I specialize in Kentucky First Time Homebuyers FHA, VA, USDA & Rural Housing, KHC and Fannie Mae mortgage loans. I have helped over 900 Kentucky families buy their first home and refinance their current mortgage for a lower rate; Kentucky First time buyers $0 down still available with 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 ID 1364
When it comes to your credit score, believing the wrong information could literally cost you.
What Types of Credit Pulls Really Harm My Score?
Research shows that people who apply for new credit too frequently indicate a higher credit risk. For this reason, scoring models like FICO® factor in the number of inquiries on your credit reports, which leads some people to incorrectly believe that having your credit pulled automatically damages your score. That is not exactly the case — and here’s the scoop:
It is true that some inquiries can potentially harm your credit. Hard inquiries, like a lender pulling your credit report, could affect your score. But soft inquiries, like checking your own credit score, will not.For example: If you apply for numerous credit cards, then it will probably negatively impact your credit score. But if you have multiple credit pulls from mortgage companies, student loan providers, or auto lenders because you are rate shopping, then there might be a less substantial impact on your score because rate shopping doesn’t indicate an elevated credit risk — as long as multiple inquires occur within a small window of time (usually between 14 and 45 days).
Should I Close Paid-Off Credit Cards?
Another common credit myth is that paid-off credit card accounts should be closed. According to FICO, credit card accounts should never be closed for the sole purpose of raising a credit score. Closing a zero-balance credit card account often has the unintended effect of raising your revolving utilization ratio — or your available credit relative to your outstanding account balances.
When you close an unused account, the available credit limit is no longer factored into your revolving utilization. If you carry an outstanding balance on any other credit cards, closing a zero-balance account could result in a higher overall revolving utilization ratio, which in turn could cause your credit score to drop.
Is 30% the Magic Number for Credit Card Utilization?
When it comes to credit card utilization, a lower percentage is generally better. One credit scoring myth that has confused a lot of consumers over the years is the idea that 30% is the magic number for credit card utilization. According to FICO, that isn’t true.
If you want to have a healthy credit score, aim to pay off your credit card balances in full each month. Pay by the statement closing date, and you should see that the account balance on your credit report is reflected as zero — and note that a zero balance can lead to lower revolving credit utilization (and generally a better credit score).
Credit score tracking is all the rage for personal finance-savvy consumers. With websites like Credit Karma, you can monitor your current score and keep an eye on irregularities in your line of credit.
But those aren’t the numbers used to gauge your credit-worthiness for a loan. Instead, banks rely on what’s known as the FICO score, an amalgamation of information about your ability to pay back credit cards, student loans, car debt and other forms of debt on time.
Here’s why you need a good credit score to buy a home: Credit scores impact the interest rate of your mortgage and could factor into whether you receive a conventional home loan (meaning that they are available/guaranteed through private financial institutions, or one of two government-backed entities, Fannie Mae or Freddie Mac).
You can visit annualcreditreport.com and get a report from one of the three major credit bureaus, Experian, TransUnion and Equifax. This check will not hurt your score, but it will give you an idea of how trustworthy you look to lenders.
If you think your credit is in good enough shape to begin working with a lender, you can ask the financial institution to check your credit. All hard credit checks from mortgage lenders within a 45-day-window are treated like one inquiry. That’ll allow you to compare two to three lenders to see who will offer a more competitive mortgage rate. FICO advises taking advantage of this by shopping around for rates within a 30-day-window.
FICO has updated its scoring method, and new scores will be out in the summer of 2020. But while those new numbers might be a shock, they won’t have much impact on home loans because mortgage lenders prefer to use older FICO scoring models to determine a borrower’s eligibility, NPR reported.
The minimum credit score is 500 for Kentucky FHA loans. However please keep in mind these two things: 1. Lenders credit their own overlays to increase the credit score threshold, most being 620, and secondly, if your credit score is below 580, you would need 10% minimum down payment, and if the credit score is over 580, then you can go with the minimum 3.5% down payment.
