There are basically 4 mortgage programs for first time home buyers in Kentucky to consider:
1. FHA LOANS IN KENTUCKY
Kentucky FHA loans are a popular choice in Jefferson County Kentucky first time home buyers
because they allow the least down payment of 3.5%, vs Fannie Mae which now requires a 5% investment on primary residences.
The current credit score requirements center around the 580 score for most FHA loans in Kentucky,
Even though FHA insure a mortgage loan down to a 500 credit score or lower sometimes, it is very
difficult to find a lender that will approve the loan with scores below 620. Keep that in mind.
The house payment will need to be around 30% of your gross monthly income. For example if
you gross around $3000 a month, then the maximum mortgage payment you would qualify
would be $1000 a month. If the loan comes back as an accept, the debt to income ratio can be
substantially higher than the 31% rule.
All FHA loans are pre-approved through an AUS, an automated underwriting system upfront
that will dictate your loan approval. The software underwriting engine looks at your credit, income, assets and figures your loan approval and will recommend an accept, refer/eligible, or refer/ineligible, or out of scope.
Most FHA investors will want a Accept on your underwriting findings to do a loan. It it comes back
referred, then there are additional conditions or overlays that could stop your loan from being approved.
2. Kentucky VA Home Loans
Kentucky VA loans require no down payment but you must have a VA certificate of Eligibility issued by the Veterans Administration to purchase a home using your VA loan entitlement.
The current credit score that most Kentucky VA lenders want is 500. There can be no bankruptcies or
foreclosures in the last two years with good reestablished credit.
The maximum debt to income ratio is 41% with a residual income of around $1000 a month after you pay all your bills. For example, if you make $4000 gross monthly, then the maximum house payment
along with your other household bills would be set at $3000 a month so as you have the $1000 residual income requirement met. There are some variances on the residual income to whereas it is based on the number of people living in the household and which state you live in.
Kentucky USDA or Rural Housing loans are not available in the more highly populated counties in Kentucky .The counties of Jefferson and Fayette Counties, parts of Boone, Kenton and Campbell, parts of Mccracken County, and parts of Bowling Green, Richmond, Frankfort, Hopkinsville, and Owensboro and Henderson County. are not eligible for USDA loans.
Kentucky USDA loans require no down payment and are subject to income and property eligibility requirements by County..
Check Kentucky USDA Income Limits Here”—–>>>>
Check Kentucky USDA Property Eligibility Limits Here—>>>>
All Kentucky Rural Housing Loans are ran through GUS, Guarantee Underwriting System, an
online to determine your loan approval The Automated Underwriting engine will come back with an Accept, Refer, or Ineligible.
Most Kentucky USDA mortgage investors want an Accept on the initial underwriting approval to do the loan or at least a 620 to 640 score to do a manual underwrite on the loan.
640 is the score that most USDA lenders want, but USDA will go down to a 580 credit score in their
guidelines but it is very difficult to get approved. If you have a score below 640 and trying to go USDA, work on getting your credit scores up first.
4. Kentucky Housing Corp or KHC
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.