Kentucky FHA Loan Changes for FICO Scores and Credit Scores for 2019
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Mortgage Loan Officer
Kentucky FHA Loan Changes for FICO Scores and Credit Scores for 2019
FHA’s $100 Down Program is allowed for Kentucky Home Buyers buying a home that is owned by HUD or FHA. The $100 Down sales incentive permits a Borrower to purchase a HUD REO Property with FHA-insured financing with a minimum downpayment of $100.
This program can ONLY be used to purchase homes owned by HUD OR FHA.
Check the link below to see if any properties are offered in your area. If a property is eligible, the listing on the website will specify $100 Down Financing Incentivize.
You can find all current listings for sale by HUD here.
The main factors in qualifying for this Kentucky FHA program are that the property must be a HUD REO property and purchased using FHA Financing, aside from these, the requirements include:
Typically, USDA-eligible properties are located in rural areas. It is a mistake, however, to think that you have to live far out in the country to qualify for a USDA loan. USDA-eligible properties are often located near urban areas.
A property’s eligibility is determined by its location with respect to USDA’s map of eligible locations. The USDA program also places limits on your household income based on median earnings in an area. If you exceed that limit, you can’t obtain a USDA loan.
The FHA, by contrast, does not place limits on household earnings. The FHA, however, does establish a maximum limit on the amount of money that can be borrowed through the program.
If you have questions about qualifying as first time home buyer in Kentucky, please call, text, email or fill out free prequalification below for your next mortgage loan pre-approval.
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The view and opinions stated on this website belong solely to the authors, and are intended for informational purposes only. The posted information does not guarantee approval, nor does it comprise full underwriting guidelines. This does not represent being part of a government agency. The views expressed on this post are mine and do not necessarily reflect the views of my employer. Not all products or services mentioned on this site may fit all people
This web site is not the FHA, VA, USDA, HUD or any other government organization responsible for managing, insuring, regulating or issuing residential mortgage loans.
All approvals and rates are not guaranteed, and are only issued based on standard mortgage qualifying guidelines
Home Buyers can qualify for a Kentucky mortgage after bankruptcy:
That didn’t take long! BREAKING: HUD suspends FHA mortgage insurance premium cut
#BREAKING In first moments of Trump presidency, HUD makes it official: FHA mortgage insurance premium cut is suspended “indefinitely.”
The Department of Housing and Urban Development announced it suspended the reduction of Mortgage Insurance Premiums, effective immediately. HUD sent out an announcement just an hour after President Trump was sworn in on Friday, stating that the cuts have been suspended indefinitely. Click the headline for more.
The requirements for Kentucky FHA loans are set by HUD.
All Kentucky Counties received a loan amount increase in 2019 for FHA loans made starting January 1, 2019
The new loan limits are effective with case numbers assigned on
or after January 1, 2019
Most Kentucky Counties will have a max of $314, 827 for 2019 FHA loans made in KY.
To find the Kentucky FHA loan limit for a specific county in Kentucky for 2019, please use the link below.
It is true that your CAIVRS report can help lenders to predict the risk of doing business with you, just like a traditional consumer credit report. But the primary reason lenders check your CAIVRS report is because they are generally required to do so for any applications that involve a federal loan (FHA, VA, USDA, SBA, etc.). Lenders are required to conduct a CAIVRS search because Title 31 of the United States Code (Section 3720B) bars “delinquent federal debtors from obtaining federal loans or loan insurance guarantees.”
Gift Rules for Down-Payment Sources Guidelines on FHA Mortgage Programs
One of the biggest obstacles to buying a home for Americans is the down payment. There was a time when you needed a 20% down payment and a high credit score to buy a home. But in 2018, you can buy a home with average to below average credit and a low down payment in some cases. One of the most popular loan programs for these buyers if the FHA loan. A major advantage of the FHA mortgage loan is you can get approved with only a 3.5% down payment with a 580 or higher credit score. If you have a lower score than that, you need a 10% down payment.
Still, there are situations where the borrower is having trouble coming up with the down payment for the loan. What to do then? FHA guidelines do allow other options. Keep reading to learn more.
More on FHA Down Payments and Approved Sources
As we note above, you are required to have at least a 3.5% down payment to be approved for an FHA loan. The money must be verified by the FHA-approved lender to come from an ‘approved source.’ What is an approved source, anyway? Most people get their down payment from cash reserves, investments, borrow from 401k or IRA, etc. The idea behind verifying where the money came from is to make sure the borrower did not get the down payment from a credit card or payday loan, etc.
But there are other options for your down payment. The funds also can come from a gift. The gift and the giver do need to meet FHA requirements, but this flexible guideline makes it possible to get into an FHA loan with, technically, zero money down. To determine if the down payment gift can be used or not, it is necessary to check HUD rules. According to HUD 41.55.1 Chapter 5 Section B, for the funds to be a gift, there cannot be any expected repayment of the money.
Also, FHA will scrutinize the giver of the gift. Chapter 5 of the HUD Code states the cash gift is ok if it comes from your relative; employer or labor union; close friend with a defined interest in you; charitable organization; government agency or public entity.
FHA also states who cannot give gift funds to you for the down payment. These are the seller; the real estate agent or broker on the deal; the builder or an associated entity.
Gift Terms Explained
The gift for your down payment cannot be made based upon paying it back later. You are required to get a gift letter from the person or organization. The letter should state that you are not required to pay the money back. It also should provide the contact information for the borrower, such as name, address, and phone number. Also included should be the bank account from which the funds will be sent.
