Kentucky Mortgage Underwriting Guidelines For Deposits, Job Gaps, Credit Inquiries

Kentucky Mortgage Education • 2026 Update

Kentucky Mortgage Underwriting Guidelines for Deposits, Job Gaps, and Credit Inquiries

Last Updated: January 2026

FHA VA USDA Conventional

Most Kentucky mortgage approvals do not fall apart because of interest rates or credit scores. They stall because underwriting needs clarification on employment gaps, recent credit inquiries, or bank deposits that do not match the borrower’s normal income pattern.

This 2026 guide explains exactly how Kentucky mortgage underwriters evaluate job history, deposits, earnest money, gift funds, and credit inquiries for FHA, VA, USDA, and Conventional loans — and how to prepare your file so it clears underwriting without last-minute conditions.

Employment history and job gaps for Kentucky mortgages

Underwriters require a documented two-year employment history. Job changes are common and usually acceptable, but gaps and frequent changes must be explained so the lender can determine income stability and likelihood of continued employment.

What triggers underwriting review

• Employment gaps of six months or more
• Multiple job changes within a short timeframe
• Changes in pay structure (hourly to commission, W-2 to self-employed)

What underwriting typically requires

• Signed letter of explanation outlining dates, reason for the gap, and why income is stable now
• Supporting documentation when applicable (school transcripts, medical leave, military service)
• Evidence that current employment is likely to continue

If school was your primary activity and you transitioned directly into employment in the same field, transcripts may satisfy part of the employment history requirement.

Credit inquiries and new debt review

Recent credit inquiries are not automatic deal-breakers. Underwriting simply must confirm that no new undisclosed debt was opened after the credit report was pulled.

Common underwriting conditions

• Signed explanation for each recent inquiry
• Confirmation whether new credit was opened
• Disclosure of payment terms if new debt exists

If a new account appears late in the process, the loan may pause while the file is re-underwritten. This is standard compliance, not lender discretion.

Large deposits in checking and savings accounts

Large or irregular bank deposits are one of the most common underwriting conditions on Kentucky mortgage loans. Lenders must confirm funds are from an acceptable source and not undisclosed borrowed money or incentives from an interested party.

How large deposits are commonly defined

• Conventional loans: deposits greater than 25% of gross monthly qualifying income
• FHA and VA loans: any large or unusual deposit, with heightened review at 2% or more of the purchase price

How underwriting evaluates deposits

• Are deposits consistent with normal income patterns?
• Is income direct-deposited?
• Is the account newly opened?
• Do multiple deposits aggregate into a large amount?

Required documentation

• Signed letter of explanation
• Proof of source such as paystubs, transfer records, sale receipts, or settlement statements

If a large deposit cannot be documented but you have sufficient verified assets without it, underwriting may exclude the deposit from usable funds and still approve the loan.

Cash on hand

Cash on hand is heavily scrutinized. Funds must be deposited and verified well before underwriting, and borrowers must demonstrate the ability to have saved the money.

• Deposit funds prior to underwriting
• Provide a signed explanation of how and over what period the funds were saved
• Support with bank statements or verification of deposit

Cash on hand is generally not acceptable as the source for gift funds.

Earnest money deposit (EMD) requirements in Kentucky

Earnest money deposits must be fully verifiable regardless of when they were made.

• Cancelled check or bank statement showing funds cleared
• Updated account balance after clearing
• Clear traceability of the source of funds

Kentucky mortgage underwriting checklist

More Kentucky mortgage program details

• FHA Loans: https://www.mylouisvillekentuckymortgage.com/p/kenttucky-fhamortgage-loansupdated.html
• VA Loans: https://www.mylouisvillekentuckymortgage.com/p/va-loans.html
• USDA Loans: https://www.mylouisvillekentuckymortgage.com/p/a-kentucky-usda-home-loan-is-zero.html
• KHC $12,500 Assistance: https://www.mylouisvillekentuckymortgage.com/p/khc-loan-programs.html

Want fewer underwriting conditions?

I review bank statements, job history, and credit activity before submission so underwriting doesn’t surprise you at the finish line.

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