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2026 FHA Loan Options for Kentucky Homebuyers

Kentucky FHA Loan Requirements – Updated for 2026

Kentucky FHA loan guidelines are established by the U.S. Department of Housing and Urban Development (HUD). FHA loans remain one of the most flexible mortgage options available to Kentucky homebuyers, particularly first-time buyers, borrowers rebuilding credit, and households using down payment assistance.

Employment and Income Requirements

Borrowers must demonstrate a stable employment history covering the most recent two years. This does not require the same employer, but the work history must show consistency in the same industry or line of work.

Recent college graduates may satisfy the two-year work history requirement by providing college transcripts, provided the current employment aligns logically with the education received.

Self-employed borrowers must document a minimum two-year history of self-employment and provide the most recent two years of federal tax returns filed with the IRS. FHA underwriting uses a two-year average of qualifying income, adjusted for business stability and trends.

All income must be verifiable through acceptable documentation such as pay stubs, W-2s, or tax returns. Cash income, undocumented deposits, or bank-statement-only income is not permitted for FHA qualifying purposes.

Down Payment Requirements

FHA loans require a minimum down payment of 3.5 percent for borrowers with credit scores of 580 or higher.

Borrowers with credit scores between 500 and 579 are limited to a maximum loan-to-value of 90 percent, requiring a minimum 10 percent down payment. In practice, most lenders apply overlays requiring higher credit scores, typically between 580 and 620, even though HUD technically allows lower scores.

Down payment funds must come from an approved source. Acceptable sources include personal savings, retirement account loans or withdrawals, and properly documented gift funds. Large or undocumented cash deposits are not allowed and remain one of the most common reasons for FHA loan delays or denials in underwriting.

Occupancy and Property Use

FHA loans are for primary residences only. The borrower must occupy the property as their primary home and move in within 60 days of closing. FHA financing may not be used for rental properties or investment homes.

Appraisal and Property Standards

The property must be appraised by a Kentucky-licensed, FHA-approved appraiser. The home must meet HUD’s minimum property standards, meaning it must be safe, sound, and secure.

Common appraisal concerns include peeling paint, exposed wiring, missing handrails, roof condition, and health or safety hazards. Most FHA appraisal issues are correctable prior to closing.

Debt-to-Income Ratio Guidelines

FHA evaluates two debt ratios:

The housing ratio (front-end), which includes principal, interest, property taxes, homeowners insurance, mortgage insurance, and HOA dues, is typically capped at 31 percent of gross monthly income.

The total debt ratio (back-end), which includes the housing payment plus all other monthly obligations reported on credit, is typically capped at 43 percent.

However, borrowers receiving an “Approve/Eligible” finding through FHA’s automated underwriting system may qualify with higher ratios, depending on credit scores, cash reserves, and other compensating factors.

Credit Score and Credit History Requirements

The minimum FHA credit score for maximum financing remains 580 in 2026. This does not guarantee approval, as lenders apply additional underwriting standards and overlays.

Borrowers must demonstrate acceptable recent payment history. FHA places significant weight on the most recent 12 months of credit performance.

Bankruptcy and Foreclosure Guidelines

Chapter 7 bankruptcy requires a minimum waiting period of two years from discharge, with re-established good credit and on-time payments afterward.

Chapter 13 bankruptcy may be eligible after at least 12 months of on-time plan payments, with trustee approval, and the borrower must qualify including the Chapter 13 payment.

Foreclosure generally requires a three-year waiting period from the date of foreclosure completion. Exceptions may be considered only for documented extenuating circumstances beyond the borrower’s control. Job relocation alone does not qualify as an extenuating circumstance.

Federal Debt and CAIVRS Requirements

Borrowers may not have delinquent federal debt, defaulted federal student loans, unpaid federal judgments, or unresolved FHA claims.

Lenders are required to check the CAIVRS (Credit Alert Interactive Voice Response System) database for all federally backed loans, including FHA, VA, USDA, and SBA loans. Title 31 of the U.S. Code prohibits delinquent federal debtors from receiving federal loan insurance or guarantees.

If a CAIVRS alert appears, the debt must be resolved or paid in full before closing.

FHA Gift Fund Rules for Down Payments

FHA permits gift funds for down payments and closing costs, provided there is no expectation of repayment.

Acceptable gift sources include relatives, employers, labor unions, close friends with a documented relationship, charitable organizations, and government or public entities.

