Kentucky FHA, VA ,USDA, KHC, Conventional and Jumbo mortgage loans. I am based out of Louisville Kentucky. For the first time buyer with little money down, we offer Kentucky Housing or KHC loans with down payment assistance.
Getting a mortgage for a home can seem like a complicated and mysterious process. Just like any good investment, you should never buy anything that you don’t understand. Knowing how the mortgage lending system works will relieve much of the stress and anxiety associated with making what is most likely the largest purchase of your entire life. This article will help you understand…
Mortgage companies are in business to make money by lending money that is secured by an asset large enough to sell and recover their capital if the borrower is no longer able or willing to pay the payments. They are not in the business of owning property and would rather not have to foreclose on a loan, repossess the property and sell it to recapture their capital. This does happen but it is not their primary business. They would rather have their borrowers make their payments so that they could collect the interest and move on down the road. To increase their odds of that happening, mortgage companies look at several areas of your financial history to determine if you will meet their standards. This is called Qualifying for a Mortgage.
What the mortgage company finds when they look at these areas will help determine the type of mortgage that is available to you and the interest rate you will pay on the money that you borrow.
Lenders want to know if you have been in your current job and/or profession for at least two years. They also want to know if you are retired or self-employed.
Mortgage lenders want to know how much your monthly income is before taxes are taken out (Gross Monthly Income). Typically you will be asked to provide check stubs for the last 30 days and Federal Tax Returns or W-2’s for the last two years to prove your income.
If you are self-employed and it is difficult for you to prove your gross income to the lender you may be able to get a “stated income” loan. If that is the route that you take, your income must be “reasonable” for your profession. Since stated income loans are riskier for the lender you will generally have a higher interest rate.
Mortgage lenders really like it if you have a history of paying your bills on time. This is reflected in your credit report and FICO score. If you have “bad credit”, you are NOT automatically disqualified from getting a mortgage. Lower credit scores will increase the interest rate that you will be required to pay and sometimes that increase will be quite significant.
You can have an awesome job with an income to make Bill Gates jealous and a great credit score but if you have already acquired too much long term debt you may not qualify for the loan you want.
Mortgage lenders will want to check your bank accounts to make sure that you have the cash necessary to pay the down payment and closing costs and that you have “reserves” available to make the loan payment. Often, the lender will require 3-6 months reserves. (Reserves can be in a 401K or other retirement account that you can pull the money out of)
The loan you are requesting will need to be proportional to your ability to make the payments. Be reasonable with your house buying expectations – don’t expect to buy a lot more house than you can afford. The recent housing bust defined the term “house poor” and got a lot of people into financial trouble. Again, mortgage lenders would much rather you make your monthly house payments because everyone loses if they have to foreclose.
The market place determines the range of interest rates available for any mortgage and the lending rates change daily. The specific interest rate you will pay is based on how well qualified you are and the type of loan you want.
The most widely used score is the FICO score, the credit score created by Fair Isaac Corporation. Lenders use the FICO Score to help them make billions of credit decisions every day. Fair Isaac calculates the FICO Score based solely on information in consumer credit reports maintained by the credit reporting agencies.
FICO credit scores range from 300 to 850. That FICO Score is calculated by a mathematical equation that evaluates many types of information from your credit report, at that agency. By comparing this information to the patterns in hundreds of thousands of past credit reports, the FICO Score estimates your level of future credit risk.
With the top end of the credit score being 850, anything above about 720 is considered excellent. Some local lenders set 740 as the benchmark for their preferred interest rates. Having a lower credit score DOES NOT mean you will not get a loan. You may qualify BUT your interest rate will be higher than someone with better credit.
The Down-Payment is the amount of your own money you are going to put into buying the property. The more money you put into the property on the front end, the lower the risk of you not paying the payments. The amount of your down payment also directly affects the amount of your loan (purchase price – down payment = loan amount). This is called the Loan to Value Ratio (LTV).
The LTV is the percentage of the value of the house that the mortgage will cover (loan amount / purchase price x 100). For example, the property you are interested in buying is selling for $100,000. You have $20,000 for the down-payment and want a mortgage for the other $80,000. The LTV for this mortgage is 80%.
Similar to the LTV is the Combined Loan to Value Ratio (CLTV). The CLTV is used when 2 loans are used to finance the home purchase. You may see or hear terms like “80-20” or “80-15-5”. This refers to the 1st lien percentage (80), the 2nd lien percentage (20 or 15) and the down payment percentage (5).
