Kentucky First Time Home Buyer Programs For Home Mortgage Loans

Kentucky first-time homebuyer programs

• KHC Regular Down Payment Assistance: Receive a loan of up to $6,000 and repay it over 10 years at a 5.5% interest rate.
• KHC Affordable Down Payment Assistance: If you have a low-to-moderate income, you can get a loan of up to $6,000 and pay it back over 10 years at a 1% rate.
• Conventional Mortgage Loan- 3% down payment credit scores should be at least 680, but preferably 720 or higher with 
• Federal Housing Administration FHA Kentucky mortgage: You can get a down payment of 3.5% with a credit score of at least 580, or get a mortgage with a credit score between 500 and 580 with 10% down using this loan, which is also called an FHA loan. 
• United States Department of Agriculture mortgage Kentucky USDA Mortgage loan: These loans, also called USDA loans, can be useful if you are a low-to-moderate income borrower looking to buy a home in a rural or suburban area.
• Veterans Affairs mortgage Kentucky VA Mortgage : These mortgages, also called VA loans, are for active-service military members or veterans, or spouses of members who have died and can provide lower interest rates than conventional mortgages.

• Am I an active or former member of the armed forces? If not, right away you can remove VA loans from consideration.
• Is my home located in a rural area? People living in more urban and suburban neighborhoods won’t qualify for a USDA loan, so you can scratch that one if that’s the case.
• How much can I afford for a down payment? FHA loans offer plenty of flexibility with their down payment options, but you will need to put up some money up front. That may not be the case with either VA or USDA loans.
• How strong is my credit score? You’ll need a 620 credit score at minimum to qualify for USDA loans. FHA and VA programs tend to be a bit more lenient on credit history.
• Which loan offers the lowest interest rate? All three government loan programs tend to offer lower interest rates than conventional mortgages, but among them, VA might have a slight edge. Mortgage rates constantly fluctuate, no matter what type of home loan you’re considering. So, be sure to take a look at the latest interest rates before making a decision.

Loan types of credit score requirements for First Time Home Buyers in Kentucky

Loans insured by the government, such as VA loans, USDA loans and FHA loans, tend to have more flexible qualification requirements than conventional mortgage loans, which are not government-backed.

To get approved for a mortgage, whether conventional or government-backed, you’ll have to meet your lender’s minimum FICO score for that particular loan type. 

Type of Loan Minimum FICO Score

Conventional 620

KHC Down Payment Assistance 620

FHA 500 with 10% down 580 3.5% down payment

VA no minimum score (depends on the lender)

USDA no minimum score (depends on the lender

Most lenders will require a DTI ratio of less than 45-50 %, but this will depend on the type of loan you’re applying for. 

To determine your DTI, lenders take into account your front-end and back-end DTI.

Front-end DTI

Your front-end ratio consists of your monthly housing expenses divided by your monthly gross income. Housing-related expenses include your future mortgage payment, taxes and mortgage insurance.

Back-end DTI

The back-end DTI is the percentage of your gross income spent on monthly debts.

The items detailed in your credit report often comprise your back-end DTI. This includes monthly obligations such as credit cards, car loans, student loans, child support and personal loans.

Private mortgage insurance (PMI)

When purchasing a property with a conventional loan, some buyers have to factor in private mortgage insurance (PMI).

PMI is generally required for homebuyers who offer less than 20% down and is designed to protect the lender if you default on your loan.

The cost of PMI is rolled into your mortgage payment as an added fee and often accounts for 0.2% to 2% of the mortgage amount. According to Freddie Mac, you can expect to pay between $30 to $70 per month for every $100,000 borrowed.

Once you build your equity to 20% of the property’s appraised value, your loan servicer is required to drop PMI. According to Freddie Mac, PMI will automatically terminate on the date your principal balance reaches 78% of the original appraised value of your home.

Mortgage insurance premiums (MIP)

Government-backed loans don’t have PMI. Instead, you’ll have to factor in mortgage insurance premiums, which are paid both at closing and as part of your monthly payment.

Both FHA and USDA loans require mortgage insurance.

FHA loans require an upfront premium of 1.75% of the loan amount. FHA borrowers also pay an annual premium of 0.45% to 1.05% of the loan amount — unless they put 10% down. Some FHA borrowers can remove MIP, but that will depend on their loan’s origination date.

On the other hand, USDA loans require an upfront mortgage premium of 1% and an annual premium of 0.35%. The drawback of USDA loans is that there’s no way to eliminate your mortgage insurance premium.

If you have a VA loan, the VA guarantee replaces mortgage insurance. However, you’ll still have to pay an upfront funding fee of 1.4% to 3.6% of the loan amount at closing.

If you don’t have the money upfront, VA, FHA and USDA loans allow you to roll the fee into your mortgage, but your loan amount and overall loan cost will increase

Conventional Loans 3%-20%

620

45%

PMI required for down payments of less than 20%. Depends on loan type, credit score and down payment.

KHC Down payment Assistance

      zero down $6k dap assistance in form of second mortgage

620 and above score 

50% maximum debt to income ratio

VA Loans

Not required for down payment

Varies by lender, no minimum credit score

no max debt ratio but residual income is important.

