Everything Kentucky first-time homebuyers need to know about qualifying for a mortgage loan

Getting Started: The Basics

What credit score do I need to buy my first home in Kentucky?

For No Money Down Loans:

  • USDA Rural Housing: No minimum credit score requirement, but most lenders prefer 620+ (640+ for solid approval)
  • KHC Down Payment Assistance: 620-640 middle credit score
  • VA Loans: No minimum credit score requirement, but most lenders prefer 620+

For Low Down Payment Loans:

  • FHA Loans: 500 minimum with 10% down, 580 minimum with 3.5% down
  • Conventional Loans: 660+ for best rates and KHC assistance

Important Notes:

  • While FHA guidelines allow 500 credit scores with 10% down, and VA/USDA technically have no minimums, most lenders have overlays requiring higher scores
  • Credit scoring uses three bureaus (TransUnion, Equifax, Experian) – they throw out the high and low scores and use the middle score
  • If two borrowers on the loan, they take the lowest middle score of both borrowers

Good News: If your scores are in the high 500s or low 600s, we can often do a rapid rescore to improve them within 30 days.

How much income do I need to qualify for a mortgage in Kentucky?

Your qualifying ratios depend on two calculations:

Front-End Ratio: New house payment ÷ gross monthly income = 31% maximum Back-End Ratio: (House payment + monthly debts) ÷ gross monthly income = 43% maximum

Example Calculation:

  • Monthly income: $3,000
  • Monthly debts: $400
  • Back-end calculation: $3,000 × 43% = $1,290 – $400 = $890 max payment
  • Front-end calculation: $3,000 × 31% = $930 max payment
  • Your qualifying payment: $890 (the lower of the two)

What counts as monthly debt:

  • Credit card minimum payments
  • Car loans
  • Student loans
  • Child support

What doesn’t count:

  • Utilities
  • Cell phone bills
  • Car insurance

The Application Process

Does it cost anything to get pre-approved?

Most lenders offer free pre-approval, though you may need to pay upfront for:

  • Credit report fee: Around $100 for single borrower
  • Additional borrowers may increase the cost slightly

We offer free mortgage applications with same-day approvals.

How long does pre-approval take?

With complete documentation: 24 hours or less

What you’ll need ready:

  • Pay stubs (last 60 days)
  • Bank statements (last 2 months)
  • Tax returns (last 2 years)
  • Employment verification

The Process:

  1. Submit complete application and documents
  2. We run it through Automated Underwriting Systems (AUS)
  3. Fannie Mae uses Desktop Underwriting (DU) and Freddie Mac uses LP Loan Prospector for AUS approvals
  4. FHA/VA also use DU and LP…LP more forgiving on VA loans
  5. USDA uses Guaranteed Underwriting System (GUS)

Possible Outcomes:

  • Automated Approval: Quick pre-approval
  • Manual Underwrite: Additional review needed (takes longer)

How long is my pre-approval valid?

Standard validity: 120 days

After 120 days, we’ll need:

  • Credit refresh before closing to make sure no added debts…This is not another hard credit report pull or soft inquiry. Just a credit check to see if any debts have been placed since loan application originated
  • Last 60 days pay stubs within closing date
  • Last 60 days of bank statements
  • Verification that your financial situation hasn’t changed

Kentucky-Specific Programs & Benefits

What no-money-down programs are available in Kentucky?

Top Options for Kentucky First-Time Buyers:

  1. KHC Down Payment Assistance – Up to $10,000 assistance
  2. USDA Rural Housing – No down payment for eligible rural areas
  3. VA Loans – No down payment for qualified veterans
  4. Fannie Mae HomeReady/Home Possible – Limited availability
  5. HUD $100 Down Programs – Select areas
  6. Local City Grants – Varies by location

Tell me about KHC (Kentucky Housing Corporation) Down Payment Assistance

Program Highlights:

  • Assistance Amount: Up to $10,000
  • Structure: Second mortgage with fixed interest rate
  • Repayment: Typically 10-year term
  • Credit Score: 620+ for government loans, 660+ for conventional
  • Purchase Price Limit: $544,232
    • First-time homebuyers statewide in non-targeted areas
    • First-time and repeat homebuyers statewide in targeted areas
    • 30-year fixed interest rate
    • Principal residence ONLY
    • Borrower must meet KHC’s MRB Income Limits
  • Debt Ratios: Front-end and back-end cannot exceed 50%