Unacceptable gift sources include the seller, real estate agents, brokers, builders, or any party with a financial interest in the transaction.

A proper gift letter is required, stating that repayment is not expected. The donor must provide identifying information and documentation showing the transfer of funds from their account to the borrower.

Government and Employer Assistance Programs

Borrowers without access to family gift funds may qualify for state, local, or employer-assisted housing programs that provide down payment or closing cost assistance. In Kentucky, FHA loans can often be paired with Kentucky Housing Corporation (KHC) down payment assistance programs, subject to income limits and program availability.

How FHA Loans Are Used in Kentucky

FHA does not directly lend money. Instead, it insures loans made by FHA-approved lenders. These loans are designed for borrowers with limited down payment funds, past credit challenges, or non-traditional credit profiles.

Many Kentucky borrowers who do not qualify for conventional financing are still able to achieve homeownership through FHA-insured loans at competitive interest rates.

Pros and Cons of FHA Loans

Advantages include low down payment requirements, flexible credit standards, and the ability to combine FHA loans with down payment assistance programs.

Disadvantages include mandatory mortgage insurance. FHA charges an upfront mortgage insurance premium of 1.75 percent of the loan amount, which can be financed, and an annual mortgage insurance premium that ranges from approximately 0.45 percent to 1.05 percent depending on loan term, loan-to-value, and origination date. This annual premium is paid monthly and, in most cases, remains for the life of the loan unless refinanced.

Final Thoughts for Kentucky Homebuyers in 2026

FHA loans continue to be a practical, reliable option for Kentucky homebuyers who need flexibility without sacrificing long-term stability. While FHA guidelines are forgiving compared to conventional loans, preparation matters. Clean documentation, stable income, responsible credit behavior, and proper sourcing of funds are essential to a smooth approval.

Working with an experienced Kentucky FHA lender can help you navigate overlays, improve credit positioning, and pair FHA financing with available assistance programs.

Joel Lobb
NMLS #57916
Text or Call 502-905-3708
kentuckyloan@gmail.com
www.mylouisvillekentuckymortgage.com

Company NMLS #1738461
Equal Housing Lender

Information is provided for educational purposes only and does not guarantee loan approval. All loans are subject to underwriting guidelines, program availability, and lender approval.

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5 Things to Know about buying a house and getting a Mortgage Loan approval in Kentucky for 2023


1. Do Mortgage Rates Change Daily?

Just like the gas prices at the pump, mortgage rates can change daily or throughout the day. Typically mortgage rates are published at 10-11 am daily by most lenders and you can lock up through the close of business which is usually around 6-7 PM. Mortgage rates can change up or down throughout the day based on various financial, economics, and geopolitical news in the US Financial markets and World markets. Generally speaking, good economic news is bad for rates and vice versa, bad economic news is good for mortgage rates.

The good news is this: Once you find a home and get it under contract, you can lock your mortgage loan rate. Typically it takes about 30-45 days to close a mortgage loan in Kentucky, so the typical lock is for 30-60 days. If rates get better you may be able to negotiate a better rate with your lender, but they usually have to improve by at least 25 basis points (.25) to do that. Not all lenders offer this option. The longer you lock the loan, the greater the costs. It is usually free to lock in a loan for up to 90 days without having to pay a fee.

What a lot of lenders are experiencing now is that some loans don’t close on time for various reasons. You can always extend the lock on the loan but it will costs you usually .125 basis points to do so. If you let the lock expire on the loan, then you have to take worse case pricing on that day when you go to relock. It is usually best to extend the lock on your loan.

2. What kind of Credit Score Do I need to qualify?

When applying for a mortgage loan, lenders will pull what they call a “tri-merge” credit report which will show three different fico scores from Trans union, Equifax, and Experian. The lenders will throw out the high and low score and take the “middle score” For example, if you had a 614, 610, and 629 score from the three main credit bureaus, your qualifying score would be 614. Most lenders will want at least two scores. So if you only have one score, you may not qualify. Lenders will have to pull their own credit report and scores so if you had it ran somewhere else or saw it on a website or credit card you may own, it will not matter to the lender, because they have to use their own credit report and scores.
Most lenders will pull your credit report for free nowadays so this should not be a big deal as long as your scores are high enough.
The Secondary Market of Mortgage loans offered by FHA, VA, USDA, Fannie Mae, and KHC all have their minimum fico score requirements and lenders will create overlays in addition to what the Government agencies will accept, so even if on paper FHA says they will go down to 580 or 500 in some cases on fico scores, very few lenders will go below the 620 threshold.
If you have low fico scores it may make sense to check around with different lenders to see what their minimum fico scores are for loans.
The lenders I currently deal with have the following fico cutoffs for credit scores:
FHA–580 minimum score
VA—-580 minimum score
Fannie Mae–620 minimum score
USDA–620 minimum score
KHC with Down Payment Assistance –620 minimum score.

