What kind of credit score do I need to qualify for a Kentucky Mortgage Loan in 2019?


 What kind of credit score do I need to qualify for a Kentucky Mortgage Loan in 2019?

Credit scores play an important part in getting approved for a Kentucky Mortgage loan. Your credit scores consist of 3 digits and range anywhere from the low-end of 300 to a high score of 800 range on the top-end. Most borrowers are going to fall in the 500, 600, 700 range, with a few in the 300 and 800 ranges.
 The higher the score the better it is for chances of getting approved for a Kentucky Mortgage loan and getting better terms as far as rates, closing costs and mortgage insurance.
There are three main credit bureaus in the United States that lenders will pull from Experian, Equifax, Transunion. Most loan programs will take your middle score. So For example, if you have 629 on transunion, 690 on equifax, and 577 on Experian, your middle credit score would be 629.
The credit score that mortgage lenders use is the fico score. They’re different credit scoring models out there, so keep that in mind, that even though you may get your credit score from Credit Karma or Credit Sesame, this is not your true fico scores that lenders use in Kentucky to approve you for a mortgage loan.
Credit Score vs Credit Karma: what’s the difference?
crekit harma vs credit sesame.jpg

Different Kentucky Home Loan Programs require different credit score requirements. I will discuss each below:

  • Kentucky FHA Mortgage loan credit score requirements:
  • The minimum credit score is 500 for Kentucky FHA loans. However please keep in mind these two things: 1. Lenders credit their own overlays to increase the credit score threshold, most being 620, and secondly, if your credit score is below 580, you would need 10% minimum down payment,  and if the credit score is over 580, then you can go with the minimum 3.5% down payment.
  • Obviously if you have a higher credit score, this will increase your chances of getting approved for a Kentucky FHA Mortgage and possibly better rates and closing costs options.
  • Kentucky VA Mortgage  loans requirements : 
  • VA does not have a minimum credit score requirement, but if the credit score is below 620 few lenders will do the loan, but I am set up with several Kentucky VA lenders where I have closed them down to a 560 credit score, but the borrower had good compensating factors such as: large down payment, low dti ratios, good job history and good residual income with no previous bankruptcies or foreclosures.
  • I would suggest if your credit scores are below 580, I would suggest on working on getting the scores up before you applied for a VA mortgage loan.
  • A lot of lenders will do a rapid rescore which in some cases can increase your credit scores in as little  as 7-10 working days.
  • The federal Department of Veterans Affairs (VA) guarantees loans for current and former members of the military and their families. VA loans provide very favorable terms to eligible borrowers and have limited qualifying requirements. You can get a VA loan with no down payment so long as the home isn’t worth more than you pay for it, and there’s no minimum credit score to qualify. You also don’t have to pay for mortgage insurance, although you do have to pay an up-front funding fee of of between .5% and 3.3% of the loan amount unless you fall within an exception for disabled vets or military widows or widowers.
  • Kentucky USDA Mortgage credit score requirements: 
  • According to their guidelines, USDA will go down to a 580 credit score, but most lenders will want a 640 credit score. USDA uses an online system to underwrite the risk of the loan, and scores under 640 are very difficult to get approved.
  • Validating the Credit Score.  Two or more eligible tradelines are necessary to validate an applicant’s credit report score.  Eligible tradelines consist of credit accounts (revolving, installment etc.) with at least 12 months of repayment history reported on the credit report.  At least one applicant whose income or assets are used for qualification must have a valid credit report score
  • The Rural Housing Service (RHS) operates under the federal Department of Agriculture to guarantee loans for rural home-buyers with limited income who can’t obtain conventional financing. The upside is that Kentucky USDA loans require no down payment. The downside is that they charge a steep up-front fee of 1% of the loan amount (which can be paid off over the entire loan term) and an annual fee of 0.35%.
  • Credit score over 680:  Perform a basic level of underwriting to confirm the applicant has an acceptable credit reputation.  Perform additional analysis if the applicant’s credit history has indicators of unacceptable credit as noted in Paragraph 10.7 of this Chapter.
  • Credit score 679 to 640:  Perform a comprehensive level of underwriting.  Underwrite all aspects of the applicant’s credit history to establish the applicant has an acceptable credit reputation.  Credit scores in this range indicate the applicant’s reputation is uncertain and will require a thorough analysis by the underwriter of the credit to draw a logical conclusion about the applicant’s commitment to making payments on the new mortgage obligation.  The applicant’s credit history should demonstrate his or her past willingness and ability to meet credit obligations.
  • Credit score less than 640:  Perform a cautious level of underwriting.  Perform a detailed review of all aspects of the applicant’s credit history to establish the applicant’s willingness to repay and ability to manage obligations as agreed.  Unless there are extenuating circumstances documented in accordance with this Chapter, a credit score in this range is generally viewed as a strong indication that the applicant does not have an acceptable credit reputation.