Eligibility Requirements:

  • First-time homebuyer status (some exceptions apply)
  • Meet county-specific income limits
  • Property must be primary residence in Kentucky
  • No fixer-uppers or subject-to properties
  • May require homebuyer education course

Property Requirements:

  • Primary residence only
  • Must meet property condition standards
  • Kentucky properties only

Understanding Loan Programs

FHA Loans in Kentucky

Best for: First-time buyers with limited down payment funds

Key Features:

  • Down Payment: 3.5% minimum (10% with 500 credit score)
  • Credit Score: 500 minimum with 10% down, 580 minimum with 3.5% down
  • Debt-to-Income: Around 31% front-end ratio
  • Down Payment Assistance: Can be combined with KHC assistance

Important: While FHA allows 500 credit scores with 10% down, finding a lender can be challenging below 580 due to lender overlays.

VA Loans in Kentucky

Best for: Qualified veterans and service members

Key Features:

  • Down Payment: $0
  • Credit Score: No minimum requirement, but most lenders prefer 620+
  • Special Requirement: VA Certificate of Eligibility required
  • Debt-to-Income: 41% maximum with $1,000+ residual income
  • Waiting Period: 2+ years after bankruptcy/foreclosure with reestablished credit

Residual Income Example:

  • Gross monthly income: $4,000
  • Maximum total monthly obligations: $3,000
  • Required residual income: $1,000

USDA Rural Housing Loans

Best for: Buyers in eligible rural and suburban areas

Key Features:

  • Down Payment: $0
  • Credit Score: No minimum requirement, but most lenders prefer 620+ (640+ for solid approval)
  • Income Limits: Varies by county and household size
  • Property Eligibility: Must check USDA eligibility maps

Important: Most lenders want a 620+ credit score (640+ preferred) or AUS “Accept” for approval.

Check Eligibility:

The Closing Process

When can I lock my interest rate?

Rate Lock Timing: Once you have a home under contract

Standard Lock Period: 90 days at no cost

Extensions Available: Yes, for a fee if more time is needed

Important: Interest rates change daily, similar to gas prices. Locking protects you from rate increases during your home buying process.

How much money do I need at closing?

Typical Closing Costs Include:

Upfront Costs:

  • Good faith deposit: Usually under $500 (returned at closing)
  • Appraisal fee: Paid to lender before closing

Closing Costs:

  • Title insurance
  • Title examination
  • Closing fee
  • Underwriting fees
  • Recording fees
  • Prepaid taxes and insurance

Cost-Saving Options:

  • Negotiate seller-paid closing costs in your contract
  • Lender credits may cover some fees
  • Down payment assistance programs often help with closing costs

Important: We provide a detailed breakdown of all estimated costs with your pre-approval.

Common Concerns Addressed

I have student loans. Will this prevent me from qualifying?

Student loans are included in your debt-to-income calculation, but they don’t automatically disqualify you. We use specific methods to calculate student loan payments:

  • Income-driven repayment plans: We use the actual payment amount
  • Deferred loans: We calculate 1% of the balance or $0 if truly deferred
  • Federal loan forgiveness programs: May help reduce your debt load

I’m self-employed. Can I still get a mortgage?

Yes! Self-employed borrowers can qualify using:

  • Bank Statements: 12-24 months of business bank statements
  • Tax Returns: Last 2 years of personal and business returns
  • P&L Statements: Current profit and loss statements
  • CPA Letter: Verification of income and business stability

I have a bankruptcy or foreclosure in my past. Can I still buy a home?

FHA Loans:

  • Bankruptcy: 2+ years after discharge
  • Foreclosure: 3+ years with reestablished credit

VA Loans:

  • Bankruptcy: 2+ years after discharge
  • Foreclosure: 2+ years with reestablished credit

USDA/Conventional:

  • Typically 3-4+ years with excellent reestablished credit

What if I’m buying with someone else?

Married Couples: Can combine incomes and typically get better qualification terms

Unmarried Co-borrowers: Both incomes and debts are considered; both must qualify

Gift Funds: Many programs allow gift funds from family members for down payment and closing costs

How do I know if an area qualifies for USDA Rural Housing?