No mortgage insurance but a one-time funding fee (1.25%-3.3% of the loan amount).

FHA Loans

3.5% to 580 credit score and 10% down with a 500 credit score.

56.9% max debt to income ratio but lower required on manual underwrites.

Mortgage insurance required. MIP can be removed after 11 years if you put down 10%.

USDA Loans

No required down payment

no minimum score varies by lender

45%

No mortgage insurance, but a one-time guarantee fee (1% of loan amount) and an annual fee (0.35% of loan amount).

Kentucky First Time Home Buyer Programs

Conventional Loan

 

• At least 3%-5% down

 

• Closing costs will vary on which rate you choose and the lender. Typically the higher the rate, the lesser closing costs due to the lender giving you a lender credit back at closing for over par pricing. Also, called a no-closing costs option. You have to weigh the pros and cons to see if it makes sense to forgo the lower rate and lower monthly payment for the higher rate and less closing costs.

 

Fico scores needed start at 620, but most conventional lenders will want a higher score to qualify for the 3-5% minimum down payment requirements Most buyers using this loan have high credit scores (over 720) and at least 5% down.

 

The rates are a little higher compared to FHA, VA, or USDA loan but the mortgage insurance is not for life of loan and can be rolled off when you reach 80% equity position in home.

 

Conventional loans require 4-7 years removed from Bankruptcy and foreclosure.

 

Max Conventional loan limits are set at $647,200 for 2022 in Kentucky

 

 

Kentucky USDA Rural Housing Program

 

 

If you meet income eligibility requirements and are looking to settle in a rural area, you might qualify for the Kentucky USDA Rural Housing program. The program guarantees qualifying loans, reducing lenders’ risk and encouraging them to offer buyers 100% loans. That means Kentucky home buyers don’t have to put any money down, and even the “upfront fee” (a closing cost for this type of loan) can be rolled into the financing.

 

Fico scores usually wanted for this program center around 620 range, with most lenders wanting a 640 score so they can obtain an automated approval through GUS. GUS stands for the Guaranteed Underwriting system, and it will dictate your max loan pre-approval based on your income, credit scores, debt to income ratio and assets.

 

They also allow for a manual underwrite, which states that the max house payment ratios are set at 29% and 41% respectively of your income.

 

They loan requires no down payment, and the current mortgage insurance is 1% upfront, called a funding fee, and .35% annually for the monthly mi payment. Since they recently reduced their mi requirements, USDA is one of the best options out there for home buyers looking to buy in an rural area.

 

A rural area typically will be any area outside the major cities of Louisville, Lexington, Paducah, Bowling Green, Richmond, Frankfort, and parts of Northern  Kentucky .

 

There is a map link  see the qualifying areas.

 

New Income limits for most counties (*) in Kentucky are $91,900 for a  4 unit household and household families of five or more + can make up to  $121,300.

The Northern Kentucky Counties (***) of Boon, Kenton, Campbell, Bracken, Gallatin, and Pendleton are $99,250 for a household of four or less and up to $130,000 for a family of five or more.

Remember,  Jefferson County Kentucky, Fayette County Kentucky are not eligible for USDA loans.

 

USDA requires 3 years removed from bankruptcy and foreclosure.

 

There is no max USDA loan limit.

 

 

Kentucky FHA Loan

 

 

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 500 credit score.

 

The current mortgage insurance requirements are kind of steep when compared to USDA, VA , but the rates are usually good so it can counteracts the high mi premiums. As I tell borrowers, you will not have the loan for 30 years, so don’t worry too much about the mi premiums.

 

The mi premiums are for life of loan like USDA.

 

FHA requires 2 years removed from bankruptcy and 3 years removed from foreclosure.

 

Maximum FHA loan limits in Kentucky are set at $420,680 for 2022…If you are looking at a larger loan amount, then you would need to look at doing a conventional loan which has a max loan amount of $647,200.00

Kentucky VA Loan

 

 

VA loans are for veterans and active duty military personnel. The loan requires no down payment and no monthly mi premiums, and no minimum credit score , saving you on the monthly payment. It does have an funding fee like USDA, but it is higher starting at 2% for first time use, and 3% for second time use. The funding fee is financed into the loan, so it is not something you have to pay upfront out of pocket.

 

VA loans can be made anywhere, unlike the USDA restrictions, and there is no income household limit and there is no max loan in Kentucky for 2022, but it does now carry higher mortgage insurance premiums in the form of New

Kentucky Down Payment Assistance

• Regular DAP

  • Purchase price up to $346,644 with Secondary Market.
  • Assistance in the form of a loan up to $6,000 in $100 increments.
  • Repayable over a ten-year term at 5.50 percent.
  • Available to all KHC first-mortgage loan recipients.

  Affordable DAP

  • Purchase price up to $346,644​ with Secondary Market.
  • Assistance up to $6,000.
  • Repayable over a ten-year term at 1.00 percent.
  • Borrowers must meet Affordable D​AP income limits.

  ​MORE ABOUT DOWN PAYMENT AND CLOSING COSTS

  • No liquid asset review and no limit on borrower reserves.
  • Specific credit underwriting standards may apply to down payment programs
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