The gift donor should be OK with giving a bank statement with the letter. Also, he or she should ensure that the transfer amount matches what is in the gift letter and what is deposited into your account.
FHA rules are very specific on these areas to ensure that the home buying process through FHA is fair and just. But as long as you follow the FHA rules, you should be able to get help with your down payment from a friend or relative.
Don’t Have Friends or Family Who Can Help?
Not every borrower has friends or family who can give them a gift for their down payment. But HUD lists many government programs spread throughout the country in most states that can offer down payment and closing cost help for certain borrowers.
It also is worth checking if your employer and state have employer assisted housing. This program can help people with moderate incomes to get a loan to cover closing costs and down payment. Look up EAH in your state on Google to see what is available.
Experts say that down payment help is available for nearly 90% of homes in the US. There is a good chance that you can get help on your down payment through one of these organizations. References: https://www.fha.com/fha_article?id=441
Senior Loan Officer
Getting a FHA loan in Kentucky in 2019 you will be confronted with minimum credit score requirements set forth by FHA and the lender. Even though FHA will insure the mortgage loan at a certain credit score, you will see that lenders will create “credit-overlays” to protect their risk and ask for a higher credit score.
So keep in mind when you are getting a FHA loan in 2019 some lenders will have higher credit score minimums in addition to the FHA Mortgage Insurance program.
For a Kentucky Home buyer wanting to purchase a home or refinance their existing FHA loan, FHA requires a 3.5% down payment and the borrower must have a 580 FICO Credit Score. If the score is below 580, then you would need 10% down and still qualify on a manual underwrite.
You must have a FICO score of at least 500 to be eligible for an Kentucky FHA loan. If your FICO score is from 500 to 579, your down payment on the loan is 10 percent of the loan.
If your FICO score is 580 or higher, your down payment is only 3.5 percent. If your credit score is less than 580, it may be more cost effective to take the necessary steps to improve your score before taking out the loan, rather than putting the money into a larger down payment.
How do they get the credit score: There are three main credit bureaus in the US. Equifax, Experian, and Transunion. The three scores vary but should be relatively close as long as the same creditors are reporting to the same bureaus.
You will get a variation in the scores due to all creditors or collection companies don’t report to all three bureaus. This is why they take the mid score. So if you have a 590 experian, 680 equifax, and 620 transunion, your qualifying credit score would be 620
Based on my experience with lenders that I deal with in Kentucky on FHA loans, most lenders require 620 middle credit score for consideration for loan approval.
How do they get the score: They take the mid score, so if you have a 590 experian, 680 equifax, and 620 transunion, your qualifying score would be 620.
If your score is below 620, a manual underwrite is where the AUS (Automated Underwriting System) refers your loan to an human being, and they look at the entire file to see if they can overturn and approve the mortgage loan because the Desktop Underwriting Automated Software could not approve you.
With scores below 620, they typically will want to verify your rent history, have no bankruptcies in last two years, and no foreclosures in the last 3 years.
If you have had any lates since the bankruptcy this will probably result in a denial on a refer manual underwrite file.
Your max house payment will be set at 31% of your gross monthly income, and your new house payment plus the bills you are paying on the credit report cannot be more than 43%.
Typically, on scores below 620 for FHA loans, they will also look at reserves or money you have saved-up after the loan is made to try and qualify you. For example, if you have a 401k or savings account that have at least 4 months reserves (take your mortgage payment x 4) and this would equal your reserves. They look at this as a rainy day fund and could help you keep up on your bills if you were unemployed or could not work.
Maximum FHA loan limits in Kentucky are set around $314,500 and below.
If you are looking to take a FHA loan in 2019 to buy or refinance a home in Kentucky, please contact me below with your questions about the credit score requirements and how they affect your loan approval.
The first thing to keep in mind is that qualifying for a mortgage involves a lot more than just a credit score. While your FICO score is a very important ingredient, it is just one factor. Lenders also look at your income and level of debt, among other things.
As a rule of thumb, however, a credit score below 620 will make buying a home very difficult. A FICO score below 620 is considered sub-prime. In the past there were mortgage companies that specialized in sub-prime mortgages. Because of the challenges in the credit market over the last year or so, however, sub-prime loans have become difficult if not impossible to obtain.
A FICO score between 600 and 640 is considered fair to good credit. But keep in mind, this range of credit scores does not guarantee you will qualify for a mortgage, and if you do qualify, it won’t get you the lowest interest rate possible. Still, to buy a home aim for a score of at least 620, recognizing that other factors weigh in the decision and that some banks may require a higher score.
What credit score do you need to get a low rate mortgage?
It use to be that a score of about 720 would yield the lowest mortgage rates available. Today, the best rates kick in with a FICO score of 760. And interest rates go up significantly as your credit score drops. To give you an idea, the following table shows current rates by credit score and calculates a monthly principal and interest payment based on a $300,000 loan:
The view and opinions stated on this website belong solely to the authors, and are intended for informational purposes only. The posted information does not guarantee approval, nor does it comprise full underwriting guidelines. This does not represent being part of a government agency. The views expressed on this post are mine and do not necessarily reflect the view of my employer. Not all products or services mentioned on this site may fit all people. NMLS ID# 57916, (www.nmlsconsumeraccess.org). USDA Mortgage loans only offered in Kentucky.
All loans and lines are subject to credit approval, verification, and collateral evaluation