As you can see, 580-620 is the minimum score with most lenders for a FHA, VA, or Fannie Mae loan, is required for the no down payment programs offered by USDA for Kentucky for First Time Home Buyers wanting to go no money down.

3. What are the down payment requirements?

The most popular programs for Kentucky First Time Home Buyers usually involves one of the following housing programs outlined in bold below:
FHA:

FHA will allow a home buyer to purchase a house with as little as 3.5% down. If your credit scores are low, say 680 and below, a lot of times it makes sense to go FHA because everyone pays the same mortgage insurance premiums no matter what your score is, and the down payment can be gifted to you. Meaning you really don’t have to have any skin into the game when it comes to down payment.

They even allow down payment assistance for down payment requirements of 3.5% through eligible parties like Kentucky Housing, Welcome Home Grants and Louisville KY and Covington Kentucky Down Payment Grants.

Lastly, FHA will allow for higher debt to income ratios with sometimes getting loan pre-approvals up to 55% of your total gross monthly income. So if you have a debt to income ratio of over 50%, Fannie Mae will not do the loan and USDA usually likes their debt to income ratios no more than 45%.

Think back to the last time you financed a purchase — be it a home, automobile, or what have you… You may remember having heard the term “debt-to-income ratio.” Today I want to spend some time going over exactly what this ratio is, and to also touch on how it can effect your personal finances.

4. What is your debt-to-income ratio?

Commonly referred to as your “DTI,” your debt-to-income ratio is a personal finance benchmark that relates your monthly debt payments to your monthly gross income.
As an example… Let’s say that your gross monthly salary is $5,000 and you are spending $2,800 of it toward monthly debt payments. In that case, your DTI would be an unhealthy 56%.
This version of your DTI is sometimes referred to as your “back-end” DTI. This is often broken down further to give a front-end debt-to-income ratio, which is a component of your back-end DTI.

How to calculate your front-end DTI for a Kentucky Mortgage Loan Approval

Your front-end DTI is calculated by dividing your monthly housing costs by your monthly gross income. Front-end DTI for renters is simply the amount paid in rent, whereas for homeowners it is the sum of mortgage principal, interest, property taxes, and home insurance (i.e., your PITI) divided by gross monthly income.

From above, if that $2,800 in debt payments is attributable to $1,500 in housing costs and $1,300 in non-housing costs, then your front-end DTI is $1,500/$5,000 = 30% (and your back-end ratio is still 56%, as calculated above).
Fannie Mae:
Fannie Mae requires just 3% down with their new Home Possible Program, but if you use their traditional mortgage loan, then 5% is the Fannie Mae Standard. Fannie Mae will go down 620 score, but if your scores are below 680, I would look seriously at the FHA loan program because Fannie Mae has steep increases to the interest rate and the mortgage insurance premiums if your scores are low.
A couple of good things about Fannie Mae is that you can buy a larger priced home and have a large loan amount due to FHA only allowing most Kentucky Home Buyers a maximum mortgage loan amount of $356,000 for a max FHA loan and $545,000 for Fannie Mae Conventional loans in Kentucky for 2020.
Lastly when it comes to mortgage insurance, FHA mortgage insurance premiums are for life of loan while Fannie Mae mortgage insurance premiums drop off when you develop 80% equity position in your house.
But as a tell most people, nobody has a loan for 30 years, and the average mortgage is either refinanced or home sold within the first 5-7 years.
VA Loans-

VA loans offer eligible Veterans and Active Duty Personnel to buy a home going no money down with no monthly mortgage insurance. This is probably the best no money down loan out there since the rates are traditionally very low on comparison to other government insured mortgages and no monthly mortgage insurance. The VA loan can be used anywhere in the state of Kentucky with the maximum VA loan limit being removed for 2021
USDA Loans-

USDA loans offer people buying a home in rural areas (typically towns of $20k or less) to buy a home going zero down. You cannot currently own another home and there is household income limits of $90,200 for a household family of four, and up to $119,300 for a household of five or more. You search USDA website for eligible areas and household income limits below at the yellow highlighted link :

KHC or Kentucky Housing-
Kentucky First Time Home Buyers typically use KHC for their down payment assistance. KHC currently offers $10,000 for down payment assistance and sometimes throughout the year they will offer low mortgage rates on their mortgage revenue bond program.

