Guide to Kentucky Mortgage Loan Programs for Home buyers

If you’re a homebuyer in Kentucky searching for the best mortgage loan program, it’s essential to understand your options. You may be interested in a conventional loan. Perhaps you are exploring government-backed programs like FHA, VA, USDA, or Kentucky Housing Corporation (KHC) loans. This guide will assist you. It will help you find the right fit and improve your chances of approval. Read on to explore the types of mortgage loans available in Kentucky and learn what you can do to qualify.

1. Kentucky Fannie Mae Conventional Loans:

Conventional loans are among the most popular mortgage options in Kentucky. These loans are not government-backed, which means they are subject to guidelines from Fannie Mae and Freddie Mac. Conventional loans are ideal for homebuyers with strong credit histories and the ability to make a small down payment. With a variety of down payment options, these loans can fit a range of budgets and financial goals.

For buyers with excellent credit and a larger down payment, conventional loans offer even lower rates and monthly payments. However, if you’re just meeting the minimum credit score requirements (620+), you should shop around for the best lender. Finding the best interest rate is essential to getting the best deal.

Key Benefits:

Minimum 3% down payment.
Credit score requirement: 620 or higher.
Competitive interest rates for borrowers with good credit (740+).
Requirements:

Debt-to-income (DTI) ratio: 45% or lower.
Loan limits: $806,500 in most areas.
Down Payment Options:

3% Down: Home Ready OR Home Possible for lower income applicants for Conventional 97 loans.
5% Down: Conventional loans with Private Mortgage Insurance (PMI). These loans have higher income limits. They are not subject to low income guidelines for lower income households.
A 20% down payment will yield you a mortgage loan without mortgage insurance. If you put down less than 20%, you will have to pay mortgage insurance based on your credit score and down payment.
This program is perfect for Kentucky home-buyers with solid credit (720 credit score or higher who can make a small down payment of at least 3% for lower income and and at least 5% down for incomes over the Home Ready and Home Possible Guidelines . Be sure to shop around to find the best interest rates.

2. Kentucky FHA Loans:

Perfect for First-Time Buyers or repeat buyers with lower fico scores and little to no money down.

Kentucky FHA loans are government-insured loans backed by the Federal Housing Administration. They are especially popular with Kentucky first-time homebuyers and those with lower credit scores (less than 620) and previous bankruptices in the last two years or foreclosures in the last 3 years

Key Benefits:

Minimum down payment: 3.5% (credit score 580+).

500 to 580 credit score required 10% down payment
Easier credit requirements compared to conventional loans.
Available to anyone, not just first-time buyers. Mortgage insurance is fixed for all applicants unlike Conventional loans that have different mi premiums for down payment and credit scores and debt to income ratios over 45%
Requirements:

Credit score: 580 or higher for 3.5% down; 500-579 for 10% down.
DTI ratio: 56,ii% or less.
Must use the home as a primary residence.
No foreclosure within the last 3 years.
Why Choose FHA Loans? FHA loans often have lower interest rates than conventional loans but come with mortgage insurance. This option is ideal for buyers who need flexibility with credit and down payment requirements.

3. Kentucky USDA Loans:

Zero Down Payment for Rural Areas
Kentucky USDA loans, backed by the U.S. Department of Agriculture, are a fantastic option for Kentucky homebuyers in rural areas of Kentucky see map here. These loans offer 100% financing, meaning no down payment is required with low mortgage insurance of 1% upfront and .35% monthly for life of loan though.

Key Benefits:

No down payment.
Lower interest rates than most other loan types.
Reduced mortgage insurance premiums.
Requirements:

Property must be located in a USDA-eligible rural area.

Kentucky USDA Mortgage Income limits: Must not exceed 115% of the area median income. see income limits for Kentucky here.

Credit score: Typically 620 or higher. 640 needed for automated approval

DTI ratio: 45% or less on the back end ratio. It is up to 32 to 34% on the front end ratio.
This program is perfect for low- to moderate-income homebuyers looking for affordable housing options in Kentucky’s rural communities.

4. Kentucky VA Loans:

Kentucky VA loans are exclusive for Veterans and Military Families. They also include spouses of deceased veterans.
VA loans are backed by the Department of Veterans Affairs. They are available for Kentucky veterans, active-duty service members, and eligible spouses.

Key Benefits:

No down payment.
No PMI required.
Competitive interest rates and low closing costs.
Eligibility:

Must meet minimum service requirements based on your military service dates.
Honorable discharge is required.
Spouses of deceased veterans may qualify under specific conditions.
Requirements:

No official credit score requirement, but most lenders prefer 620 or higher.
DTI ratio: No set guidelines. The debt ratio can be much higher on VA loans. This is because they have a residual income requirement that FHA, Convention, and USDA loans do not. The debt ratio can be much higher on VA loans with a high residual income. VA loans are one of the best mortgage options for Kentucky veterans. They offer flexibility and cost savings.

5. KHC Loans:

Assistance Programs for First-Time Kentucky Homebuyers
The Kentucky Housing Corporation (KHC) provides programs that assist first-time buyers. They help with down payments and closing costs. These programs often work alongside FHA, VA, and USDA loans.

Key Benefits:

Assistance with down payment and closing costs.
Affordable fixed interest rates. Two sets of interest rates for Conventional, FHA, VA, USDA based on household income limits. See the difference here at this link

Credit score requirements: 620 or higher for government loans. For conventional loans, a score of 660 is needed.
Income limits apply depending on household size and location. Check MRB and Regular DAP Income Rates here.
Must complete a homebuyer education course for conventional loans with mortgage insurance. Can be done in about 1 hour and can be done online. Not that big of a deal.
Contact a KHC-approved lender for more details and to find out if you qualify. Many banks and mortgage companies avoid offering the Kentucky Housing Down Payment Assistance program. They are deterred by the red tape involved and the limitations on the compensation from KHC.

1 –  Email – kentuckyloan@gmail.com 2.   Call/Text – 502-905-3708

Joel Lobb
Mortgage Loan Officer – Expert on Kentucky Mortgage Loans

 Website: www.mylouisvillekentuckymortgage.com
 Address: 911 Barret Ave., Louisville, KY 40204

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Company NMLS# 1738461
Personal NMLS# 57916

For assistance with Kentucky mortgage loans, reach out via email, call, or text Joel Lobb directly.