Obviously, if you have a higher credit score, this will increase your chances of getting approved for a Kentucky FHA Mortgage and possibly better rates and closing costs options.
Kentucky VA Mortgage loans requirements :
VA does not have a minimum credit score requirement, but if the credit score is below 620 few lenders will do the loan, but I am set up with several Kentucky VA lenders where I have closed them down to a 560 credit score, but the borrower had good compensating factors such as large down payment, low dti ratios, good job history and good residual income with no previous bankruptcies or foreclosures.
I would suggest if your credit scores are below 580, I would suggest on working on getting the scores up before you applied for a VA mortgage loan.
A lot of lenders will do a rapid rescore which in some cases can increase your credit scores in as little as 7-10 working days.
The federal Department of Veterans Affairs (VA) guarantees loans for current and former members of the military and their families. VA loans provide very favorable terms to eligible borrowers and have limited qualifying requirements.
You can get a VA loan with no down payment so long as the home isn’t worth more than you pay for it, and there’s no minimum credit score to qualify. You also don’t have to pay for mortgage insurance, although you do have to pay an up-front funding fee of between .5% and 3.3% of the loan amount unless you fall within an exception for disabled vets or military widows or widowers.
Kentucky USDA Mortgage credit score requirements:
According to their guidelines, USDA will go down to a 580 credit score, but most lenders will want a 640 credit score. USDA uses an online system to underwrite the risk of the loan, and scores under 640 are very difficult to get approved.
Validating the Credit Score. Two or more eligible tradelines are necessary to validate an applicant’s credit report score. Eligible tradelines consist of credit accounts (revolving, installment etc.) with at least 12 months of repayment history reported on the credit report. At least one applicant whose income or assets are used for qualification must have a valid credit report score
The Rural Housing Service (RHS) operates under the federal Department of Agriculture to guarantee loans for rural home-buyers with limited income who can’t obtain conventional financing. The upside is that Kentucky USDA loans require no down payment. The downside is that they charge a steep up-front fee of 1% of the loan amount (which can be paid off over the entire loan term) and an annual fee of 0.35%.
Kentucky Fannie Mae and Freddie Mac Conventional Credit Score Requirements
These are considered “conventional loans’ that can be often be obtained with a 3% to 5% down payment. Of course, there are higher standards for conventional home financing. The most common minimum credit score requirement to get approved today is a 620 FICO.
This type of score is typical for people that have high credit card balances or a few delinquent payments in their past. The general consensus on Freddie Mac and Fannie Mae loans in Kentucky is that a 620 score is the entry-point to qualify, but you will need thorough documentation of income with credit scores in the 620 to 640 range. You will have a better shot to be approved for a mortgage-backed by Fannie or Freddie with a 680-credit score and less strenuous underwriting.
Competitive Mortgage Rates and Fees
Monthly Mortgage Insurance Is Not Always Required
Ideal for First Time Home Buyers with Good Credit
Down Payments For Mortgage Loan Approval
Down payments are fairly straightforward: it’s the amount you pay out initially when agreeing to buy a home, and the more you put down, the less you have to borrow from a mortgage lender to continue gaining equity in a home.
The minimum down payment to get a mortgage is 3.5 percent of the home’s cost, although unless you put down 20 or more percent on a conventional loan (more on that later) or get a mortgage backed by a federal agency, you’ll be subject to paying for mortgage insurance, according to the Consumer Financial Protection Bureau.
Down Payment Closing Cost Assistance
KHC recognizes that down payments, closing costs, and prepaids are stumbling blocks for many potential home buyers. Here are several loan programs to help. Your KHC-approved lender can help you apply for the program that meets your need.
Regular DAP
Purchase price up to $314,827 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 $314,827 with Secondary Market.
Assistance up to $6,000.
Repayable over a ten-year term at 1.00 percent.
