I specialize in Kentucky First Time Homebuyers FHA, VA, USDA & Rural Housing, KHC and Fannie Mae mortgage loans. I have helped over 1300 Kentucky families buy their first home or refinance their current mortgage for a lower payment; Kentucky First time buyers we still how available down payment assistance with KHC. Free Mortgage applications/ same day approvals. Web site is not endorsed by the FHA, VA, USDA govt agency. Text/call 502-905-3708 kentuckyloan@gmail.com NMLS 57916 NMLS 1738461
Loans will be able to close as normal and access to FHA Connection and VA’s WebLGY system will be available. However, any function that requires staff involvement may be impacted by a shutdown.
The National Flood Insurance Program (NFIP) expires at 11:59 p.m. September 30. As a result, KHC will follow agency guidelines in place during the federal government shutdown.
If federal tax transcripts or validation of social security numbers are required per underwriting or listed as an AUS finding, then they will be required prior to closing or purchase of a loan. SSA Form 89 is used to validate social security numbers.
Please stay tuned for further updates on this topic. These policies will be enacted only if the federal government shuts down and will remain in effect throughout the period of shut down.
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Kentucky Mortgage Loan Expert For Kentucky FHA, VA, USDA, Fannie Mae and KHC Down payment Assistance Loans
Government shutdown affects on USDA, FHA, VA, Rural Housing, KHC and Fannie Mae Mortgage loans in Kentucky
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).
If you’re applying for an FHA loan, but your credit report shows disputed accounts, you need to understand how this can affect your approval. In this video, Joel Lobb — licensed Kentucky Loan Officer (NMLS #57916) — explains the FHA’s updated rules for handling disputed accounts, what counts as “significant derogatory,” and what you can do to improve your chances of approval.
💡 You’ll learn:
What FHA considers a “disputed account”
When disputed accounts must be resolved or removed
The $1,000 threshold rule for disputed derogatory accounts
Exceptions for medical collections and identity theft
How to fix credit report disputes before underwriting
<a target="_blank" href="https://www.google.com/search?ved=1t:260882&q=FHA+Loans&bbid=2083715272801756161&bpid=460774671124448744" data-preview><a target="_blank" href="https://www.google.com/search?ved=1t:260882&q=FHA+Loans&bbid=2083715272801756161&bpid=460774671124448744" data-preview><a target="_blank" href="https://www.google.com/search?ved=1t:260882&q=FHA+Loans&bbid=2083715272801756161&bpid=460774671124448744" data-preview>FHA Loans</a></a></a> & Disputed Accounts: What You Must Know to Avoid Denial
FHA Loans & Disputed Accounts: What You Must Know to Avoid Denial
Updated: 2025 | By Joel Lobb, Kentucky Mortgage Loan Officer
📖 Reading Time: 5 minutes
Quick Answer: If you dispute a negative account, it won't automatically disappear from FHA underwriting. Disputed accounts—especially derogatory ones—can derail your mortgage approval. The good news? Understanding FHA's dispute rules puts you back in control.
Introduction
Here's a hard truth that catches many Kentucky homebuyers off guard: if you dispute a negative account, it won't automatically disappear from FHA underwriting. In fact, disputed accounts—especially derogatory ones—can derail your mortgage approval entirely.
I've worked with over 1,300 Kentucky families, and I've seen this exact issue cost borrowers thousands in delays or forced them to start their application over. The good news? Understanding FHA's dispute rules puts you back in control.
In this guide, you'll learn:
How FHA actually treats disputed accounts (it's different than you think)
The critical $1,000 threshold that triggers manual review
Why this matters: FHA underwriters want to see your real financial picture. An inflated credit score that hides payment problems is a red flag for mortgage default risk.
The Critical $1,000 Threshold: FHA's Non-Negotiable Rule
Here's where many borrowers get caught off guard.
If your total disputed derogatory (non-medical) accounts add up to $1,000 or more, FHA requires manual underwriting. This means:
Your loan won't auto-approve through DU or LPA (Fannie Mae's automated systems)
A human underwriter will review your entire file
You'll need documentation proving disputes are valid
Example: You have a $600 collection dispute and a $500 charge-off dispute. That's $1,100 total—you've crossed the threshold and triggered manual underwriting, regardless of your credit score.
Disputed Accounts: What FHA Actually Allows
Let's break down the real rules (not assumptions):
2Identify Disputed Accounts & Calculate Total Balance
List every account you've disputed, note the balance, and add them up. Be honest—include everything marked as disputed.
