How Do I Qualify for An FHA Loan in Kentucky based on score, income, work history and credit?

How to Get a Kentucky FHA Mortgage Loan

If you’re a first-time homebuyer in Kentucky or simply looking for an accessible loan option, an FHA mortgage loan is worth exploring. With low down payments, flexible credit requirements, and potential for down payment assistance, FHA loans provide a pathway to homeownership for many Kentucky residents. Here’s everything you need to know about qualifying for and securing an FHA loan in Kentucky.

Kentucky FHA Mortgage Loan Options to consider

1. Low Down Payment

–  FHA Mortgage Loans only require a 3.5% down payment. And what makes that even more attractive is that it can be a gift from a relative. Do you have a parent or sibling who would “Gift” you some money for a down payment? If so, it could be time to apply for an  FHA Mortgage Loan.

2.Flexible Credit Qualifying

– HUD did NOT set a credit score requirement for qualifying for an  FHA Mortgage Loan. However many lenders in the market today have drafted “Overlays” that set minimum credit score requirements. Most lenders like to see a minimum 580 to 620  credit score, but don’t get discouraged if you are not there yet. If you are close to 620, it is often just as simple as reviewing your credit to determine how to quickly raise it. If you are not close to 620, ask your FHA Mortgage Loan Originator if they have a program for you. Chances are, there is! Bankruptcies and prior foreclosures do not automatically disqualify you either.

3.The Seller Can Pay Your Closing Costs

– That’s right. You need to have a quality Realtor who will help you negotiate not only the best price for the home, but also that the seller will pay your closing costs. HUD allows FHA Mortgage Loans to have the seller pay up to 6% of the purchase price. Sounds good so far, a down payment gift and seller paying closing costs!

4.Flexible Income Qualifying

– The standard for income qualifying ratios is 31/43 which means that up to 31% of your monthly income can be used to pay your monthly household mortgage payment; and up to 43% of your monthly income can be used to qualify for ALL monthly expenses. Those ratios can go up to 55% if you have good credit and a good income history allowing you to qualify when others might not.

5.Qualify Without Your Spouse’s BAD Credit –

This is a tricky one but it is also not well known. You can effectively qualify for an FHA Mortgage Loan without your spouse’s Bad Credit. FHA will look at your spouse’s credit but cannot decline your loan due to your spouse’s debt or credit score. So if you have a spouse with a crummy credit profile, you should take a look at  FHA Mortgage Loans to see if it will work for you.

Kentucky FHA Mortgage Requirements 

An FHA loan is a mortgage issued by federally qualified lenders and insured by the Federal Housing Administration (FHA). FHA loans are designed for low-to-moderate income borrowers who are unable to make a large down payment.

Minimum Credit Score is 500 with at least 10% down
Minimum Credit Score is 580 if you put less than 10% down
The FHA Kentucky Maximum loan for 2023 is $472,030
Upfront and Monthly Mortgage Insurance is required regardless of the Loan to Value
FHA Loans are only available for financing primary residences
Maximum Debt to Income Ratio of 50% (unless mitigating factors justify allowing a higher DTI)


Borrowers must have a steady employment history of the last two years within the same industry or line of work. Recent college graduates can use their transcripts to supplant the 2-year work history rule as long as it makes sense
Self-Employed will need a 2-year history of tax returns filed with IRS. They will take a 2-year average.

FHA requires a 3.5% down payment. Can be gifted from family member or from retirement savings plan, or money saved-up. Any type of cash deposits is not allowed for down payments. No exceptions to this rule!! This is one of the biggest issues I see in FHA underwriting nowadays.

 FHA loans are for primary residence occupancy. Not rental houses.

Borrowers must have a property appraisal from a FHA-approved appraiser.