It only makes sense that the more debt you have the riskier the loan is for the lender. There is a finite amount of income in all of our households and it all gets allocated every month. Lenders use a “debt-to-income” ratio to determine how qualified you are for the loan based on how much debt you already have.
Your Debt to Income Ratio (DTI) is the percentage of your income that you owe in debt on a monthly basis. For example, if you make $5,000 per month, and have debt payments (car loans, credit cards, student loans, etc.) of $2,000, your DTI ratio is 40%. The higher this ratio is, the less likely you will be to qualify for a low interest rate.
Conventional loans typically have a qualifying ratio of 28/36. FHA loans will sometimes allow for a higher debt load of 29/41 qualifying ratio.
The first number in a qualifying ratio is the maximum percentage of your gross monthly income that can be applied to your mortgage. That includes the loan principal and interest, private mortgage insurance, property taxes, homeowners insurance, and homeowner’s association dues.
The second number is the maximum percentage of your gross monthly income that can be applied to housing expenses and recurring debt. Recurring debt includes monthly payments for cars, boats, motorcycles, child support payments and monthly credit card payments.
Example: of a 28/36 qualifying ratio:
Gross monthly income of $5,000 x .28 = $1400 can be applied to housing.
Gross monthly income of $5,000 x .36 = $1,800 can be applied to recurring debt plus housing expenses
Example: of a 29/41 qualifying ratio:
Gross monthly income of $5,000 x .29 = $1,450 can be applied to housing.
Gross monthly income of $5,000 x .41 = $2,050 can be applied to recurring debt plus housing expenses
These are just general guidelines and everyone’s personal finances are unique. To get the real answer about how well you qualify and to determine how large a mortgage a local lender will offer contact one of our preferred lenders and visit with a loan officer.
I am a Dave Ramsey fan and I believe in paying cash but even Dave concedes when it comes to buying a house. In Financial Peace Dave calls the FICO score an “I love debt score” and brags about not having one. He even tells a story about trying to rent an apartment and he couldn’t because he doesn’t have a FICO score. He then says, “I can’t rent an apartment because I don’t have a FICO score… I could write a check and buy the whole complex but I can’t rent an apartment because I don’t have a credit score!” Which is a great story for someone that CAN write a check and buy the whole complex… The rest of us need to maintain a really good credit score.
Looking for a mortgage, auto or student loan may cause multiple lenders to request your credit report, even though you are only looking for one loan. To compensate for this, the score ignores mortgage, auto, and student loan inquiries made in the 30 days prior to scoring. So, if you find a loan within 30 days, the inquiries won’t affect your score while you’re rate shopping. In addition, the score looks on your credit report for mortgage, auto, and student loan inquiries older than 30 days. If it finds some, it counts those inquiries that fall in a typical shopping period as just one inquiry when determining your score. For FICO scores calculated from older versions of the scoring formula, this shopping period is any 14 day span. For FICO scores calculated from the newest versions of the scoring formula, this shopping period is any 45 day span. Each lender chooses which version of the FICO scoring formula it wants the credit reporting agency to use to calculate your FICO score.
40 year fixed, 30 year fixed, 20 year fixed, 15 year fixed, 10 Year Fixed, Adjustable Rate, etc. All of these loan types have different interest rate ranges.
Once you have completed a loan application, determined what type of loan you want and qualified for that loan you can “lock” the interest rate for that loan. Locking the Interest Rate means, for the period of the “lock” you are guaranteed that interest rate. Lock periods are typically 15, 30 or 60 days, although you may be able to get an extended lock period.
If you do not close on the loan before the lock period expires, you will NOT have a guaranteed interest rate anymore. And, the longer the lock period, the higher the rate will be. For example, a 15 day lock may be at 5.125%, a 30 day lock at 5.25%, and a 60 day lock at 5.375%. So, before locking your loan, be sure you are not locking for too long a time or for too short a time.
Interest rates fluctuate daily and may go up or down. By locking your rate, you are betting that rates will go up in the future.
You can reduce the interest rate on your mortgage by paying “points” at closing. A point is 1% of the value of the loan, so a point on a $200,000 loan is $2,000. If you “buy down” you loan to a lower interest rate you will have lower monthly payments and pay less interest over the life of the loan. However, “buying down” you loan to a lower interest rate means more money out of your pocket on the front end when you close the loan. You should do the math and weigh each side of the equation before making a decision about buying down the interest rate or not.
