How to Get Approved for a Kentucky Mortgage Loan with Bad Credit

Kentucky Mortgage Loans for Bad Credit: Your Path to Homeownership

Quick Summary: Kentucky homebuyers with bad credit can qualify for mortgages with scores as low as 500. FHA, VA, USDA, and KHC programs offer flexible options with down payment assistance available.

Can You Get a Mortgage in Kentucky with Bad Credit?

Yes, absolutely! Despite what many believe, Kentucky mortgage loans for bad credit are not only possible but widely available through specialized loan programs. Over the past 20+ years helping Kentucky families, I've successfully guided more than 1,300 borrowers to homeownership, including many with credit challenges, bankruptcy, or foreclosure in their past.

The key is understanding which Kentucky mortgage programs work best for your specific credit situation and having an experienced loan officer who knows how to navigate the approval process effectively.

Ready to Start Your Kentucky Home Buying Journey?

Get your free mortgage pre-approval with same-day decision!

Call (502) 905-3708 Email Joel Lobb

Best Kentucky Mortgage Programs for Bad Credit

FHA Loans Kentucky - Most Flexible Option

• Minimum Credit Score: 500 with 10% down payment
• Credit Score 580+: Only 3.5% down required
• Down Payment Sources: Accepts gifts, grants, 
• Debt-to-Income: Up to 57% with automated approval
• Best For: First-time buyers, limited savings, credit scores under 620

Why FHA loans are ideal for Kentucky bad credit borrowers: The Federal Housing Administration's flexible guidelines make FHA loans the most accessible option for Kentucky first-time homebuyers with credit challenges. Unlike conventional loans, FHA focuses more on your recent payment history and overall financial picture rather than just your credit score.

Kentucky VA Loans for Veterans

• Credit Requirements: No official minimum (most lenders prefer 620+)
• Possible Approvals: 500 range with strong compensating factors
• Down Payment: $0 required
• Funding Fee: Can be financed into loan
• Best For: Veterans and active military with service eligibility

USDA Rural Housing Loans Kentucky

• Credit Requirements: No official minimum (typically 620-640)
• Down Payment: $0 required
• Income Limits: Must not exceed 115% of area median income
• Property Location: Must be in USDA-eligible areas
• Best For: Rural and suburban Kentucky homebuyers

Conventional Loans Kentucky

• Minimum Credit Score: 620 for 3-5% down
• PMI Removal: Can be removed at 20% equity
• Best For: Borrowers with 720+ scores and stable income and debt ratio under 45% 

Kentucky Housing Corporation (KHC) Down Payment Assistance

One of the biggest advantages for Kentucky bad credit mortgage borrowers is the availability of down payment assistance through KHC programs. These can be combined with FHA, VA, USDA, and conventional loans to reduce your upfront costs significantly.

Current KHC Programs Available:

• KHC First-Time Homebuyer Program: Up to $10,000 in down payment assistance

Important: KHC down payment assistance is still available in 2025, but funding is limited and allocated on a first-come, first-served basis. Contact us immediately to check current availability.

What Credit Scores Qualify for Kentucky Mortgages?

Here's the reality about Kentucky mortgage credit requirements based on 20+ years of experience:

Credit Score Ranges and Options:

• 500-579: FHA loans with 10% down payment
• 580-619: FHA loans with 3.5% down, some VA loan options
• 620-639: All programs available, conventional loans possible
• 640+: Best rates and terms across all programs

Remember, your credit score is just one factor. Lenders also consider your debt-to-income ratio, employment history, assets, and recent credit behavior when making approval decisions.

Overcoming Specific Credit Challenges

Bankruptcy and Kentucky Mortgages

Chapter 7 Bankruptcy: FHA loans available 2 years after discharge, conventional loans after 4 years. VA and USDA loans typically require 2+ years with re-established credit.

Chapter 13 Bankruptcy: May qualify during active repayment plan with court approval and 12+ months of on-time payments.

Foreclosure and Kentucky Home Loans

Previous foreclosure doesn't permanently disqualify you from Kentucky homeownership:

• FHA Loans: 3 years after foreclosure completion
• VA Loans: 2 years with extenuating circumstances
• USDA Loans: 3 years after foreclosure
• Conventional Loans: 7 years (3 years with extenuating circumstances)

Collection Accounts and Charge-Offs

Medical collections under $2,000 are typically ignored by FHA. Other collections may not need to be paid off before closing, depending on the loan program and circumstances.

Get Your Kentucky Bad Credit Mortgage Pre-Approval

Don't let past credit challenges stop you from owning a Kentucky home. Our expert guidance and specialized programs can help you qualify today.