Borrowers must meet Affordable DAP income limits.
KHC is used for mostly applicants in urban areas of Kentucky that don’t have access to USDA or other government agencies to buy a home with no down payment.
A minimum of 3.5% down payment is required with this loan. Down payment assistance loans are available from $4500-$6,000, and are paid back over a period of ten years. They are typically offered to buyers with limited cash reserves and carry an interest rate of 1 to 5.5%. These loans can make a critical difference to buyers for whom the down payment is an obstacle. Buyers whose 3.5% down payment is less than the $6000 limit may choose to use the remainder of a down payment loan to pay closing costs, further reducing the amount needed to bring to closing.
The Federal Home Loan Bank of Cincinnati (FHLB Cincinnati) has established a set-aside of Affordable Housing Program (AHP) funds to help create homeownership through a program called the Welcome Home Program. Welcome Home funds are available to Members as grants to assist homebuyers.
Welcome Home grants are limited to $5,000 per household, households are eligible only if the total household income is at or below 80% of Mortgage Revenue Bond (MRB) income limits, and funds are offered on a “first-come, first-served” basis. Other program requirements are identified below.
The debt-to-income (DTI) ratio is particularly key for lenders.
Debt consists of how much you currently owe such as student loans, car payments and credit card payments, compared to your gross monthly income (before taxes are taken out).
Fannie Mae, a federally backed company that purchases and guarantees mortgages for borrowers, allows a debt-to-income ratio of up to 45 percent, although it may be as high as 50 percent for people with phenomenal credit scores and incomes.
How lenders use your DTI for a Kentucky Mortgage Loan Approval
Kentucky Mortgage lenders typically use DTI (along with other variables) to determine whether or not you qualify for a loan, and to help determine your Kentucky mortgage rate. A high front-end DTI raises red flags with lenders because it is commonly associated with borrower default. In fact, reducing front-end DTI to reduce the risk of homeowner default was one of the main objectives of the loan modification programs introduced by the government in 2009.
There are specific limits for DTI that are used as cut-off points when evaluating borrowers. Current DTI limits for conventional conforming mortgage loans are typically 28% on the front end and 36% on the back end, though these limits are slightly higher for government subsidized Kentucky FHA loans.
While there are certainly other factors to consider when determining our eligibility for financing (e.g., credit score, etc.), your DTI is an important determinant that you should be aware of. By working to improve it, you can make yourself a better credit risk, and thus get more favorable treatment from lenders.
Two obvious ways to improve DTI are to increase your income and/or decrease your debt. Both are solid goals.
Call us today for a free pre-qualification for your next mortgage loan in Kentucky. We are available 7 days a week to take your call..502-905-3780 or email us at kentuckyloan@gmail.com
Most lenders will wants a middle credit score of 620 for KY First Time Home Buyers looking to go no money down. The two most used no money down home loans in Kentucky being USDA Rural Housing and KHC with their down payment assistance will want a 620 middle score on their programs.
If you have access to 3.5% down payment, you can go FHA and secure a 30 year fixed rate mortgage with some lenders with a 580 credit score. Even though FHA on paper says they will go down to 500 credit score with at least 10% down payment, you will find it hard to get the loan approved because lenders will create overlays to protect their interest and maintain a good standing with FHA and HUD.
Another popular no money down loan is VA. Most VA lenders will want a 620 middle credit score but like FHA, VA on paper says they will go down to a 500 score, but good luck finding a lender for that scenario.
A lot of times if your scores are in the high 500’s or low 600’s range, we can do a rapid rescore and get your scores improved within 30 days.
Kentucky Conventional Mortgages – These mortgages are not insured by the government, but they do conform to the government standards known as Freddie Mac and Fannie Mae. One thing to note about a conventional mortgage is that they require mortgage insurance unless you can put down at least 20%; once the loan’s principal balance drops below 78% of the home’s value, you no longer have to pay mortgage insurance.