Borrowers’ front-end ratio (mortgage payment plus HOA fees, property taxes, mortgage insurance, homeowners’ insurance) needs to be less than 31 percent of their gross income, typically. You may be able to get approved with as high a percentage as 43 percent. If the Automated Underwriting System gives you an Approved Eligible you can go higher on the debt ratios
Borrowers must have a minimum credit score of 580 for maximum financing with a 3.5% down payment

Borrowers must have a minimum credit score of 500-579 for maximum LTV of 90 percent with a minimum down payment of 10 percent. Most lenders will not go below 580 to 620 score, and very few lenders will go to 580 score. It’s best to work on getting your scores up before you apply or work with a loan officer to improve them.
2 years removed from Chapter 7 is required with good pay history after bankruptcy

1 year removed from Chapter 13 is okay with an excellent pay history with the Chapter 13 plan and permission from trustee. You will need to qualify with the Chapter 13 payment along with new house payment. Again, scores will play into your loan pre-approval.

Typically, borrowers must be three years out of foreclosure and have re-established good credit. Exceptions can be made if there were extenuating circumstances and you’ve improved your credit. If you were unable to sell your home because you had to move to a new area, this does not qualify as an exception to the three-year foreclosure guideline.

Pros and cons of Kentucky FHA loans

Pros

• You can have a lower credit score: If you haven’t established much of a credit history or you’ve encountered some issues in the past with making on-time payments, a 620 credit score — the typical magic number for consideration of a conventional mortgage — might seem out of reach. If your credit score is 580, you’re in good standing with most FHA-approved lenders.

• You can make a lower down payment: FHA loans also give the option for a smaller down payment. With a credit score of at least 580, you can make a down payment of as little as 3.5 percent. If your credit score is between 500 and 579, you may still be able to qualify for an FHA-backed loan, but you will need to make a 10 percent down payment.

• You can stop renting earlier: Since FHA loans make buying a home easier, you can start building equity sooner. Instead of continuing to rent while trying to save more money or improve your credit score, FHA loans make the dream of being a homeowner possible sooner.

Cons

• You won’t be able to avoid mortgage insurance: Since your credit score is lower, you’re a bigger risk of default. To protect the lender, you have to pay mortgage insurance. You can roll the upfront insurance premium into your closing costs, but your annual premiums will be divided into 12 installments and show up on every mortgage bill. If you put down less than 10 percent, you have to pay those annual premiums for the entire life of the loan. There’s no escaping them. That’s a big difference from conventional loans: Once you build up 20 percent equity, you no longer have to pay for private mortgage insurance.

• You’ll have to meet property requirements: If you’re applying for an FHA loan, the property has to meet some eligibility requirements. The most important is the price: FHA-backed mortgages are not allowed to exceed certain amounts, which vary based on location. You have to live in the property, too. FHA loans for new purchases are not designed for second homes or investment properties.

• You could pay more: When you compare mortgage rates between FHA and conventional loans, you might notice the interest rates on FHA loans are lower. The APR, though, is the better comparison point because it represents the total cost of borrowing. On FHA loans, the APR can sometimes be higher than conventional loans.

• Some sellers might shy away: In the ultra-competitive pandemic housing market, sellers weighing multiple offers often viewed FHA borrowers less favorably.

Joel Lobb
Mortgage Loan Officer
Individual NMLS ID #57916



Text/call: 502-905-3708

email: kentuckyloan@gmail.com

http://www.mylouisvillekentuckymortgage.com/

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).

KENTUCKY VA MORTGAGE LOAN INFORMATION

COMMON KENTUCKY VA LOAN MYTHS FOR KENTUCKY VETERANS AND ACTIVE DUTY BORROWERS

1. VA loans are difficult to qualify for.
2. All VA loans require a down payment.
3. VA loans require private mortgage insurance (PMI).
4. You can't refinance a VA loan.
5. You can only have one VA loan.
6. You can use a VA loan once.
7. VA loans are not assumable.
8. You can't buy land with a VA loan.
9. You can't build a house with a VA loan.
10. VA loans only apply to the home purchase itself.

Is it hard to qualify for a VA loan?

Myth #1: Kentucky VA loans are difficult to qualify for.

Fact: VA loans have fewer credit restrictions compared to conventional loans. These reduced restrictions, like a higher debt-to-income (DTI) ratio and more leniency regarding credit scores, mean it can be easier to qualify. VA has no minimum credit score but lenders will have overlays with most being 620 and some going down to 580, with a few going all the way down to 500 but it is very difficult to get approved at this level --- though each individual case and lender will vary.

Do VA loans require a down payment?

Myth #2: All Kentucky VA loans require a down payment.

Fact: While conventional loans generally require down payment options that can reach up to 20%, no such thing is required with a VA home loan at or under the local conforming limit. Down payments are still an option, of course, but they are not a requirement.

The VA allows you to purchase jumbo loans, but the down payment depends on your entitlement:

• Full entitlement - 100% LTV (loan-to-value) maximum
• Partial entitlement - Maximum loan must be calculated using 25% guarantee of 1 unit county loan limit. Max LTV is lesser of max allowed or LTV required to meet 25% guaranty

Do VA loans have PMI?

Myth #3: VA loans require private mortgage insurance (PMI).

Fact: Private mortgage insurance is not required for VA loans. PMI typically adds 0.2%-0.9% of expenses to your monthly mortgage payments when you put less than 20% down. That’s a big additional expense you don’t have to worry about when you get a VA loan. Remember, VA loans do come with a funding fee.

Can you refinance a VA loan?

Myth #4: You can’t refinance a Kentucky VA loan.

Fact: Thanks to VA streamline and cash-out loan programs, VA loans are actually easier to refinance than conventional mortgages. The streamline version lowers the mortgage rate of an already existing VA loan, usually for less than the current principal and interest. This means it doesn't require a credit check or appraisal. The cash-out option involves a credit check and appraisal, since the home’s value represents the maximum loan amount and the new loan will be larger than the existing loan.

How many VA loans can you have?

Myth #5: You can only have one Kentucky VA loan.

Fact: There is no limit to the number of VA loans you can have. While it is possible to have multiple VA loans at once, this depends on VA loan entitlement. VA loan entitlement refers to the amount that the VA will pay your lender if you default on your loan. There is a limit on your VA entitlement. It can be split across multiple loans but the limit remains the same. For full entitlement, the VA covers:

• Up to $36,000 for loans < $144,000
• Up to 25% for loans > $144,000

If, however, you’ve used a portion of your entitlement in one loan that you’re still actively paying off (or defaulted on), the amount of entitlement you have on any new loan is reduced. This means that you may need to put money down yourself instead of having the usual benefit of a zero down payment for VA loans. To learn about VA loan limits and entitlement, visit us here.

How many times can you use a VA loan?

Myth #6: You can only use a Kentucky VA loan once.

Fact: There is no limit on the number of times you can use the VA loan benefit. You can use the benefit an unlimited number of times throughout your life, as long as you still qualify. To qualify, you need to meet certain requirements, which you’ll already be aware of if you’ve taken out a VA loan in the past. For those who haven’t taken out a VA loan prior, you can learn how to qualify here.

Are VA loans assumable?

Myth #7: Kentucky VA loans are not assumable.

Fact: Federally insured and guaranteed loans are usually assumable. This includes VA loans. What does it mean if a loan is assumable? An assumable mortgage is when the lender allows you, the buyer, to take over the current mortgage that the seller has. This can save a lot of money if the interest rates are lower on the existing mortgage than they would be to take out a new mortgage. Assumable mortgages allow buyers, who otherwise wouldn’t qualify for a VA loan, to take over a VA mortgage. This means that you would get most, if not all, of the benefits that come with VA loan eligibility. In order to assume a VA mortgage, you will need to meet certain requirements, such as:

• acceptable credit history and  credit score
• debt-to-income ratio to meet guidelines 
• No Bankruptcies or foreclosures in last 2 years ( Chapter 7) --Chapter 13 is possible within one year in the plan.
• acceptable work history for last two years
• residual income requirements
• property passing VA standards

You will also be required to pay the VA funding fee that comes with VA loans. This equates to 0.5% of the total loan amount. This may be waived if you’re an eligible military borrower who qualifies for an exemption. Other fees may be required as well.