The down payment assistance usually never runs out because you have to pay it back in the form of a second mortgage. It helps a lot of home buyers that want to buy in urban areas that cannot utilizer the USDA program in rural areas. Most of the time the first mortgage is a FHA loan tied with the 2nd mortgage fore down payment assistance. All KHC programs require a 620 score and rates are locked for 45 days.

5. What if I have had a bankruptcy or foreclosure in the past?

FHA and VA are the easiest on previous bankruptcies. FHA and VA both require 2 years removed from the discharge date on a Chapter 7. If you are in the middle of a Chapter 13, FHA will allow for financing with a 12 month clean history payment to the Chapter 13 courts, and with trustee permission.

VA requires 2 years removed from a foreclosure (sheriff sale date of home) and FHA requires 3 years.

USDA requires 3 years removed from both a foreclosure and bankruptcy, but on the foreclosure they do not go off the sale date. This may save you a little time if you had a previous foreclosure.

Fannie Mae (Conventional Loan)

Fannie Mae is by far the strictest. They require 4-7 years out of a foreclosure or bankruptcy

If you have questions about qualifying as first time home buyer in Kentucky, please call, text, email or fill out free prequalification below for your next mortgage loan pre-approval.

Bankruptcy Requriements for a FHA, VA, USDA, and Fannie Mae Loan Approval in Kentucky
click on link to apply for free mortgage quote

Joel Lobb
Senior Loan Officer
(NMLS#57916)

Text or call phone: (502) 905-3708

email me at kentuckyloan@gmail.com

http://www.mylouisvillekentuckymortgage.com/

The view and opinions stated on this website belong solely to the authors, and are intended for informational purposes only. The posted information does not guarantee approval, nor does it comprise full underwriting guidelines. This does not represent being part of a government agency. The views expressed on this post are mine and do not necessarily reflect the views of my employer. Not all products or services mentioned on this site may fit all people

CONFIDENTIALITY NOTICE: This message is covered by the Electronic Communications Privacy Act, Title 18, United States Code, §§ 2510-2521. This e-mail and any attached files are deemed privileged and confidential, and are intended solely for the use of the individual(s) or entity to whom this e-mail is addressed. If you are not one of the named recipient(s) or believe that you have received this message in error, please delete this e-mail and any attached files from all locations in your computer, server, network, etc., and notify the sender IMMEDIATELY at 502-327-9770. Any other use, re-creation, dissemination, forwarding, or copying of this e-mail and any attached files is strictly prohibited and may be unlawful. Receipt by anyone other than the named recipient(s) is not a waiver of any attorney-client, work product, or other applicable privilege. E-mail is an informal method of communication and is subject to possible data corruption, either accidentally or intentionally. Therefore, it is normally inappropriate to rely on legal advice contained in an e-mail without obtaining further confirmation of said advice.

Kentucky Mortgage Broker Offering FHA, VA, USDA, Conventional, and KHC Down Payment Assistance Home Loans 500 credit score FHA loan, 580 credit score FHA, 620 credit score FHA loan, Bankruptcy, deed-in-lieu, FHA Guidelines, fico scores FHA loan, first time buyer kentucky, foreclosure, HUD Foreclosure, Kentucky FHA HUD Homes for $100 Down, Kentucky FHA Important Links, Kentucky Housing, KY FHA LOANS, Louisville Ky Home Loans, mortgage charge-offs, short sales

Kentucky FHA loans after a bankruptcies, foreclosures, deeds-in-lieu of foreclosure, pre-foreclosures, short sales, and mortgage charge-offs.

Kentucky FHA loans after a significant derogatory credit events which include bankruptcies, foreclosures, deeds-in-lieu of foreclosure, pre-foreclosures, short sales, and mortgage charge-offs.