Qualifying credit: 620-740
Loan terms: 15 or 30 years
3% Down Payment minimum
Kentucky FHA Loans – An FHA loan is insured by the Federal Housing Administration, who guarantees a portion of the loan should the borrower default. This minimizes the lender’s risk and allows them to expand their borrowing parameters to the benefit of first-time homebuyers who might not have large savings or strong credit. Keep in mind that closing costs will be much higher for this type of mortgage and the home must meet rigorous appraisal standards.
Qualifying credit: 500 minimum with 10% down payment and 580 score higher 3.5% down payment
Kentucky VA LoansIf you are an active duty military personnel (or veteran in California and Hawaii), you may be eligible for this mortgage plan backed by the Dept. of Veteran Affairs. Income and credit requirements are significantly lower than other loans, making the approval process much easier, but be prepared to face longer closing periods than you would experience through a private lender.
Qualifying credit: No minimum Credit score for va loans
Outstanding debt---debt ratios usually around 45% on the backend
Credit background-----looking at last 2-4 years mostly in regards to bankruptcies, foreclosures, short-sales,
Employment history--2 year work history not really the same job but same line of work and pay being consistent.
The newest version of the FICO credit score unveiled on Thursday will have a broader view of how you manage your debt and will boost as many scores as it will hurt.
Instead of relying on just a snapshot of your financial behavior, the new score, called FICO Score 10, will be able to peer into your financial habits for the past 24 months and determine – based on that history – if you’re a risky borrower.
About 40 million Americans will see their FICO score increase by 20 points or more because of the change, while another 40 million will experience a decline by at least 20 points, said Dave Shellenberger, vice president of product management at FICO. Another 30 million will notice smaller changes either way.
“These are the most predictive scores FICO has developed to date,” Shellenberger told Yahoo Money. “They really do an excellent job of reinforcing good consumer financial habits – making payments on time, not running up balances, taking out credit only when you need it. Those types of behaviors are rewarded strongly.”
FICO unveiled a new credit score that will help the credit scores of some Americans and hurt some as well. (Photo: Getty Creative)
Who will the new FICO score hurt?
The new score will judge certain risky behaviors more harshly.
For instance, if you build up balances on your credit cards over the last 24 months, that will hurt your score. Before, the FICO score could only see your current balance, and not the history of your growing credit card debt.
Another potential red flag is personal loans. If you consolidated credit card balances into a personal loan and then subsequently racked up new credit card debt, your score would reflect a riskier borrower.
This is especially timely, given the rise in personal loans over the last five years and increases in credit card debt, according to Matt Schulz, chief industry analyst with CompareCards.com.
“Personal loans have grown to be such a popular tool, it’s good that FICO is going to address that,” he told Yahoo Money. “We certainly have seen a lot of credit card debt move into the personal loan space.”
Building up credit card debt over time will hurt your score more under the new FICO version. (Photo: REUTERS/Fayaz Aziz)
Who will the new FICO score help?
The new score will be more forgiving of other behaviors that may be considered risky by earlier score versions.
For example, if you run up your credit card balances over Christmas or on a summer vacation, but it’s a one-time spike, that won’t hurt your FICO 10 score as much. That’s because the model can look back on historical balances and see this is not a consistent pattern.
“In the past, the FICO score would focus on the most recent data,” Shellenberger said. “FICO 10 gives a more holistic picture that can help during an aberration. That sudden spike’s impact on your score softens considerably.”
Change ‘bound to happen’
A number of changes in the credit landscape prompted FICO to rebuild its score, an undertaking the company does every five years or so. Its score is the most widely used by lenders to determine who to lend to and at what interest rate.
The new score now utilizes so-called trended data in a person’s credit report that shows a person’s credit performance over the last two years. It also provides more granular data, such as the amount you paid toward your credit card.
Previous FICO scores didn’t take into account this trended data, but its competitor – VantageScore – uses the data in its latest score version.