Use the USDA eligibility website to check specific addresses. Many areas that seem “suburban” actually qualify, including some areas around Louisville, Lexington, and other cities.

Next Steps: Getting Started

What documents should I gather before applying?

Income Documentation:

  • Last 60 days of pay stubs
  • Last 2 years of tax returns (all pages and schedules)
  • Last 2 years of W-2s
  • Bank statements for last 2 months (all pages)

If Self-Employed:

  • Last 2 years business and personal tax returns
  • Year-to-date P&L statement
  • 12-24 months of bank statements

Asset Documentation:

  • Checking and savings account statements
  • Investment account statements
  • Documentation for any gift funds

Additional Items:

  • Photo ID
  • Social Security card
  • Divorce decree (if applicable)
  • VA Certificate of Eligibility (if applicable)

How do I start the process?

  1. Gather your documents (see list above)
  2. Complete our free online application
  3. Schedule your consultation – we’ll review your options
  4. Get pre-approved – typically within 24 hours
  5. Start house hunting with confidence

Why choose our services?

Local Kentucky Expertise:

  • Over 20 years in Kentucky mortgage lending
  • Helped 1,300+ Kentucky families achieve homeownership
  • Deep knowledge of Kentucky-specific programs

Fast Service:

  • Free mortgage applications
  • Same-day approvals
  • Personalized attention throughout the process

Comprehensive Programs:

  • FHA, VA, USDA, KHC, and conventional loans
  • Down payment assistance programs
  • First-time buyer education and support

Ready to Get Started?

Contact Joel Lobb, Kentucky Mortgage Specialist

NMLS Personal ID: 57916
Company NMLS ID: 1738461
Licensed in: Kentucky Only
Equal Housing Lender

Visit http://www.nmlsconsumeraccess.org for licensing information

Frequently Asked Questions – Quick Reference

Q: What’s the minimum credit score for first-time buyers in Kentucky? A: 500 credit score with 10% down on FHA loan. USDA and VA don’t have minimum credit score requirements but most lenders have overlays whereas 620 is the preferred score for VA loans and 620 for USDA loans. To get a more solid approval upfront for USDA a 640 score would be better. There are three credit scores from TransUnion, Equifax, and Experian and they will throw out the high and low score and take middle score. If two borrowers on loan, they take the lowest middle score of both borrowers.

Q: How much down payment do I need? A: $0 with USDA, VA, or KHC assistance. 3.5% with FHA. Options available for every situation.

Q: How long does the process take? A: Pre-approval in 24 hours, full process typically 30-45 days from application to closing.

Q: Can I use down payment assistance with any loan program? A: KHC assistance works with FHA, VA, USDA, and conventional loans. Each has specific requirements.

Q: Do I need perfect credit? A: No! We work with borrowers across the credit spectrum and can help improve scores quickly.

Joel Lobb, Mortgage Broker FHA, VA, KHC, USDA

Louisville, Kentucky, United StatesWhy Work With Me?

Local Expertise: I know the ins and outs of Kentucky’s housing market and loan programs. Fast Approvals: I offer free mortgage applications with same-day approvals to keep the process moving quickly. Customized Loan Solutions: Whether you’re buying a home or refinancing, I’ll find the right loan program to fit your needs. Personalized Service: I treat every client like family, ensuring you’re supported and informed throughout the process.

About My Website Visit my website for a wealth of resources tailored to Kentucky homebuyers. You’ll find: Step-by-step guides for first-time homebuyers. Information on loan programs like FHA, VA, USDA, and KHC. Tools to help you calculate potential payments and affordability.

Blog posts with tips and updates on the Kentucky housing market. A secure portal to start your loan application and upload documents. Please Note: My website is not endorsed by the FHA, VA, USDA, or any government agency. It is an independent platform created to educate and assist homebuyers with expert advice and accessible too

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


 www.mylouisvillekentuckymortgage.com
 911 Barret Ave., Louisville, KY 40204

Evo Mortgage
Company NMLS# 1738461
Personal NMLS# 57916

This information is for educational purposes and not an offer of credit. All loans subject to approval. Equal Housing Lender. This website is not endorsed by FHA, VA, USDA, or any government agency.