A Chapter 7 bankruptcy – MUST be discharged at least 2 years from Case Number Assignment Date. Requirements
include:
1. Complete Copy of Bankruptcy paperwork MUST be provided
2. Borrower must write a detailed explanation explaining the reason for the Bankruptcy
3. The Borrower must have re-established good credit; or chosen not to incur new credit obligations.
4. An elapsed period of less than two years, but not less than 12 months, may be acceptable, if the Borrower:
– Can show that the bankruptcy was caused by extenuating circumstances beyond the Borrower’s control; and
– Has since exhibited a documented ability to manage their financial affairs in a responsible manner.
– If a Chapter 7 is discharged less than 2 years from the date of Case Number Assignment Date the loan must be downgraded to Manual Underwriting and meet all requirements listed in HUD 4000.1 Handbook

 

Chapter 13 must be discharged ** Requirements include:
1. Complete Copy of Bankruptcy paperwork MUST be provided
2. Borrower must write a detailed explanation explaining the reason for the Bankruptcy
3. The Borrower must have re-established good credit; or chosen not to incur new credit obligations.
4. An elapsed period of less than two years, but not less than 12 months, may be acceptable, if the Borrower:
‐ Can show that the bankruptcy was caused by extenuating circumstances beyond the Borrower’scontrol; and
‐ Has since exhibited a documented ability to manage their financial affairs in a responsible manner.

5. If a Chapter 13 is discharged less than 2 years from the date of Case Number Assignment Date the loan must be downgraded to Manual Underwriting and meet all requirements listed in HUD 4000.1 Handbook

Foreclosure/Deed-in-Lieu
1. A Borrower is generally not eligible for a new FHA-insured Mortgage if the Borrower had a foreclosure or a DIL of foreclosure in the three-year period prior to the date of Case Number Assignment.
2. This three-year period begins on the date of the DIL or the date that the Borrower transferred ownership of the Property to the foreclosing Entity/designee.

Short Sale

1. A Borrower is generally not eligible for a new FHA-insured Mortgage if they relinquished a Property through a Short Sale within three years from the date of Case Number Assignment.
2. The three-year period begins on the date of transfer of title by Short Sale.

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Kentucky FHA Loan

FHA loans are good for home buyers with lower credit scores and no much down, or with down payment assistance grants. FHA will allow for grants, gifts, for their 3.5% minimum investment and will go down to a 580 credit score.

The current mortgage insurance requirements are kinda steep when compared to USDA, VA , but the rates are usually good so it can counteract the high mi premiums. As I tell borrowers, you will not have the loan for 30 years, so don’t worry too much about the mi premiums.

The mi premiums are for life of loan like USDA.

FHA requires 2 years removed from bankruptcy and 3 years removed from foreclosure.

Maximum FHA loan limits in Kentucky are set around $285,000 -$299,000 depending on the county in Kentucky

Joel Lobb
Senior Loan Officer
(NMLS#57916)

American Mortgage Solutions, Inc.
10602 Timberwood Circle, Suite 3
Louisville, KY 40223

text or call my phone: (502) 905-3708
email me at kentuckyloan@gmail.com

The view and opinions stated on this website belong solely to the authors, and are intended for informational purposes only. The posted information does not guarantee approval, nor does it comprise full underwriting guidelines. This does not represent being part of a government agency. The views expressed on this post are mine and do not necessarily reflect the view of my employer. Not all products or services mentioned on this site may fit all people. NMLS ID# 57916, (www.nmlsconsumeraccess.org). Mortgage loans only offered in Kentucky.
All loans and lines are subject to credit approval, verification, and collateral evaluation and are originated by lender. Products and interest rates are subject to change without notice.

Joel E Lobb
American Mortgage
5029053708
email us here

Some products and services may not be available in all states. Credit and collateral are subject to approval. Terms and conditions apply. This is not a commitment to lend. Programs, rates, terms and conditions are subject to change without notice. The content in this marketing advertisement has not been approved, reviewed, sponsored or endorsed by any department or government agency. Rates are subject to change and are subject to borrower(s) qualification.

Kentucky FHA, VA, USDA & Rural Housing, KHC and Fannie Mae mortgage loans.

