Student Loan Guidelines For Qualifying for a Mortgage Loan in Kentucky

Student Loan Guidelines for Qualifying for a Mortgage in Kentucky (Update)

Learn how student loan payments impact your Kentucky mortgage approval. FHA, VA, USDA, Fannie Mae, and Freddie Mac all treat student loans differently — here’s what you need to know before applying.

Loan type	Student Loan Payment Requirement
FHA	Must be included in the borrower’s liabilities regardless of the payment type or status. The payment amount must be either: ▪ The greater of: ·        ..5% of the outstanding balance on the loan or ·        Monthly payment reported on the borrower’s credit report, or ▪ The servicer’s documented payment provided the payment will fully amortize the loan over the repayment term period
VA	Deferred A payment does not need to be included if written evidence supports that the student loan debt will be deferred beyond 12 months of closing. In Repayment Include loans with payments starting within 12 months. Calculate threshold payment as a rate of 5% of outstanding balance divided by 12 months. If credit report payment is higher, use credit report payment. If current documentation from student loan servicer reflects actual terms and payment for each loan, the verified payments may be used even if less than the threshold payment calculation.
USDA	Fixed Payment A permanent amortized, fixed payment is used when documentation supports fixed payment, interest and term. Non-Fixed payment Use .5% of the loan balance reflected on the credit report. Payment arrangements that are deferred or non-fixed (Income Based Repayment (IBR), graduated, adjustable, interest only, etc.) may not be used.
Fannie	Loans in Repayment Period ▪ If provided, use the credit report payment ▪ If credit report is incorrect, obtain student loan documentation from the servicer to verify the payment used for qualification Income Driven Repayment Plan Use the student loan documentation to verify the actual monthly payment. Borrower may be qualified with a $0 payment if the documentation supports it. Loans in Deferment or Forbearance ▪ A payment equal to 1% of the outstanding student loan balance (even if this amount is lower than the actual fully amortizing payment) or ▪ A fully amortizing payment using the documented loan repayment terms
Freddie	Loans in Repayment Period Use the greater of payment reported on credit report or .5% of the higher of original or outstanding loan balance as shown on credit report. Loans in Deferment or Forbearance Use greater of payment reported on credit report or .5% of the higher of original or current outstanding loan balance as shown on the credit report. Loan Forgiveness Cancelation Discharge Employment Contingent Repayment Programs Payment may be excluded if file contains documentation that indicates: ▪ Monthly payment is deferred and/or in forbearance and full balance of the loan will be forgiven, canceled, discharged or will be paid if qualified for an employment-contingent repayment program and ▪ Borrower currently meets requirements for the student loan forgiveness/cancelation program Obtain documentation from the student loan servicer to show the loan will be forgiven, canceled, discharged or that the borrower qualifies and is approved under an employment contingent repayment program that will extinguish the debt.

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Joel Lobb 

 Email - kentuckyloan@gmail.com 

 Call/Text - 502-905-3708

 www.mylouisvillekentuckymortgage.com
 911 Barret Ave., Louisville, KY 40204

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Evo Mortgage
Company NMLS# 1738461
Personal NMLS# 57916

Kentucky Mortgage Loan Expert For Kentucky FHA, VA, USDA, Fannie Mae and KHC Down payment Assistance Loans

🏡 Kentucky Mortgage Qualification

How Student Loan Payments Affect Your DTI & Loan Options

FHA Loans

Most Popular for First-Time Buyers

📊 Payment Calculation

Use GREATER of:

• 0.5% of balance
• Credit report payment
• Documented payment

⏸️ Deferred Status

Payment ALWAYS included in DTI calculation

💡 Key Note

Even $0 payments count—uses 0.5% calculation

VA Loans

For Veterans & Service Members

📊 In Repayment

Use GREATER of credit report payment or 5% of balance ÷ 12

✅ Deferred Advantage

NO payment included if deferred 12+ months past closing

💡 Key Note

Documentation is key—get written proof of deferment

USDA Loans

Rural Kentucky Homebuyers

📊 Fixed Payments

Use documented payment that amortizes loan

📊 Variable/Deferred

Use 0.5% of loan balance or full amortizing payment

💡 Key Note

Standard 10-year repayment gets most favorable calculation

Fannie Mae

Conventional Program

📊 In Repayment

Use credit report payment (verified if needed)

