Here’s a concise overview of the FHA mortgage qualifying criteria for Kentucky:

FHA mortgage qualifying criteria for Kentucky

Credit score:
- 580 or higher allows for a 3.5% down payment
- 500-579 requires a 10% down payment
- Lenders may have higher requirements
Debt-to-income ratio (DTI):
- Front-end ratio (housing expenses) should be 31% or less of income
- Back-end ratio (all debts) should be 43% or less
- Some lenders may allow higher ratios with compensating factors
Down payment:
- Can come from savings, gifts, or down payment assistance programs
- Seller can contribute up to 6% of the sale price towards closing costs
Employment:
- Must show stable income for at least two years
- Self-employed borrowers need two years of tax returns
Property requirements:
- Must be safe, sound, and secure
- Appraiser will check for minimum property standards
Loan limits in Kentucky:
- Vary by county, ranging from Kentucky FHA loan limits by county FHA limit $498,257
Mortgage insurance:
- Upfront premium of 1.75% of loan amount
- Annual premium between 0.45% and 1.05%, depending on loan terms
Income requirements:
- No maximum income limit
- Must be able to afford payments, including taxes and insurance

Additional information:

FHA loans require two types of mortgage insurance:

Upfront Mortgage Insurance Premium (UFMIP):
- 1.75% of the base loan amount
- Paid at closing or can be financed into the loan
- Example: On a $200,000 loan, UFMIP would be $3,500
Annual Mortgage Insurance Premium (MIP):
- Paid monthly as part of your mortgage payment
- Rates vary based on loan term and loan-to-value (LTV) ratio:
  - For 30-year loans with LTV > 95%: 0.85% annually
  - For 30-year loans with LTV ≤ 95%: 0.80% annually
  - For 15-year loans with LTV > 90%: 0.70% annually
  - For 15-year loans with LTV ≤ 90%: 0.45% annually

Key points about FHA mortgage insurance:

Unlike conventional loans, FHA MIP is required for the life of the loan in most cases
MIP can only be removed by refinancing to a conventional loan once you have 20% equity
The annual MIP is divided by 12 and added to your monthly mortgage payment

For example, on a $200,000 30-year loan with 3.5% down payment:

Let’s compare FHA mortgage insurance to private mortgage insurance (PMI) on conventional loans:

Key differences:

Cost: FHA can be more expensive long-term due to the upfront premium and inability to remove MIP without refinancing
Duration: Conventional PMI can be cancelled, FHA MIP typically cannot
Flexibility: Conventional PMI offers more options (lender-paid, single premium, etc.)
Credit impact: FHA MIP doesn’t vary by credit score, conventional PMI does

Advantages of FHA:

Advantages of Conventional:

Stricter standards: FHA appraisals are more rigorous and detailed.
Dual purpose: Assess both the value and the property condition.
Minimum Property Standards (MPS): Must meet specific safety, security, and soundness requirements.
Repairs: May require repairs to be completed before loan approval.
Appraiser qualifications: Must be FHA-approved.
Validity period: Typically valid for 120 days.
Cost: Generally more expensive due to additional requirements.

Focus on value: Primarily concerned with determining the property’s market value.
Less stringent: Fewer specific property condition requirements.
Condition ratings: Use more general ratings (C1-C6) for property condition.
Repairs: Less likely to require repairs before closing.
Appraiser qualifications: No special FHA approval needed.
Validity period: Usually 60-90 days, but can vary by lender.
Cost: Typically less expensive than FHA appraisals.

Key differences:

FHA appraisals are more thorough and may catch more potential issues.
Conventional appraisals offer more flexibility for properties in less-than-perfect condition.
FHA appraisals may lead to required repairs, potentially delaying closing or affecting negotiations.

Credit score requirements FHA vs USDA, VA, and conventional loans

Here’s a comparison of credit score requirements for FHA, USDA, VA, and conventional loans: