A Beginner's Guide to Home Mortgage in Kentucky


  • Conventional home loans - conventional mortgages are the ones that comply with the loan limits and terms set by government-backed mortgage companies Fannie Mae and Freddie Mac. They usually require a 3-5% down payment and allow you to borrow up to $647,200 (as of 2022). Typical credit score requirements are 620 and up. In reality, if scores are under 720, and with minimal down payment, it is hard to get approved for a conventional loan and best to look at doing a FHA loan. 
  • USDA Loans - these mortgages are designed for those buyers looking to invest in rural areas. They are backed by the USDA and don’t require a down payment, but only homes in certain areas might be eligible. No minimum score but 620 to 640 credit score requirement with household income limits for each county in Kentucky.
  • VA Loans - these loans are catered to members of the US military and their families. They are backed by the Department of Veterans Affairs and don’t require a down payment or no monthly Private Mortgage Insurance (PMI). No minimum score but 580 and above with most lenders.
  • FHA Loans - These are loans backed by the Federal Housing Administration and only require a minimum down payment of 3.5 and a score of 580 and 10% down with a 500 credit score.
  • KHC loans with down payment assistance of $7,500 require minimum credit score of 620

 

A Good Credit Score 

Some government-backed loans are accessible with a score no minimum score or 500 to 580, while conventional loans require a minimum credit score of 620.  


Down Payment

Thanks to today’s availability of different loan types, you no longer need to build that infamous 20% down payment, and you can access a loan with a 0-3% down. 


A Debt-To-Income Ratio Below 45%

The debt-to-income (DTI) ratio measures how much of your income is used to repay outstanding debt. 


Frequently Asked Questions for A Kentucky Mortgage Loan Approval


 

What documents do I need to prepare for my Kentucky Mortgage loan application?


Below is a list of documents that are required when you apply for a mortgage. Every situation is different so you may be required to provide less or more documentation. 


Sometimes a document you provide will promote us to ask for something additional.  This is a normal part of the process and does anything mean that anything is wrong. 


Your Property    

  

·         Copy of signed sales contract including all riders and addendums.

·         Verification of the deposit when you made your offer. 

·         Names, addresses and telephone numbers of  your realtor, builder, insurance agent and attorney (if involved).


Your Income


·         Copies of your pay-stubs for the most recent 30-day period and year-to-date.

·         Copies of your W-2 forms for the past two years. 

·         Names and addresses of all employers for the last two years. 

·         Letter explaining any gaps in employment in the past 2 years. 

·         Green card or visa (copy of front & back)


If you are self-employed or receive commission or bonus, interest/dividends, or rental income:


·        Full tax returns for the last two years including attached schedules and statements. If you have filed an extension, please supply a copy of the extension

·        Year-to-date Profit and Loss statement.

·         K-1's for all partnerships and S-Corporations for the last two years.

·         Completed and signed Federal Partnership (1065) and/or Corporate Income Tax Returns (1120) including all schedules, statements and addenda for the last two years. (Required only if your ownership position is 25% or greater.)

 

If you will use Alimony or Child Support to qualify:


·        Divorce decree or court order stating amount, as well as, proof of receipt of funds for last year.

 

If you receive Social Security income, Disability or VA benefits:


·         Award letter from that organization.


Source of Funds and Down Payment


·         Sale of your existing home - Settlement/Closing Statement. (You won't have this until you close on your current home)

·         Savings, checking or money market funds - bank statements for the last 2 months.

·         Stocks and bonds -

most recent statement. 

·         Gifts - If part of your cash to close, provide Gift Letter (ask us and we will provide one for you) 


Debt or Obligations


·         Prepare a list of all names, addresses, account numbers, balances, and monthly payments for all current debts with copies of the last three monthly statements

·         Include all names, addresses, account numbers, balances, and monthly payments for mortgage holders and/or landlords for the last two years

·         If you are paying alimony or child support, include marital settlement/court order stating the terms of the obligation


When should I refinance?