Call Now: (502) 905-3708 Apply Online

Steps to Improve Your Kentucky Mortgage Approval Odds

Before You Apply:

• Review Your Credit Reports: Get free reports from annualcreditreport.com
• Dispute Errors: Challenge any inaccurate information
• Pay Down Credit Card Balances: Aim for under 30% utilization
• Don't Close Old Accounts: Length of credit history matters
• Avoid New Credit Applications: Hard inquiries temporarily lower scores

Gather Required Documentation:

• 2 years of tax returns
• Recent pay stubs (30 days)
• 2 months of bank statements
• Employment verification letter
• Explanation letters for credit events

Why Choose Joel Lobb for Your Kentucky Bad Credit Mortgage?

20+ Years of Kentucky Mortgage Experience

Since starting in the mortgage industry, I've specialized in helping Kentucky families with challenging credit situations achieve homeownership. My experience includes:

• 1,300+ successful Kentucky mortgage closings
• Expertise in all bad credit loan programs
• Strong relationships with KHC and local assistance programs
• Same-day pre-approval decisions
• Personalized guidance throughout the process

Local Kentucky Market Knowledge

Understanding Kentucky's unique housing market and local assistance programs gives my clients significant advantages:

• Knowledge of Kentucky county-specific down payment programs
• Relationships with Kentucky real estate professionals
• Understanding of rural vs. urban property considerations
• Familiarity with Kentucky-specific lending requirements

Ready to Start Your Kentucky Home Purchase?

Joel Lobb - Kentucky Mortgage Loan Officer
NMLS #57916 | EVO Mortgage NMLS #1738461

Phone: (502) 905-3708
Email: kentuckyloan@gmail.com
Website: www.mylouisvillekentuckymortgage.com
Office: 911 Barret Ave., Louisville, KY 40204

Frequently Asked Questions

What's the lowest credit score for a Kentucky mortgage?

FHA loans accept credit scores as low as 500 with a 10% down payment. With a 580+ score, you can qualify with just 3.5% down.

Can I buy a house in Kentucky with a 550 credit score?

Yes, FHA loans are available for 550 credit scores with 10% down payment. VA loans may also be possible for eligible veterans with strong compensating factors.

How long after bankruptcy can I get a Kentucky mortgage?

FHA loans are available 2 years after Chapter 7 discharge. Chapter 13 filers may qualify during active repayment with court approval and 12+ months of payments.

Is down payment assistance available with bad credit in Kentucky?

Yes, KHC down payment assistance programs can be combined with FHA, VA, and USDA loans, even for borrowers with lower credit scores.

What documents do I need for a Kentucky bad credit mortgage?

Standard documentation includes 2 years of tax returns, recent pay stubs, bank statements, and explanation letters for any credit events like bankruptcy or foreclosure.

Take the First Step Toward Kentucky Homeownership

Don't let bad credit keep you from owning a home in Kentucky. With the right program and expert guidance, homeownership is within reach.

Get Your Free Consultation Email Your Questions

Equal Housing Lender. This website is not endorsed by the FHA, VA, USDA, or any government agency. All loan programs subject to credit approval and property eligibility. Interest rates and programs subject to change without notice.

Related Kentucky Mortgage Resources

• Kentucky First-Time Homebuyer Programs
• FHA Loan Requirements Kentucky
• VA Loans Kentucky - Complete Guide
• USDA Rural Housing Loans Kentucky
• Kentucky Housing Corporation Down Payment Assistance

Official Resources:

• FHA Official Website - HUD.gov
• VA Home Loans - VA.gov
• USDA Rural Development
• Kentucky Housing Corporation
• Consumer Financial Protection Bureau

How to get approved for a Kentucky Mortgage Loan with Bad Credit

There are several mortgage loans programs for Kentucky Homebuyers that may have had experienced bad credit in the past. 

Below is a summary of programs that borrowers can use to get approved for a mortgage loan with bad credit..

 FHA loans in Kentucky, FHA will go down to a 500 minimum credit score with at least 10% down payment or 10% equity on a refinance. 

If your scores is over 580, then you could use a FHA loan in Kentucky to with just 3.5% down payment or refinance with that much equity. 

If it turns out that you have a 620 credit score or higher, you can look at doing an Conventional loan with just 3 to 5% down payment. Typically on conventional loans if your score is below 660, you would need 5% down payment.

If you happen to be a Veteran and qualify for a Kentucky VA loan,  you could possibly get approved for a VA loan with no minimum credit score. 

In reality, it is very difficult to get for a VA loan with a score below 560 to 580 range, with most VA lenders requiring a 620 credit score. 

