Kentucky FHA Guidelines for Bankruptcy

Many Kentucky homebuyers believe a bankruptcy automatically disqualifies them from buying a home again. The reality is very different. FHA mortgage guidelines allow many borrowers to qualify for a new home loan after bankruptcy, foreclosure, or other credit challenges if certain waiting periods and credit requirements are met.

Below are the primary FHA guidelines borrowers in Kentucky should understand when applying for a mortgage after bankruptcy.

Collections

Outstanding collections do not always have to be paid in order to qualify for an FHA mortgage. The underwriter will evaluate the circumstances surrounding the collection account, including the amount owed and the borrower’s overall credit profile.

Learn more about how collections are treated on FHA and conventional loans.

Judgments

Judgments generally must be paid off before a mortgage loan becomes eligible for FHA insurance. However, exceptions may be allowed if:

• The borrower has been making regular, documented payments
• The creditor agrees to subordinate the judgment to the new mortgage
• The payment arrangement has been established and verified

See additional low down payment mortgage options available in Kentucky.

Foreclosure Waiting Period

Borrowers who have experienced a foreclosure or deed-in-lieu of foreclosure generally must wait three years before becoming eligible for a new FHA loan.

In certain situations, the waiting period may be reduced if the borrower can document significant extenuating circumstances such as a medical emergency, job loss, or other verified hardship.

Learn more about FHA guidelines after foreclosure, short sale, or deed in lieu.

Chapter 7 Bankruptcy

Borrowers may qualify for an FHA loan two years after the discharge of a Chapter 7 bankruptcy.

During this waiting period, lenders will typically look for:

• Re-established credit
• Stable employment history
• No major new derogatory credit events

Read more about getting a mortgage after Chapter 7 bankruptcy.

Chapter 13 Bankruptcy

Borrowers who are currently in a Chapter 13 repayment plan may still qualify for an FHA mortgage if:

• At least 12 months of the repayment plan has been completed
• Payments have been made on time
• The bankruptcy court approves the mortgage transaction

Learn more about buying a home while in Chapter 13 bankruptcy.

FHA Down Payment Requirements

FHA loans require a minimum down payment of 3.5% with qualifying credit. Many Kentucky buyers combine FHA financing with down payment assistance programs that may help cover some or all of the required funds.

• 3.5% minimum down payment
• Flexible credit guidelines
• Higher debt-to-income allowances than many conventional loans
• Available to first-time and repeat buyers

Start Your Kentucky FHA Homebuyer Review

If you’ve experienced bankruptcy, foreclosure, or other credit challenges, you may still qualify for a Kentucky FHA mortgage loan.

Call or text to review your eligibility and explore available mortgage options.

Joel Lobb
Mortgage Broker – FHA, VA, USDA, KHC
Phone: 502-905-3708

www.mylouisvillekentuckymortgage.com

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Joel Lobb, Mortgage Broker FHA, VA, KHC, USDA
NMLS #57916 | Company NMLS #1738461
Licensed in Kentucky Only

This website is not affiliated with or endorsed by FHA, VA, USDA, or any government agency. All loans subject to credit approval and program guidelines.