It's generally a good time to refinance when mortgage rates are 2% lower than the current rate on your loan. It may be a viable option even if the interest rate difference is only 1% or less. Any reduction can trim your monthly mortgage payments. Example: Your payment, excluding taxes and insurance, would be about $770 on a $100,000 loan at 8.5%; if the rate were lowered to 7.5%, your payment would then be $700, now you're saving $70 per month. Your savings depends on your income, budget, loan amount, and interest rate changes. Your trusted lender can help you calculate your options.


What are points?


A point is a percentage of the loan amount, or 1-point = 1% of the loan, so one point on a $100,000 loan is $1,000. Points are costs that need to be paid to a lender to get mortgage financing under specified terms. Discount points are fees used to lower the interest rate on a mortgage loan by paying some of this interest up-front. Lenders may refer to costs in terms of basic points in hundredths of a percent, 100 basis points = 1 point, or 1% of the loan amount.


Should I pay points to lower my interest rate?


Yes, if you plan to stay in the property for a least a few years. Paying discount points to lower the loan's interest rate is a good way to lower your required monthly loan payment, and possibly increase the loan amount that you can afford to borrow. However, if you plan to stay in the property for only a year or two, your monthly savings may not be enough to recoup the cost of the discount points that you paid up-front.


What is an APR?


The annual percentage rate (APR) is anot the interest rate you pay. The APR reflects the costs of obtaining a mortgage as a yearly rate. It is usually higher than the note rate, or advertised rate, because it takes into the costs. Because APR calculations are affected by the various different fees charged by lenders, a loan with a lower APR is thought to be a better deal, but that's not always true.  

 

The best way to know what is the best deal fo ryou ist to obtain a cost analysis from your lender so you can compare different options side-by-side.

Ask us for your analysis.
 

What does it mean to lock the interest rate?


Mortgage rates can change from one day to the next. If interest rates rise sharply during the application process it can increase the borrower’s mortgage payment unexpectedly. Once you "lock-in" your loan’s interest rate, that guarantees that rate for a specified time period, often 30-60 days, and then that is your rate for the entire term of your loan (assuming you have a fixed rate)

 

How is my credit judged by lenders?


Credit scoring is a system creditors use to help determine whether to give you credit. Information about you and your credit experiences, such as your bill-paying history, the number and type of accounts you have, late payments, collection actions, outstanding debt, and the age of your accounts, is collected from your credit application and your credit report. Using a statistical program, creditors compare this information to the credit performance of consumers with similar profiles. A credit scoring system awards points for each factor that helps predict who is most likely to repay a debt. A total number of points -- a credit score -- helps predict how creditworthy you are, that is, how likely it is that you will repay a loan and make the payments when due.


The most widely use credit scores are FICO scores, which were developed by Fair Isaac Company, Inc. Your score will fall between 350 (high risk) and 850 (low risk).


Because your credit report is an important part of many credit scoring systems, it is very important to make sure it's accurate before you submit a credit application.


 To get copies of your report, contact the three major credit reporting agencies:

Equifax: (800) 685-1111
Experian (formerly TRW): (888) EXPERIAN (397-3742)
Trans Union: (800) 916-8800
These agencies may charge you up to $9.00 for your credit report.


You are entitled to receive one free credit report every 12 months from each of the nationwide consumer credit reporting companies – Equifax, Experian and TransUnion. This free credit report may not contain your credit score and can be requested through the following website: https://www.annualcreditreport.com


What can I do to improve my credit score?


Credit scoring models are complex and often vary among creditors and for different types of credit. If one factor changes, your score may change -- but improvement generally depends on how that factor relates to other factors considered by the model. Only the creditor can explain what might improve your score under the particular model used to evaluate your credit application.

Nevertheless, scoring models generally evaluate the following types of information in your credit report:

·         Have you paid your bills on time? Payment history typically is a significant factor. It is likely that your score will be affected negatively if you have paid bills late, had an account referred to collections, or declared bankruptcy, if that history is reflected on your credit report.

·         What is your outstanding debt? Many scoring models evaluate the amount of debt you have compared to your credit limits. If the amount you owe is close to your credit limit, that is likely to have a negative effect on your score.

·         How long is your credit history? Generally, models consider the length of your credit track record. An insufficient credit history may have an effect on your score, but that can be offset by other factors, such as timely payments and low balances.

