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

How Mortgage Lenders Use All Three Credit Scores

Your credit score is a major driver in whether an automated underwriting system (AUS) such as Fannie Mae Desktop Underwriter or Freddie Mac Loan Product Advisor will approve your mortgage. Understanding how lenders interpret all three credit scores can help you prepare for FHA, VA, USDA, Conventional, or Kentucky Housing Corporation financing.

Why Mortgage Lenders Pull All Three Scores

Lenders use a tri-merge credit report that pulls information from the three national credit bureaus:

• Equifax
• Experian
• TransUnion

Each bureau uses a different scoring model, which is why your three numbers are rarely the same. These differences are normal and expected.

To learn more about how credit scores work, visit Credit Scores for Kentucky Mortgages.

Factors That Impact Your Mortgage Credit Score

Several behaviors influence how your scores are calculated:

• Payment history and recent late payments
• Credit card utilization levels
• Collections, charge-offs, judgments, and bankruptcy
• Length of credit history
• New credit and inquiries

For borrowers seeking FHA financing in Kentucky, these factors are critical because FHA scoring models weigh payment history heavily.

How to Improve Your Scores Before a Mortgage

Many people assume paying off every credit card boosts the score. In reality, mortgage scoring models reward active but responsible use of revolving credit.

• Lower your credit card balances to 30–45 percent of the limit
• Keep older accounts open to preserve credit age
• Avoid opening new accounts before applying
• Address any recent late payments or collections

For buyers preparing for a zero-down option such as a Kentucky USDA loan or Kentucky VA loan, maintaining strong and stable credit is essential for AUS approval.

How Lenders Select the Score Used for Approval

Mortgage lenders do not average your three scores. They use the middle score.

If your scores were 780, 776, and 790, the lender uses the middle score of 780.

For joint borrowers, lenders use the lowest middle score between both applicants.

Minimum Scores Required for Mortgage Programs

Different mortgage programs have different minimum credit score expectations:

• FHA: 580 for maximum financing
• VA: Lenders typically require 580–620
• USDA: 620 for automated approval
• Conventional (Fannie Mae/Freddie Mac): 620 minimum

Explore specific requirements for each program below:

• Kentucky FHA Loan Requirements
• Kentucky VA Loan Guide
• Kentucky USDA Zero-Down Program
• Mortgage Programs for Kentucky Homebuyers

External references for further reading:

• Consumer Financial Protection Bureau: Credit Scores
• MyFICO: How Credit Scores Work

Conventional Mortgage Guidelines for Kentucky

Freddie Mac and Fannie Mae Underwriting Guidelines for Mortgage Approval

These are called conventional because they must conform to the Freddie Mac and Fannie Mae standards set by the government, but they are not government insured. This poses a greater risk to lenders because they are not guaranteed repayment in the event the loan defaults; rather, they are forced to take a personal loss.

For these reasons, conventional mortgages are more difficult to obtain with stricter lending requirements in regards to credit score, down payment, debt to income ratio, mortgage insurance  and previous bankruptcies or foreclosure.

 Let's take a look at each subject below:👇

Credit Scores: 

Fannie Mae and Freddie Mac Require a minimum 620 credit score.

You have three credit scores from Experian, Equifax, and Transunion, and they take the middle score, throwing out the high and low score. The higher the credit score the better pricing you will get on the rate and mortgage insurance along with your down payment.
Ideally for higher credit score buyers, say over 680, and with at least 3% down payment with a low debt to income ratio.

Down Payment:  

Conventional mortgage loans require a minimum of 3% down payment. The more you put down, the better the rate, lower the mortgage insurance, and greater chances of getting approved.

If you put down 20%, then you will not have to pay mortgage insurance, or if you refinance an existing loan that has mortgage insurance, you can potentially get rid of the mortgage insurance if your equity position is less than 20% of the home's value.

Debt to Income: 

Conventional Mortgage loans typically will not allow for a back-end ratio of over 45%. They're two ratios, the front-end and back-end ratio. The front-end ratio is a percentage of the total house payment of your total gross monthly income. The back-end ratio is the new total house payment along with the monthly payments on your credit report divided by your total gross monthly income.

For example, if you make $3,000 gross a month, your total backend ratio would me maxed out at 1,350 a month. So if you had $300 in monthly payments on the credit report, this would allow for a maximum house payment of $1,050.00

Mortgage Insurance:

 Mortgage insurance is typically cheaper and less expensive on conventional mortgage loans. They're competing private mortgage insurance companies competing for the business with the names of MGIC, Radian, Essent, Genworth and Ugcorp.

