Kentucky First Time Home Buyer Questions to Ask Your Lender?


via Kentucky First Time Home Buyer Questions to Ask Your Lender?

 

There are basically 4 mortgage programs for first time home buyers in Kentucky to consider:

1. FHA LOANS IN KENTUCKY

FHA Loans In Kentucky for Bad Credit



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.

Credit Score Minimums for a FHA Loan with 580 Credit score and below and 580 credit score or higher

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.


3. Kentucky USDA/Rural Housing:


100% Financing USDA Kentucky Mortgage Loans



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



Kentucky Housing Corporation has $6,000 Down Payment Assistance


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.

 

There are 4 basic things that a borrower needs to show a lender in order to get approved for a mortgage.

Home Loan Options for Kentucky First-Time Home-buyers in 2020


Kentucky FHA Mortgage Loans

Kentucky FHA loans are insured to give lenders a layer of protection if you default on the mortgage. They typically have competitive interest rates, smaller down payments and lower closing costs than conventional loans. A low credit score can still warrant only a 3.5 percent down payment down to a 580 credit score.

If the score is below 580, you will need a down payment of 10%

2 years removed from bankruptcy and 3 years removed from foreclosure

Clear Cavirs Alert Number (Delinquent with Government Debts)

2 year work history usually needed.

No need for rent verification unless credit scores are derogatory.

Collections usually don’t have to be paid, but if being garnished or sued with a judgement lien, typically will need to be paid.

Max debt to income ratio centered around 50% of your total gross monthly income divided by your monthly payment on the credit report along with new house payment.

Kentucky VA Home Loans

Kentucky Mortgage  loans is backed by the  VA guarantees home loans that help active military members, veterans and surviving spouses. VA loans don’t require a down payment or minimum credit score and no monthly mortgage insurance. This is one of the biggest benefits of VA loans is that they don’t require monthly mi, like FHA (.85. .80 or .45) , USDA (.35) and some Conventional Loans (varies on credit score and equity position or down payment or as lenders call it Loan to Value.

They offer 100% Financing, 2 years removed from bankruptcy or foreclosure, a clear CAVIRS, and must meet residual income requirements.

 

VA loans is the only type of mortgage loan offered in the Secondary Market (FHA, VA, USDA, Fannie Mae and Freddie Mac Conventional Loans) that has residual income requirements based on household size and state you live in.

What is residual income?

Residual income is the amount left over after you pay your monthly utilities on home, property taxes and home insurance, mortgage payment and the FICA/Medicare, Taxes for State and Federal, Health Insurance, 401k deductions and loans on credit report to include child support.

 

Kentucky Fannie Mae and Freddie Mac

They are government-sponsored entities that back home loans for low- and moderate-income families.

Down payments can be as low as 3 percent and monthly mortgage is relativity cheap if you have a high credit score (over 720) and at least 5% down payment.

One of the biggest advantages of conventional loans when you are putting down less than 80%,  is that the mortgage insurance is not for life of loan like, FHA, USDA has, and it has no upfront mortgage insurance premium like FHA (1.75% upfront mi premium) or VA (upfront mi premium from 2.15% to 3.6% depending on usage and loan type)

Kentucky USDA Rural Housing Loan
The U.S. Department of Agriculture, or USDA, focuses on homes in rural areas and guarantees the home loan. Borrowers don’t have to buy or run a farm.

A credit score of 640 or higher typically gets an applicant streamlined processing. A lower score is allowed but may require extra documentation about payment history.

Kentucky Rural Development Mortgage Guide

No Down Payment Required, Zero NADA! – Kentucky Rural Housing USDA loans allow someone to buy a home without putting any money down.
Lower Mortgage Insurance costs – Mortgage Insurance, is much lower on KY USDA loans than on FHA This can save you a lot of money.
30 year fixed Interest Rates for Kentucky Rural Housing Loans with no prepay penalty The interest rates are lower on USDA loans, which results in lower payments, and plenty of money saved over time.

How to Qualify for a Kentucky USDA Loan

Property Eligibility – The home you want to finance with a KY USDA loan must be an eligible property. The property must be located in a rural area which is generally defined to have the following characteristics: Under certain conditions, towns and cities with populations between 10,000 and 25,000. The USDA makes the eligibility determination, which may be verified at the following link: http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do.