·         Have you applied for new credit recently? Many scoring models consider whether you have applied for credit recently by looking at "inquiries" on your credit report when you apply for credit. If you have applied for too many new accounts recently, that may negatively affect your score. However, not all inquiries are counted. Inquiries by creditors who are monitoring your account or looking at credit reports to make "prescreened" credit offers are not counted.

·         How many and what types of credit accounts do you have? Although it is generally good to have established credit accounts, too many credit card accounts may have a negative effect on your score. In addition, many models consider the type of credit accounts you have. For example, under some scoring models, loans from finance companies may negatively affect your credit score.

Scoring models may be based on more than just information in your credit report. For example, the model may consider information from your credit application as well: your job or occupation, length of employment, or whether you own a home.

To improve your credit score under most models, concentrate on paying your bills on time, paying down outstanding balances, and not taking on new debt. It's likely to take some time to improve your score significantly.

 

What is an appraisal?


An Appraisal is an estimate of a property's fair market value. It's a document generally required (depending on the loan program) by a lender before loan approval to ensure that the mortgage loan amount is not more than the value of the property. The Appraisal is performed by an "Appraiser" typically a state-licensed professional who is trained to render expert opinions concerning property values, its location, amenities, and physical conditions.

 

What is PMI (Private Mortgage Insurance)?


On a conventional mortgage, when your down payment is less than 20% of the purchase price of the home mortgage lenders usually require you get Private Mortgage Insurance (PMI) to protect them in case you default on your mortgage. Sometimes you may need to pay up to 1-year's worth of PMI premiums at closing which can cost several hundred dollars. The best way to avoid this extra expense is to make a 20% down payment, or ask about other loan program options.

 

What happens at closing ?


The property is officially transferred from the seller to you at "Funding".  Often you will go to a title company or attorneys office for your "closing".  However, this is just to sign all the final documents. Ownership of the property is officially transferred either later that day of often the next business day, which is when you will normally obtain the keys to the home.  If you can't attend the closing meeting personally, i.e., if you’re out-of-state, closing can take anywhere just about anywhere as we have mobile notaries that can help you with signing documents and notarizing your signature. 

 



KENTUCKY FIRST TIME HOME BUYER REQUIREMENTS MORTGAGE LOAN APPROVAL?






--Joel Lobb

Mortgage Loan Officer
Individual NMLS ID #57916

American Mortgage Solutions, Inc.

Text/call:      502-905-3708
fax:            502-327-9119
email:
          kentuckyloan@gmail.com

 


Kentucky Mortgage Guidelines for Income, Employment, and credit scores

Kentucky Mortgage Lender for First Time Home Buyers for FHA, VA, USDA, KHC Kentucky Housing







Kentucky Home Loans Preapproval Checklist
  • A driver’s license or U.S. passport
  • Verification of employment
  • Recent pay stubs covering the last 30 days
  • W-2 forms from the previous two years
  • Last two years of personal federal income tax returns with all pages and schedules. If self-employed, last two years of individual federal income tax returns with all pages and schedules, as well as a business license, a year-to-date profit and loss statement (P&L), a balance sheet, and a signed CPA letter stating you are still in business
  • Bank account statements proving that you have enough to cover the down payment and closing costs. If someone is helping you with the down payment, a gift letter stating that the fund is a gift a
  • Last quarterly statements for asset accounts (401(k), IRA, stock accounts, mutual funds)

Kentucky Mortgage Loan Preapproval: What To Know

What affects your home loan preapproval

Your income, work history, credit score, money down and  saving are key factors that lenders will consider during the mortgage process.

Employment Status for Kentucky Mortgage Pre-Approval

Self-employed individual requires two-year tax returns'.

Only borrowers who have an ownership interest of 25% or more in a business and are not W-2 employees are considered “self-employed.” However, there is an exception if the borrower can show a two-year history in a similar line of work, which includes having documentation that proves an equal or higher income in the new role compared to the W2 position.

Debt-to-Income Ratio

The debt-to-income ratio is the percentage of your monthly gross income that goes toward paying debts. There are two types of DTI that lenders will consider during the mortgage process: front-end and back-end. The first consists only of your housing-related expenses, whereas the latter also includes all your minimum required monthly debts.