FICO 10 also reflects major changes in credit reports in the last few years due to regulations and settlements. Tax liens, judgments, and medical collections paid by insurance have been removed from credit histories altogether, while defaulted medical debt can’t show up on a report for at least six months.
“This was bound to happen,” John Ulzheimer, a credit expert who formerly worked at FICO and Equifax, told Yahoo Money. “When you take away highly predictive attributes, the scoring models are going to more heavily weigh other attributes that haven't been watered down or removed from consumer credit reports.”
If you pay your bills on time and keep credit card balances low, your credit score will still be high, even under the new FICO score. (Photo: Getty Creative)
Same old credit score rules apply
No matter which FICO score is used, the three pillars of maintaining a high credit score remain the same:
Pay your bills on time, all the time.
Keep balances on your credit cards well below their limits.
Don’t apply for too much credit, too often.
“If you do these three things over and over again,” Schulz said, “over time your credit will be just fine.”
Janna is an editor for Yahoo Finance. Follow her on Twitter@JannaHerron.
What do I need to get approved for a Rural Housing Loan in Kentucky?
You really need to look at the four following items below:
Credit Score: They typically want a 640 credit score with no bankruptcies or foreclosures in the last 3 years. KY USDA Loans are initially ran thru GUS (Guarantee Underwriting System), an underwriting approval engine online that Kentucky USDA Mortgage lenders use to tell us how much you are qualified for based on the income, assets, property, and credit provided. Most lenders will want an Approved Eligible. If your score is below 640, you will automatically get a refer eligible which most lenders will not do.
Homeownership: You cannot currently own another home with a USDA loan but there are waivers granted if you can show the current living arrangements are not suitable and safe for your family.
Income: Typically, you cannot make more than $86k approximately for a household family of four, and up to $115k for a household family of five in most Kentucky counties. Some Kentucky Counties are more but not much.
Location: Kentucky has 120 counties, and USDA is not allowed in the following KY Counties: Jefferson, Fayette (whole county) and parts of McCracken, Boone, Kenton, Campbell, Bullitt, Daviess, Warren, Franklin and Christian counties. The best thing to do on the location is tell me an address and I can look it up for you.
VA loans are hands-down the preferred choice for those who qualify searching for a competitive loan program with no money down. VA lending guidelines are similar to those with other loan types and are approved and documented in much the same fashion as conventional loans. However, VA loans do have specific requirements that make the program unique and do have additional requirements. Here is a list of some common questions.
Since the VA guarantees my loan, does that mean I’m guaranteed a VA loan? No, the VA guaranty is to the lender approving your VA loan. As long as the lender approves your loan using established VA guidelines, should the loan ever go into default, the lender can receive compensation of 25 percent of your loan amount. Lenders will still review your income and credit amount other requirements before issuing an approval.
What are “non-allowable” closing costs? The VA restricts certain closing costs that may be charged to and paid for by the veteran. Your VA lender can provide you with a list of these restricted fees along with other charges that you may be responsible for.
What credit score does the VA require? Credit scores, a 3-digit number reflecting your current credit profile, are not required by the VA. However, most VA lenders do require a minimum credit score with lenders asking for a score to be at or above 640.
How do I know if I qualify for a VA loan? VA lenders must review your certificate of eligibility to determine whether or not you’re eligible for a VA loan. However, basic requirements ask that you have more than 180 days of active duty service, an honorably discharged veteran, served six years in the National Guard or Reserves or the spouse of a service member who died as a result of a service-related injury.
What types of loans does the VA offer? All VA lenders provide loan choices in both fixed rate and adjustable rate loans. Most lenders offer fixed rate terms of 10, 15, 20, 25 and 30 years. Adjustable rate mortgages are typically issued as hybrids, where the initial rate is fixed for a predetermined period before changing into a loan that can adjust annually.