  • Little or no credit history: The lack of credit history on the credit report may be mitigated if the applicant can document a willingness to pay recurring debts through other acceptable means such as third party verifications or cancelled checks. Due to impartiality issues, third party verifications from relatives of household members are not permissible.   Lenders can develop a Non-Traditional Credit Report for applicants who do not have a credit score in accordance with Paragraph 10.6 of this Chapter
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.
  • Competitive Mortgage Rates and Fees
  • Monthly Mortgage Insurance Is Not Always Required
  • Ideal for First Time Home Buyers with Good Credit
Common Misconceptions About Credit Scoring
Credit scoring is a mystery to many and it even surprises us occasionally.  Below are examples of common misconceptions we hear all the time
If I pay off my balance every month so it should show a zero balance on my credit report:  Wrong!
Credit card companies will usually report your ending balance on your monthly statement. So even if you pay off your credit card every month, it will not show a zero balance on credit. A bad scenario for someone’s score would be the following: Credit limit is $1,000 and the card owner charges $900 but pays off the balance once the statement is received. The card will report a $900 balance that is 90% of the credit limit and that will hurt the credit score as 30% of a credit score is balance compared to credit limits as a percentage.
I will lower my credit limits to make my credit look better.  Wrong!
Do not put your credit limits too low! Again, 30% of your score is balance compared to credit limits. For instance if you charge $1000 per month on a $10,000 limit card, the balance is 10% of the limit which is very good. On the other hand, if you lower the limit to $1500, the balance is 67% of the limit which hurts the credit score.
I will close my credit cards to help my credit report.  Wrong!  most of the time
Having a good mix of credit types is very important to have a great credit score. I will say this again, 30% of the score is balance compared to credit limits on revolving accounts and if someone doesn’t have any open cards, then a lot of points are being lost on a score. Most experts say that having 2 or 3 revolving accounts that report to all 3 bureaus with low balances compared to the limits is the magic number for the best score. Also a portion of the credit score is how long accounts are open so keep the lines of credit open a very long time rather than opening and then closing accounts often
What if underwriting will require me to pay off a collection to approve my loan, Am I stuck?  No
Then all you need to do is simply have to do it have it as a condition to pay off the collection at closing rather than up-front.  By doing this, it will not have time to lower your credit score before closing your loan.
I haven’t paid my student loans in years because they are in collection status, but that was a long time ago so I’m ok, right?  No
Unfortunately if they are government backed loans, then this will affect your ability to obtain a government mortgage loan.  A good thing about government student loans is that they will usually allow you to start paying them again, then usually within 6 – 12 months, they will report the loan again as current.  Make sure that the company agrees to do this and get it in writing.  By doing this, you can go from owing Thousands of dollars as a collection to having a regular loan with hopefully a manageable payment.
I just got a car loan, so my credit should be good.  Not necessarily
I hate to say it, but about anyone can get a car loan no matter how bad the credit is so this is not an indication of good credit. Having an installment loan like a car loan is a good thing to have on credit as long as it is paid on time and the longer it has reported, the better. As a side note, be wary of buying a car and the dealership pulling your credit without your knowledge to many creditors. It is not uncommon for someone with marginal or sometimes good credit to have their credit pulled 10 times or more.
I will pay off my old collections just before applying for a mortgage so my scores will go up.  Usually your scores will go down unless they agree to “delete” or “remove” them from your credit in writing
Be careful here! If there are older collections with a date of last activity that is a while back and they are paid off, the credit scores can go down in the short term. So if someone has a 650 credit score which would qualify for most mortgages, wants to increase their scores a little by paying off old collections just before purchasing a home, the collections would now show paid off (if they actually update which they often don’t), but now show a date of last activity as “now”. It doesn’t make sense but the bureaus treat the collection activity like it just happened which doesn’t seem right but it happens. Often it makes more sense to pay off the collections at or prior to closing following the recommendation of the loan officer.  Fair Isaac is working on potential changes to how this affects scores and maybe the other credit bureaus will make this change too.
Charged off accounts and collections are treated the same when getting a mortgage, right?  Actually NO
Sometimes when an account is charged off, it is not required to be paid off for qualifying purposes.  This is true on FHA loans for instance.
I will dispute some credit accounts on my credit report so my scores will go up.
Read the article below on how dispute language can hurt you when applying for a mortgage.
If you want a personalized answer for your unique situation call, text, or email me or visit my website below:

Joel Lobb
Mortgage Loan Officer

Individual NMLS ID #57916

American Mortgage Solutions, Inc.
10602 Timberwood Circle 
Louisville, KY 40223
Company NMLS ID #1364

Text/call: 502-905-3708

email: kentuckyloan@gmail.com

If you are an individual with disabilities who needs accommodation, or you are having difficulty using our website to apply for a loan, please contact us at 502-905-3708.
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#57916http://www.nmlsconsumeraccess.org/
— Some products and services may not be available in all states. Credit and collateral are subject to approval. Terms and conditions apply. This is not a commitment to lend. Programs, rates, terms and conditions are subject to change without notice. The content in this marketing advertisement has not been approved, reviewed, sponsored or endorsed by any department or government agency. Rates are subject to change and are subject to borrower(s) qualification.

 

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What does debt to income ratio mean for a Mortgage Loan Approval in Kentucky?

Debt ratios and mortgage guidelines for approval in Kentukcy?


via What does debt to income ratio mean for a Mortgage Loan Approval in Kentucky?

 

How does your debt to income ratio play into a Kentucky Mortgage Loan Approval for FHA, VA, USDA and Fannie Mae Mortgage Loans

When it comes to getting approved for a Kentucky Mortgage loan, lenders will look at your current gross monthly income versus your current debts to qualify up to your maximum spending limits for a mortgage loan. Also called your dti or debt to income ratios.

There are two ratios they use: Front end ratio and back-end ratio

The first ratio is measured using your new house payment, taking into account your principal and interest payment, property taxes and home insurance premiums along with the mortgage insurance. That ratio typically needs to be less than 1/3 of your gross monthly income to fit most KY mortgage programs for FHA, VA, USDA and Fannie Mae guidelines.

I have attached below a picture with  a general overview of qualifying ratios for a Kentucky Mortgage loan approval when it comes to income vs debts or debt to income ratios.

Debt-to-Income Ratio Guide for Kentucky FHA, VA, USDA and KHC Loans: 

Acceptable Ratios
Housing Debt to Income
Conventional 28% 41-50%
FHA 29% 41-56.5%
VA
USDA/RHS
KHC 
29%
29%
40%
41-65%
41-45%
50%
Higher ratios may be accepted with compensating factors: low loan value, large cash reserves after closing, high credit scores, etc,

So for example, let’s say you make $3000 gross a month, then your max house payment on the new loan would equal about $1000 for your new house payment.

Your current rent payment, utility bills, car insurance, cell phone bills, don’t go into account when figuring your max ratios.