✅ IDR Plans

Can use $0 payment if documented on IDR plan

💡 Key Note

Most flexible with income-driven repayment options

Freddie Mac

Conventional Program

📊 In Repayment

Use GREATER of credit report payment or 0.5% of balance

⚠️ More Restrictive

0.5% calculation often results in higher imputed payment

💡 Key Note

May have higher DTI impact than Fannie Mae

🎯 Quick Comparison: Same $50,000 Student Loan

FHA (Deferred)

$250/month
0.5% × $50,000 = Always counted

VA (Deferred)

$0/month
Excluded if 12+ months deferred

USDA (Deferred)

$250/month
0.5% × $50,000 = Counted

Fannie Mae (IDR)

$0/month
IDR plan can show $0

Kentucky First-Time Homebuyer Resources

Understanding how student loans affect qualification helps you choose the best loan program for your situation.

📞 502-905-3708 | 📧 kentuckyloan@gmail.com
Your Kentucky Mortgage Expert

Child Support & Mortgage Approval in Kentucky | FHA, VA, USDA, KHC Guidance

Joel Lobb 

 Email - kentuckyloan@gmail.com 

 Call/Text - 502-905-3708

 www.mylouisvillekentuckymortgage.com
 911 Barret Ave., Louisville, KY 40204

---

Evo Mortgage
Company NMLS# 1738461
Personal NMLS# 57916

Kentucky Mortgage Loan Expert For Kentucky FHA, VA, USDA, Fannie Mae and KHC Down payment Assistance Loans

Child Support & Mortgage Approval Complete Guide for Kentucky Homebuyers FHA • VA • USDA • KHC • Fannie Mae

Child Support Obligations and Mortgage Approval: What Kentucky First-Time Homebuyers Need to Know

Expert guidance from Joel Lobb, Mortgage Loan Officer specializing in Kentucky FHA, VA, USDA & KHC programs

Getting approved for a mortgage is a significant milestone, but if you have child support obligations or judgments on your record, you might be wondering: will this affect my ability to buy a home? The short answer is yes—but it's not a dealbreaker. Let's break down how child support impacts your mortgage application across the major loan programs available to Kentucky homebuyers, and what you can do about it.

How Child Support Obligations Affect Your Mortgage

When lenders review your mortgage application, they look at your entire financial picture—including any legal obligations to pay child support. Here's why this matters:

Your Debt-to-Income Ratio (DTI)

Lenders calculate your debt-to-income ratio by dividing your total monthly debt payments by your gross monthly income. Child support obligations count as debt. If you're paying $400 per month in child support and your other debts total $800, that's $1,200 in monthly obligations. Most mortgage programs require a DTI of 43-50%, which means your total monthly debts can't exceed 43-50% of your gross income. High child support payments can push you over this threshold and hurt your approval chances.

Here's a quick visual example of how DTI works:

EXAMPLE: Marcus's Monthly Finances
─────────────────────────────────────────────
Gross Monthly Income:                    $4,000

Monthly Debt Obligations:
  Child Support:                           $400
  Car Loan:                                $300
  Credit Card Payments:                    $150
  Student Loan:                            $200
  ────────────────────────────────
  Total Monthly Debts:                   $1,050

DTI Calculation:
$1,050 (total debts) ÷ $4,000 (gross income) = 26.25% DTI ✓

Result: Marcus's DTI is 26.25%, well below the 50% FHA limit.
He's in good shape for mortgage approval (assuming other factors
like credit score and employment are solid).

─────────────────────────────────────────────

EXAMPLE: If Marcus adds a proposed $800 mortgage payment:
  Total with mortgage would be:           $1,850
  New DTI: $1,850 ÷ $4,000 = 46.25% DTI ✓
  Still within FHA limits!

─────────────────────────────────────────────

The key takeaway: Your child support obligation directly affects
how much mortgage payment you can afford.

Credit Reports and Judgment Records

If you've missed child support payments, this typically shows up on your credit report and can significantly lower your credit score. Unpaid or late child support judgments are major red flags for lenders. Even if you're current now, past delinquencies will require explanation and can result in higher interest rates or loan denial.

Verification of Compliance

Lenders will verify that you're current on all child support obligations. They may request court documents, payment records, or a letter from the child support enforcement agency confirming you're up to date. If you're behind, most lenders won't approve your application until you catch up.