If you are looking to purchase a home in a rural area, you can look at doing a Kentucky USDA loan because they have no minimum credit score but most lenders will want a 620 to 640 credit score. 

Kentucky FHA Loan are your best bet you have a lower fico score or credit score.

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. You can go down to a 500 credit score potentially with a 10% down payment. 

1 -  Email - kentuckyloan@gmail.com 

2.   Call/Text - 502-905-3708

Joel Lobb
Mortgage Loan Officer - Expert on Kentucky Mortgage Loans

 Website: www.mylouisvillekentuckymortgage.com
 Address: 911 Barret Ave., Louisville, KY 40204

---

Evo Mortgage
Company NMLS# 1738461
Personal NMLS# 57916

For assistance with Kentucky mortgage loans, reach out via email, call, or text Joel Lobb directly.

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

When applying for a mortgage in Kentucky, it's crucial to understand that lenders utilize specific FICO® score models tailored for mortgage underwriting. These models differ from the scores commonly accessed through consumer credit monitoring services.

FICO® Score Models Used by Kentucky Mortgage Lenders

Mortgage lenders in Kentucky, consistent with industry standards, rely on the following FICO® score versions: mylouisvillekentuckymortgage.com

• FICO® Score 2 – Derived from Experian data

• FICO® Score 4 – Based on TransUnion data

• FICO® Score 5 – Utilizes Equifax dataI  nvestopedia Direct Mortgage Loans

These are collectively known as the "classic" FICO® models and are mandated for use in underwriting loans backed by entities such as Fannie Mae, Freddie Mac, FHA, VA, and USDA

.mylouisvillekentuckymortgage.com+1Louisville Kentucky Mortgage Loans+1

Importance of the Middle Credit Score

Lenders typically obtain a tri-merge credit report, encompassing scores from all three major bureaus. The middle score—the one that falls between the highest and lowest—is used to assess your creditworthiness. For joint applications, the lower middle score between co-borrowers is considered.  

Investopedia+2Louisville Kentucky Mortgage Loans+2kyfirsttimehomebuyer.wordpress.com+2

Discrepancies Between Consumer and Mortgage Credit Scores

It's common for consumers to notice differences between the credit scores they access through services like Credit Karma and those used by mortgage lenders. This is because consumer platforms often provide scores based on models like FICO® 8 or VantageScore 3.0, which are not utilized in mortgage lending. These consumer scores can be 20–40 points higher or lower than the mortgage-specific scores

Strategies to Enhance Your Mortgage Credit Score

To improve your mortgage-specific FICO® scores:

• Maintain Low Credit Utilization: Aim to keep your credit card balances below 30% of your credit limits.

• Limit New Credit Inquiries: Avoid applying for new credit lines 30–60 days before seeking mortgage pre-approval.

• Address Inaccuracies: Dispute any incorrect information on your credit reports directly with the credit bureaus.

• Prioritize Paying Down Revolving Debt: Reducing balances on credit cards can positively impact your scores.

Link to article below

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

Kentucky First-Time Homebuyer Programs for Bad Credit

Navigating First-Time Homebuyer Programs in Kentucky with Imperfect Credit

Executive Summary: The aspiration of homeownership in Kentucky is attainable, even for individuals whose credit scores may not be pristine. A robust array of federal and state-backed programs, complemented by targeted local initiatives, is specifically designed to support first-time homebuyers who have navigated financial challenges or are in the process of establishing their credit history.

Table of Contents

• Federal Loan Programs
• Kentucky Down Payment Assistance Programs
• Strategies to Improve Credit Score
• Navigating the Home Buying Process
• Conclusion

Federal Loan Programs: Your Foundation for Homeownership

Kentucky-Specific Programs and Down Payment Assistance (DPA)

Strategies for Improving Your Credit Score for Home Buying

Navigating the Home Buying Process with Lower Credit

Conclusion: Taking the Next Step Towards Your Kentucky Home

Ready to Get Pre-Approved?

Contact Joel Lobb, Senior Loan Officer at EVO Mortgage, for a free same-day pre-approval—even with credit challenges.

Call or Text: 502-905-3708 | Email: kentuckyloan@gmail.com

Joel Lobb, NMLS #57916 | EVO Mortgage, NMLS #1738461
Equal Housing Lender. Not a commitment to lend. All loans subject to underwriting approval.

 

What Mortgage Loan Is Best for My Credit Score in Kentucky?

One of the most common questions I get as a Kentucky mortgage broker is: “Which home loan can I qualify for based on my credit score?” Whether you're a first-time homebuyer or simply exploring your options, your credit score plays a critical role in which loan programs you’re eligible for. Here’s a simple breakdown that compares FHA, VA, USDA, and Conventional loans.

