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
Applying for a Kentucky Mortgage Soon? Don't Dispute that Account Sounds counterintuitive, I'm sure ... But until you...
Got Dispute Comments on Your Credit Report?
If you've disputed any accounts in the past, chances are your credit report still has dispute comments listed. That might seem harmless—but if you're applying for a mortgage, those comments could delay or even block your loan approval.
Here’s what you can do:
Call each credit bureau (numbers on the graphic).
Ask to remove any dispute comments.
Verify they’re gone by pulling a fresh consumer credit report.
Follow up within 72 hours to confirm it’s been done.
Pro Tip: Do this before your lender pulls your credit. It could save time, stress, and keep your home loan on track.
If you’re not sure where to start, drop a comment or shoot me a message. I’m here to help walk you through the process!
Which FICO Score Do Kentucky Mortgage Lenders Use?
Which FICO Score Models Matter for Kentucky Mortgage Loans?
FICO® scores are the cornerstone of mortgage approvals, but not all FICO scores are created equal. If you're buying a home in Kentucky—especially using government-backed loans like FHA, VA, or USDA—it's crucial to understand which versions lenders actually use to qualify you.
Understanding the FICO® Scores Used by Mortgage Lenders
When you check your credit score on apps like Credit Karma or your bank, you're likely seeing a version that lenders don’t use for mortgages. These are typically FICO 8 or VantageScore 3.0. Mortgage lenders, on the other hand, use older FICO score versions designed specifically for risk evaluation in home lending.
Which FICO Scores Do Lenders Pull?
Here's what most Kentucky mortgage lenders look at:
FICO Score 2 (Experian)
FICO Score 4 (TransUnion)
FICO Score 5 (Equifax)
These are often referred to collectively as the “classic FICO models” and are used for:
Why Is Your Mortgage Score Different Than Credit Karma?
Credit Karma uses VantageScore 3.0, which isn't used in mortgage underwriting. It may show a score that's 20–40 points higher (or lower) than what your lender sees. That’s why getting a lender-pulled tri-merge report is essential before house hunting.
How to Improve the Right FICO Score
Keep credit card utilization under 30%
Avoid new hard inquiries 30–60 days before applying
Dispute inaccurate accounts directly with bureaus (but avoid disputes right before applying)
Understanding Credit Scores for Kentucky Mortgage Loan Approval
Why do some mortgage lenders require a certain credit score whereas other mortgage lenders may not?
One Word Mortgage Overlays. Some lenders will institute a higher credit score than the minimum below to lessen their risk of having to buy the loan back from the government agencies if they get too many mortgage defaults. In order to protect their lending portfolio and hedging their risk, they will require say a 640 credit score or higher for a FHA loan, whereas the guidelines clearly state you can do a FHA loan with a minimum credit score of 580 To understand mortgage overlays, it helps to have a foundation of how the mortgage approval process works. Mortgage lenders always have underwriting guidelines—standards to determine the amount and terms you qualify for.
Credit Score Minimum guidelines are typically set based on the mortgage program, e.g., FHA, VA, or USDA. FHA, --
What score does the Mortgage Lender Use? Why may it be different than the one you are seeing?
The reason mortgage lenders use older FICO Scores is because they don’t have a choice. They are essentially forced to use them.
For a bank to sell a mortgage to Fannie Mae or Freddie Mac, FHA VA, USDA, Etc, 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 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:
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?
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.
Contact Joel Lobb for Expert Mortgage Advice
Joel Lobb is an experienced Mortgage Loan Officer , Inc. specializing in helping Kentucky homebuyers navigate credit and mortgage processes.
Disclaimer: The information provided is for educational purposes and does not guarantee approval or represent underwriting guidelines. Always consult with your lender for personalized advice.
If you'd like any adjustments or additional details, let me know!
NMLS 57916 |
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).
To get a Kentucky mortgage loan with bad credit through FHA, VA, USDA, or the Kentucky Housing Corporation (KHC), you'll need to take specific steps tailored to each program:
Kentucky FHA Loan with Bad Credit:
Credit Score Requirement: FHA loans typically accept lower credit scores than conventional loans. While the minimum credit score can vary, aiming for at least a 580 score can increase your chances.
Down Payment: With a credit score below 580, a 10% down payment may be required. If your score is 580 or above, you can qualify with a 3.5% down payment.
Work on Your Credit: Prioritize improving your credit score by paying bills on time, reducing debt, and disputing any errors on your credit report.
Kentucky VA Loan with Bad Credit:
Credit Score Requirement: VA loans are known for being flexible with credit requirements. While there's no set minimum score, lenders often look for scores around 620 or higher.
VA Loan Guaranty: The VA doesn't directly issue loans but guarantees a portion of the loan, making lenders more willing to approve applicants with lower credit scores.