How Child Support Impacts Different Loan Programs

The good news is that different loan programs have different flexibility levels. Here's how the major programs available to Kentucky buyers handle child support:

FHA Loans

FHA loans are designed for first-time homebuyers, and they're generally more forgiving than conventional loans. However, child support is still a factor:

• DTI Considerations: FHA allows DTI ratios up to 50%, which is higher than many conventional programs. This gives you more breathing room if child support is reducing your available debt capacity.
• Credit Standards: FHA doesn't require a perfect credit score. If child support payment issues affected your credit in the past, you may still qualify if you can show improvement and current compliance.
• Documentation: You'll need to show proof that you're current on child support. Bring payment records, court documents, or verification letters from the Kentucky Court of Justice or child support enforcement office.

Working with me as your FHA lender: We can often work with past credit challenges. If you're behind on child support, the first step is getting current—then we can reassess your application.

VA Loans

VA loans offer excellent benefits for military-connected borrowers, but the VA is strict about financial obligations:

• Entitlement and Debt: The VA considers all legal debt obligations when determining loan approval. Unpaid child support can hold up your application.
• Disability Compensation Consideration: If you're receiving VA disability benefits, these are typically not counted in your income calculations, but child support obligations still count against you.
• Certificate of Eligibility: The VA may flag your file if there are outstanding child support judgments. You'll need proof of compliance before approval.

Working with me as your VA lender: Veterans' benefits are powerful, but we need to make sure your child support situation is resolved first. If there are any outstanding issues, I can guide you through the process.

USDA and Rural Housing Loans

USDA loans are excellent for rural Kentucky properties and are designed for moderate-income borrowers. Here's how child support plays in:

• Rural Development Expectations: USDA takes a conservative approach to debt obligations. Child support must be accounted for in your DTI calculations, and you'll need current proof of payment.
• Income Verification: USDA loans verify income carefully. If child support is being deducted from your paycheck, that will be factored into your available income for the mortgage payment.
• Geographic Requirements: Remember, USDA loans are only available in designated rural areas. Make sure your Kentucky property qualifies before we start the application.

Working with me as your USDA lender: If you're buying in rural Kentucky, USDA loans offer great rates and terms. We just need to ensure your child support is current and properly documented.

Fannie Mae Loans

Fannie Mae loans are conventional loans backed by the mortgage giant. They have stricter guidelines than government programs:

• Strict DTI Requirements: Fannie Mae typically caps DTI at 43%, which leaves less room if child support is impacting your numbers.
• Credit Standards: Fannie Mae requires stronger credit histories. Late child support payments can hurt your eligibility.
• Full Verification: You'll need complete documentation of child support payments and current status.

When to choose Fannie Mae: If your child support obligations are low relative to your income and your credit is solid, Fannie Mae can offer competitive rates.

Solutions for Kentucky Homebuyers with Child Support Obligations

If child support is affecting your mortgage prospects, don't give up. Here are proven strategies:

1. Get Current and Stay Current

This is the most important step. If you're behind on child support, contact the Kentucky Court of Justice or the Cabinet for Health and Family Services—Division of Child Support to arrange a payment plan or modification. Once you're current, lenders will view your application much more favorably.

Action Item: Before applying for a mortgage, ensure all child support payments are 100% current. Bring recent payment verification (last 3-6 months) to your mortgage application.

Kentucky Resources:

• Kentucky Court of Justice – Family Law: https://kycourts.gov/
• Cabinet for Health and Family Services – Child Support Services: https://chfs.ky.gov/agencies/dfcyf/dcs
• Kentucky Child Support Enforcement Payment Portal: https://kdocs.kctcs.edu/

2. Modify Your Child Support Order if Possible

If your income has changed significantly since your support order was established, you may be able to request a modification. A lower support obligation reduces your DTI and improves your mortgage approval chances.

Action Item: Contact a family law attorney or Kentucky's child support enforcement office to explore modification options. Bring documentation of income changes.

Kentucky Resources for Modification:

• Kentucky Court of Justice – Family Court Self-Help Center: https://kycourts.gov/
• Cabinet for Health and Family Services – Child Support Modification Request: https://chfs.ky.gov/agencies/dfcyf/dcs
• Legal Aid of the Bluegrass (free legal assistance for eligible Kentuckians): https://www.legalaidky.org/

3. Focus on FHA or Government Loans

If your DTI is tight due to child support, FHA, VA, or USDA loans typically offer more flexibility than conventional (Fannie Mae) loans. These programs were designed to help borrowers who might not qualify under strict conventional guidelines.

