Qualifying for a Kentucky FHA Mortgage Loan
If you’re looking to buy a home in Kentucky but have low credit, a small down payment, or past financial issues, an FHA loan might be the perfect solution. Backed by the Federal Housing Administration (FHA), this loan program is designed to help first-time homebuyers and those with less-than-perfect credit achieve homeownership.
In this guide, we’ll break down the requirements, benefits, and steps to qualify for an FHA mortgage loan in Kentucky.
What is an FHA Loan?
An FHA loan is a government-backed mortgage that allows buyers to purchase a home with as little as 3.5% down and flexible credit requirements. It’s a great option for first-time homebuyers and those with lower credit scores or limited savings.
Low down payment (as little as 3.5%) More lenient credit score requirements Flexible debt-to-income (DTI) ratios Competitive interest rates Allows for gifted down payment funds
FHA Loan Requirements in Kentucky
1. Minimum Credit Score for FHA Loan
- 580+ credit score → Qualifies for 3.5% down payment
- 500-579 credit score → Requires 10% down payment
🔹 Tip: Lenders use your middle FICO mortgage score, which may be different from Credit Karma or other free credit scores.
2. Down Payment Requirements
- 3.5% down payment if credit score is 580 or higher
- 10% down payment if credit score is 500-579
- Down payment can be gifted from family, employers, or charitable organizations
🔹 Example: If you’re buying a $200,000 home, the minimum required down payment would be:
- $7,000 (3.5%) for a 580+ credit score
- $20,000 (10%) for a 500-579 credit score
3. Debt-to-Income Ratio (DTI) for FHA Loan
Your debt-to-income ratio (DTI) is the percentage of your monthly income that goes toward debt payments.
Front-End DTI (Housing Payment): 45% max
Back-End DTI (All Debts): 50% max (sometimes up to 57% with compensating factors)
Example: If you earn $4,000/month, your total monthly debt payments (mortgage, car loan, credit cards, etc.) should be under $1,879 (56.99%).
Compensating Factors That Allow Higher DTI:
Strong credit score
Large savings reserves
Higher down payment
4. Employment & Income Requirements
- Must show 2 years of stable employment
- Self-employed borrowers must provide 2 years of tax returns
- Acceptable income sources: W-2, self-employment, commission, social security, child support, and more
- Recent job changes may require explanation letters if gaps of 6 months of unemployment in the last two years sometimes they will require you to be on your current job for 6 months, but this can vague.
- Typically no more than 3 jobs in the last 12 months
5. FHA Loan Limits in Kentucky
FHA loan limits vary by county and are based on home prices in the area.
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Check FHA loan limits for your Kentucky county here: HUD FHA Loan Limits
Kentucky FHA Loan Property Requirements
To qualify for an FHA loan, the home must meet safety and livability standards set by HUD.
- No major structural issues (foundation, roof, electrical, plumbing)No peeling paint (for homes built before 1978)No exposed wiring or safety hazardsWater, heating, and sewer systems must function properly
- The home must be your primary residence (no investment properties)
- FHA loans allow condos, but the condo development must be FHA-approved.
- Mobile homes must meet certain foundation standards. More info here
- Must have a permanent heat source. No wood burning stove or space heaters.
- Does not have to have Central Air, can use window units to cool.
FHA Loan for Refinancing & Cash-Out
FHA loans aren’t just for buying a home! You can also refinance your mortgage with an FHA loan:
FHA Streamline Refinance – Lower rates, no appraisal, no income verification
FHA Cash-Out Refinance – Borrow up to 80% of your home’s value
Kentucky FHA loan requirements:
- At least 18 years old to apply
- No age limit. just must be 18 years of age to apply.
- Must occupy the home as a primary residence, no rental homes or investment property
- An appraisal must be done by an FHA-approved appraiser. Typically FHA appraisal in Kentucky costs anywhere from low-end $325 to $525 with most FHA lenders in KY.
- Home inspection is not required
- Termite inspection not required
- 2 years removed from Chapter 7 bankruptcy, and 1 year in Chapter 13 bankruptcy is possible to get a loan while in bankruptcy
- Foreclosure or short sale on previous home mortgage requires 3 years removal from those dates.
- Mortgage insurance (MIP) is required
- Upfront Mortgage Insurance Premium is 1.75% and monthly mortgage insurance is .85% or .80% depending on loan term and loan to value.
- Mortgage insurance is for life of loan.
- No matter your credit scores, everyone pays the same mortgage insurance premiums.
- Must have 2 years of employment history proving a reliable source of income
- 500 FICO score requirement with at least 10% down payment
- 580 FICO score requirement with at least 3.5% down payment
- Gifts and down payment assistance programs are allowed to meet your down payment requirements. Cannot come from seller, but seller can contribute up to 6% of the sales price toward buyer’s closing costs and prepaids.
- Student loan payments are factored into the debt-to-income ratio when applying. Typically if loans are deferred, or in an income=based repayment plan, the FHA underwriters will use 1% of the outstanding balance, which sometimes can make it difficult to qualify.
- Your debt-to-income ratio must not be higher than 31% or total debt obligation cannot be higher than 43% of your current income. This is for a manual underwriter, meaning that if the AUS underwriting system by mortgage lenders will approve you for a higher debt to income ratio, that is fine.
Pros and cons of Kentucky FHA loans
Pros
- You can have a lower credit score: If you haven’t established much of a credit history or you’ve encountered some issues in the past with making on-time payments, a 620 credit score — the typical magic number for consideration of a conventional mortgage — might seem out of reach. If your credit score is 580, you’re in good standing with most FHA-approved lenders.