Those charged by the mortgage company and/or mortgage broker, those charged by 3rd party vendors, those charged by the Title Company, Escrow Company or Escrow Attorney and Pre-Paid Charges.
These can include loan origination fees and Broker fees which are usually a percentage of the loan amount; administrative fees and application fees, processing fees and underwriting fees. These last fees usually run from $100 to $500, and ALL of them are negotiable.
These are charges collected by the lender and paid to outside companies that provide a service. These are not usually negotiable and can include appraisal charges, flood certification fees, courier charges, document prep fees, mortgage lender attorney fees, etc.
These are the fees charged by the Title Company, Escrow Company or Escrow Attorney. They are usually set by the state and are not negotiable. These charges include title insurance, attorney fees, state/county/city registration fees, etc.
If the lender will be establishing an escrow account to pay taxes and insurance, the buyer will pre-pay taxes and insurance to establish an escrow account and will pre-pay the interest on the loan until the end of the month in which the loan closes.
The day you choose to close determines the amount of pre-paid interest you will have to pay. Closing at the end of the month means that you will pay less pre-paid interest. For example, if you close on October 1st you will pay 31 days of pre-paid interest. If you close on October 31st you will pay 1 day of pre-paid interest.
It doesn’t matter what day of the month you close on, you will not have your first loan payment due until a month has passed. So, if you close in October, your first payment is due in December – you get November for free!
Private Mortgage Insurance (PMI) is required on all loans that have a LTV greater than 80%. PMI is an insurance premium that you pay every month as part of your monthly payment. However, PMI is not intended to protect you. PMI is insurance coverage that protects the mortgage lender against default on the loan. If you stop making your payments, the mortgage lender is paid a percentage of the loan amount (usually 25% to 35%) by the insurance company.
We just moved here the first of January in 2017 from Ohio to the Louisville, KY area and we found Joel’s website online. He was quick to respond to us and got back the same day on our loan approval. He was very knowledgeable about the local market and kept us up-to date throughout the loan process and was a pleasure to meet at closing. Would recommend his services.
“We were searching online for mortgage companies in Louisville, Ky locally to deal with and found Joel’s website, and it was a godsend. He was great to work with, and delivered on everything he said he would do. I ended up referring my co-worker at UPS, and she was very pleased with his service and rates too. Would definitely vouch for him.” September 2016
“We contacted Joel back in July 2011 to refinance our Mortgage and he was great to work with. We contacted several lenders locally and online, and most where taking almost 60 days to close a refinance, Joel got it done in 23 days start to finish,I would definetly recommmend him. He got us 3.75% with just $900 in closing costs on our FHA Streamline loan.
“Joel is one of the best Mortgage Brokers I have ever worked with in my sixteen years in the real estate and mortgage business.” May 25, 2010
“Joel has always worked very hard to keep his word and to work out seasonable solutions to difficult problems. He is truly an expert in FHA and other type loans.”
September 1, 2010 Nancy Nalley
“I have worked with Joel since 1998. He is a great loan professional.” I refer most of my Louisville, Kentucky area home buyers to him and he always take special care of them.
August 23, 2012 Jon ClarK
“Joel Lobb is a real professional in the lending industry, with many years of experience, he is the one to go to for any mortgage lending needs.” August 22, 2011
RICHARD VOLZ , Residential Sales , Remax Foursquare Realty
“When looking to purchase our new home in 2006, I had the pleasure of meeting Joel Lobb. Not only was he personable and easy to reach, he was extremely knowledgeable in his field and made sure to find us the best rate and a top notch mortgage company. We were able to complete the process in less than 3 weeks with his expertise. I find Joel to have the utmost high integrity and I recommend him to anyone who say’s they are need of mortgage assistance. He is also fantastic and keeping everyone up to date on the latest in the housing industry through his twitter posts. He provided great results for our family and we still communicate to this day!”
August 21, 2010
“We first use Joel on our new home purchase in 2007 in St Matthews, Kentucky area and he was great to work with. We have since refinanced our home with him in 2010 when rates got really low and he has always delivered on what he says. I could not imagine using anyone else.”
