Can you buy a house in Kentucky with Bad Credit?

Buying A House with Bad Credit in Kentucky

When in comes to buying a house in Kentucky and getting approved for a mortgage loan a lot of buyers will have to confront their past credit issues. Credit, along with income, work history, and assets determine if you qualify for a mortgage loan. 

Below I will address the main issues you have to address when it comes to getting approved for a mortgage with past credit problems. 

 Mortgage late payments: One late payment in the last 12 months is permitted so long as it can be explained and fully documented if necessary.

• Foreclosure: Thirty-six months from the date of the foreclosure until eligibility to repurchase using the 3.5 percent down payment FHA Loan, 48 months for VA Loans (no money down required), seven years no matter the down payment on a conventional type.

• Short sale: Thirty-six months from the date of the short sale until eligibility to repurchase using the 3.5 percent down payment FHA Loan, 24 months with the VA, 24 months on a conventional money loan with a minimum down payment of 20 percent.

Bankruptcy: Chapter 7 (Chapter 13 is less common), 24 months from the date of discharge until eligibility to repurchase using the 3.5 percent down FHA Loan, 48 months on VA Loans (still no money down required),  48 months on conventional no matter the down payment. All mortgage companies have different thresholds of risk appetite. For example, the FHA (Federal Housing Administration) has no credit score requirement. Why, then, do lenders have a minimum credit score requirement of 620 for an FHA Loan? Unbeknownst to the majority of home buyers, many mortgage companies have a secret ominous business strategy.

Enter “investor overlays.” 
Investor overlays are adjustments to guidelines and/or pricing created in favor of the mortgage company. This is exactly why one lender can do the loan, and another lender cannot do the loan in some instances.
Tip: every mortgage lender has investor overlays, it’s the nature of how mortgage companies operate, key is work with the lender whose overlays are minimal.

Timing

Typically speaking, if you want to get a mortgage after bankruptcy you’ll need to allow time to pass. For conventional mortgages you’ll need to wait four years after Chapter 7 bankruptcy or two years after Chapter 13 bankruptcy. But there are some other mortgage options that require a shorter waits.

Credit Scores 

580 to 620 is the bottom score (again with few exceptions) that lenders will permit. Below a 620, then you have to look at doing a FHA loan or VA loan if you are a veteran. Even at 620, people consider you a higher risk that other folks and are going to penalize you or your borrower with a more expensive loan. 720 is when you really start to get in the “as a lender we love you” credit score. 760 is even better.

 Watch your credit scores carefully. You have three credit scores, and the lender will take your middle score. For example, let's say you have a 590 on Transunion, 679 on Experian, and a 618 on Equifax. Then your middle qualifying credit score will be 618 credits score.

If you absolutely cannot get your credit scores up to 620, then FHA will be a good option for you. FHA states that if your fico credit score is 580 or above, they will allow for a 3.5% down payment, and if below 580, you will need 10% down payment.

There are a lot of mortgage lenders that will not go below 580 to 620 range, so keep that in mind when you are shopping for a mortgage lender, because they create credit overlays.

FHA Mortgage

Two years after your Chapter 7 bankruptcy discharge you may apply for an FHA loan. If you filed Chapter 13 bankruptcy, then you’ll only need to wait until you’ve made twelve months of satisfactory payments, and you’ll need to get the approval of the bankruptcy trustee. But if you want to be given serious consideration, you’ll need to provide a clear explanation for why you filed bankruptcy. For example, maybe you filed Chapter 13 bankruptcy because you had a medical emergency and was unable to pay your medical bills.

VA Mortgage

If you’re a veteran, you can get a VA mortgage two years after your bankruptcy discharge. This VA application process can be challenging, but in some ways it’s more lenient since post-bankruptcy credit issues such as a foreclosure won’t restart the 2-year waiting period. However, credit issues after bankruptcy might affect your interest rate, so take care to keep your credit as clean as possible.

USDA Mortgage

If you live in a rural area, you may qualify for a USDA mortgage three years after your bankruptcy discharge. It’s important to note that while the USDA provides loans to rural residents it’s only for property that will serve as the borrower’s primary residence. The USDA will not finance the purchase of income property or a vacation home.

As you prepare to apply for a mortgage after bankruptcy, keep in mind that the mortgage lender will take into account the totality of your financial situation—your finances, credit history, credit score, and any extenuating circumstances

Joel Lobb  Mortgage Loan Officer

EVO Mortgage
911 Barret Ave, Louisville, KY 40204

1 -  Email - kentuckyloan@gmail.com 

2.   Call/Text - 502-905-3708

https://www.mylouisvillekentuckymortgage.com/2010/10/get-approved-for-mortgage-or-home-loan.html

NMLS 57916  | Company NMLS#173846

How To Get Approved for A Kentucky FHA, VA, USDA, Mortgage Home Loan After A Bankruptcy?

How To Get Approved for A Kentucky FHA, VA, USDA, Mortgage Home Loan After A Bankruptcy?

Many debtors fear that a bankruptcy will close off any chance of getting a mortgage. But that’s simply not true, with a little time and proper planning you can get a mortgage with good interest rates.