The second ratio, called the backend-ratio measures your new house payment, plus your current monthly debts listed on the credit report.  Most Kentucky Mortgage programs will want to cap this at 45% to 50%, with some going a little higher with compensating factors.

For example, let’s say you make $3000 gross a month, and your new house payment is $1000, taking you up to your max limits on the front end ratio of 1/3.  and let’s say you have a $300 car payment, $100 in credit card payments and $150 student loan payment.

What is your maximum qualifying house payment with a back-end ratio of 50% with the current debts above? Let’s look at the math: Take $3,000 x 50% =$1,500 — this is going to be your max limits on the backend ratio with new house payment and current debt load. So let’s see what this amounts to:

($1500-$300-$100-$150=$950)

So if we take the $1500 minus your current monthly bills on the credit report, this is going to equal a max house payment of $950. As you can see, even though the front end ratio allows for $1000 max house payment, the back-end ratio is going to be $950, so you would go with the lowest of the two.

If you pay or receive child support  or child support this can be added or deducted to affect your max qualifying ratios for a mortgage loan, along with 401k loans.

As stated above, car insurance, cell phone bills, current rent payments, utility bills, insurance, does not come into play when qualifying for a max mortgage loan approval.

Curios about how much you would qualify for a mortgage loan in Kentucky?

Call, text or email me your questions and I would be glad to help you.

 
American Mortgage Solutions, Inc.
10602 Timberwood Circle Suite 3
Louisville, KY 40223
Company ID #1364 | MB73346
 


Text/call 502-905-3708
kentuckyloan@gmail.com

http://www.nmlsconsumeraccess.org/
If you are an individual with disabilities who needs accommodation, or you are having difficulty using our website to apply for a loan, please contact us at 502-905-3708.

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#57916http://www.nmlsconsumeraccess.org/

— Some products and services may not be available in all states. Credit and collateral are subject to approval. Terms and conditions apply. This is not a commitment to lend. Programs, rates, terms and conditions are subject to change without notice. The content in this marketing advertisement has not been approved, reviewed, sponsored or endorsed by any department or government agency. Rates are subject to change and are subject to borrower(s) qualification.

What is the minimum credit score I need to qualify for a Kentucky FHA, VA, USDA and KHC Conventional mortgage loan in 2018?


via What is the minimum credit score I need to qualify for a Kentucky FHA, VA, USDA and KHC Conventional mortgage loan in 2018?

What kind of credit score do I need to qualify for different first time home buyer loans in Kentucky?
Answer below:
Most lenders will wants a middle credit score of 620 to 640 for KY First Time Home Buyers looking to go no money down. The two most used no money down home loans in Kentucky being USDA Rural Housing and KHC with their down payment assistance will want a 620 to 640 middle score on their programs.
If you have access to 3.5% down payment, you can go FHA and secure a 30 year fixed rate mortgage with some lenders with a 580 credit score. Even though FHA on paper says they will go down to 500 credit score with at least 10% down payment, you will find it hard to get the loan approved because lenders will create overlays to protect their interest and maintain a good standing with FHA and HUD.
Another popular no money down loan is VA. Most VA lenders will want a 620 middle credit score but like FHA, VA on paper says they will go down to a 500 score, but good luck finding a lender for that scenario.
A lot of times if your scores are in the high 500’s or low 600’s range, we can do a rapid rescore and get your scores improved within 30 days.
02_by_the_numbers_what_your_FICO_score_means

Kentucky VA Loans for Kentucky First-Time Home Buyers


via Kentucky VA Loans for Kentucky First-Time Home Buyers

How to Apply for a Kentucky VA Loan


via How to Apply for a Kentucky VA Loan

 

5 Easy Steps To A Kentucky VA Loan

Apply for a Certificate of Eligibility.

A veteran who doesn’t have a certificate can obtain one easily by making application on VA Form 26-1880, Request for Determination of Eligibility and Available Loan Guaranty Entitlement, to the local VA office.