For sellers, if a non-military borrower assumes your mortgage, your VA entitlement won’t be restored until the loan is paid in full. You will want to request that the lender releases you from liability on the loan to avoid dips in your credit reports if the buyer defaults or makes a late payment.

Can you buy land with a VA loan?

Myth #8: You can’t buy land with a Kentucky VA loan.

Fact: The VA doesn’t authorize buyers to singularly purchase land with a VA loan. However, you can purchase land and build a home on it. This is partially because VA loans are granted with a required occupancy period — you must use the property as your primary residence for at least one year. If there is already a home on the land, this is acceptable. Another acceptable scenario is if you plan to immediately build a home on the land after purchase. This may require a purchase/construction loan.

You can also purchase land with a conventional loan or certain other types of loans. Then you can build a home on the land using a VA construction loan. Upon completion, military borrowers can refinance VA construction loans into permanent VA loans. Builders must be VA-approved.

Finally, you can purchase land and build a property using a non-VA purchase/construction loan. Then you can refinance the loan upon completion of the build into a permanent VA loan (as long as the property meets the VA’s requirements).

Can you use a VA loan to build a house?

Myth #9: You can’t build a house with a Kentucky VA loan.

Fact: VA construction loans do exist, as mentioned above, and under the right circumstances, they can be refinanced into permanent VA loans. Ask your lender about VA purchase/construction loan options.

Can you use a VA loan for home improvement?

Myth #10: Kentucky VA loans only apply to the home purchase itself.

Fact: The VA allows for increases to purchase loans for the purpose of making renovations. The VA’s Energy Efficiency Mortgage program, for instance, lets borrowers add up to $6,000 to their home loan amount to install solar heating, insulation and storm windows, among other features.

In conclusion

Applicant subject to credit and underwriting approval. Not all applicants will be approved for financing. Receipt of application does not represent an approval for financing or interest rate guarantee does not guarantee the quality, accuracy, completeness or timelines of the information in this publication. While efforts are made to verify the information provided, the information should not be assumed to be error free. 

1 -  Email - kentuckyloan@gmail.com 

2.   Call/Text - 502-905-3708

Joel Lobb
Mortgage Loan Officer - Expert on Kentucky Mortgage Loans

 Website: www.mylouisvillekentuckymortgage.com
 Address: 911 Barret Ave., Louisville, KY 40204

---

Evo Mortgage
Company NMLS# 1738461
Personal NMLS# 57916

For assistance with Kentucky mortgage loans, reach out via email, call, or text Joel Lobb directly.

Kentucky FHA Loan Program

FHA Loan Requirements in Kentucky

Navigating the process of securing an FHA loan in Kentucky can be made simpler with the right information.

Down Payment

Minimum 3.5% Down Payment of purchase price on a 580 credit score or higher

Minimum 10% Down payment on credit scores 500-579

Credit Score

• Borrowers must have a minimum credit score of 500-579 for maximum LTV of 90 percent with a minimum down payment of 10 percent. Most lenders will not go below 580 to 620 score, and very few lenders will go to 580 score. It's best to work on getting your scores up before you apply or work with a loan officer to improve them.

Debt-to-Income Ratio

Front-end: 45% max, Back-end: 50-56.99% max

Work History

2 years consistent employment preferred

Top 3 Benefits of Kentucky FHA Loans

Low Down Payment

Only 3.5% down payment required, which can be gifted from a relative, own funds, 401k, savings and checking account, no cash allowed. Secured asset can be used to borrow off for the donw payment. ie.. car, house, securities, 

Flexible Credit

Credit scores as low as 500 with at least 10% down payment or equity position.

Seller-Paid Closing Costs

Sellers can pay up to 6% of the purchase price in closing costs.

FHA Loan Eligibility

Income Requirements

Your debt-to-income ratio must be within the limits of the FHA and your lender. There are both front-end and back-end DTI ratios to be considered. The front-end is capped at 45% and the back-end ratio is limited to 50-56.99% in most cases.

Credit Background

Your credit history will be reviewed, with most weighted over the last 2-3 years. Bankruptcies, foreclosures, collections, and pay history will be reviewed over the last two years.