 Conversely, it is not like Government insured FHA, VA and USDA  mortgage loans where all applicants get the same premiums regardless of credit score, down payment and debt to income ratio. Mortgage insurance is usually expressed as a monthly premium, with no upfront mortgage premiums like FHA, VA, and USDA government loan programs.

The higher the credit score, lower debt to income ratio and more nd can be removed once you reach 80% equity position in the home.

Bankruptcies and Foreclosure: 

Bankruptcy (Chapter 7 or Chapter 11)

A four-year waiting period is required, measured from the discharge or dismissal date of the bankruptcy action.

Exceptions for Extenuating Circumstances

A two-year waiting period is permitted if extenuating circumstances can be documented, and is measured from the discharge or dismissal date of the bankruptcy action.

Bankruptcy (Chapter 13)

A distinction is made between Chapter 13 bankruptcies that were discharged and those that were dismissed. The waiting period required for Chapter 13 bankruptcy actions is measured as follows:

• two years from the discharge date, or
• four years from the dismissal date.

.Foreclosure

A seven-year waiting period is required, and is measured from the completion date of the foreclosure action as reported on the credit report or other foreclosure documents provided by the borrower.

Deed-in-Lieu of Foreclosure, Pre-foreclosure Sale, and Charge-Off of a Mortgage Account

These transaction types are completed as alternatives to foreclosure.

• A deed-in-lieu of foreclosure is a transaction in which the deed to the real property is transferred back to the servicer. These are typically identified on the credit report through Remarks Codes such as “Forfeit deed-in-lieu of foreclosure.”
• A pre-foreclosure sale or short sale is the sale of a property in lieu of a foreclosure resulting in a payoff of less than the total amount owed, which was pre-approved by the servicer. These are typically identified on the credit report through Remarks Codes such as “Settled for less than full balance.”
• A charge-off of a mortgage account occurs when a creditor has determined that there is little (or no) likelihood that the mortgage debt will be collected. A charge-off is typically reported after an account reaches a certain delinquency status, and is identified on the credit report with a manner of payment (MOP) code of “9.”

A four-year waiting period is required from the completion date of the deed-in-lieu of foreclosure, pre-foreclosure sale, or charge-off as reported on the credit report or other documents provided by the borrower.

Joel Lobb (NMLS#57916)
Senior  Loan Officer

10602 Timberwood Circle Suite 3

Louisville, KY 40223

Text/call 502-905-3708

kentuckyloan@gmail.com

NMLS Consumer Access

 Accessibility Statement 

Privacy Policy

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/

Effective on 9/18/21, Fannie Mae announced that their Automated Underwriting System will now take an AVERAGE of the two scores for qualifying

 

Fannie Mae announced that their Automated Underwriting System will now take an AVERAGE of the two scores for qualifying

Do you and your partner have very different credit scores? Great news! You may have access to more loan program options than you thought!

Here's the deal... All lenders pull FICO scores from each of the three credit bureaus to qualify a borrower. In situations with co-applicants, we will use the lower of the two middle scores for qualifying purposes. Historically, to do a Conventional Loan, both mid-scores would have to be above 620.

Effective on 9/18/21, Fannie Mae announced that their Automated Underwriting System will now take an AVERAGE of the two scores for qualifying. This critical change may help many borrowers qualify and have increased advantages when putting an offer in on a home.

Long story short - we can help you now more than ever. Curious if this will help you? Reach out to me today, and we can investigate.

PS: These changes are effective September 18th, 2021 and there are still a lot of other variables to consider and guidelines are always subject to change. Let's start a conversation today! Message me for more details or to get started.

Mortgage Application Checklist of Documents Needed below  👇

W-2 forms (previous 2 years)
Paycheck stubs (last 30 days - most current)
Employer name and address (2 year history including any gaps)
Bank accounts statement (recent 2 months – all pages
Statements for 401(k)s, stocks and other investments (most recent)
federal tax returns (previous 2 years)
Residency history (2 year history)
Photo identification for applicant and co-applicant (valid Driver’s License







Joel Lobb (NMLS#57916)

Senior Loan Officer

American Mortgage Solutions, Inc.
10602 Timberwood Circle Suite 3
Louisville, KY 40223

Company ID #1364 | MB73346

Text/call 502-905-3708

kentuckyloan@gmail.com


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/

NMLS Consumer Access for Joel Lobb 

Accessibility for Website 

Privacy Policy

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Joel Lobb, American Mortgage Solutions (Statewide)

Joel has worked with KHC for 12 of his 20 years in the mortgage lending business. Joel said, “A lot of my clients would not have been able to purchase a home of their own or possibly delayed their purchase due to lack of down payment but with the $6,000 DAP loan program, this gets them into a house sooner and starts their path to homeownership while building equity instead of throwing their money away.”

