- 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.
Kentucky Rural Housing USDA Implements Immediate Measures to Help Rural Housing Loan Program Affected by COVID-19
WASHINGTON, April 1, 2020 – USDA Rural Development has taken a number of immediate actions to help rural residents, businesses and communities affected by the COVID-19 outbreak. Rural Development will keep our customers, partners, and stakeholders continuously updated as more actions are taken to better serve rural America.
* Visit www.rd.usda.gov/coronavirus for information on Rural Development loan payment assistance, application deadline extensions, and more.
OPPORTUNITIES FOR IMMEDIATE RELIEF
* Rural Development Guaranteed Loan Programs
Effective immediately until September 30, 2020, lenders may offer 180-day loan payment deferrals without prior agency approval for Business and Industry Loan Guarantees, Rural Energy for America Program Loan Guarantees, Community Facilities Loan Guarantees, and Water and Waste Disposal Loan Guarantees. For additional information, see page 17721 of the March 31, 2020, Federal Register.
Rural Housing Service
Effective March 19, borrowers with USDA single-family housing Direct and Guaranteed loans are subject to a moratorium on foreclosure and eviction for a period of 60 days. This action applies to the initiation of foreclosures and evictions and to the completion of foreclosures and evictions in process.
Direct Loan Program:
• USDA has waived or relaxed certain parts of the application process for Single-Family Housing Direct Loans, including site assessments, and has extended the time period that certificates of eligibility are valid.
• A Direct Loan borrower who is experiencing a reduction of income by more than 10 percent can request a Payment Assistance package to see if he/she is eligible for payment assistance or for more assistance than currently received.
• Moratorium Assistance is available for Direct Loan borrowers experiencing medical bill expenses (not covered by insurance) or job loss because of COVID-19. Qualifying borrowers can receive a moratorium on house payments for a period of time, repaid at a later date.
• Direct Loan questions should be directed to USDA’s Customer Service Center at 800-414-1226 (7:00 a.m.-5:00 p.m. Eastern Time Monday-Friday) or https://www.rd.usda.gov/contact-us/loan-servicing. Call volume and wait times are high at this time.
Guaranteed Loan Program:
• Guaranteed Loan borrowers who are in default or facing imminent default due to a documented hardship can have payments reduced or suspended by their lender for a period not to exceed 12 months delinquency. Once the hardship is resolved, the lender can modify the loan to cure the delinquency or make up the missed payments based on the borrower’s individual circumstances.
•*USDA is granting lenders temporary exceptions pertaining to appraisals, repair inspections and income verification for the Single-Family Housing Guaranteed Loan Program (SFHGLP) due to theCOVID-19 pandemic. Effective immediately, the following exception sto Agency guidance found atHB-1-3555 are in effect for a period of 60-days.
*Residential Appraisal Reports–Existing Dwelling: For purchase and non-streamlined refinance transactions, when an appraiser is unable to complete an interior inspection of an existing dwelling due to concerns associated with the COVID-19 pandemic, an “Exterior-Only Inspection Residential Appraisal Report”, (FHLMC 2055/FNMA 2055) will be accepted. In such cases, appraisers are not required to certify that the property meets HUD HB 4000.1 standards. The appraisal must be completed in accordance with the Uniform Standards of Professional Practice (USPAP) and the Uniform Appraisal Dataset (UAD).This exception is not applicable to new construction properties or construction-to-permanent loans. As a reminder, appraisals are not required for streamlined and streamlined-assist refinance transactions.
*Repair Inspections–Existing Dwelling: For loans for which a completion certification is not available due to issues related to the COVID-19 pandemic, a letter signed by the borrower confirming that the work was completed is permitted. Lenders must also provide further evidence of completion, which may include photographs of the completed work, paid invoices indicating completion, occupancy permits or other substantially similar documentation. All completion documentation must be retained in the loan file. This exception is not applicable to rehabilitation and repair loans noted in section 12.28 of HB-1-3555.
*Verbal Verification of Employment: Lenders must document and verify the borrower’s annual and repayment income in accordance with Agency regulations. Lenders should use due diligence in obtaining the most recent income documentation to re-verify the borrower’s repayment ability prior to closing. When the lender is unable to obtain a Verbal Verification of Employment(VVOE)within 10 business days of loan closing due to a temporary closure of the borrower’s employment, alternatives should be explored. For example, email correspondence with the borrower’s employer is an acceptable alternative to a VVOE. If the lender is unable to obtain a VVOE or acceptable alternative, the requirement will be waived when the borrower has a minimum of two months cash reserves. In the case of a reduction of income, the borrower’s reduced income must be sufficient to support the new loan payment and other non-housing obligations. Borrowers with no income at the time of closing are not eligible for SFHGLP loans regardless of available cash reserves.