Down Payment

You must be able to make a down payment and cover closing costs if the seller will not pay for it or it cannot be covered by lender credit. You must have your own down payment. The seller and lender cannot supply you with the down payment requirements for an FHA loan.

Maximum FHA Loan Amounts

County Limits

Maximum loan amount varies by county in Kentucky. All 120 counties have the same approval amount. And there are no income limits on FHA loans, just have to meet debt to income ratio requirement's.

Highest Limit

The highest maximum FHA loan in Kentucky is $524,225- see limits for Kentucky for 2025 below

https://www.hud.gov/program_offices/housing/sfh/lender/origination/mortgage_limits

Financing Percentage

Maximum financing is 96.5% of appraised value or selling price, whichever is lower.

Down Payment and Closing Costs

Minimum Investment

Buyers must invest at least 3.5% of the sales price for down payment and closing costs. if score is below 580, will need to 10% down payment. Minimum score is 500 for a FHA loan.

Acceptable Sources

Down payment can come from gifts, government agencies, or other approved sources.

Eligible Property Types

Single-Family Homes

Traditional detached houses qualify for FHA loans.

Condos

Approved condominium units are eligible if on HUD approved list. See list below

https://entp.hud.gov/idapp/html/condlook.cfm

Multi-Unit Properties

1-4 family residences where the borrower occupies one unit.

Types of FHA Refinance Loans

Rate/Term Refinance

For borrowers with conventional mortgages wanting to switch to an FHA loan.

Cash-Out Refinance

Access home equity for homeowners whose property value has increased.

Streamline Refinance

Minimum Credit Score

General Requirement

A minimum credit score of 500 is required for FHA loans in Kentucky with some lenders requiring a 620. If below 580 and higher than 500, then you will need a 10% down payment.

Lower Score Option

Borrowers with credit scores between 500 and 579 may still qualify with a larger down payment of 10%.

Credit History

The FHA considers your payment history, credit utilization, and other factors when assessing your creditworthiness.

Down Payment Amounts

Standard Down Payment

The standard down payment for FHA loans in Kentucky is 3.5% of the purchase price.

Lower Credit Score

If your credit score falls between 500 and 579, you'll need a 10% down payment.

Gift Funds

Down payment funds can be gifted from family members or other eligible sources.

Debt-to-Income Ratio Limits

Understanding Debt-to-Income Ratio

The debt-to-income (DTI) ratio measures the percentage of your monthly income that goes towards debt payments.

• Mortgage payment
• Credit card payments
• Student loans
• Auto loans

FHA Loan DTI Limit

FHA loans in Kentucky generally have a maximum DTI limit of 50%, which means that your debt payments cannot exceed 50% of your monthly income.

Employment and Income Requirements

Stable Employment

FHA lenders typically require a minimum of two years of consistent employment history.

Verifiable Income

You'll need to provide documentation, such as pay stubs or tax returns, to verify your income.

Self-Employment

If you are self-employed, you may need to provide additional financial documentation, such as tax returns and bank statements.

Property Eligibility Criteria

Property Type	Eligibility
Single-family homes	Eligible
Condominiums	Eligible with certain restrictions
Townhouses	Eligible
Multi-family units	Not eligible for FHA financing

Mortgage Insurance Premiums

Annual Premium

You'll pay an annual mortgage insurance premium (MIP) on your FHA loan.

Upfront Premium

An upfront MIP is also required at closing, typically 1.75% of the loan amount.

MIP Duration

The MIP can be paid for the life of the loan or for a set period of time depending on your down payment and loan term.

Applying for an FHA Loan in Kentucky

Credit Check

Your credit history is crucial for FHA loan approval.

Property Appraisal

An appraisal is conducted to determine the fair market value of the property.

Income Verification

You'll need to provide documentation to verify your income.

Loan Underwriting

The lender will review your application and make a decision on your loan.