🏦 Loan Options by Credit Score

Use the infographic below to see where your credit score aligns with each loan program:

• FHA Loan: Available for scores as low as 500 (with 10% down). Most lenders require at least 580 for 3.5% down.
• Conventional Loan: Typically requires 620+ with 3-5

How to Get a VA Loan with Bad Credit in Kentucky

How to Get a VA Loan with Bad Credit in Kentucky (2025 Guide)

If you're a veteran in Kentucky struggling with a low credit score, you're not alone—and you still have options. The VA home loan program is one of the most flexible mortgage solutions available, even for borrowers with past credit challenges, bankruptcy, or foreclosure. Here's how Kentucky veterans can qualify for a VA loan—even with bad credit.

Key Benefits of a VA Loan for Kentucky Veterans with Bad Credit

• No Minimum Credit Score Required by the VA: Most Kentucky VA lenders require 580–620, but some accept scores as low as 500.
• Faster Recovery After Bankruptcy or Foreclosure: Apply just 2 years after bankruptcy or foreclosure (or 1 year with extenuating circumstances).
• No Down Payment Required: VA loans offer 100% financing.
• No PMI: No monthly private mortgage insurance required.

Common Credit Issues & VA Loan Impact in Kentucky

Credit Issue	VA Loan Impact
Credit score under 580	May require manual underwriting
Medical collections	Usually not a problem
Credit card collections	Older than 12 months may be acceptable
Child support arrears	Must be resolved
Student loan collections	Must be brought current
Recent rent/mortgage lates	Usually disqualifying
IRS collections	Must be in a payment plan

Manual Underwriting: Your Best Friend in Kentucky

Manual underwriting allows VA-approved lenders to consider your full financial picture even with credit score issues.

• 12 months of on-time rent or mortgage payments
• Stable employment & income
• Acceptable DTI and residual income
• Documentation for past issues

Compensating Factors That Help Approval

• Substantial savings or liquid assets
• Long-term employment history
• VA disability or retirement income
• Low increase in housing expense

Waiting Periods After Bankruptcy & Foreclosure

Event	Standard	With Extenuating Circumstances
Chapter 7 Bankruptcy	2 years	1 year
Chapter 13 Bankruptcy	12 payments	Court approval
Foreclosure	2 years	1 year

What Is Considered Bad Credit for VA Loans?

• 500–579: Poor – May qualify with strong compensating factors
• 580–619: Fair – May qualify with manual underwriting
• 620+: Preferred range for automated approval

Tips to Improve VA Loan Approval Chances

1. Pay all bills on time for at least 12 months
2. Reduce your debts and credit usage
3. Don’t apply for new credit before applying for a mortgage
4. Gather documentation for past credit issues
5. Work with a Kentucky VA loan specialist or broker

No Credit Score? No Problem

Alternative credit like rent, utilities, car insurance, and phone bill payment histories can be used in underwriting.

Why Use a Mortgage Broker for a VA Loan in Kentucky?

• Access to multiple VA-friendly lenders
• Experience with manual underwriting and credit-challenged files
• Better odds of approval tailored to your profile

Final Thoughts

Even with bad credit, veterans in Kentucky can still qualify for a VA home loan. With no minimum credit score required by the VA, manual underwriting flexibility, and experienced local lenders, your path to homeownership is still within reach.

Contact a VA Loan Expert in Kentucky

Joel Lobb – Senior Loan Officer
Phone: (502) 905-3708
Email: kentuckyloan@gmail.com
NMLS ID: 57916
Website: www.kentuckymortgageblog.com
Equal Housing Lender

How to Get Approved for a Kentucky Mortgage Loan with Bad Credit.

Buying a home in Kentucky with bad credit can be done with the right mortgage loan officer to guide you through the process.

 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%. 

Joel Lobb
Mortgage Loan Officer

Individual NMLS ID #57916

Text/call:      502-905-3708

email:          kentuckyloan@gmail.com

https://www.mylouisvillekentuckymortgage.com/

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 IS THE MINIMUM CREDIT SCORE FOR A KENTUCKY FHA MORTGAGE HOME LOAN APPROVAL?

Kentucky FHA Mortgage Credit Score Requirements

FHA is introducing new guidelines on loan to value ratios and the minimum credit score required for FHA borrowers in Kentucky. As detailed in a Mortgagee Letter from the Department of Housing and Urban Development (HUD), the following credit requirements will apply for FHA borrowers, effective October 4, 2010.