Melody Glasscock March 2014
Contacted him about buying a home and he was great to work with. I was moving to Louisville Ky to take a new job and he walked me through the entire process. He explained to me all the different options for FHA, VA, USDA mortgage loans and credit score requirements versus Fannie Mae. Since I was a first time home buyer I needed alot of help and guidance. I would definitely recommend him. Fast to respond and available to answer questions that I or my realtor had after hours.
Anderson Johnson April 2018
We moved from Michigan to Northern Kentucky area and we were really impressed. We got a USDA loan no money down and closed in less than 3.5 weeks. We shopped around online with other lenders but Joel was always first to respond and his rates were just a little better than other lenders. He kept us informed through the process along with our realtor and there was absolutely no surprises like we heard from other co-workers and friends that they experienced in their loan process. We have already referred another co-worker to Joel . He’s AWESOME!
|Kentucky USDA Single Family Housing Homes for sale 02/22/2018|
|535 Hillview st||3/1||$35,510.00 – GovtBid|
|Grayson, KY 411431462||Foreclosure Sale|
|213 State Route 716||3/2||$50,710.00 – GovtBid|
|Ashland, KY 41102||Foreclosure Sale|
|1069 Raccoon Rd||3/2||$102,475.00 – GovtBid|
|Raccoon, KY 41557||Foreclosure Sale|
|217 Brooks Street||3/1.5||$43,755.00 – GovtBid|
|Cynthiana, KY 41031||Foreclosure Sale|
|12171 River Rd.||3/2||$67,525.00 – GovtBid|
|Campbellsburg, KY 40011||Foreclosure Sale|
|1718 Amos Ridge Rd||3/1||$53,190.00 – GovtBid|
|Frenchburg, KY 40322||Foreclosure Sale|
|121 Jellico Drive||3/2||$105,765.00 – GovtBid|
|Coxs Creek, KY 40013||Foreclosure Sale|
|1553 Harrodsburg Road||3/1||$33,500.00 – GovtBid|
|Lawrenceburg, KY 40342||Foreclosure Sale|
|777 KY Highway 801 S||3/3||$50,920.00 – GovtBid|
|Morehead, KY 40351||Foreclosure Sale|
|114 Mary Street||2/2||$75,345.00 – GovtBid|
|Winchester, KY 40391||Foreclosure Sale|
|2185 State Highway 1661||3/2||$53,600.00 – GovtBid|
|grayson, KY 411436823||Foreclosure Sale|
|240 hugh St||3/2||$24,790.00 – GovtBid|
|Grayson, KY 411431911||Foreclosure Sale|
|5526 Stinson Fork||3/1||$24,120.00 – GovtBid|
|Rush, KY 41168||Foreclosure Sale|
|121 Blue Bird Rd.||3/1||$20,502.00 – GovtBid|
|West Liberty, KY 41472||Foreclosure Sale|
|3311 Castle HWY||3/1||$69,475.00 – GovtBid|
|Pleasureville, KY 40057||Foreclosure Sale|
|1744 E. Gap Hill Rd.||3/2||$30,150.00 – GovtBid|
|Cub Run, KY 42729||Foreclosure Sale|
|212 Dogwood Trail||3/2||$52,930.00 – GovtBid|
|Shepherdsville, KY 40165||Foreclosure Sale|
|602 Greenhill Rd.||3/1||$40,000.00 – GovtBid|
|Ashland, KY 41102||Foreclosure Sale|
|120 Hoffman Ln||3/2||$78,795.00 – GovtBid|
|LaGrange, KY 40031||Foreclosure Sale|
|164 Parkway Dr.||2/1||$36,110.00 – GovtBid|
|Scottsville, KY 42164||Foreclosure Sale|
|203 Fuller Branch||3/2||$50,250.00 – GovtBid|
|Vanceburg, KY 41179||Foreclosure Sale|
|832 Daniels Drive||3/1||$28,140.00 – GovtBid|
|Worthington, KY 41183||Foreclosure Sale|
|175 Blue Jay Circle||4/2||$53,600.00 – GovtBid|
|Falmouth, KY 41040||Foreclosure Sale|
|113 Alexandria Cir||3/1||$47,245.00 – GovtBid|
|Nicholasville, KY 40356||Foreclosure Sale|
|514 Jamie Ridge Dr.||3/2||$56,465.00 – GovtBid|
|Mt Sterling, KY 40353||Foreclosure Sale|
|1303 Asbury St||3/1||$32,160.00 – GovtBid|
|Leitchfield, KY 42754||Foreclosure Sale|
|2300 West KY 8||3/1||$41,540.00 – GovtBid|
|Vanceburg, KY 41179||Foreclosure Sale|
|117 Dove Drive||3/1||$34,840.00 – GovtBid|
|Lawrenceburg, KY 40342||Foreclosure Sale|
|302 E. St||3/1||$37,455.00 – GovtBid|
|Mt. Sterling, KY 40353||Foreclosure Sale|
|72 Cedar Brook Court||3/1||$35,510.00 – GovtBid|
|Cynthiana, KY 41301||Foreclosure Sale|
|3487 Wallingford Rd.||3/2||$63,205.00 – GovtBid|
|Flemingsburg, KY 41041||Foreclosure Sale|
|186 Fairview Avenue||3/1||$53,600.00 – GovtBid|
|Lawrenceburg, KY 40342||Foreclosure Sale