The lower your DTI, the better your chances of securing a home loan. 

For example, FHA loans secured by the government have more lenient requirements — you can have a DTI of up to 57% and still get approved for an FHA home loan. USDA loans used to buy homes in rural areas have a lower maximum DTI of 45%.

Loan-to-Value Ratio

The loan-to-value ratio (LTV) is a number lenders use to determine how risky a loan to a potential borrower might be. It measures the relationship between the loan amount and the market value of the property you want to buy, and it can also determine whether mortgage insurance will be required.

All mortgages have a maximum LTV to qualify. However, just like with DTI, the LTV varies depending on the loan. FHA loans, for example, have an LTV of 96.5% since they allow down payments of as little as 3.4%.

Going for an LTV of 80% or less is “ideal” because you get unique benefits as a buyer, but that requires a down payment of 20%. Ultimately, each buyer will need to figure out their own LTV based on how large a down payment they can afford.

Credit History and FICO Score for Kentucky Mortgages 

Your credit history is one of the most important factors when it comes to getting a mortgage.

Credit History and FICO Score for Kentucky Mortgages





Best Kentucky Mortgage Lender for First Time Home Buyers in Kentucky

You don’t need a perfect credit score to buy a house, but those with outstanding scores are usually rewarded with lower interest rates and a greater variety of payment options. Buyers with very poor credit have the option of finding a co-signer who has better credit than them to help secure the loan.

Why Getting Preapproved Is Such a Big Deal

Getting preapproved for a mortgage helps you shop for homes that you can afford and shows you are a serious buyer.

But a letter of preapproval is more than just a way to look good to sellers. It also helps you find the right mortgage lender and provides some flexibility in bargaining or negotiating for a better price range or specific costs, repairs, and improvements to a home.

Getting preapproved makes the entire closing process faster, too. It takes an average of 30 to 45 days to close on a house in Kentucky, and part of that period is due to the process of mortgage approval, title search, appraisal report, home inspections, verifying employment and bank account info along with taxes and w-2s and paystubs to validate the pre-approval.

What are standard continuity of employment requirements?

A borrower will need to verify a two-year cumulative employment history. Less than two year may be 

offset via school transcripts; if guaranteed hourly (40) or salaried in nature, the base income 

will be allowable. Variable earnings will require at minimum 12 months receipt on current position; 

OT, Bonus and commission are considered variable however, must reflect a cumulative two- year 

history of receipt.


What income can I use for a traveling nurse?

A minimum 12-month history of contract nursing work is required. Income documentation must

 include  copies of applicable contracts and WVOE’s for each position. The income will be averaged. 

Standard two- year employment history required.


Do we allow one score on a conventional transaction? No score?

Yes! If the borrower has three scores, the middle score is to be used; two scores, the lower score 

is to be used; one score, that score is to be used.  If no score, only allowable with AUS A/E and 

less than 50% of transactional income contributions. We do not average scores.


Can I use part time or secondary income for qualifying purposes?

Yes! Conventional~ secondary employment will require a two- year history of receipt to use in 

conjunction with the primary employment earnings. Multiple second jobs over this time frame are 

allowable however the borrower may not have a job gap > one month in length. Part time employment 

alone will be considered variable in nature and will require a minimum 12- month history; earnings 

will be averaged. FHA~ will require an uninterrupted two- year history for utilization.


When must a borrower start a new job in conjunction with future employment?

Conventional requires a start date within 90 days of the Note date. FHA requires a start date 

within 60 days of note date. VA max 60 days of note date. Non contingent contract required for each 

entity.


What type of income(s) are considered illegal?

Foreign shell banks; medical marijuana dispensaries; any business or activity related to 

recreational marijuana-use , growing, selling or supplying- even if permitted by state or local law.

 Policy is not limited to  owner of business.


Joel Lobb
Mortgage Loan Officer
Individual NMLS ID #57916

American Mortgage Solutions, Inc.

Text/call:      502-905-3708
fax:            502-327-9119
email:
          kentuckyloan@gmail.com