Kentucky Mortgage After a Bankruptcy – Chapter 7 or 13
How Long After Bankruptcy Can I Buy a House?
You can buy a house approximately one or two years after filing for bankruptcy, only if you restore your credit and avoid new debt. Filing a Chapter 7 or Chapter 13 bankruptcy will impact your credit report and put a negative score on your credit. But it does not mean that you cannot buy your own house.
Chapter 7 Bankruptcy
The standard type of bankruptcy is Chapter 7, in which the court wipes down your qualifying debts. In this case, your credit score is affected. If you file Chapter 7 bankruptcy, you have to wait for about four years after the court dismisses your bankruptcy to make you eligible for a conventional loan.
However, government-backed mortgage loans are more complex. You have to wait for about three years after your bankruptcies’ dismissal to qualify for a USDA loan. At the same time, you have to wait for about two years in order to qualify for a VA or FHA loan.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy involves the restructuring of your debts. That means you have to make scheduled payments to your creditors. It does not have a substantial effect on your credit score. Moreover, you can keep your assets as well. While regulations for chapter 13 are less severe than Chapter 7, these loans also have a waiting period.
Conventional loans after chapter 13 bankruptcy usually require a waiting period depending on the court’s choice to handle your bankruptcy. Generally, the waiting period is about four years from the date you file bankruptcy and two years from your dismissal date.
While chapter 7 bankruptcy standards are relaxed for government-backed loans, USDA loans have a 1-year waiting period after filing for Chapter 13 bankruptcy. FHA and VA loans need a court to dismiss or discharge approval of your loan before your apply. However, the waiting period remains the same in both cases, whether dismissal or discharge.
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.
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.
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-ratedmortgage 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.
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.
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Joel Lobb Mortgage Loan Officer Expert on Kentucky Mortgage Loans
RHS Increase in Annual Fee for Rural Housing Mortgage Loans in Kentucky
Kentucky USDA Mortgage Lenders must underwrite the loan using an annual fee of .5 percent and resubmit the application to RD in GUS after October 1, 2014
On Wednesday, October 1, 2014, the annual fee for both purchase and refinance loans will increase from .4 percent to .5 percent. The Guaranteed Underwriting System (GUS) has been updated to allow lenders to select and underwrite at either the .4 percent or .5 percent annual fee structure. Lenders should communicate with Rural Development (RD) offices to understand current processing time-frames.
GUS “Final Submissions” with an annual fee of .4 percent, that areissued a conditional commitment by RD prior to the close of business on Tuesday, September 30, 2014, will not be affected by the annual fee change. Those submissions that are not issued a conditional commitment by RD prior to the close of business on Tuesday, September 30, will be affected by the annual fee change.
Lenders must underwrite the loan using an annual fee of .5 percent and resubmit the application to RD in GUS.
Income from all occupants of the household must be included as qualifying income regardless of whether or not they are obligated on the note. Income eligibility can be determined from the following USDA web site. Final eligibility must still be determined by USDA
When a borrower has a rental property it must also be included in the eligibility calculation.
Positive net rental income is included in the eligibility income for the household
Negative net rental income is counted as zero for eligibility income
Qualifying Income:
The underwriter is responsible for calculating income and approving the loan. Applicants with commission only position’s, or varying amounts of overtime and bonus income may not exhibit enough stable monthly income to qualify. Typically, income of less than 24 months duration should not be included in qualifying income.
Salaried Borrowers
Pay-stubs covering most recent 30 day period, W-2’s for the previous two years and telephone verification of employment performed by Freedom Mortgage (paystub must show at least 30 days of year-to-date earnings).
If overtime, commission, or bonus income is used for qualifying purposes the file must be documented with a two year history of receipt and be expected to continue.
Standard VOE, sent directly to the employer, along with the borrower’s most recent paystub.
Self-Employed Borrowers
Copies of the borrower’s signed individual Federal tax returns that were filed with the IRS for the most recent two years. As an alternative, the Freedom may obtain IRS-issued transcripts of the borrower’s tax returns, as long as the transcripts include the information from all of the applicable schedules. The tax return documentation should be complete and include all appropriate schedules.
The self-employed applicant also should submit current documentation of the business’s income and expenses, including any applicable Federal tax returns that were filed with the IRS for the most recent two years as well as year-to-date profit and loss and balance statements.
Rental Income
Rental income may only be counted for repayment income if the lease has been in place for at least two years. For leases older than two years, count positive net rental income in repayment income and negative net rental income as debt. If rental income is not received for a full two year period then the full PITIA must be used in the debt to income calculation.
Rental income calculation – reduce monthly gross income by a 25% vacancy rate, and then the monthly PITI, HOA dues, etc. are subtracted. If positive then include in income if negative include in DTI.
All other income sources refer to USDA guidelines for all income guidelines and documentation requirements
Assets:
Assets are not required; however, any assets disclosed must be supported with appropriate documentation
Satisfactory explanation and documentation should be provided for large deposits or increases in liquid assets
Cash on hand is not acceptable
Bank accounts require Verification of Deposit with average 2 month balance, or 2 consecutive months statements dated within 45 days of loan application
Earnest money deposit may be considered an asset if deposit is not already reflected in liquid assets
Asset amount of retirement accounts is 60% of the vested account balance
Gifts must be documented through gift donor letter and establish that gift does not have to be repaid
For sale proceeds of real property, provide HUD-1 or equivalent closing statement to indicate the actual amount of cash proceeds realized by the borrower
Stocks and bonds must be documented by a statement provide by stockbroker or financial institution managing the portfolio
Households with net family assets of greater than $5,000 require that the actual income derived from all net family assets or a percentage of the value of such assets based on the current passbook savings rate be considered when calculating income.
Kentucky USDA Mortgage Lender for Rural Housing Loans 