Action Item: Let's discuss which program fits your situation best. Call or text me at 502-905-3708 to explore your options.

4. Increase Your Income

If your household income is higher than currently documented, we can work to verify additional income sources: bonuses, overtime, self-employment income, rental income, or spousal income. Higher income directly improves your DTI ratio.

Action Item: Gather documentation of all income sources for the past 2 years (tax returns, pay stubs, 1099s).

5. Reduce Other Debts

Even before your mortgage application, paying down credit card balances, auto loans, or personal loans will lower your overall DTI and improve your approval chances.

Action Item: Create a plan to eliminate smaller debts. Every $100 in monthly debt reduction helps your DTI.

6. Down Payment Assistance with KHC

Through Kentucky Housing Corporation (KHC) programs, first-time homebuyers can access down payment assistance grants and favorable loan terms. While child support still counts toward DTI, KHC programs often work with borrowers who have complex financial situations.

Action Item: Ask me about KHC programs and whether you qualify for down payment assistance. This can reduce your loan amount and improve your approval odds.

Real-World Example: Sarah's Story

How One Kentucky Teacher Achieved Homeownership Despite Child Support

Sarah, a Kentucky schoolteacher and first-time homebuyer, was paying $350 per month in child support from a previous marriage. Her income was solid at $48,000 annually, but the child support obligation was pushing her DTI above conventional lending limits.

Here's what we did:

1. Reviewed her complete financial picture and determined she was a strong candidate for an FHA loan, which allowed a 50% DTI.
2. Verified her child support compliance with documentation from the court system.
3. Explored KHC down payment assistance, which reduced her needed down payment from 10% to 3%.
4. Combined these strategies with a co-signer (her sister), which improved her overall application.

Result: Sarah was approved for an FHA loan with a $130,000 mortgage at a competitive rate. She's now a homeowner—and her child support obligation didn't stop her.

Frequently Asked Questions

Q: Will child support show up on my credit report?

A: Only if you've missed payments. Current, on-time child support doesn't typically appear on your credit report, but lenders verify your status as part of the application process.

Q: Can I hide child support obligations from my lender?

A: No. Lenders will discover this through credit reports, background checks, and direct verification with court systems. Being upfront from the start is always better.

Q: What if I'm currently in a modification process?

A: Most lenders will want to see a finalized new order before approving your application. If you're in the process, let's discuss timing with your application.

Q: Does child support affect refinancing the same way?

A: Yes. If you're refinancing an existing mortgage, child support obligations are evaluated just like in a purchase scenario.

Q: What if my ex isn't paying and I'm owed child support?

A: Unfortunately, child support owed to you doesn't directly help your mortgage application, though it might support a modification argument to reduce your own obligations.

Your Next Steps

If you're a Kentucky first-time homebuyer with child support obligations, don't assume you can't qualify for a mortgage. Thousands of Kentuckians in similar situations have successfully purchased homes through FHA, VA, USDA, and Fannie Mae programs.

Here's what I recommend:

1. Get organized: Gather your last 2 months of child support payment records and court documentation showing your current status.
2. Schedule a free consultation: Call or text me at 502-905-3708 to discuss your specific situation. There's no obligation—I just want to understand your circumstances.
3. Explore your programs: Based on your situation, we'll determine which loan program offers the best path forward.
4. Start your free application: Once we've discussed your options, apply for free through my secure portal. You could have a same-day pre-approval.

Remember, your past financial challenges don't define your future as a homeowner. With over 20 years of experience helping Kentucky families achieve homeownership, I've worked with borrowers facing all kinds of financial complexities—including child support obligations. Let's find the right loan program for you.

Questions? Ready to Get Started?

📧 Email: kentuckyloan@gmail.com

📞 Call/Text: 502-905-3708

🌐 Verify Licensing: www.nmlsconsumeraccess.org

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Joel Lobb
Mortgage Loan Officer – Kentucky Mortgage Specialist
NMLS Personal ID: 57916 | Company NMLS ID: 1738461
Equal Housing Lender

IMPORTANT DISCLAIMERS & COMPLIANCE NOTICE:

Educational Content: This blog post is educational content provided by Joel Lobb, a Mortgage Loan Officer licensed in Kentucky. It is not legal advice or a guarantee of mortgage approval. Mortgage eligibility and approval depend on individual financial circumstances, credit history, employment verification, property appraisal, and underwriting requirements.

