- Annual Qualifying Income – The requirement for calculations to be included on the Income Calculation worksheet have been removed and should now be included on Attachment 9-B, the underwriter transmittal summary, FNMA form 1008/Freddie form 1077, or equivalent
- 4506-T – The requirement for asset statements to be reviewed to ensure borrowers have no additional income sources has been removed.
- Repayment Income – MCC income must now be included in repayment income.
- Boarder Income – USDA now considers a boarder as a household member and a boarder’s income must now be included in annual income calculation. Rent paid by boarders that is reported on tax returns must also be included in annual income.
- Capital Gains – USDA removed requirement from Repayment Income to provide evidence showing borrowers own additional property or assets that may be sold if additional income is needed to support the mortgage obligation
- Commission – The borrower must now show one year history in same or similar line of work to include commission in repayment income.
- Fellowship, Stipend, Scholarship – Scholarship award letters must now provide date of termination and USDA will no longer presume benefits with no expiration date will continue. USDA also added guidelines for GI Bill income and stated it cannot be included in annual or repayment income.
- MCC – This income must now be included in repayment income, but no history is required. A copy of the W-4 from employer is required to verify borrower is taking tax credit on monthly basis. Note: MCC’s are ineligible with FWL as qualifying income.
- Unreimbursed Business Income – only taxable income is allowed to be included in repayment income
- Section 8 – USDA removed requirement for section 8 income to be deducted from the monthly PITI to determine DTI if it is paid directly to the loan servicer when included in the repayment income.
- Self Employed Income – Federal tax returns must now be reviewed to determine gross income for annual calculations. Removed requirement to deduct business loss before entering as repayment income into GUS or on loan application. Clarified documentation requirements as most recent 2 years of federal tax returns / transcripts & YTD P&L may be audited or unaudited
- Social Security Income – clarified documentation options and will allow social security benefit statement or form SSA-1099/1042S to source
- Temporary Leave – The history requirements for repayment income has been changed and now income must be received by loan closing.
- Cash on Hand – The underwriter must review the reasonableness of accumulation based upon income stream, spending habits, etc. and cash on hand can no longer be included in reserves
- Gift Funds – Clarification provided on how gift funds must be sourced when gift funds have been deposited into borrower’s account, not deposited into borrower’s account, or if funds are being wired directly to the settlement agent.
- Large Deposits – USDA no longer addresses lump sum additions.
Category: 100% Financing Zero Down
Kentucky USDA Rural Development Loan Program:
The following is a list of the “nuts and bolts” of the Kentucky USDA Rural Development Loan Program:
- The house has to be located in a Kentucky USDA Rural Development Loan Program: area designated as an USDA eligible area.
- To determine the USDA approved designated areas, reference the following USDA map instructions:
- Go the USDA Rural Development Website
- On the top left hand side, click “Single Family Housing Guaranteed”
- Click “Accept”
- Enter the property address to determine if a specific house or general area is located in an USDA eligible area
- The household income must be moderate as determined by USDA. The USDA Loan evaluates household income, which includes the combined income of all adults living in the household; even if they are not on the mortgage loan. Click here to determine your household income eligibility.
- If it appears that the household income exceeds the moderate income thresholds established by USDA, do not throw in the towel just yet. USDA allows for deductions for child care and medical expenses as well as for children, students, and elderly members of the household that will be living in the USDA financed property.
- This is not a farmer’s loan. As a matter of fact, the property cannot have any income producing capabilities, and when the land value of the property exceeds 30% of the appraised value additional requirements must be met.
- The house has to be in fairly good condition. The appraisal type being utilized is an FHA appraisal, so make sure that there are not any safety related challenges(i.e. missing banisters, peeling paint, exposed electric).
- This is a true no money down loan program. Or stated differently, you do not need a down payment.
- While there is a monthly mortgage insurance premium (or prorated portion of an Annual Fee), the cost of the monthly mortgage insurance is 59% less than a comparable FHA Loan. This makes the USDA loan more affordable than an FHA Loan when analyzing down payment requirements and monthly mortgage payments.
- The seller can pay all closing costs and pre-paids (i.e. escrows). Often the home buyer’s only out-of-pocket cost as part of the purchase transaction is approximately $550 for the appraisal report.
- If the house appraises for more than the purchase price, the difference can be used to pay for closing costs and pre-paids (i.e. escrows). Only the USDA Loan program allows for closing costs to be rolled on top of the purchase price.