3Calculate Your Disputed Derogatory Total
Add up only the non-medical collections and charge-offs. If the total is under $1,000, you're in safer territory. If it's $1,000+, plan ahead.
4Make Your Decision
Under $1,000: You can likely move forward with your application
$1,000+: Consider removing or resolving disputes before applying
5If You Need to Remove Disputes
Contact each credit bureau directly and request to retract or withdraw your dispute. This removes the "dispute" notation from your report.
Important: Your credit score will likely drop after removing disputes (typically 20-50 points). This is temporary, but it's real. Your loan officer can discuss the impact before you proceed.
6Re-Pull Your Credit Report
Wait 30-45 days, then pull a fresh report to confirm disputes are removed and your score has stabilized.
7Work With Your Loan Officer
Bring your updated credit reports and provide a brief written explanation of any disputes you removed. A knowledgeable FHA loan officer will guide you through the rest.
Common Mistakes That Cost Borrowers
I've seen these happen repeatedly—don't let them happen to you:
Your credit score will drop. If you remove disputes without understanding the impact on your loan approval, you could disqualify yourself unnecessarily. Always consult your loan officer first.
Mistake #2: Confusing "Paid Off" With "Resolved for FHA"
Paying off or settling a disputed account doesn't automatically remove the dispute notation. You still need to formally withdraw the dispute with the credit bureau.
Some lenders have stricter requirements than FHA itself. Before you apply, ask your loan officer about their specific dispute policy. What FHA allows, your lender might not.
A: Yes. Pre-approval depends on clean credit reporting, just like final approval.
Why This Matters for Kentucky Homebuyers
As a Kentucky mortgage professional with over 20 years of experience, I've guided more than 1,300 families through situations exactly like this. Disputed accounts are one of the top reasons first-time buyers face unexpected delays or denials.
The difference between success and frustration often comes down to knowing these rules before you apply—not after.
Ready to Protect Your FHA Approval?
Don't let disputed accounts derail your homeownership dreams. I'm here to guide you through every step with personalized attention and expert knowledge of Kentucky's FHA programs.
Schedule your free FHA consultation today!
Next Steps
Here's what I recommend:
Pull your credit reports this week and identify any disputed accounts
Calculate your disputed derogatory total to understand where you stand
Schedule a free consultation with an experienced FHA loan officer to review your specific situation
Apply for pre-approval once disputes are addressed
Contact Me Today
📧 Email: kentuckyloan@gmail.com
📞 Call/Text: 502-905-3708
I offer free mortgage applications with same-day approvals to keep your process moving quickly. With personalized attention and expert knowledge of Kentucky's housing market, I'll help you achieve your homeownership dreams.
About the Author
Joel Lobb is a Kentucky-licensed Mortgage Loan Officer with over 20 years of experience helping first-time homebuyers and refinance clients navigate FHA, VA, USDA, and KHC programs.
Disclaimer: This website is not endorsed by the FHA, VA, USDA, or any government agency. It is an independent platform created to educate and assist Kentucky homebuyers with expert advice and accessible tools. For official FHA guidelines, visit fha.gov.
Getting approved for a loan is not as hard as some make it. The 3C approach breaks it down in its simplest form so no need to overthink or complicate with “what if’s” or variable situations and these factors are the same in every state. They all have to line up for your loan to be approved but here there are in order of significance
Capacity
- No matter if your credit is in 800’s the ability to afford a loan (capacity aka DTI) is the MOST important C and why most applications either get denied or reduced. Income is EVERYTHING.
To get a conforming (FHA / VA / Conventional) loan you need 2yrs of verifiable Full time income even if it’s pieced together with different employers with 2yrs W2’s and your most recent paystub if you’re an employee and OT and/or bonus cannot be used if you’ve been with your employer for less than 2yrs.
If you have part time employment as well that income cannot be used unless you’ve worked both jobs for at least 2yrs UNLESS your P/T job is the exact same as your F/T job and your hours are not variable then in most cases you can get an exception if you’ve been there for at least 1yr. If you’re self employed 2 most recent tax returns with positive income on line 31 of your schedule C.
If homeownership is your goal, then don’t be cheap and have a certified tax preparer prepare your taxes because it’s likely you’ll need certain docs to get approved only they can provide. Also DO NOT write off all your income to avoid paying the IRS taxes because this will disqualify you from a loan and you’ll have to get a more expensive loan with a bigger down payment.
Credit -
many people think this is the most important but it’s not but it is important. With a high enough capacity (low DTI) I’ve seen clients with minimum scores get approved. FHA requires 580, VA does not have a minimum score requirement and while some lenders can do down in the 500’s generally most lenders do not go below 580, and conventional requires 620.