Independent Platform: This website is not endorsed by or affiliated with the Federal Housing Administration (FHA), Department of Veterans Affairs (VA), United States Department of Agriculture (USDA), Kentucky Housing Corporation (KHC), Fannie Mae, or any government agency. It is an independent educational platform created to provide information and guidance to Kentucky homebuyers.

Subject to Change: Loan programs and requirements are subject to change without notice. Child support obligations, judgments, and payment history are evaluated on a case-by-case basis by individual lenders and may affect mortgage eligibility differently depending on the program and circumstances.

Professional Consultation Recommended: If you're experiencing financial hardship, legal issues related to child support, or have concerns about your eligibility, please consult with a qualified family law attorney, financial advisor, or mortgage professional before taking any action.

Equal Housing Lender. NMLS Personal ID: 57916 | Company NMLS ID: 1738461

© 2025 Joel Lobb | Mortgage Loan Officer | Equal Housing Lender

This content is provided for educational purposes only. Not affiliated with FHA, VA, USDA, KHC, or Fannie Mae.

FHA loans are a popular option for Kentucky home buyers' with bad credit

FHA loans remain a top choice for Kentucky homebuyers with less-than-perfect credit 

Credit score:

* The minimum credit score for an FHA loan in Kentucky is 500 to 580 depending on your credit score and down    payment. However, some lenders may accept scores as low as 500 with a larger down payment (10% instead of 3.5%).

Debt-to-income ratio:

* Your debt-to-income ratio (DTI) is your monthly debt payments divided by your gross monthly income. Most lenders prefer a DTI below 50%, but some may allow up to 56.9%.

Down payment:

* The minimum down payment for an FHA loan is 3.5% of the purchase price.

Employment and income:

* You'll need to have steady employment for at least two years and sufficient income to cover your monthly mortgage payment.

* You'll also need to meet other requirements, such as having a valid Social Security number and homeowner's insurance.

If you have bad credit and are considering an FHA loan in Kentucky, it's important to shop around and compare rates from different lenders. You may also want to consider talking to a credit counselor to help improve your credit score before you apply.

Joel Lobb 

 Email - kentuckyloan@gmail.com 

 Call/Text - 502-905-3708

 www.mylouisvillekentuckymortgage.com
 911 Barret Ave., Louisville, KY 40204

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Evo Mortgage
Company NMLS# 1738461
Personal NMLS# 57916

Kentucky Mortgage Loan Expert For Kentucky FHA, VA, USDA, Fannie Mae and KHC Down payment Assistance Loans

KENTUCKY FHA LOAN CREDIT SCORE REQUIREMENTS

What credit score do I need to qualify for Kentucky FHA loan is one of the most common questions lenders hear. The short answer is you must have a minimum credit score of 500 to be eligible for an Kentucky FHA loan. Higher scores will get you better terms and a smaller down payment requirement. Anything lower than 500 disqualifies you from consideration for an Kentucky FHA loan.

There are two sets of credit score requirements.

One important thing to understand is that the Federal Housing Administration (FHA) does not lend money directly to home buyers. You will fill out an application with a regular lender just as you would if you were applying for any other type of mortgage. What the FHA does is ensure your loan to help protect the lender in case you default. You will be required not only to meet the FHA guidelines to qualify for a loan but also meet any additional qualifications required by the lender. This means there are two sets of requirements you have to meet with your credit score.

1. The first set of requirements comes from the Department of Housing and Urban Development (HUD). HUD oversees the FHA and determines what a borrower’s minimum eligibility requirements will be to obtain an FHA loan.

2. The second set of requirements comes from the mortgage lender. The mortgage lender has the right to add its requirements to those mandated by HUD.

What HUD requires of borrowers to be eligible for an FHA loan

The HUD Handbook 4000.1 includes the official guidelines when it comes to the FHA mortgage insurance program.

It states that in 2020 the borrowers with credit scores of 580 or higher are eligible for a 96.5% loan with 3.5% down.

Borrowers with credit scores from 500 to 579 are eligible for a 90% loan with 10% down.

Individuals with credit scores below 500 are not eligible for the FHA program.