- USDA has no restriction on whether you are a first time home buyer or move-up home buyer.
- This loan program is only for primary residence (i.e. no second home or investment properties).
- You should not own any other functional property; although there are some circumstances under which USDA may waive this requirement.
- The preferred minimum credit score is 640. However, if you have a documented rent history, no late payments on your credit cards, and no new collections within the last 12 months, a credit score as low as 620 may be considered.
- All property types including single family homes, town homes, modular, and even condominiums qualify for this loan program. Manufacture homes such as single and doublewides constructed prior to January 1, 2006 do not qualify.
- There is no maximum mortgage amount, but the house does have to be considered moderate in a size
Income Requirements for a Kentucky USDA Rural Housing Loan.
Key reminders for income calculations: • Look at the date of employment, date the recent pay stub pays through, and the VOE. • Look for overtime, bonus, commission, or any additional income that should be counted and count it. • Make sure you are calculating your days correctly when averaging the income. • If there has been a recent increase in salary or hourly rate, use the higher salary or hourly rate when calculating the Annual Household Income. • #1 Reminder: Document your process. USDA reviewers look for Underwriter notes and any sort of explanation. It helps them to review a file faster if they don’t have to recreate what has already been done. Q. The applicant has a history of overtime, with a substantial amount received year to date; however, the VOE states the overtime is unlikely to continue. Do I need to include overtime in the annual income calculation? A. Annual income is calculated based on what is expected to be received in the ensuing 12 months. If there is a history of overtime, it would need to be considered by the underwriter when calculating annual income. Ultimately it is the approved lender’s responsibility to review the complete income history to determine what is expected to be received in the ensuing 12 months and to document the permanent loan file to support their lending decisions. Q. Does the IRS child tax credit need to be included in the annual income calculation? A. No, tax credits, including the Child Tax Credit are not included in the Annual income calculation. Q. Is per diem considered in annual income calculations? A. If the per diem is taxable income, then it must be included in annual income. If the per diem is non-taxable income, it is considered reimbursement and therefore not included in annual income. Q. The VOE states the applicant is expected to receive a 3% pay raise within the next 3 months. Do we have to count this expected increase in annual income? A. Annual income is calculated based on what is expected to be received in the ensuing 12 months, including bonus income, projected pay raises, etc. If a pay raise is expected within the next 12 months, it would need to be included in the annual income calculation. Q. We have a borrower that is divorced and has joint custody of a child that is only claimed on the tax returns as a dependent every other tax year. Can we consider this child a household member for the calculation of family size and income eligibility? A. Applicants with shared custody may include their children as household members and receive the $480 per child deduction.
Annual household income for Kentucky USDA Loans
All files must include an income calculation worksheet.
Lenders may document their income calculations on their own in-house income worksheet
Defines Annual Income as: Income from all household members who live or propose to live in the dwelling as their primary residence for all or part of the ensuing 12 months. Adjusted annual income is used to determine whether an applicant is income-eligible for a guaranteed loan, or interest assistance, if applicable.
Adjusted annual income provides for deductions to account for varying household circumstances and expenses.
USDA Home Loan in Kentucky Compared to FHA loans in Kentucky.
Why use USDA financing for your next home purchase in Kentucky?
There are very few ways to purchase a home these days in Kentucky without a typical 3.5% down payment that is required for an FHA loans in Kentucky. Many home buyers in Kentucky are surprised to find that a USDA Home Loan offers a lower payment than an FHA loan, even with NO DOWN PAYMENT! “How can this be?” you ask. The reason is because a Kentucky USDA home loan requires much lower MORTGAGE INSURANCE.
Kentucky FHA Loan vs. Kentucky USDA Loan Comparison
| FHA | USDA |
| $150,000 purchase price | $150,000 purchase price |
| 4.75% 30 year fixed rate | 4.75% fixed rate |
| 1.75% up front mortgage insurance (financed) | 1.0% Guarantee Fee (financed) |
| .85% month mi premium | .35% monthly mi premium |
| $871.19 P&I monthly payment with monthly mortgage insurance (not including taxes and insurance) |
$826.86 P&I monthly payment (not including taxes and insurance |
| $5250.00 required down payment | $0 down payment |
A rural housing USDA loan saved this client $46.74 per month and they made NO DOWN PAYMENT!