What is a funding fee? The funding fee is an insurance premium that finances the VA guarantee on your loan and is expressed as a percentage of the amount borrowed. This percentage can vary based upon loan type, equity and other loan characteristics but the funding fee for a first time purchase with no money down is 2.3 percent of the loan. The funding fee may be rolled into the loan amount in lieu of paying out of pocket. Most borrowers choose to roll the fee into the loan.
Do all lenders offer VA loans? VA loans are typically offered by most lenders but it’s important to work with a lender that is an approved VA lender. An approved VA lender is authorized to process, underwrite and fund a VA loan. It’s important that you work with a lender with extensive VA experience to help you navigate your way through the VA approval process.
Can I use a VA loan more than once? Yes, you can use a VA loan more than once as long as your original entitlement is restored. Your entitlement is restored when you sell your house and pay off the existing VA home loan.
What is my entitlement? The entitlement issued today is $36,000 and the VA will guarantee a loan up to four times that amount, or $144,000. For loans above that, the VA guarantee will be 25 percent of the loan amount up to $417,000. In certain “high cost” areas, the guarantee and maximum loan amounts are g
Your credit score measures your risk of paying late or defaulting on a loan. Lenders use credit scores along with the rest of your loan information to measure your likelihood of paying back the debt on time. Credit scores allow mortgage companies to use software programs called automated underwriting systems, or AUS, to determine if the amount of risk is acceptable for the loan program requested.
Credit Bureaus
The three major credit bureaus are Equifax, Experian and TransUnion. Lenders are encouraged to report loans and payment history to the credit bureaus on a monthly basis. When companies need to examine a potential borrower's payment history, they buy a credit report using the borrower's name, address and Social Security number. Each credit bureau calculates the credit score differently. This is why the exact same information can be on all three credit reports and they all report a different credit score.
Factors that Affect Credit Scores
Many factors affect your credit score. Making your payments on time every month is one important factor. Payments made more than 30 days late will lower your credit score. Collections, judgments, tax liens, bankruptcy and foreclosure can have devastating effects on your credit score. Each time you authorize someone to look at your credit that can lower your credit score as well.
Raising Your Credit Score
One misconception is the belief that paying off credit cards will raise your credit score. The credit bureaus want to see your ability to manage ongoing credit without missing payments or using the entire credit line. Pay down your credit cards so the balances are between 30 to 45 percent of the total available credit line. The older the credit line, the better. If you close a credit card, close the newest ones first and keep the older ones.
Finding the Middle Score
Mortgage lenders require access to all three credit bureaus for each borrower. They use the mid-credit score. If your three scores were 780, 776 and 790 they would use the middle of the three scores, in this case 780. They would not average the scores by adding the three numbers together and dividing the sum by three.
Minimum Credit Score Requirement
In January 2010, the Federal Housing Authority, or FHA, began requiring a minimum 580 credit score for any FHA loan with less than a 10 percent down payment or equity if the loan is a refinance. Conventional loans require a minimum credit score of 620. Lenders are allowed to require their own minimum credit score requirements beyond what the mortgage investors and insurers require. Having the required score does not guarantee loan approval; it is only one factor that lenders consider when approving a loan.
I have helped over 1300 Kentucky families buy or refinance their home over the last 20 years. Realizing that this is one of the biggest, most important financial transactions a family makes during their lifetime, I always feel honored and respected when I am chosen to originate their personal home loan. You can count on me to deliver on what I say, and I will always give you honest, up-front personal attention you deserve during the loan process.
I have several advantages over the large banks in town. First, I can search and negotiate for your loan options through several different mortgage companies across the country to get you the best deal locally. Where most banks will offer offer you their one set of loan products. I have access to over 10 different mortgage companies to broker your loan through to get you the best pricing and loan products that may not fit into the bank's program due to credit, income, or other underwriting issues.
You will not get lost in the shuffle like most borrowers do at the mega banks; you're just not a number at our company, you are a person and we will treat you like one throughout the entire process.