Having said all that just because you meet the minimum score does not mean you’ll get an approval before credit profile (positive tradeline history, collection activity, credit usage) is what matters most. I’ve seen applicants with 680+ get denied for conventional loans because they have a poor credit profile or low capacity (higher DTI).
FHA is a little more forgiving which is why they are easier loans to get than conventional. Obviously the higher the score, the better the chances are for approval but high scores aren’t needed if capacity and collateral are strong.
Collateral - aka down payment.
Underwriters request either 1 bank statement for FHA or 2 bank statements for conventional and all they are looking for is verification of cash to close, large deposit (FHA more than 1% of loan amount deposited in 1 deposit) activity and reserves if needed, not spending habits. Large purchases are irrelevant and NSF’s can be explained with an explanation letter. The higher the down payment in percentages (3.5 or 5%, 10%, 15%, 20% etc…) not dollars ($2000 or $5000 more than required) then the lower the risk and higher chance of approval especially for conventional loans. Plus dollars don’t noticeably reduce your monthly payment but percentages do.
Overlays -
additional restrictions some lenders have in addition to standard mortgage guidelines. If your lender is telling you anything more is required than what’s posted above it’s because they have overlays which make it more difficult to get approved with them. Example - Veteran’s United will not take credit scores under 620 = OVERLAY
If you want a personalized answer for your unique situation call, text, or email me or visit my website below:
The loan must be for a property used for your primary residence.
The property must be appraised by an FHA-approved appraiser.
The property must be safe, sound and secure, in compliance with minimum property standards as defined by the U.S. Department of Housing and Urban Development, or HUD.
You must have a valid Social Security number and be a legal resident of the U.S.
You must have a minimum credit score of 580 with a down payment of at least 3.5 percent, or a minimum credit score of 500 with a down payment of at least 10 percent.
You may not have delinquent federal debt or judgments, or debt associated with past FHA loans.
You must have steady employment history.
You must make a down payment of at least 3.5 percent of the purchase price. If the down payment was gifted by a family member, documentation is required.
You must have a DTI ratio that does not exceed limits.
Any judgments or collections on the credit report must be resolved or satisfactorily explained.
Any required waiting period has passed, as follows:
Event
Waiting period
Waiting period with extenuating circumstances (nonrecurring events beyond your control that result in sudden, significant, prolonged reduction in income or a catastrophic increase in financial obligations)
Chapter 7 or 11 bankruptcy
Four years
Two years
Chapter 13 bankruptcy
Two years from discharge, or four years from dismissal
Two years
Multiple bankruptcies
Five years if more than one filing in last seven years. Most recent bankruptcy must have been caused by extenuating circumstances.
Three years from most recent discharge or dismissal
Foreclosure
Seven years
Three years, with additional requirements after three years up to seven years: 90 percent maximum loan-to-value purchase, principal residence, limited cash-out refinance
Deed-in-lieu of foreclosure, preforeclosure sale (short-sale), or charge-off of mortgage account
Four years
Two years
Debt-to-Income Ratio Limits for Kentucky FHA Loans
Two DTI ratio figures are calculated when considering an Kentucky FHA mortgage. Thefront-end DTIratio is your total monthly housing expense, which includes the mortgage principal and interest, mortgage insurance, homeowners insurance, property taxes and applicable homeowners association fees, divided by your total monthly income. The back-end DTI ratio is your total monthly debt obligation, including housing, minimum credit card payments, auto loans, student loans and any other required monthly debt payment, divided by your total monthly income.
Standard FHA front- and back-end DTI limits are 31 percent and 43 percent, respectively. If you earn $3,500 per month, your front-end DTI cannot exceed $1,085 and the sum of all your monthly debt obligations cannot exceed $1,505. f Applications for Kentucky FHA borrowers with lower salaries and higher DTIs are manually underwritten. Manual underwriting means that your lender assigns a person to review your loan application and documents, versus running your information through an automated underwriting system. Manually underwritten FHA loans allow for front- and back-end DTI ratios of up to 40 percent and 50 percent, respectively. To qualify for these higher DTI limits, you will need to meet other requirements.
To qualify for an FHA loan in Kentucky, you'll need to meet several requirements. Here's a detailed breakdown of what lenders will be looking for in 2025:
Credit Score Requirements
While the FHA itself doesn't set a minimum credit score, most Kentucky FHA lenders do. For 2025, you'll generally need a credit score of at least 580 to qualify for the 3.5% low down payment option. If your score is between 500 and 579, you may still be eligible, but you'll likely need to make a larger down payment of at least 10%.