To be eligible for maximum financing, borrowers will need a minimum credit score of 500 or higher.

Kentucky FHA Borrowers with a credit score between 500 and 579 will be limited to a loan to value of 90%. A sub 580 FICO credit score borrower will henceforth need to make a 10% minimum down payment on a purchase transaction.


All Kentucky FHA borrowers with a credit score below 500 will not be eligible for FHA-insured mortgage financing in Kentucky.


The new credit requirements are not expected to dramatically change the number of Kentucky FHA mortgage approvals.


minimum credit score requirement of 580 to 620 or higher for Kentucky FHA borrowers.


In limited cases, borrowers with scores between 580 and 639 could still obtain mortgage approval with compensating factors such as large down payment (more than 3.5% minimum), low debt to income ratios, and substantial reserves in the bank with a verifiable pay history of no late payments in the last 12 months of rent and on credit report. A late is considered 30 days late in the credit rating world.

Ultimately, there is no singular credit score that can guarantee you a mortgage approval. Each lender is free to set their own credit score requirements.

But many loan types are insured by government organizations. And lenders cannot accept borrowers with credit scores below the minimum these organizations set. The four most popular home loan types are:

Conventional: Not backed by any government agency, but must meet the Fannie Mae and Freddie Mac underwriting guidelines

FHA: Loans backed by the Federal Housing Administration


VA: Loans backed by the US Department of Veterans Affairs (for military members)USDA: Loans backed by the US Department of Agriculture (for low- to moderate-income families who buy homes in rural areas)

The minimum credit score requirements for each of these loan types:

Conventional:

620 SCORE NEEDED. BUT TO GET APPROVED FOR A FANNIE MAE LOAN MOSTLY LIKE YOU WILL NEED A 720 SCORE OR HIGHER IF YOU HAVE LESS THAN 20% EQUITY POSITION OR LESS THAN 20% DOWN PAYMENT DUE TO PRIVATE MORTGAGE INSURANCE

FHA:

580 for a 3.5% down payment
500 for down payments of at least 10%
**MOST FHA LENDERS WILL WANT A 580 to 620 CREDIT SCORE NOWADAYS

VA:

No minimum BUT MOST VA LENDERS WILL WANT A 580 to 620 CREDIT SCORE

USDA:

No minimum, but with a credit score of at least 620 to 640 you could qualify for streamlined credit analysis and chances of approval goes way down if score is below 640...

Which credit score is used to qualify for a Mortgage loan in Kentucky?

For example if you have a 598, 625, 604 on each of the main three reporting agencies, then your qualifying fico score would be 604. 

If you’re planning to apply for a mortgage, be aware that the credit score you see on your application might differ slightly from the one you’re used to. 

It might even be different than what comes up when you monitor your credit, or even when you apply for a car loan.

Banks use a slightly different credit score model when evaluating mortgage applicants. Below, we go over what you need to know about credit scores you’re looking to buy a home.

The scoring model used in mortgage applications

While the FICO® 8 model is the most widely used scoring model for general lending decisions, banks use the following FICO scores when you apply for a mortgage:

FICO® Score 2 (Experian)
FICO® Score 5 (Equifax)
FICO® Score 4 (TransUnion)

As you can see, each of the three main credit bureaus (Equifax, Experian and TransUnion) use a slightly different version of the industry-specific FICO Score. That’s because FICO tweaks and tailors its scoring model to best predict the creditworthiness for different industries and bureaus. You’re still evaluated on the same core factors (payment history, credit use, credit mix and age of your accounts), but the categories are weighed a little bit differently.


The FICO 8 model is known for being more critical of high balances on revolving credit lines. Since revolving credit is less of a factor when it comes to mortgages, the FICO 2, 4 and 5 models, which put less emphasis on credit utilization, have proven to be reliable when evaluating good candidates for a mortgage.

Mortgage lenders pull all three reports,from all three bureaus, but they only use one when making their final decision.

“A bank will use all three bureaus,”--- “It’s called a tri-merge.”

If all three of your scores are the same, then their choice is simple. But what if your scores are different?


If two of the three scores are the same, lenders use that one, regardless of whether it’s higher or lower than the other one.

And if you are applying for a mortgage with another person, such as your spouse or partner, each applicant’s FICO 2, 4 and 5 scores are pulled. The bank identifies the median score for both parties, then uses the lowest of the final two.

Joel Lobb  Mortgage Loan Officer NMLS 57916

Text/call: 502-905-3708

email: kentuckyloan@gmail.com

http://www.mylouisvillekentuckymortgage.com/

NMLS 57916  | Company NMLS #173846

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).