Disclaimer: No statement on this site is a commitment to make a loan. Loans are subject to borrower qualifications, including income, property evaluation, sufficient equity in the home to meet Loan-to-Value requirements, and final credit approval. Approvals are subject to underwriting guidelines, interest rates, and program guidelines and are subject to change without notice based on applicant’s eligibility and market conditions. Refinancing an existing loan may result in total finance charges being higher over the life of a loan. Reduction in payments may reflect a longer loan term. Terms of any loan may be subject to payment of points and fees by the applicant Equal Opportunity Lender. NMLS#57916 http://www.nmlsconsumeraccess.org/
Just like the gas prices at the pump, mortgage rates can change daily or throughout the day. Typically mortgage rates are published at 10-11 am daily by most lenders and you can lock up through the close of business which is usually around 6-7 PM. Mortgage rates can change up or down throughout the day based on various financial, economics, and geopolitical news in the US Financial markets and World markets. Generally speaking, good economic news is bad for rates and vice versa, bad economic news is good for mortgage rates.
The good news is this: Once you find a home and get it under contract, you can lock your mortgage loan rate. Typically it takes about 30-45 days to close a mortgage loan in Kentucky, so the typical lock is for 30-60 days. If rates get better you may be able to negotiate a better rate with your lender, but they usually have to improve by at least 25 basis points (.25) to do that. Not all lenders offer this option. The longer you lock the loan, the greater the costs. It is usually free to lock in a loan for up to 90 days without having to pay a fee.
What a lot of lenders are experiencing now is that some loans don’t close on time for various reasons. You can always extend the lock on the loan but it will costs you usually .125 basis points to do so. If you let the lock expire on the loan, then you have to take worse case pricing on that day when you go to relock. It is usually best to extend the lock on your loan.
FHA will allow a home buyer to purchase a house with as little as 3.5% down. If your credit scores are low, say 680 and below, a lot of times it makes sense to go FHA because everyone pays the same mortgage insurance premiums no matter what your score is, and the down payment can be gifted to you. Meaning you really don’t have to have any skin into the game when it comes to down payment. They even allow down payment assistance through eligible parties (government grants or non-profits). Lastly, FHA will allow for higher debt to income ratios with sometimes getting loan pre-approvals up to 55% of your total gross monthly income.
VA loans offer eligible Veterans and Active Duty Personnel to buy a home going no money down with no monthly mortgage insurance. This is probably the best no money down loan out there since the rates are traditionally very low on comparison to other government insured mortgages and no monthly mortgage insurance. The VA loan can be used anywhere in the state of Kentucky with the maximum VA loan limit being $417k
USDA loans offer people buying a home in rural areas (typically towns of $20k or less) to buy a home going zero down. You cannot currently own another home and there is household income limits of $75,000 for a household family of four, and up to $99,000 for a household of five or more. You search USDA website for eligible areas and household income limits below at the yellow highlighted link :
Vantage Score ranges vary depending on the version the bureau is using. Earlier versions offer a range of 501 to 990 whereas a newer version would range from 300 to 850.
Credit bureaus will often provide scores within several different scoring models, which can cause you to have two different scores issued by a single bureau at one time. This can be confusing if you do not understand where the score is coming from, who it is being provided to, and why. If you go to get a credit card and then go to buy a car, those two places of business from whom you are seeking credit will likely be looking at different scoring models and therefore would each likely be looking at a different score by which they would determine your creditworthiness.
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 a 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.