- You can make a lower down payment: FHA loans also give the option for a smaller down payment. With a credit score of at least 580, you can make a down payment of as little as 3.5 percent. If your credit score is between 500 and 579, you may still be able to qualify for an FHA-backed loan, but you will need to make a 10 percent down payment.
- You can stop renting earlier: Since FHA loans make buying a home easier, you can start building equity sooner. Instead of continuing to rent while trying to save more money or improve your credit score, FHA loans make the dream of being a homeowner possible sooner.
Cons
- You won’t be able to avoid mortgage insurance: Since your credit score is lower, you’re a bigger risk of default. To protect the lender, you have to pay mortgage insurance. You can roll the upfront insurance premium into your closing costs, but your annual premiums will be divided into 12 installments and show up on every mortgage bill. If you put down less than 10 percent, you have to pay those annual premiums for the entire life of the loan. There’s no escaping them. That’s a big difference from conventional loans: Once you build up 20 percent equity, you no longer have to pay for private mortgage insurance.
- You’ll have to meet property requirements: If you’re applying for an FHA loan, the property has to meet some eligibility requirements. The most important is the price: FHA-backed mortgages are not allowed to exceed certain amounts, which vary based on location. You have to live in the property, too. FHA loans for new purchases are not designed for second homes or investment properties.
- You could pay more: When you compare mortgage rates between FHA and conventional loans, you might notice the interest rates on FHA loans are lower. The APR, though, is the better comparison point because it represents the total cost of borrowing. On FHA loans, the APR can sometimes be higher than conventional loans.
- Some sellers might shy away: In the ultra-competitive pandemic housing market, sellers weighing multiple offers often viewed FHA borrowers less favorably
How to Apply for an FHA Loan in Kentucky
In order to get you pre-approved for your max loan amount, I will need the following items from you. This is a free process and I will give you a copy of your credit report for free!
- Most recent 30 days of pay stub(s)
- W-2s for most recent two years and last two years tax returns
- Most recent 60 days bank statements all pages
- Most recent 401(k)/retirement statement if applicable
- copy of photo id
Once I get the information above, I can usually get you pre-approved in one to two days, and get your loan closed in 30-45 days after you get an accepted offer on a home. Your first house payment usually starts 30-60 days after you close.
Your loan pre-approval is usually good for 120 days.
An FHA loan is one of the best options for Kentucky homebuyers with:
If you’re ready to explore your options, I can help you get pre-approved for an
Email – kentuckyloan@gmail.com 
Call/Text – 502-905-3708Joel Lobb
Mortgage Loan Officer – Expert on Kentucky Mortgage Loans
Website: www.mylouisvillekentuckymortgage.com
Address: 911 Barret Ave., Louisville, KY 40204
Evo Mortgage
Company NMLS# 1738461
Personal NMLS# 57916
For assistance with Kentucky mortgage loans, reach out via email, call, or text Joel Lobb directly.
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FHA loans vs. conventional mortgages
CONVENTIONAL LOAN FHA LOAN
Credit score minimum 620 500
Down payment 3% to 20% 3.5% for credit scores of 580+; 10% for credit scores of 500-579
Loan terms 8- to 30-year terms 15- or 30-year terms
Mortgage insurance premiums PMI (if less than 20% down): 0.58% to 1.86% of loan amount Upfront premium: 1.75% of loan amount; annual premium: 0.45% to 1.05%
Interest type Fixed-rate or adjustable-rate Fixed-rate
Pros and cons of FHA loans
Pros
You can have a lower credit score: If you haven’t established much of a credit history or you’ve encountered some issues in the past with making on-time payments, a 620 credit score — the typical magic number for consideration of a conventional mortgage — might seem out of reach. If your credit score is 580, you’re in good standing with most FHA-approved lenders.
You can make a lower down payment: FHA loans also give the option for a smaller down payment. With a credit score of at least 580, you can make a down payment of as little as 3.5 percent. If your credit score is between 500 and 579, you may still be able to qualify for an FHA-backed loan, but you will need to make a 10 percent down payment.
You can stop renting earlier: Since FHA loans make buying a home easier, you can start building equity sooner. Instead of continuing to rent while trying to save more money or improve your credit score, FHA loans make the dream of being a homeowner possible sooner.
Cons
You won’t be able to avoid mortgage insurance: Since your credit score is lower, you’re a bigger risk of default. To protect the lender, you have to pay mortgage insurance. You can roll the upfront insurance premium into your closing costs, but your annual premiums will be divided into 12 installments and show up on every mortgage bill. If you put down less than 10 percent, you have to pay those annual premiums for the entire life of the loan. There’s no escaping them. That’s a big difference from conventional loans: Once you build up 20 percent equity, you no longer have to pay for private mortgage insurance.
You’ll have to meet property requirements: If you’re applying for an FHA loan, the property has to meet some eligibility requirements. The most important is the price: FHA-backed mortgages are not allowed to exceed certain amounts, which vary based on location. You have to live in the property, too. FHA loans for new purchases are not designed for second homes or investment properties.
You could pay more: When you compare mortgage rates between FHA and conventional loans, you might notice the interest rates on FHA loans are lower. The APR, though, is the better comparison point because it represents the total cost of borrowing. On FHA loans, the APR can sometimes be higher than conventional loans.
Some sellers might shy away: In the ultra-competitive pandemic housing market, sellers weighing multiple offers often viewed FHA borrowers less favorably.