When you’re ready to purchase a home in Joel's area, contact him at:
Phone: 502-905-3708
Email: Kentuckyloan@gmail.com
Website: www.mylouisvillekentuckymortgage.com

Homeownership doesn’t mean you need perfect credit. Some people can buy a home with a 620 credit score.

Fannie Mae Waiting period for Foreclosures, bankruptcies, and short sales for a new mortgage loan approval

 CONVENTIONAL FANNIE MAE KENTUCKY LOANS 

Derogatory Item	Waiting Period
Foreclosure	Home given back to the bank – No owner participation �         7 years from date foreclosure completed and transferred back to bank – No extenuating circumstances * �         Extenuating circumstances - 3 years from date foreclosure completed and transferred back to bank with 10% down.  Primary home purchase and rate and term refinance only. No second homes or investments. Qualifying extenuating circumstances are death or well documented extended illness.
Short Sale Deed in Lieu of Foreclosure	New rule - started August 16. 2014 Short Sale = Home sold but sales price less than owned Deed in Lieu = Home returned to lender in exchange for forgiving loan �         4 years from date sale closed and transferred to a new owner or transferred back to bank
Bankruptcy – Chapter 7	Debts are discharged through BK, client does not pay any debts owing �         4 years from discharge date �         2 years from discharge date possible with extenuating circumstances *
Bankruptcy – Chapter 13	Debts are paid back on a monthly scheduled payment plan �         2 years from discharge date �         4 years from dismissal date
Bankruptcy AND Foreclosure House INCLUDED in bankruptcy	New rule - started August 16, 2014Bankruptcy AND foreclosure, with home foreclosed on included in bankruptcy. Waiting period is based on bankruptcy discharge date, not foreclosure date, regardless of how long after the bankruptcy the official foreclosure occurred. Fannie Mae only

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Joel Lobb
Senior  Loan Officer

(NMLS#57916)

American Mortgage Solutions, Inc.

10602 Timberwood Circle, Suite 3

Louisville, KY 40223

 phone: (502) 905-3708

 Fax:     (502) 327-9119

kentuckyloan@gmail.com

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KENTUCKY FANNIE MAE CONVENTIONAL LOAN MINIMUM BORROWER CONTRIBUTIONS CHANGES

KENTUCKY FANNIE MAE CONVENTIONAL LOAN MINIMUM BORROWER CONTRIBUTIONS CHANGES FOR 2019 

Fannie Mae New Loan Limits for Kentucky in 2019 Fannie mae has just announced an increase to Kentucky's County Loan Limits for 2019. Effective Thursday November 29th, Fusion will be updated to allow Kentucky Conventional loans to be locked using the 2019 Loan Limits. The new loan limits are listed below. Individual County Loan Limits for 2019 can be found on Kentucky Fannie Mae Conventional  Loan Limit Look-Up Table HERE.

 

Joel Lobb (NMLS#57916)
Senior  Loan Officer

 

American Mortgage Solutions, Inc.

10602 Timberwood Circle Suite 3

Louisville, KY 40223

Company ID #1364 | MB73346

 

Text/call 502-905-3708
kentuckyloan@gmail.com

 

 

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/

-- Some products and services may not be available in all states. Credit and collateral are subject to approval. Terms and conditions apply. This is not a commitment to lend. Programs, rates, terms and conditions are subject to change without notice. The content in this marketing advertisement has not been approved, reviewed, sponsored or endorsed by any department or government agency. Rates are subject to change and are subject to borrower(s) qualification.

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Kentucky Fannie Mae HomePath® program for 2014

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The Kentucky Fannie Mae HomePath® program offers borrowers the opportunity to purchase a Kentucky Fannie Mae owned property with a low down payment and no appraisal or mortgage insurance. For a list of eligible properties, visit the HomePath website at www.homepath.com. As little as 3-5% down No appraisal or mortgage insurance1 is required Credit scores for conforming balances as low as 620 for LTVs up to 80% and 660 for LTVs over 80% Expanded seller contributions allowed up to 6% on some scenarios

The following is a list of documents that may be required to process your mortgage loan:

·        One full month’s worth of pay stubs

·        Last 2 years W-2′s

·         Last 2 years tax returns 

·        Last two months bank statements for all accounts 

·       

I don't need originals, copies are fine. You can fax, email, or drop off at my office below .  I will supply you a copy of your credit report for free along with your pre-approval letter to buy a home. 

