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
* Your debt-to-income ratio (DTI) is your monthly debt payments divided by your gross monthly income. Most lenders prefer a DTI below 50%, but some may allow up to 56.9%.
Getting approved for a loan is not as hard as some make it. The 3C approach breaks it down in its simplest form so no need to overthink or complicate with “what if’s” or variable situations and these factors are the same in every state. They all have to line up for your loan to be approved but here there are in order of significance
Capacity
- No matter if your credit is in 800’s the ability to afford a loan (capacity aka DTI) is the MOST important C and why most applications either get denied or reduced. Income is EVERYTHING.
To get a conforming (FHA / VA / Conventional) loan you need 2yrs of verifiable Full time income even if it’s pieced together with different employers with 2yrs W2’s and your most recent paystub if you’re an employee and OT and/or bonus cannot be used if you’ve been with your employer for less than 2yrs.
If you have part time employment as well that income cannot be used unless you’ve worked both jobs for at least 2yrs UNLESS your P/T job is the exact same as your F/T job and your hours are not variable then in most cases you can get an exception if you’ve been there for at least 1yr. If you’re self employed 2 most recent tax returns with positive income on line 31 of your schedule C.
If homeownership is your goal, then don’t be cheap and have a certified tax preparer prepare your taxes because it’s likely you’ll need certain docs to get approved only they can provide. Also DO NOT write off all your income to avoid paying the IRS taxes because this will disqualify you from a loan and you’ll have to get a more expensive loan with a bigger down payment.
Credit -
many people think this is the most important but it’s not but it is important. With a high enough capacity (low DTI) I’ve seen clients with minimum scores get approved. FHA requires 580, VA does not have a minimum score requirement and while some lenders can do down in the 500’s generally most lenders do not go below 580, and conventional requires 620.
Having said all that just because you meet the minimum score does not mean you’ll get an approval before credit profile (positive tradeline history, collection activity, credit usage) is what matters most. I’ve seen applicants with 680+ get denied for conventional loans because they have a poor credit profile or low capacity (higher DTI).
FHA is a little more forgiving which is why they are easier loans to get than conventional. Obviously the higher the score, the better the chances are for approval but high scores aren’t needed if capacity and collateral are strong.
Collateral - aka down payment.
Underwriters request either 1 bank statement for FHA or 2 bank statements for conventional and all they are looking for is verification of cash to close, large deposit (FHA more than 1% of loan amount deposited in 1 deposit) activity and reserves if needed, not spending habits. Large purchases are irrelevant and NSF’s can be explained with an explanation letter. The higher the down payment in percentages (3.5 or 5%, 10%, 15%, 20% etc…) not dollars ($2000 or $5000 more than required) then the lower the risk and higher chance of approval especially for conventional loans. Plus dollars don’t noticeably reduce your monthly payment but percentages do.
Overlays -
additional restrictions some lenders have in addition to standard mortgage guidelines. If your lender is telling you anything more is required than what’s posted above it’s because they have overlays which make it more difficult to get approved with them. Example - Veteran’s United will not take credit scores under 620 = OVERLAY
If you want a personalized answer for your unique situation call, text, or email me or visit my website below:
Credit score: Low credit scores (generally below 620) are a major factor in loan denials. Having a history of late payments, delinquencies, or collections can negatively impact your score.
Debt-to-income ratio (DTI): This ratio compares your monthly debt payments to your gross income. A high DTI (generally above 50%) indicates you have a lot of debt compared to your income, making it harder to afford a mortgage payment.
Employment history: Lenders prefer borrowers with stable employment and income. Recent job changes, gaps in employment, or insufficient income documentation can raise concerns.
Down payment: A smaller down payment increases the loan amount and loan-to-value ratio (LTV), making the loan riskier for lenders. In Kentucky, FHA loans require a minimum 3.5% down payment, while conventional loans typically require 20%.
Insufficient assets: While not always a disqualifier, having limited savings or assets can weaken your application by reducing your financial cushion.
Property-related reasons:
Appraisal value: If the appraised value of the property is lower than the purchase price, it creates a high LTV, making the loan riskier for lenders.
Property condition: Major repairs or structural issues with the property could require significant investment before closing, which lenders may not be comfortable with.
Location: Properties in floodplains or other high-risk areas may be ineligible for certain loan types or require additional insurance.
Call/Text - 502-905-3708
