Category: usda first time buyer Kentucky

How to buy a house in Kentucky with Zero Down Payment Mortgage Loan


How to buy a house in Kentucky with Zero Down Payment Mortgage Loan
How to buy a house in Kentucky with Zero Down Payment Mortgage Loan
byu/AblePost7537 inMortgageQuestionsKY

First-Time Home Buyer Loans in Kentucky

FHA Loans 

Kentucky FHA loans are one of the most popular options for first-time buyers due to their flexible requirements in regards to lower credit scores, previous bankrupticeo or foreclosures or high debt to income ratios:

  • Credit score needed: As low as 580 for 3.5% down; scores between 500-579 require a 10% down payment.
  • Down payment: 3.5% of the home’s purchase price. 10% down payment needed for scores between 500-579
  • Mortgage insurance: Required on all loans regardless of down payment or equity position. Can make the loan more expensive when compared to Conventional Loans 
  • Work history: 2 years of consistent employment or income.
  • Bankruptcy: You can qualify for an FHA loan 2 years after a Chapter 7 bankruptcy discharge, or 1 year after a Chapter 13 discharge, with court approval.
  • Debt to Income Ratios: Can be higher than Conventional loans. The max backed end ratio on AUS approval is 56.99% and 45% on the front end ratio. 

Kentucky VA Loans

If you’re a Kentucky veteran, active-duty service member of the Army, Airforce, Marines, Coast Guard, or qualifying spouse, VA loans offer a powerful path to homeownership:

  • Credit score needed: VA does not have a minimum score but most lenders typically like to see a 620 credit score or higher. I have closed some VA loans under 620 so it can be done but typically much better rates and fees on higher scores.  
  • Down payment: None required. Can put money down to lower the upfront mortgage insurance.
  • Mortgage insurance: No mortgage insurance, though there’s a one-time funding fee and it varies depending on usage and down payment and either a refinance or purchase. 
  • Work history: You must show stable income and employment, but the VA loan program is flexible with unique employment situations. If you are getting out of the military and getting a new job typically must be in line with your MOS. 
  • Bankruptcy: VA loans allow approval 2 years after Chapter 7 or 1 year after Chapter 13 bankruptcy.

Kentucky USDA loans

Designed for Kentucky Home Buyers in rural areas outside major metro areas of Kentucky , USDA loans offer another no-down-payment option:

  • Credit score needed: Typically 640 or higher. but can go down lower to 620 on a manual underwriter sometimes with lenders. Will need compensating factors such as a positive rental history for last 12 months, low debt to income ratio  (under 29% and 41% resopeivitley) and 1-2 months reserves and no payment shocik on the loan.
  • Down payment: None required.
  • Mortgage insurance: USDA loans have an upfront fee of 1% of the loan amount and an annual fee of 0.35%. Life of loan and does not vary based on down payment or term. USDA only does 30 year rate term loans. 
  • Work history: A stable income is required, with proof of 2 years’ work history.
  • Bankruptcy: USDA loans require a 3-year waiting period after a bankruptcy or foreclosure.

Kentucky Housing Corporation (KHC) Loans

KHC offers several programs to help first-time homebuyers:

  • Down payment assistance: Up to 10,000 in down payment and closing cost assistance for qualifying buyers. 10k is based on a second mortgage over 10 years at 3.75% rate. Not a true grant. Has to be paid back. 
  • Credit score needed: Minimum 620 for most programs.
  • Income limits: KHC programs are income-based, so you’ll need to meet certain household income limits.
  • Work history: Two years of consistent employment are typically required.
  • Debt Ratio: 50% max debt ratio on backend and front end. 
  • Rates and Terms: Since it is the State Housing Agency, every borrower gets the same set of rates and terms no matter which lender you use. 

Checklist of Documents Needed for a Kentucky First-Time Home Buyer Loan

  • Government-issued ID (driver’s license, passport)
  • Social Security number
  • Pay stubs for the last 30 days
  • W-2 forms for the last 2 years
  • Federal tax returns for the last 2 years
  • Bank statements for the last 2-3 months
  • Proof of any additional income (child support, alimony)
  • Employment verification
  • List of all debts and assets
  • Bankruptcy discharge papers (if applicable)
  • Gift letter (if using gift funds for your down payment)

Highly Rated Best Mortgage Company in Kentucky

Finding the right lender is crucial when purchasing your first home. One of the top-rated mortgage companies in Kentucky is Joel Lobb. Joel specializes in helping first-time homebuyers navigate FHA, VA, USDA, and KHC loan programs. With over 20 years of experience and a dedication to personal service, Joel has helped over 1,300 families secure their dream homes. His reputation for offering same-day approvals and free pre-qualifications makes him a trusted name in the industry.

For more information, contact Joel Lobb:

Final Thoughts

Purchasing a home for the first time in Kentucky can be an exciting journey. With a variety of loan options available—like FHA, VA, USDA, and KHC loans—you can find a mortgage that fits your needs, even if you have a bad credit score or are dealing with bankruptcy. Be sure to compare interest rates, understand mortgage insurance requirements, and follow a clear checklist of documents to make the home-buying process as smooth as possible.

—

Joel Lobb  Mortgage Loan Officer Expert on Kentucky Mortgage Loans 

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

https://www.mylouisvillekentuckymortgage.com/

Louisville Kentucky Mortgage Broker Offering FHA, VA, USDA, Conventional, and KHC Zero Down Payment Home Loans


Here are action steps you can take right now to buy a home in Kentucky in 2025

How to Qualify for a USDA Home Loan in Kentucky


 

The Kentucky Rural Housing  USDA home loan program offers an excellent opportunity for eligible homebuyers in rural and suburban areas of Kentucky to secure affordable financing with no down payment. To qualify, applicants must meet specific requirements related to credit score, income, work history, bankruptcy, foreclosure, debt-to-income ratio, property requirements, and mortgage insurance. Here’s a detailed guide to help you understand these qualifications:

Credit Score Required For Kentucky Rural Housing Approval

A minimum credit score of 640 is generally required to qualify for a USDA loan. This score allows for streamlined processing through the Guaranteed Underwriting System (GUS). Applicants with scores below 640 may still qualify but will need to undergo manual underwriting, which requires additional documentation and scrutiny.

Income Requirements for Kentucky USDA Rural Housing Approval

USDA loans have income limits that vary by county and household size. These limits are designed to ensure the program assists low- to moderate-income families. Generally, your household income should not exceed 115% of the median income for your area. The USDA provides an online tool to check income eligibility based on your location and household size.

Work History requirements for Kentucky USDA loan Approval 

A stable work history is essential for Kentucky  USDA loan approval. Lenders typically look for at least two years of consistent employment. Any gaps in employment need to be explained and documented. For self-employed applicants, a minimum of two years of tax returns is required to verify income stability.

Kentucky USDA Rural Housing Bankruptcy and Foreclosure Guidelines

While past financial difficulties like bankruptcy or foreclosure can affect your eligibility, they do not automatically disqualify you. Here are the typical waiting periods:

  • Chapter 7 Bankruptcy: At least three years from the discharge date.
  • Chapter 13 Bankruptcy: At least one year of the payout period must be completed with satisfactory payment history and court approval for a new loan.
  • Foreclosure: At least three years from the completion date.

Kentucky USDA Debt-to-Income Ratio (DTI) Requirements

The Kentucky USDA loan program has specific DTI requirements to ensure borrowers can manage their mortgage payments. The front-end ratio (housing expenses) should not exceed 29% of your gross monthly income, and the back-end ratio (total monthly debt obligations) should not exceed 45%. Exceptions can be made for borrowers with compensating factors, such as higher credit scores or additional cash reserves.

Kentucky USDA Property Requirements

USDA loans are intended for properties in designated rural areas. The USDA provides an online tool to check property eligibility. The home must be used as the primary residence and meet certain quality standards according to Kentucky FHA Appraisal HUD Guidelines  including:

  • Adequate and functional heating, plumbing, and electrical systems
  • Structurally sound foundation and roof
  • Safe water supply and waste disposal systems
  • Must have an undamaged exterior, foundation and roof
  • Must have safe and reasonable property access
  • Must not contain loose wiring and exposed electrical systems
  • Must have all relevant utilities, including gas, electricity, water and sewage functioning properly.
  • Must have a working, permanent heating system that can heat the property adequately
  • Must have surfaces free of chipping or peeling lead-based paint
  • Must have adequate access to attic spaces and natural ventilation in crawl spaces
  • Must have access to potable water
  • Must be free from wood-destroying insect infestations
  • Must not have interior and exterior health and safety hazards, such as no handrails on steep staircases
  • Must be a marketable property

Mortgage Insurance Required For Kentucky USDA loan Approval

Kentucky Rural Housing USDA loans require mortgage insurance, which includes an upfront guarantee fee and an annual fee. The upfront fee is typically 1% of the loan amount, which can be financed into the loan. The annual fee, usually 0.35% of the loan balance, is paid monthly as part of the mortgage payment. These fees help protect lenders and the USDA in case of borrower default.

Summary

Qualifying for a USDA home loan in Kentucky involves meeting specific criteria in several areas:

  • Credit Score: Minimum 640 for streamlined processing; lower scores may require manual underwriting.
  • Income Requirements: Must not exceed 115% of the median income for your area.
  • Work History: At least two years of stable employment.
  • Bankruptcy and Foreclosure: Waiting periods of 1-3 years depending on the situation.
  • Debt-to-Income Ratio: 29% for housing expenses, 41% for total debt; exceptions possible.
  • Property Requirements: Must be in a designated rural area and meet quality standards.
  • Mortgage Insurance: Includes an upfront guarantee fee and an annual fee.

By understanding and meeting these requirements, you can take advantage of the USDA loan program to achieve homeownership in Kentucky’s rural areas. For personalized assistance, consider consulting with a mortgage broker or lender experienced in USDA loans, like Joel Lobb in Louisville, who can guide you through the process and help you qualify.

Joel Lobb  Mortgage Loan Officer

American Mortgage Solutions, Inc.
10602 Timberwood Circle
Louisville, KY 40223
Company NMLS ID #1364

Text/call: 502-905-3708

email: kentuckyloan@gmail.com

http://www.mylouisvillekentuckymortgage.com/