 

It usually takes about 24 hours for a pre-approval to come back from underwriting department. 

 

Let me know your questions. 

 

Thanks and look forward to helping you

 

 

Joel Lobb
Senior  Loan Officer

(NMLS#57916)

American Mortgage Solutions, Inc.

800 Stone Creek Pkwy, Ste 7,

Louisville, KY 40223

 phone: (502) 905-3708

 Fax:     (502) 327-9119

kentuckyloan@gmail.com

 http://mylouisvillekentuckymortgage.com/

Fill out my form!

HomePath® Mortgage financing for Kentucky

Kentucky HomePath® Mortgage financing. 

Mortgage provides special financing terms exclusively for Kentucky Fannie Mae
real-estate-owned properties and can deliver distinct advantages in a down
market:

• Low down payment and flexible mortgage terms
• Available for Owner-Occupied, Second and Investment Properties
• Down payments as low as 3%
• No appraisal fees
• Properties displaying this logo are
eligible for purchase by GMAC Bank
• No Mortgage Insurance required
• Renovation Option not eligible for purchase by GMAC Bank
• Fannie Mae High Balance available in qualifying areas
• 6% Sales Concession Allowed up to 97%
• LTV Minimum Credit Score 620
Put the HomePath Mortgage program to work and grow
your business
• Offer attractive financing options on a wide array of Fannie Mae REO
properties to your current borrower base
• Provide your realty partners with a web-link to the HomePath
Mortgage-eligible properties in their area so they can offer more
options to their clients
• To see listings in your area and connect with listing agents go to


  www.homepath.com
For further information, contact

ü     Kentucky HomePath – Did you know we don’t have overlays?  

ü   Kentucky HomePath -- Did you know we allow 97% on Owner Occupied, 90% on Second Homes, and 85% on Investment Properties (all 1 unit and 660 score)

ü   Kentucky  HomePath – Did you know that the HomePath product does not require an appraisal or MI? 

Fill out my form!

HomePath Financing

Financing Opportunities for HomePath Homes

A foreclosed property can represent a great opportunity and a good value — but a HomePath property can offer even more. Some homes may qualify for special incentives, which will be clearly indicated on the property details page of an eligible property.

Financing

For many homebuyers, finding their perfect house is the easy part – finding the right financing for their circumstances can be harder. Fannie Mae has several financing options. The mortgage options address the financing challenges of multigenerational households, such as parents, adult children, and others sharing a home, as well as low- and moderate-income households. *

Fannie Mae's mortgage products support sustainable homeownership by allowing:

• Low Down Payment and Flexible Sources of Funds.
• Conventional home financing with private mortgage insurance (PMI) that, unlike many government-insured loans, may be eligible for cancellation when home equity reaches 20%.
• Homeownership education helps buyers get ready to buy a home and be prepared for the responsibilities of homeownership.
• Innovative underwriting flexibilities, including income from a rental unit or boarder, can help buyers qualify.
• Energy Efficient upgrades
• Home Improvement costs included in the mortgage
• 2nd mortgages - Community Seconds

* There are other requirements for getting approved for any of these mortgage options. Speak with your lender to learn more.

More information about financing

Financing Assistance Programs

Many state and local housing authorities offer financing programs that can assist you with the down payment and purchase of your new home. Additionally, HUD's Neighborhood Stabilization Program (NSP) provides homebuyer funds through special financing programs.

We support public funds programs and offer additional assistance to the buyer, including the following:

• Earnest money requirement for individuals using public funds is only $500. Fannie Mae waives the earnest money requirement for public entities using public funds to purchase a Fannie Mae- owned property.
• Once an offer using NSP funds is accepted, buyers have the opportunity to renegotiate after receiving an NSP required Uniform Residential Appraisal value for the property.
• The standard closing period for a public funds offer is 45 days, which allows time to fulfill the NSP requirements for funding.
• Buyers using public funds to purchase a home can do so without competition from investors during the First Look marketing period (typically the first 20 days on the market).

More information about NSP funds

HomePath Property Eligibility Exception

Interested Party Contributions

This is usually paid by the seller – HomePath properties qualify for expanded eligibility, check with your Lender for their allowances.

The above flexibility is available on all HomePath properties. All other requirements of Fannie Mae's Selling Guide apply.

For more information on HomePath properties, lenders should refer to the Selling Guide.