2020 Kentucky USDA Loan Income Limits for Kentucky Counties
Debt ratios and mortgage guidelines for approval in Kentukcy?
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.
|Housing||Debt to Income|
|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:
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.
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The U.S. Department of Agriculture mortgage program is for Kentucky home buyers that have no money to put down, have a stable 2 year job history, no bankruptcies or foreclosures in last 3 years and the new house payment should be close to or not more than 1/3 of your gross monthly income, this is called effective income.
There is also a test for compliance income meaning cannot make more than a certain amount to use the USDA loan program in Kentucky. Most Kentucky counties are limited to $82k for a household of four, and up to $109k household income for a family of five or more.
Thy used an automated underwriting system called GUS to pre-approved Kentucky home Buyers. If your score, middle credit score of the three main bureaus of experian, equifax, and trans union is below 640, you will automatically get downgraded to a refer and it will make it more difficult to get approved for the USDA loan.
I would suggest to get your scores up to 640 before submitting your loan application, however a lot of lenders including myself will go down to a 620 score, but be ready to hand over your blood type and other documents. 😂😂
You don’t have to be a Kentucky first time home buyer people with low to moderate incomes who want to buy a home in an eligible area. They typically don’t want you to own another piece of real estate and if you have access to 20% down payment they will not let you use the program.
This program is not intended for working farms, so if the property has farm income, i.e. crops, cattle, livestock, or other income this will not work for USDA loan programs.
They will do loans on mobile homes that meet FHA standards and that are brand new. They will not finance a used mobile home.
To get a Kentucky USDA loan, you work with a bank or other lender. The loan is backed by the USDA. You must be within certain income requirements — which depend on your area — and agree to use the home solely as a primary residence.
Like Kentucky FHA loans , Kentucky Rural Development USDA mortgages have fees. There is an upfront guarantee fee, which can be as much as 1.0 percentile of the principal loan amount, which is added to your loan. You also will have to pay a mortgage insurance fee which is .35% and this is called the annual fee. This is way cheaper than mortgage insurance premiums of 1.75% and .85% for the same comparison.