Kentucky Mortgage Broker Offering FHA, VA, USDA, Conventional, and KHC Down Payment Assistance Home Loans Bankruptcy, credit scores, Credit Scores/Credit Reports, foreclosure, HUD Foreclosure, short sales

Kentucky FHA Loans and requirements for a loan approval after a bankruptcy, foreclosure, short sale

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FHA expands mortgage backing to the once bankrupt | 2013-08-16 | HousingWire

Kentucky FHA loans guidelines for after a bankruptcy, foreclosure, short-sale below:

  • Foreclosures: 3 years from the foreclosure completion date and transferred back to the lender to the credit report date
  • Short Sale: 3 years from the title transfer date
  • Bankruptcy Chapter 7: 2 years from the discharge date. If a property is surrendered in chapter 7 bankruptcy, it is considered to be possible foreclosure which could increase waiting time
  • Bankruptcy Chapter 13: 1 year wait with a scheduled payment plan on liabilities factored into debt-to-income ratio and bankruptcy court approval for mortgage process or 2 years from discharge date
Joel Lobb
Senior  Loan Officer
(NMLS#57916)
American Mortgage Solutions, Inc.
800 Stone Creek Pkwy, Ste 7,
Louisville, KY 40223
 Fax:     (502) 327-9119
 
 Company ID #1364 | MB73346

Kentucky Mortgage Broker Offering FHA, VA, USDA, Conventional, and KHC Down Payment Assistance Home Loans Bankruptcy, Collections Accounts, credit scores, Credit Scores/Credit Reports, deed-in-lieu, Disputed Accouts, FHA Guidelines, fico score, short sales

Kentucky FHA loans have new guidelines for collections, judgements, and disputed accounts on credit report.

 

Kentucky FHA Loan Guidelines for Credit, Down payment, income,

HA has published the following guideline updates, which will be effective for all loans with case numbers assigned on or after September 9th
  • Specific verbiage for Well Water Testing has been added indicating that it must be performed by a disinterested party in a method acceptable to the local health authority. The borrower or any other interested party may not have contact with the sample. Additionally, cases mandating a Well Water Test have been added to include (but not limited to) the following
    • Newly constructed properties and/or wells
    • Properties with deficiencies in the well or well water as determined by an appraiser
    • Areas where water has been reported or is otherwise known to be unsafe
    • Properties located in close proximity to dumps, landfills, industrial sites, farms, or other sites that could contain hazardous waste
    • Properties where distance between well and septic systems is less than 100 feet
  • Clarification issued indicating Overtime, Bonus, or Tip Income must be calculated using the lesser of
    • Average Overtime, Bonus, or Tip income earned over the previous 2 years (or if earned less than 2 years, the total length of time it has been received); OR
    • Average Overtime, Bonus, or Tip income earned over the previous year
  • All requirements regarding unreimbursed business expenses and Commission Income or Automobile Allowances has been completely removed to align with current IRS tax laws
  • Mortgagees and Third Party Originators have been specifically added to the list of parties to which Interested Party Contribution (IPC) limits apply, with the exception that Premium Pricing credits do not apply to the IPC limit unless the mortgagee is also acting as the seller, agent, builder, or developer.
  • Rent Below Fair Market has been defined as an inducement to purchase when the borrower is allowed to live in the property rent free or at a rental amount more than 10 percent under the fair market rent as determined by the appraiser.
  • Disaster Certifications and new Appraisals in Disaster Areas must now be dated at least 14 days after the Incident Period start date. NOTE: This requirement is in addition to the standard Century Disaster Area Policy.
  • Clarification has been added that Reduction in Term for Streamline Refinances refers specifically to the reduction of the remaining amortization period of the existing mortgage.
  • Manual Underwriting Tips for FHA
    Don’t Forget to Submit!
    • Verbal VOE, paystub(s) covering most recent 30 day period, W2’s for the past 2 years
    • 2 year employment history
    • At least 1 months reserves from the borrower’s own funds (cannot be a gift); 3 months required for 3-4 unit properties
    • VOR or 12 months cancelled checks if credit does not report last 12 months housing history
    • LOX for any derogatory credit or any late payments within the last 24 months
    DTI Requirements:
    • 31/43% FHA (no compensating factors required)
    What can trigger a downgrade to manual underwrite?
    • $1,000 or more in Disputed Derogatory Credit Accounts
    • 20% or greater decline in self employed income
    • Mortgage lates in the last 12 months (see guidelines for full list)
    Payment History Requirements:
    • All mortgage and installment loan payments must have been on time within the last 12 months and no more than two 30 day lates within the last 24 months
    • No derogatory credit on revolving accounts in the last 12 months
  • FHA – Underwriting must follow DU to determine if a collection account must be paid, even on a manual underwrite. Typically DU will require the following:
    • If the credit report shows a cumulative balance of $2,000 or more for collection accounts:
    • The debt(s) must be paid in full prior to or at closing, or
    • Payment arrangements must be made with the creditor and the monthly payment included in the DTI, or
    • A monthly payment of 5% of the outstanding balances of each collection must be included in the borrower’s DTI.
    • Collection accounts of non-borrowing spouses in a community property state must be included in the $2,000 cumulative balance and analyzed as part of the Borrower’s ability to pay all collection accounts. Community property states are Arizona, California, Texas, Washington, and Wisconsin.
Kentucky Mortgage Broker Offering FHA, VA, USDA, Conventional, and KHC Down Payment Assistance Home Loans Bankruptcy, credit scores, deed-in-lieu, fico score, foreclosure, short sales