1 -  Email - kentuckyloan@gmail.com 

2.   Call/Text - 502-905-3708

Joel Lobb
Mortgage Loan Officer - Expert on Kentucky Mortgage Loans

 Website: www.mylouisvillekentuckymortgage.com
 Address: 911 Barret Ave., Louisville, KY 40204

---

Evo Mortgage
Company NMLS# 1738461
Personal NMLS# 57916

For assistance with Kentucky mortgage loans, reach out via email, call, or text Joel Lobb directly.

Louisville Kentucky Mortgage Lender for FHA, VA, KHC, USDA and Rural Housing Kentucky Mortgages: Kentucky First-time Home Buyer Programs

Louisville Kentucky Mortgage Lender for FHA, VA, KHC, USDA and Rural Housing Kentucky Mortgages: Kentucky First-time Home Buyer Programs: Buying your first house in Kentucky can be a scary process. Here are the main home loan programs that homebuyers use to buy their first hous...

KHC $10,000 Down Payment Assistance Program for 2025

Kentucky Housing $10,000 Down Payment Assistance Help for Homebuyers 

If you're a first-time homebuyer in Kentucky, the Kentucky Housing Corporation (KHC) offers great options. They help make your dream of homeownership a reality. You can even buy your next home with no money down.

The KHC Down Payment Assistance (DPA) program can provide up to $10,000. This assistance helps with your down payment. It also covers closing costs and prepaid items. Here's everything you need to know to qualify and take advantage of these opportunities:

Home Buyer Eligibility:

1. First-Time and Repeat Buyers: KHC helps both first-time and repeat home buyers throughout Kentucky.
2. U.S. Citizenship: You must be a U.S. citizen or have legal status to live in the U.S.
3. Income: Only income through the Secondary Market is considered for eligibility.
4. Principal Residence: The property must be your principal residence. You cannot own any other residential property at the time of closing.
5. Closing Assistance: Borrowers can qualify for the KHC Down Payment Assistance Program. They must meet both the income and purchase price limits.

Kentucky Housing Credit Standards:

To qualify for a KHC loan, there are specific credit and financial criteria:

1. Credit Score: A minimum credit score of 620 is required for FHA, VA, and RHS loans, and a 660 minimum score is needed for Conventional loans.
2. Debt Ratio: The maximum allowable debt ratio is 50%.
3. Collections: In most cases, collections do not need to be paid off in full.
4. Bankruptcies and Foreclosures: These must be discharged for at least two to seven years.
5. Non-Taxable Income: Non-taxable income can be grossed up to help you meet the income requirements.

Property Eligibility:

1. New and Existing Properties: Both new and existing properties are eligible for KHC loans.
2. Manufactured Housing: Both new and existing manufactured homes are eligible, with the caveat that RHS loans only cover new construction manufactured housing.
3. Purchase Price Limit: The purchase price limit is set at $510,939 for both Secondary Market and MRB Loans.
4. Appraisal and Inspections: A full appraisal is required for all KHC loans. Additionally, VA loans are the only loan product requiring a termite inspection, and a termite soil treatment certificate is required for all new construction properties except for conventional loans.

What You Can Use the KHC Down Payment Assistance For:

1. Down Payment: You can use the assistance to help cover your down payment when buying a home.
2. Closing Costs: The program also helps pay for closing costs, which can be one of the most challenging parts of buying a home.
3. Prepaid Items: KHC DPA can help with prepaids such as homeowner’s insurance or property taxes that may be due at closing.

Start Your Home Buying Journey Today!

If you're interested in using the KHC Down Payment Assistance Program for 2025, connect with a qualified lender. There are several benefits to using this program. These benefits include no money down options. There is assistance available for both new and repeat buyers. Don't let down payment challenges hold you back. Reach out today to get started on your path to homeownership with the support of the KHC.

1 -  Email - kentuckyloan@gmail.com 

2.   Call/Text - 502-905-3708

Joel Lobb
Mortgage Loan Officer - Expert on Kentucky Mortgage Loans

 Website: www.mylouisvillekentuckymortgage.com
 Address: 911 Barret Ave., Louisville, KY 40204

---

Evo Mortgage
Company NMLS# 1738461
Personal NMLS# 57916

For assistance with Kentucky mortgage loans, reach out via email, call, or text Joel Lobb directly.