Veterans and their family members, or Medal of Honor
recipient.
Joel Lobb Mortgage Loan Officer Individual NMLS ID #57916
American Mortgage Solutions, Inc. 10602 Timberwood Circle Louisville, KY 40223 Company NMLS ID #1364
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).
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Address: 911 Barret Ave., Louisville, KY 40204
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Address: 911 Barret Ave., Louisville, KY 40204
First-Time Home Buyers Welcome