Rebuild Your Credit

If you want to get a mortgage after bankruptcy, you’ll need to get busy rebuilding your credit right away. If you make sure your credit report accurately reflects your bankruptcy, all zero balance credit accounts are closed at the time of your discharge, and pay your credit bills on time you will begin to see some improvement in your credit score within 12 months of your discharge.

Here are some key tasks in rebuilding your credit:

• Get a secured credit card

• Credit Score
  

While the items on your credit report matter, you’ll also need to watch your FICO score. There are many different types of credit scores out there.  You have the individual credit bureaus scores (Experian, Trans Union, and Equifax), FICO scores, Vantage Scores, and industry specific scores. However when looking to purchase a home you will want to watch your FICO as it is used in an overwhelming majority of mortgage related credit evaluations.

Also it’s important to note that FICO changes the way they evaluate creditworthiness based on new information and changes in the market.  They have recently release FICO version 9. Since the majority of mortgage lenders still use an older FICO scoring model, when evaluating and monitoring your score, FICO recommends you use one calculated from a scoring model previous to Version 8.

When evaluating your FICO score it’s good to know that a score above 760 is considered excellent while a score under 620 is considered poor AND IT WILL BE HARD TO GET PRE-APPROVED WITH A CREDIT SCORE BELOW 580 RIGHT NOW

Timing

Typically speaking, if you want to get a mortgage after bankruptcy you’ll need to allow time to pass. For conventional mortgages you’ll need to wait four years after Chapter 7 bankruptcy or two years after Chapter 13 bankruptcy. But there are some other mortgage options that require a shorter waits.

FHA Mortgage

Two years after your Chapter 7 bankruptcy discharge you may apply for an FHA loan. If you filed Chapter 13 bankruptcy, then you’ll only need to wait until you’ve made twelve months of satisfactory payments, and you’ll need to get the approval of the bankruptcy trustee. But if you want to be given serious consideration, you’ll need to provide a clear explanation for why you filed bankruptcy. For example, maybe you filed Chapter 13 bankruptcy because you had a medical emergency and was unable to pay your medical bills.

VA Mortgage

If you’re a veteran, you can get a VA mortgage two years after your bankruptcy discharge. This VA application process can be challenging, but in some ways it’s more lenient since post-bankruptcy credit issues such as a foreclosure won’t restart the 2-year waiting period. However, credit issues after bankruptcy might affect your interest rate, so take care to keep your credit as clean as possible.

USDA Mortgage

If you live in a rural area, you may qualify for a USDA mortgage three years after your bankruptcy discharge. It’s important to note that while the USDA provides loans to rural residents it’s only for property that will serve as the borrower’s primary residence. The USDA will not finance the purchase of income property or a vacation home.

As you prepare to apply for a mortgage after bankruptcy, keep in mind that the mortgage lender will take into account the totality of your financial situation—your finances, credit history, credit score, and any extenuating circumstances.

--

Joel Lobb
Mortgage Loan Officer

Individual NMLS ID #57916

American Mortgage Solutions, Inc.

10602 Timberwood Circle 

Louisville, KY 40223

Company NMLS ID #1364

click here for directions to our office

Text/call:      502-905-3708

fax:            502-327-9119
email:          kentuckyloan@gmail.com

https://www.mylouisvillekentuckymortgage.com/

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Kentucky Bankruptcy Guidelines for Kentucky Conventional & Kentucky FHA Mortgage Loans

Can you buy a home while in bankruptcy in Kentucky?

KENTUCKY MORTGAGE WITH A BANKRUPTCY



Bankruptcy Chapter 7


Kentucky Fannie Mae Guidelines for a Previous Chapter & Bankruptcy:




4 years from discharge or dismissal date
2 years from discharge or dismissal date it borrower meets FNMA definition for Extenuating Circumstances
5 years if more than one bankruptcy was filed within the last 7 years


Kentucky FHA Guidelines for a Past Bankruptcy Chapter 7


2 years from the discharge date for DU approval. Case number assignment cannot be ordered until wait period has elapsed
Manual underwrites are allowed on a refer/eligible DU finding as long as 2 years has elapsed from the discharge date and the borrower has either re-established good credit or chosen not to incur any new credit obligations
Exception for 2 year wait period:
An elapsed period less than 2 years but no less than 12 months may be acceptable
The borrower must document the bankruptcy was caused by extenuating circumstances beyond their control such as a serious illness or death of a wage earner
The borrower must document an ability to manage their financial affairs in a responsible manner
Divorce, loss of a job, or inability to sell a home after relocation is not an acceptable extenuating circumstance


Bankruptcy Chapter 13


KY Fannie Mae Bk Guidelines for Chapter 13 Bk


2 years from discharge date
4 years from dismissal date
2 years from dismissal date it borrower meets FNMA definition for Extenuating Circumstances 5 years if more than one bankruptcy was filed within the last 7 years


Kentucky FHA Mortgage Guidelines for Chapter 13


2 years from the discharge date for DU approval. Case number assignment cannot be ordered until wait period has elapsed
Manual underwrites are allowed 1 day after discharge date or at least 12 months of the payout period under the bankruptcy has elapsed at the time of case number assignment
Must receive a refer/eligible DU finding
Must have documentation of 12 months satisfactory payment history
Must have written permission from trustee to enter into new mortgage transaction