Decide on a home you want to buy and sign a purchase agreement.

Order an appraisal from VA. (Usually this is done by the lender).

Most VA regional offices offer a “speed-up” telephone appraisal system. Call the regional VA office for details. See also How To Get a VA Loan.

Apply to a mortgage lender for the loan.

While the appraisal is being done, the lender (mortgage company, savings and loan, bank, etc.) can be gathering credit and income information. If the lender is authorized by VA to do automatic processing, upon receipt of the VA or LAPP appraised valuedetermination, the loan can be approved and closed without waiting for VA’s review of the credit application. For loans that must first be approved by VA, the lender will send the application to the local VA office, which will notify the lender of its decision.

Close the loan and move in.41708199_2217996045114382_5135852507360133120_n

The Big Change with the Removal of Tax Liens and Judgments – Continental Credit


The Big Change with the Removal of Tax Liens and Judgments

Believe it or not there is a lot of sarcasm in the title because the change is expected to be minuscule. However, our mortgage professional hot line has been ringing off the hook with our referral sources want to know anywhere from how much the scores will go up, to, if the lending criteria will change to offset the increases. Therefore, let me provide the full scoop so we are all very educated on the subject.

This all went in to effect on July 1st, 2017. As of that day all judgments and tax liens that were existing already or to be added in the future must pass THREE of FOUR of the most detailed, scrutinizing audits known to mankind. The first one makes me shudder; these public records must have your Name! Crazy, right? Next, your SS#! It gets deeper from there, next, your address and yes, finally, even your DOB! Do I live in coocoo land? In what world isn’t this just the basic information one should need to even consider starting to report a tax lien or judgment? And you only need THREE of them, so we can just throw out something trivial like your NAME after all.

In all seriousness, what does this actually equate to when it’s all said and done? It definitely varies from which source has conducted what survey. I’ve researched anywhere from 2% of credit reports being impacted at an average of 15 points to Vantage’s recent release of 6% of reports being impacted with an average of 10 points. Either way, it’s not worth much time thinking about it unless you want to think of the laughable situation that this took forever to pass and the final criteria was the most basic 3/4 things you should possible ever have to begin with in the first place.

In this credit specialist’s opinion which nobody seems to want talk about, I foresee many scores going down due to this! This has to do with credit score card calculations. It’s an advanced subject, but in a nutshell, your score to a degree is based on other people in a similar situation as you, therefore if you are with people with tax liens your score range is within that score card. Remove the lien, BUT don’t fix anything else (which is what this is), now you are with people with no tax liens putting yourself in a more difficult bracket. Call us for a better explanation, it’s certainly more interesting than this Big Change! Most importantly however, this allows us to work religiously on any of your turn downs. 

 

 

 

 

 

 

 

Believe it or not there is a lot of sarcasm in the title because the change is expected…

Interest rates are typically based on the answers to these questions:

How Good Is Your Credit Score? 

FICO ScoreThe 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.

 

 
American Mortgage Solutions, Inc.
10602 Timberwood Circle Suite 3
Louisville, KY 40223
Company ID #1364 | MB73346
 


Text/call 502-905-3708
kentuckyloan@gmail.com

http://www.nmlsconsumeraccess.org/
If you are an individual with disabilities who needs accommodation, or you are having difficulty using our website to apply for a loan, please contact us at 502-905-3708.

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#57916http://www.nmlsconsumeraccess.org/

— Some products and services may not be available in all states. Credit and collateral are subject to approval. Terms and conditions apply. This is not a commitment to lend. Programs, rates, terms and conditions are subject to change without notice. The content in this marketing advertisement has not been approved, reviewed, sponsored or endorsed by any department or government agency. Rates are subject to change and are subject to borrower(s) qualification.

 

 

 

Source: The Big Change with the Removal of Tax Liens and Judgments – Continental Credit

Louisville Ky VA Loans


via Louisville Ky VA Loans

Guide to Kentucky VA LoansGuidelines