It's important to note that different lenders may have varying credit score requirements, with some requiring scores of 620 or higher. Shopping around with multiple Kentucky FHA lenders can help you find one that works with your specific credit situation.
Down Payment Requirements
As mentioned, the minimum down payment for an FHA loan is 3.5% of the purchase price for borrowers with a credit score of 580 or higher. This down payment can come from several sources:
Your personal savings
A gift from a family member (with proper documentation)
Down payment assistance programs available in Kentucky
Funds from a retirement account (with restrictions)
Debt-to-Income (DTI) Ratio
Your DTI ratio is the percentage of your gross monthly income that goes towards paying your monthly debts. For FHA loans, your housing DTI (mortgage payment including principal, interest, taxes, insurance, and HOA fees) should ideally be no more than 31% of your income, and your total DTI (all debts) should be no more than 43%.
However, with a strong credit score and other compensating factors, you may be approved with a higher DTI, potentially up to 55% in some cases. Kentucky FHA lenders will evaluate your entire financial picture when making this determination.
Income and Employment Requirements
You'll need to demonstrate a steady employment history for the past two years. Your income must be verifiable through pay stubs, tax returns, and other documentation. Self-employed individuals will need to provide at least two years of tax returns to demonstrate consistent income.
Recent college graduates may be able to use their education to satisfy the employment history requirement if they can show their degree relates to their current employment.
Property Requirements
The home you're buying must be your primary residence - you cannot use an FHA loan for investment properties or vacation homes. The property also needs to meet the FHA's minimum property standards, which means it must be safe, sound, and secure. An FHA-approved appraiser will inspect the property to ensure it meets these standards.
Eligible property types in Kentucky include single-family homes, condominiums (in FHA-approved projects), townhomes, and multi-unit properties (up to 4 units) where you'll live in one of the units.
2025 FHA Loan Limits in Kentucky
For 2025, the FHA has set the following loan limits for all counties in Kentucky:
Single-Family Home (1-unit): $524,225
2-Unit Property: $671,200
3-Unit Property: $811,275
4-Unit Property: $1,008,300
These limits apply to all 120 Kentucky counties, as there are no high-cost county exceptions in the state for 2025. This means whether you're buying in Jefferson County (Louisville), Fayette County (Lexington), or any rural Kentucky county, the same loan limits apply. It's important to note that these limits can change annually based on housing market conditions.
FHA Mortgage Insurance Premium (MIP)
FHA loans require two types of mortgage insurance premiums that protect the lender in case of default:
Upfront Mortgage Insurance Premium (UFMIP)
This is a one-time premium of 1.75% of the loan amount, which is typically financed into the loan rather than paid out of pocket at closing. For example, on a $200,000 loan, the UFMIP would be $3,500.
Annual Mortgage Insurance Premium (MIP)
This premium is paid monthly as part of your mortgage payment. The amount varies from 0.45% to 1.05% of the loan amount annually, depending on your loan term, loan-to-value ratio, and down payment. For most borrowers with the minimum 3.5% down payment, the annual MIP is 0.85% of the loan amount.
Unlike conventional loan PMI, FHA MIP typically cannot be removed unless you refinance to a conventional loan or pay down your loan balance to 78% of the original purchase price (and the loan is at least 5 years old).
How to Apply for a Kentucky FHA Loan
Applying for an FHA loan in Kentucky is a straightforward process when you work with an experienced Kentucky FHA mortgage lender. Here are the detailed steps you can expect:
Step 1: Get Pre-Approved
The first step is to get pre-approved with an FHA-approved lender. During pre-approval, the lender will review your credit, income, assets, and debts to determine how much you can borrow. This gives you a clear idea of your budget and shows sellers that you are a serious buyer in Kentucky's competitive housing market.
Step 2: Gather Required Documents
You will need to provide various financial documents, including:
Recent pay stubs (typically last 30 days)
Tax returns for the past 2 years
Bank statements for the past 2-3 months
Employment verification letter
Valid government-issued identification
Social Security card
Documentation of any additional income sources
Step 3: Find a Home
Once you are pre-approved, you can start shopping for a home that meets your needs and the FHA's property requirements. Consider working with a real estate agent familiar with FHA loans and Kentucky's housing market to help you find suitable properties.
Step 4: Complete the Loan Application
After you have an accepted offer on a home, you will complete the full loan application with your Kentucky FHA lender. This includes providing updated documentation and any additional information requested by the underwriter.