Other benefits of Kentucky USDA Home Loans
- Low up front closing costs
- In some cases closing costs can be financed if home appraises for more than purchase price
- Minor credit problems OK with a minimum credit score of 581***Most lenders will want a 620 or 640 score or higher.
- No maximum loan amounts just household income limits based on which Kentucky County you are buying a home.
- Fixed Rates Only for 30 years with no prepay penalty
A Kentucky USDA rural housing loan strive to find anyway possible to approve your loan, however there are some cases where a USDA Loan is not an option;
a previous bankruptcy must be discharged 3 years,
you must occupy the home being purchased as your primary residence,
the home may not be used for income producing purposes (farm, rental, etc.),
Joel Lobb (NMLS#57916)
Senior Loan Officer
Senior Loan Officer
American Mortgage Solutions, Inc.
10602 Timberwood Circle Suite 3
If you are an individual with disabilities who needs accommodation, or you are having difficulty using our website to apply for a loan, please contact us at 502-905-3708.
Disclaimer: No statement on this site is a commitment to make a loan. Loans are subject to borrower qualifications, including income, property evaluation, sufficient equity in the home to meet Loan-to-Value requirements, and final credit approval. Approvals are subject to underwriting guidelines, interest rates, and program guidelines and are subject to change without notice based on applicant’s eligibility and market conditions. Refinancing an existing loan may result in total finance charges being higher over the life of a loan. Reduction in payments may reflect a longer loan term. Terms of any loan may be subject to payment of points and fees by the applicant Equal Opportunity Lender. NMLS#57916http://www.nmlsconsumeraccess.org/
Kentucky USDA Guideline Changes for Income, Student Loans, and total debt ratios.
Updated HB-1-3555, Chapter 11, Ratio Analysis
The Single Family Housing Guaranteed Loan Program (SFHGLP) is pleased to announce revisions to technical HB-1-3555, Chapter 11, Ratio Analysis. An advance copy of the proposed changes was made available on July 20, 2021. These changes became effective upon the recent issuance of a Procedure Notice (PN). Below are the highlighted revisions:
Chapter 11- Ratio Analysis
11.2 B. The Total Debt Ratio:
- Student Loans: Removed the phrase “the greater of” from Non-Fixed payment loans and added guidance regarding “when the payment is above zero” and “when the payment is zero”.
- Revolving accounts: “with no outstanding balance” are not required to be closed.
- Mortgages: Rental Property – Eliminated language regarding omission of mortgage debt. Guidance for entry of rental income in GUS is provided in the GUS Lender User Guide under Section 4.1.4.1.1, Retained Investment Properties.
- Added: Debt management plans:
- Include the monthly payment amount due from the counseling plan.
- Refer to Chapter 10 for guidance on credit exception and documentation requirements.
11.3 DEBT RATIO WAIVERS AND COMPENSATING FACTORS
A. Purchase Transactions: Debt Ratio Waivers
- GUS Refer, Refer with Caution, and manually underwritten loans without GUS assistance:
- Added: “The lender must document eligible compensating factors to support a debt ratio waiver.”
- Added: “all” of the following conditions are met to the first paragraph.
- Debt Ratio Waiver Request and Agency Approval:
- Added: “The issuance of the Conditional Commitment for a Loan Note Guarantee represents Agency approval of the ratio waiver.”
B. Refinance Transactions: Debt Ratio Waivers
- Added a bullet: GUS files that receive a GUS recommendation of Refer, Refer with Caution, or are not supported by GUS, require debt ratio waivers, and supporting documentation must be submitted to the Agency.
- Added: “The issuance of the Conditional Commitment for a Loan Note Guarantee represents Agency approval of the ratio waiver”.
11.7 OBLIGATIONS NOT INCLUDED IN DEBT-TO-INCOME RATIOS
- Added: “unless a payment plan is in place” to the second bullet concerning Federal, state, and local taxes.
Joel Lobb
Mortgage Loan OfficerIndividual NMLS ID #57916
American Mortgage Solutions, Inc.10602 Timberwood Circle Louisville, KY 40223Company NMLS ID #1364
click here for directions to our office
Text/call: 502-905-3708fax: 502-327-9119
email: kentuckyloan@gmail.com
https://www.mylouisvillekentuckymortgage.com/
Kentucky USDA Mortgage Lender for Rural Housing Loans 