Here’s a concise overview of the FHA mortgage qualifying criteria for Kentucky:

1. Credit score: Minimum 580 for 3.5% down payment, 500-579 for 10% down payment
2. Debt-to-income ratio: Generally 43% or less, though exceptions may be made
3. Down payment: Minimum 3.5% of purchase price (with 580+ credit score)
4. Employment: Steady income for at least two years
5. Property requirements: Must meet FHA standards and be primary residence
6. Loan limits: Vary by county in Kentucky
7. Mortgage insurance: Required for the life of the loan
8. Income limits: None, but must be able to afford monthly payments

1. Credit score:
   • 580 or higher allows for a 3.5% down payment
   • 500-579 requires a 10% down payment
   • Lenders may have higher requirements
2. Debt-to-income ratio (DTI):
   • Front-end ratio (housing expenses) should be 31% or less of income
   • Back-end ratio (all debts) should be 43% or less
   • Some lenders may allow higher ratios with compensating factors
3. Down payment:
   • Can come from savings, gifts, or down payment assistance programs
   • Seller can contribute up to 6% of the sale price towards closing costs
4. Employment:
   • Must show stable income for at least two years
   • Self-employed borrowers need two years of tax returns
5. Property requirements:
   • Must be safe, sound, and secure
   • Appraiser will check for minimum property standards
6. Loan limits in Kentucky:
   • Vary by county, ranging from Kentucky  FHA loan limits by county FHA limit $498,257
7. Mortgage insurance:
   • Upfront premium of 1.75% of loan amount
   • Annual premium between 0.45% and 1.05%, depending on loan terms
8. Income requirements:
   • No maximum income limit
   • Must be able to afford payments, including taxes and insurance

Additional information:

• FHA loans are assumable
• Allow for lower credit scores compared to conventional loans
• More flexible on previous bankruptcies or foreclosures

FHA mortgage insurance for Kentucky borrowers:

FHA loans require two types of mortgage insurance:

1. Upfront Mortgage Insurance Premium (UFMIP):
   • 1.75% of the base loan amount
   • Paid at closing or can be financed into the loan
   • Example: On a $200,000 loan, UFMIP would be $3,500
2. Annual Mortgage Insurance Premium (MIP):
   • Paid monthly as part of your mortgage payment
   • Rates vary based on loan term and loan-to-value (LTV) ratio:
     • For 30-year loans with LTV > 95%: 0.85% annually
     • For 30-year loans with LTV ≤ 95%: 0.80% annually
     • For 15-year loans with LTV > 90%: 0.70% annually
     • For 15-year loans with LTV ≤ 90%: 0.45% annually

Key points about FHA mortgage insurance:

• Unlike conventional loans, FHA MIP is required for the life of the loan in most cases
• MIP can only be removed by refinancing to a conventional loan once you have 20% equity
• The annual MIP is divided by 12 and added to your monthly mortgage payment

For example, on a $200,000 30-year loan with 3.5% down payment:

• Annual MIP rate: 0.85%
• Annual MIP amount: $200,000 x 0.85% = $1,700
• Monthly MIP payment: $1,700 / 12 = $141.67 added to your mortgage payment

 Let’s compare FHA mortgage insurance to private mortgage insurance (PMI) on conventional loans:

FHA Mortgage Insurance:

1. Required for all FHA loans, regardless of down payment
2. Upfront premium of 1.75% of loan amount
3. Annual premium of 0.45% to 0.85%, depending on loan terms
4. Generally lasts for the life of the loan
5. Same rates for all borrowers, regardless of credit score

Conventional Loan PMI:

1. Only required if down payment is less than 20%
2. No upfront premium (typically)
3. Annual premium varies widely, usually 0.15% to 1.95%
4. Can be removed when loan-to-value ratio reaches 78%
5. Rates vary based on credit score, down payment, and loan terms

Key differences:

1. Cost: FHA can be more expensive long-term due to the upfront premium and inability to remove MIP without refinancing
2. Duration: Conventional PMI can be cancelled, FHA MIP typically cannot
3. Flexibility: Conventional PMI offers more options (lender-paid, single premium, etc.)
4. Credit impact: FHA MIP doesn’t vary by credit score, conventional PMI does

Advantages of FHA:

• May be cheaper short-term, especially for lower credit scores
• Easier to qualify for with lower credit scores or higher debt-to-income ratios

Advantages of Conventional:

• Potentially lower long-term costs, especially for borrowers with good credit
• Ability to remove PMI without refinancing

Appraisal difference between FHA and conventional loans

FHA Loan Appraisals:

1. Stricter standards: FHA appraisals are more rigorous and detailed.
2. Dual purpose: Assess both the value and the property condition.
3. Minimum Property Standards (MPS): Must meet specific safety, security, and soundness requirements.
4. Repairs: May require repairs to be completed before loan approval.
5. Appraiser qualifications: Must be FHA-approved.
6. Validity period: Typically valid for 120 days.
7. Cost: Generally more expensive due to additional requirements.

Conventional Loan Appraisals:

1. Focus on value: Primarily concerned with determining the property’s market value.
2. Less stringent: Fewer specific property condition requirements.
3. Condition ratings: Use more general ratings (C1-C6) for property condition.
4. Repairs: Less likely to require repairs before closing.
5. Appraiser qualifications: No special FHA approval needed.
6. Validity period: Usually 60-90 days, but can vary by lender.
7. Cost: Typically less expensive than FHA appraisals.

Key differences:

• FHA appraisals are more thorough and may catch more potential issues.
• Conventional appraisals offer more flexibility for properties in less-than-perfect condition.
• FHA appraisals may lead to required repairs, potentially delaying closing or affecting negotiations.

Credit score requirements FHA vs USDA, VA, and conventional loans

Here’s a comparison of credit score requirements for FHA, USDA, VA, and conventional loans:

FHA Loans:

• Minimum score: 500
• 500-579: Requires 10% down payment
• 580+: Eligible for 3.5% down payment
• Many lenders prefer 620+ for better terms

USDA Loans:

• Minimum score: 640 (set by most lenders)
• USDA itself doesn’t set a minimum, but 640 is standard
• Scores below 640 may require manual underwriting

VA Loans:

• No official minimum set by the VA
• Most lenders require 620+
• Some may go as low as 580
• Lower scores may require manual underwriting

Conventional Loans:

• Minimum score: 620 for most lenders
• 620-659: Higher rates and stricter requirements
• 660-679: Better terms
• 740+: Best rates and terms
• 780+: Optimal pricing and easiest approval

Key points:

1. FHA is most lenient, accepting scores as low as 500
2. Conventional loans typically have the highest requirements
3. USDA and VA fall in between, with most lenders requiring 580-640
4. Higher scores generally mean better rates and terms across all loan types

Text/call: 502-905-3708

email: kentuckyloan@gmail.com

http://www.mylouisvillekentuckymortgage.com/