The Latest Guidelines on Waiting Periods – Valley Business Journal

The Latest Guidelines on Waiting Periods – Valley Business Journal.

 

It might be interesting to update everyone on the latest guidelines on required waiting periods after a Bankruptcy, Foreclosure or Short Sale. The rules seem to change fairly often and, of course, may vary greatly with lenders and mortgage investors.

For conventional financing, basic guidelines at this time show a waiting period of four years after a Chapter 7 or 11 Bankruptcy, two years with extenuating circumstances; after a Chapter 13 Bankruptcy, it would be two years from the Discharge date, four from Dismissal date (two from Dismissal with justifying circumstances). A Foreclosure on your record would mandate a seven-year waiting period, three with extenuating circumstances but with additional restrictions as to the maximum loan-to-value allowed and occupancy of the property. A Short Sale or Deed-in-Lieu on a person’s credit requires a waiting period of at least two years for an 80% loan-to-value and four for 90%, two with mitigating circumstances can be possible up to 90%.

FHA and VA requirements may be considerably different. For example, if a person had a Chapter 7 Bankruptcy, the usual waiting period would be two years for FHA, but under some circumstances it could be moved down to just one, not with VA though. Many factors must be clearly illustrated, including either no new debt since discharge or re-establishment and maintenance of good credit plus a demonstrated ability to manage one’s financial obligations. A new purchase after a Chapter 13 Bankruptcy (where debts are being paid over time) has different guidelines also, primarily being that the Bankruptcy has been in a payout period for at least one year, with satisfactory performance and Court approval. Foreclosures and short sales generally mandate three years with FHA, two with VA.

These are some of the lending policies, but of course a person must also qualify for the new loan – income, stability of same, debt ratios and credit scores are critical. We must measure that with the basic question of whether a person is ready to purchase again and take on ownership responsibilities. Working with an experienced, professional mortgage advisor should be very helpful if you find yourself in this kind of situation.

The snag would come in the underwriting portion of the mortgage application process.

“The IRS office won’t be able to provide the forms to prove income, deal with tax lien information, and the like. Because those documents aren’t available, those loans will be stuck until further notice,’’ Herrera said.

It’s in the intake — the starting of the files — where a backlog could occur, he said.

With the housing recovery in the Inland region still viewed as fragile, any slow-down in sales has a trickle-down effect on the economy.

National Association of Realtors chief economist Lawrence Yun recently pinned the August slow-down in pending home sales — contract signings eased 1.6 percent — on tight inventory conditions, higher interest rates, rising prices and restrictive mortgage credit.

For the three month quarter ended June 2013, nearly 20 percent of the 8,758 mortgage transactions reported to the Inland Valleys Association of Realtors were FHA-insured.

Conventional loans insured by Freddie Mac and Fannie Mae accounted for 34 percent of the transactions; Veterans Administration-backed mortgage applications represented 4 percent of the loan business, Herrera said.

Donavon Ternes, president and chief operating officer of Provident Savings Bank, agreed the FHA-furloughs could end up harming – or bogging down — the number of refinance transactions or purchase money transactions looking for FHA-insurance on the loan.

Kentucky Mortgage Broker Offering FHA, VA, USDA, Conventional, and KHC Down Payment Assistance Home Loans Bankruptcy, foreclosure, short sales

FHA to Home Buyers: We’ll Forgive But (Won’t) Forget | Mortgage Rates & Trends

FHA to Home Buyers: We’ll Forgive But (Won’t) Forget | Mortgage Rates & Trends.

