Kentucky Rural Housing USDA Guidelines 2011

Kentucky Rural Housing USDA Guidelines 2011.



Kentucky Rural Housing USDA Guidelines 2011



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Kentucky Rural Housing USDA  Guidelines 2011
Property Eligibility (GRH Purchase Transactions Only)
• In order for a property to be eligible for a Kentucky Rural Development guaranteed

loan, the property must be located in a rural designated area as defined in Rural Development Instruction §1980.312. You may view eligible areas on USDA Rural Development’s web-site at:

• Property must be a nonfarm, non-income providing tract.
• According to Rural Development Instruction §1980.313 (e) “Generally,

the value of the site must not exceed 30 percent of the total value of the property. When the value of the site is typical for the area, as evidenced by the appraisal, and the site cannot be subdivided into two or more sites, the 30 percent limitation may be exceeded.”

Inspection requirements on Rural Development properties are as follows:
New Construction – If the Builder is providing a one-year warranty, the
following inspections are required:
Framing Inspection
Footing Inspection
Final Inspection
Thermal Certification
If a 10-year Builder Warranty is provided, only a Final Inspection and a
Thermal Certification are required

Existing properties must meet the current requirements of HUD Handbooks 4150.2 and 4905.1, typically verified through an RHS Adequacy Certification (Existing Dwelling Inspection Report), or by the appraiser certifying in the comments section of the appraisal that the property meets HUD Handbooks 4150.2 and 4905.1.

Required Repairs/Escrow Agreements

When repairs are required for structural or mechanical deficiencies that exceed the Seller’s contractual obligation, can assist borrowers.  allows the ability to finance required improvements based on an “as improved” appraised value, in combination with an escrow hold-back at closing.

Unless the deficiency is a significant item that negatively impacts the safety or livability of the dwelling, loan closing need not be delayed. For those deficiencies that can be corrected post-closing, Chase will require, in addition to our standard closing items:

A corrected FNMA 1003 (Uniform Residential Loan Application) with the amount of financed improvements listed under the “Repairs” Section.

Estimates/contracts for all repairs financed with loan proceeds.
A -approved escrow hold-back agreement signed by buyer and
seller at closing.
A collection of one and one-half times of the estimated repair cost
retained at closing to be disbursed by the settlement agent.
Final inspection of required repairs will be required.

Rural Development requires all repairs to be completed prior to their issuance of the final Loan Note Guarantee (Rural Development Form 1980- 17). However, external repairs delayed by weather related issues must be completed within 120 days of loan closing as outlined inKentucky Rural Housing USDA  Rural Development Instruction §1980.315 – Escrow accounts for exterior development


RURAL HOUSING Kentucky Rural Housing USDA
Borrowers who are not commissioned, but need to
validate their expenses.
Part-Time – Part-time or second job income with duration of 24 months
may be used.
Overtime and Bonus Income – Overtime and bonus income can be

used to qualify the applicant if the employer verifies that the applicant has received it during the last 24 months and indicates that the overtime or bonus income will in all probability continue. The lender must develop an average of the last 24 months overtime and bonus income to determine the amount of income that can be considered in evaluating the borrower’s qualifications.

Self-Employed Income – Two (2) previous years 1040′s are required.

They must be signed and certified by the applicant. Additionally, a year-to-date Profit & Loss Statement with Balance Sheet, prepared and signed, must be submitted. If the applicant has 25 percent or more ownership interest in any business entity, the applicant must also provide the most recent two (2) years’ business tax returns (Corporate, Sub-S Corporate, or Partnership) along with a current Profit and Loss Statement with a Balance Sheet prepared and signed by an accountant.

Alimony, Child Support, and Separate Maintenance – Chase

requires documentation that child support, alimony, or separate maintenance will continue for three (3) years after the date of the mortgage application or it will not be considered as income. The borrower must also provide evidence that the funds have been received for the last 12 months. Acceptable evidence includes deposit slips, canceled checks, court records, or tax returns.

Retirement Income – Retirement income, i.e., pensions, annuities,

401K distribution, etc., may be verified by letters from the organizations providing the income, copies of the retirement award letters (with photocopies of canceled checks attached), tax returns, or IRS W-2 forms. This evidence must confirm a continuation of this income for a minimum of three (3) years.


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