What lenders may require of borrowers to be eligible for an FHA loan


Lenders have the right to add requirements over and above the minimum requirements of HUD. These additional requirements are called overlays. Your lender may or may not require them. This is not something that should come as a surprise to you, however. Requiring a credit score of 580 to 620 is not unusual. In addition to your credit score, you must have a manageable debt level that lenders are comfortable with and enough income to repay your loan.

What credit score do I need to qualify for FHA loan?


These percentages show that the majority of borrowers who successfully qualify for FHA loans fall into the 600 to 799 range. While it is true that some successfully qualify in the low range of 500 to 599, you have a much better chance of being approved for a loan with good terms and a low down payment if you fall into the higher range.

Joel Lobb 

 Email - kentuckyloan@gmail.com 

 Call/Text - 502-905-3708

 www.mylouisvillekentuckymortgage.com
 911 Barret Ave., Louisville, KY 40204

---

Evo Mortgage
Company NMLS# 1738461
Personal NMLS# 57916

Kentucky Mortgage Loan Expert For Kentucky FHA, VA, USDA, Fannie Mae and KHC Down payment Assistance Loans

Got Disputes on Your Credit Report? Read This Before Applying for an FHA Loan!

FHA Loan Rules on Disputed Accounts (Updated 2025)

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

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
• Which disputes don't count against you
• Exactly what to do before you apply

What Counts as a Disputed Derogatory Account?

FHA defines disputed derogatory accounts as negative items on your credit report that you're actively disputing. These typically include:

• Collections accounts (unpaid debts sold to collection agencies)
• Charge-offs (accounts creditors wrote off as uncollectible)
• Recent late payments (30+ days late in the last 24 months)

Accounts That DON'T Count (Good News!)

Not all disputed accounts hurt your FHA approval. These are safe:

• Medical collections (always excluded, even if disputed)
• Zero-balance accounts (paid off or settled)
• Non-derogatory disputes (minor errors on good accounts)

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

Even if an automated system gives you a conditional approval, this rule overrides it.

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):

Scenario	FHA Rule	What You Should Do
Medical collection disputes	Exempt—don't count	Keep as-is, no action needed
Collections or charge-offs < $1,000 total	No manual underwriting required	Proceed with application
Collections or charge-offs ≥ $1,000 total	Manual underwriting required	Remove or resolve disputes before applying
Identity theft disputes	Can be excluded with documentation	Provide police report or FTC affidavit
Disputes older than 24 months	May not count toward threshold	Discuss with your loan officer
Zero-balance or settled accounts	No action required	Apply normally
Current accounts (never late)	Not derogatory—exempt	No impact on approval

How to Protect Your FHA Approval: Step-by-Step

1Pull All Three Credit Reports

Request free reports from annualcreditreport.com (the only official site). Equifax, Experian, and TransUnion often show different information.

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:

Mistake #1: Removing Disputes Without Professional Guidance

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.

Mistake #3: Thinking Medical Disputes Must Be Removed

Medical collections are exempt from FHA's $1,000 rule. Leave them alone—there's no benefit to removing them, and it just wastes your time.

Mistake #4: Underestimating Lender Overlays

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.

Mistake #5: Applying Too Soon After Removing Disputes

Give your credit report time to update (30-45 days minimum). Applying immediately after removing disputes looks suspicious to underwriters.

Frequently Asked Questions

Q: Can I keep medical collections on my credit report?

A: Yes. FHA always excludes medical collections from the $1,000 threshold, even if disputed.

Q: What happens if I cross the $1,000 threshold?

A: Manual underwriting is required. This isn't a denial—it just means a human reviews your file instead of an automated system.

Q: Do I have to pay off all negative accounts to get FHA approved?

A: No. FHA doesn't require you to pay off old debt. You just need to manage disputes properly.

Q: I'm an identity theft victim—can I still get approved?

A: Yes. Provide documentation (police report, FTC affidavit) and FHA will exclude those accounts.

Q: Will my credit score drop if I remove disputes?

A: Likely yes (20-50 points typically). But your FHA approval odds improve significantly.

Q: Does this $1,000 rule apply to pre-approval?

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:

1. Pull your credit reports this week and identify any disputed accounts
2. Calculate your disputed derogatory total to understand where you stand
3. Schedule a free consultation with an experienced FHA loan officer to review your specific situation
4. 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.

Credentials: NMLS Personal ID: 57916 | Company NMLS ID: 1738461 | View NMLS Consumer Access

Equal Housing Lender

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.

Equal Housing Lender

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