Proof of Financial Stability: Highlight stable income and employment history to strengthen your application.
Kentucky USDA Loan with Bad Credit:
Credit Score Requirement: USDA loans typically require a minimum credit score of 640. However, some lenders may consider scores as low as 580 with compensating factors.
Income Limits: Ensure your income falls within USDA's income limits for the area where you're buying.
Compensating Factors: Emphasize factors like a steady job, low debt-to-income ratio, and a history of making timely payments to offset a lower credit score.
Kentucky Housing Corporation (KHC) Loan with Bad Credit:
Credit Score Requirement: KHC loans may have varying credit score requirements depending on the specific program. Aim for a score of at least 620 for better chances of approval.
Down Payment Assistance: KHC offers down payment assistance programs that can help lower-income and first-time homebuyers. Check eligibility and requirements for these programs.
Prequalification: Consider getting prequalified to understand your options and improve your negotiating position.
Hope your day is full of sunshine
Joel Lobb Mortgage Loan Officer
American Mortgage Solutions, Inc. 10602 Timberwood Circle Louisville, KY 40223 Company NMLS ID #1364
NMLS 57916 | Company NMLS #1364/MB73346135166/MBR1574
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).
For all these loans, working with a knowledgeable mortgage broker like Joel Lobb can be beneficial. They can guide you through the specific requirements, help you understand your options, and assist in improving your chances of approval despite bad credit.
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.
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.
The new credit requirements are not expected to dramatically change the number of Kentucky FHA mortgage approvals.
Get used to the term credit overlays. You may call several FHA lenders and a lot of them will tell you that even though FHA will insure lower credit scores, most lenders had already imposed a 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)
What is a good FICO Score for Mortgage Loan Approval?
FICO Scores generally range from 300 to 850, where higher scores demonstrate lower credit risk and lower scores demonstrate higher credit risk (note: some types of FICO® Scores have a slightly broader range).
What’s considered a “good” FICO® Score varies, since each lender has its own standards for approving credit applications, based on the level of risk it finds acceptable. So one lender may offer its lowest interest rates to people with FICO® Scores above 730, while another may only offer it to people with FICO® Scores above 760.
The chart below provides a breakdown of ranges for FICO® Scores found across the U.S. consumer population. Again, each lender has its own credit risk standards, but this chart can serve as a general guide of what a FICO® Score represents.
Student-Loan Freeze Led to Big Credit-Score Gains, N.Y. Fed Says
Some 30 million student borrowers saw scores rise, study says
Freeze is set to expire on Aug. 31 but Biden may extend it
Share of Borrowers by Credit Score
Credit scores for student loan borrowers increased dramatically
Here are some key takeaways from the New York Fed report.
Better Credit Scores
The share of student-loan balances held by subprime borrowers fell to 26% in 2021, from 36% in 2019. That’s primarily because loans owed to the federal government that were delinquent before the pandemic were marked as current under the forbearance policy, putting millions of households on a sounder financial footing.
“The end of forbearance will have impacts on credit scores, borrowing, and household cash flow over the coming year for the 38 million federal borrowers that have benefited from the pause,” the New York Fed researchers wrote. “Some borrowers will enter delinquency or default.”
Growing Balances
With repayments on hold, about two-thirds of student-debt holders had balances that were growing or flat at the end of 2021, compared with just 48% in 2019. That’s an increase of roughly 3.2 million borrowers.
There was also a shift in the typical size of debts, with larger loans accounting for a bigger share of the total. At the same time, 5.4 million people who were recorded as having student debt outstanding at the end of 2019 no longer owed anything by the end of 2021.
Loan Shifts
Since the pandemic, larger debts have increased as a share of total loans
Source: Federal Reserve Bank of New York Consumer Credit Panel / Equifax
DC Debt Leader
On average, student borrowers in and around the nation’s capital owed the most at the end of 2021. Washington DC topped the list, with an average debt of $53,769, while Maryland ranked second and Virginia fifth.
Student Loans by State
Average balances vary widely across states
Source: Federal Reserve Bank of New York Consumer Credit Panel / Equifax
Note: As of Q4 2021, average balance
“Of the ten states (not including D.C.) with the largest median balance, seven belong to the Southern Census region (Georgia, Maryland, Virginia, North Carolina, South Carolina, Alabama, and Tennessee),” the report found.
Top 10 Student Loan Debt
Seven of top-10 largest belong to the Southern Census region
Source: Federal Reserve Bank of New York Consumer Credit Panel / Equifax
Note: Ranked by median loan amount
Once the forebearence period ends, loan amounts are anticipated to rise and delinquency rates across states in the South are expected to have worse outcomes.
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