Job History – Similar to all other mortgage loans, a two year employment history is required. You must show that you have been consistently employed for the past two years in order to qualify for Kentucky USDA financing; however in certain circumstances a small gap in employment may be permitted with a reasonable explanation. Additionally, if you have just completed schooling or military service and are newly employed but do not yet have a 2 year history, your income may also be eligible.

Income Limits – The Kentucky Rural Housing USDA program is intended to assist low and moderate-income Kentucky households, therefore to be eligible for a USDA loan, your household income may not exceed the moderate-income limits established for the specific county in which you are financing a home. you may view the eligibility requirements on this page of the USDA website:


New Income limits for most counties (*) in Kentucky are $86,850 for a household family of four and household families of five or more  can make up to  $114,650.



The Northern Kentucky Counties (***) of Boon, Kenton, Campbell, Brackenn, Gallatin, and Pendleton are $93,500 for a household of four or less and up to $123,400 for a family of five or more.

USDA Eligible Areas in Northern Kentucky
Burlington
Hebron
Independence
Walton
Alexandria
Highland Heights
Cold Springs
Grant County
Owen County
Pendleton County

USDA Income Limits
Boone, Kenton & Campbell Counties (N. KY)

$93,500 (family size 1-4)
$123,400 (family size 5 or more)

Grant, Owen & Pendleton Counties (N. KY)

$86,850 (family size 1-4)
$114,650 (family size 5 or more)

With the new changes for 2019 USDA Income limits, the Jefferson County Louisville, KY Metro area (**) saw an increase of $87,600 for a family of four and up to $115,650 for a family of five or more. The metro area surrounding counties of Jefferson County includes Oldham, Bullitt, Spencer are included in these higher income limits for USDA loans.

Remember,  the entire  Jefferson County and Fayette County  Kentucky counties are not eligible for USDA loans. Along with parts of the following counties Daviess (Owensboro), Mccracken (Paducah), Madison County, (Richmond), Clark County (Winchester), Warren (Bowling Green), Hardin (Fort Knox and Radcliff), Bullitt(Hillview, Maryville, Zoneton, Fairdale, Brooks), Franklin, (Frankfort), Henderson (Henderson City Limits), Christian County (Hopkinsville, Fort Campbell), Boyd County (Ashland city limits) and the most Northern Parts of Boone, Kenton, Campbell Counties of Northern Kentucky (Covington, Florence, Richwood, Hebron, Ludlow, Fort Thomas, Bellevue, Ryle, Beechwood, ) see  map below

DTI Ratio or debt to income ratios. One of the main criteria in determining if you will be approved or not is your debt-to-income ratio. While you must not make too much money, you also must not have too much debt. Your debt-to-income ratio is how much monthly debt you have (only those debts which show on your credit report are counted) compared to your qualifying income.

Credit Score – The minimum credit score for a Kentucky USDA Mortgage Loan goes down to a 581 credit score, however most loans get approved at 640 or higher .varies from lender to lender, but most want to see at least a 640 credit score for you to be approved.

Mortgage Insurance – USDA loans have their own version of mortgage insurance. It is called the “Guaranteed Fee” and works similarly to FHA loans which have an upfront and monthly mortgage insurance premium (MIP). With USDA loans, there is a 1.00% upfront guarantee fee which may be financed on top of your loan, and a 0.35% annual guarantee fee that is divided into 12 payments each year. The amount of your annual fee (paid monthly) adjusts each year and goes down as your loan balance does. Use our USDA calculator to get an idea of what your monthly payment will be

Kentucky Good Neighbor Next Door Mortgage Loan
This program sponsored by the U.S. Department of Housing and Urban Development helps law enforcement officers, firefighters, emergency medical technicians and K-12 grade teachers buy homes.

A 50 percent discount off a home’s listed price is available through the program in areas labeled “revitalization areas.” Buyers must commit to living in the home for at least 36 months.

Kentucky FHA 203(k) Rehab Loans

If a fixer-upper fits more easily into your budget, a Section 203(k) rehabilitation program loan that’s backed by FHA can help. It considers the value of the home after you’ve made improvements, and lets you borrow the money for these fixes, rolling it into your mortgage. The down payment can be as low as 3 percent!