 

— FHA to Home Buyers: We’ll Forgive But (Won’t) Forget | Mortgage Rates & Trends

 



rule change is allowing certain borrowers who have gone through a foreclosure, bankruptcy or other adverse event to become eligible to receive a new mortgage backed by the Federal Housing Administration after waiting as little as one year. Previously, they had to wait at least three years before they could qualify for a new government-backed loan. Fannie Mae and Freddie Mac, which guarantee conventional loans. require borrowers to wait seven years after a foreclosure unless there are extenuating circumstances, in which case the wait is three years.



 to be eligible for the new FHA loans, borrowers must be able to show their household income fell by 20 percent or more for at least six months and was  tied to unemployment or another event beyond their control. And they must prove their incomes have had a “full recovery; prove they have had at least one hour of approved housing counseling and have had 12 months of on-time housing payments.

Joel Lobb (NMLS#57916)
Senior  Loan Officer
502-905-3708 cell
502-813-2795 fax
kentuckyloan@gmail.com

Key Financial Mortgage Co. (NMLS #1800)*
107 South Hurstbourne Parkway*
Louisville, KY 40222*

Kentucky Mortgage Broker Offering FHA, VA, USDA, Conventional, and KHC Down Payment Assistance Home Loans Bankruptcy, short sales

SURRENDURING YOUR HOME IN BANKRUPTCY

SURRENDURING YOUR HOME IN BANKRUPTCY.

via SURRENDURING YOUR HOME IN BANKRUPTCY.

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Kentucky Mortgage Broker Offering FHA, VA, USDA, Conventional, and KHC Down Payment Assistance Home Loans Bankruptcy, foreclosure, short sales

FHA Loans After Bankruptcy, Foreclosure, Short Sale: 2013 Rule Change

FHA Loans After Bankruptcy, Foreclosure, Short Sale: 2013 Rule Change.

FHA Loans After Bankruptcy, Foreclosure, Short Sale: 2013 Rule Change

To that end, FHA is changing the rules for borrowers who want to use an FHA loan after a bankruptcy, short sale, foreclosure, or deed in lieu of foreclosure. Borrowers who can show that the negative event was due to income losses beyond their control could be eligible for an FHA loan within one year of the event. This is a major change over the previous three-year rule for bankruptcies and foreclosures.

Read more: http://www.homebuyinginstitute.com/news/fha-after-foreclosure-bankruptcy-463/#ixzz2f4Rpj5Os

— 

Joel Lobb (NMLS#57916)
Senior  Loan Officer
502-905-3708 cell
502-813-2795 fax
kentuckyloan@gmail.comKey Financial Mortgage Co. (NMLS #1800)*
107 South Hurstbourne Parkway*
Louisville, KY 40222*
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Kentucky Mortgage Broker Offering FHA, VA, USDA, Conventional, and KHC Down Payment Assistance Home Loans foreclosure, short sales

Don’t Let a Short Sale Keep You From a New Mortgage | Consumer Information

Don’t Let a Short Sale Keep You From a New Mortgage | Consumer Information.

July 26, 2013

by

Colleen Tressler
Consumer Education Specialist, FTC

If you negotiated a short sale of your home, you may be surprised to learn that some mortgage loan underwriting systems can’t distinguish short sales from foreclosures on consumer reports. And that may keep or delay you from getting a new mortgage.

You see, borrowers who go through a foreclosure typically have to wait seven years before they’re eligible for a new mortgage. But short sellers may qualify in as little as two years. When you’re trying to buy a new home, an additional five years can seem like a lifetime. So is there anything you can do to improve your financial footing? You bet there is.

  • Get a letter from your lender confirming that your loan closed in a short sale, not a foreclosure. Send a copy of the letter to each of the nationwide credit reporting companies: Equifax, Experian, and TransUnion.
  • Order a copy of your credit report. Make sure the information is accurate. If you find a mistake, contact the credit reporting company and business providing the information to correct the error.
  • When you’re ready to buy another home, get pre-approved for a loan. A pre-approval letter from a lender shows that you are able to go through with a purchase. Pre-approval is not a final loan commitment; it means you met with a loan officer, your credit report was reviewed, and the lender believes you can qualify for a specific loan amount. This pre-approval process allows your lender to identify issues and errors in your credit report that may keep you from qualifying for a loan. That, in turn, allows you to correct inaccuracies before they can prevent you from buying another home.
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