Step 5: Home Appraisal and Inspection
The lender will order an FHA appraisal to ensure the home meets FHA property standards and is worth the purchase price. You may also want to get a separate home inspection for your own peace of mind.
Step 6: Final Underwriting and Approval
The underwriter will review all documentation and make a final decision on your loan. They may request additional documentation or clarification during this process.
Step 7: Closing
Once your loan is approved and all conditions are met, you will close on your new Kentucky home and get the keys!
Frequently Asked Questions (FAQs)
Can I get an FHA loan with a bankruptcy?
Yes, it is possible to get an FHA loan after a bankruptcy. Generally, you will need to wait at least two years after a Chapter 7 bankruptcy discharge and have re-established good credit. For a Chapter 13 bankruptcy, you may be able to qualify after making 12 on-time payments in your plan, with court approval.
Are FHA loans only for first-time homebuyers?
No, FHA loans are available to all qualified homebuyers, not just first-time buyers. They are a great option for anyone who can meet the eligibility requirements, including repeat buyers and those looking to refinance.
What is the difference between an FHA loan and a conventional loan?
The main differences include down payment requirements (3.5% vs typically 5-20%), credit score requirements (580 vs typically 620+), and mortgage insurance (MIP vs PMI). FHA loans are generally more accessible but require mortgage insurance for the life of the loan in most cases.
Can I use an FHA loan to buy a fixer-upper in Kentucky?
Yes, the FHA 203(k) renovation loan program allows you to finance both the purchase and renovation costs in a single loan. This can be a great option for buyers looking to purchase and improve a home in Kentucky.
How long does it take to close on an FHA loan in Kentucky?
Typically, FHA loans take 30-45 days to close from the time of application, though this can vary based on the lender, property type, and complexity of your financial situation.
Ready to Get Started with Your Kentucky FHA Loan?
Don't let another month go by without taking action toward homeownership. Kentucky's housing market is competitive, and having your financing in place gives you a significant advantage.
Our experienced Kentucky FHA mortgage specialists are ready to guide you through every step of the process.
Find the Right Kentucky FHA Mortgage Lender
Choosing the right lender is just as important as choosing the right loan. Look for a Kentucky FHA mortgage lender that is experienced with FHA loans and can guide you through the process smoothly. A good lender will:
Answer your questions promptly and thoroughly
Help you understand your options and loan terms
Work with you to find a loan that fits your financial situation
Provide competitive rates and fees
Have experience with Kentucky's local housing market
Offer excellent customer service throughout the process
Kentucky Housing Market Insights for 2025
Understanding Kentucky's housing market can help you make informed decisions about your FHA loan. As of 2025, Kentucky continues to offer relatively affordable housing compared to national averages, making it an attractive state for first-time homebuyers using FHA loans.
Major Kentucky cities like Louisville, Lexington, Bowling Green, and Owensboro each offer unique opportunities for FHA loan borrowers. Rural areas of Kentucky also present excellent value propositions for families looking to maximize their purchasing power with an FHA loan.
An FHA loan can be an excellent path to homeownership for Kentucky residents, offering flexible requirements, competitive rates, and low down payment options. Whether you're a first-time homebuyer in Louisville, a growing family in Lexington, or anyone in between looking to purchase a home in the Bluegrass State, an FHA loan might be the perfect solution for your needs.
The key to success is working with an experienced Kentucky FHA mortgage lender who understands both the FHA program requirements and the local Kentucky housing market. Take the first step today by getting pre-approved and discovering how much home you can afford with an FHA loan.
Ready to take the next step towards homeownership in Kentucky?
About the Author
Joel Lobb is a licensed Kentucky Mortgage Loan Officer (NMLS #57916) with more than 20 years of experience helping families across Kentucky achieve homeownership. Specializing in FHA, VA, USDA, and KHC loan programs, Joel has guided over 1,300 families through the mortgage process—including hundreds of borrowers with credit scores in the 580–620 range.
Licensing Information
• NMLS Personal ID: 57916
• Company NMLS ID: 1738461 (EVO Mortgage)
• Licensed to originate mortgage loans in Kentucky only
• Equal Housing Lender
Legal Disclaimers
This website is for educational purposes only and does not constitute financial or legal advice. Loan programs, rates, and requirements are subject to change without notice. Not all borrowers will qualify. This information is not endorsed or sponsored by FHA, VA, USDA, Fannie Mae, or any government agency.
Joel Lobb is licensed to originate mortgages in Kentucky only.
Equal Housing Lender. All rights reserved. Licensed by the Kentucky Department of Financial Institutions.
Call/Text - 502-905-3708
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