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
|$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.),
Senior Loan Officer
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/
2021 Kentucky Rural Development Mortgage Guide
- 30 year fixed rate only for Purchases and Existing USDA loans Refinances.
- Zero down Mortgage loan with no loan limits!
- Upfront funding fee is 1.0% and annual mi fee is .35% (very low compared to FHA)
- Typically cannot own other real estate. There are exceptions to this.
- You do not have to be a first-time home buyer in Kentucky
- Can refinance existing USDA loan as long as lowering rate by 1% and can do without an appraisal. There are overlays to this by lenders.
- Closing costs and prepaids can be paid by seller but must be put into contract
- Closing costs may be financed into the loan up to the appraised value.
- You will need two credit trade lines reporting at least for 12 months on your credit file. They don’t have to be open and active. Just reporting on your credit report.
- All Guaranteed Mortgage Loans are ran through GUS. GUS stands for the Guaranteed Underwriting System. USDA and their underwriters use this system to pre-approve you. They review credit score/history, income, debt to income ratio and assets to determine your loan eligibility. If your credit score is below 640 or your debt to income ratio is over 45%, it will get a refer and you will find most lenders will not approve the loan.
- Some lenders will do a credit score down to 600, but they will want a lot of documentation to overturn the refer and compensating factors for the lower credit score. They typically will need to verify rent for last 12 months, with no lates, cash payments are not acceptable, and debt to income ratios are set at 29% and 41% respectively. Reserves are typically helpful too on lower credit scores, so keep in that in mind, if you have money in a savings account, for a rainy day fund, this will help sometimes get the loan approved.
- If you have access to 20% down payment you cannot use the USDA Program. Money in a retirement account does not account toward the 20% rule.
- Properties must be located in an eligible area of Kentucky. Typically the large metro areas of Kentucky including the following: all of Jefferson County, all of Fayette County, Owensboro, Paducah, Hopkinsville, Bowling Green, Richmond, Frankfort and Northern KY cities of Covington, Florence, Erlanger, Beechwood, Richwood are not eligible
USDA Eligible Areas In Northern Kentucky for Boone, Kenton, Campbell, Grant Counties
- Highland Heights
- Cold Springs
- All Of Grant County, Pendleton County And Owen County
A property must be located in an eligible area in order to use a USDA loan to purchase a home. Contrary to belief, Rural Development loans are not only for farms or very rural homes.
Actually, a property with an operating and income producing farm is not eligible for these loans!
2021 Kentucky USDA Rural Max Income Limits:
- New Income limits for most counties (*) in Kentucky are $90,200 for a 4 unit household and household families of five or more + can make up to $119,200.
- The Northern Kentucky Counties (***) of Boon, Kenton, Campbell, Bracken, Gallatin, and Pendleton are $99,500 for a household of four or less and up to $129,400 for a family of five or more.
- With the new changes for 2019 USDA Income limits, the Jefferson County Louisville, KY Metro area (**) saw an increase of $90,200 for a family of four and up to $119,100 for a family of five or more. The metro area includes Oldham, Bullitt, Spencer, Hardin, Larue and Meade are including in these higher income limits for USDA loans.Remember, Jefferson County Kentucky, Fayette County Kentucky are not eligible for USDA loans.,Below is the website where you can check and make sure
Some More Facts about a Kentucky USDA loan:
It’s a two step approval process. The chosen USDA lender must first underwrite the file and get it approved based on the income, assets, and credit report submitted. Then, the lenders must submit to USDA for a “conditional commitment”. This conditional commitment is the final loan approval paperwork you are looking for.
Even though the lender may have approved the file, it still must go to USDA office in Lexington for an assignment to SFH underwriter for the final approval process. They typically are checking the appraisal and income at this stage. There have been instances where the lender would approve the file but USDA would not due to appraisal issues or income and job history.
This is very rare instances, so keep that in mind when it comes to final loan approval.
This two-step approval process usually adds 4-6 days to the final loan approval process, so keep that in mind when you are writing up your contract because it takes a little longer to close these loans vs FHA, VA, and Fannie Mae loans.
Well Test Treatments: Properties with a well as the primary drinking source will require a well water test. There are local labs to perform this test and the water must pass.
Septic Test: Sometimes they will require the septic tank to be inspected if called for in the appraisal report or home inspection.
Older Homes: As a general rule, USDA does not like homes older than 100 years old. They will sometimes require a home inspection in addition to the mandatory appraisal on older homes.
USDA Loan After a Short Sale: A short sale is not the end of the world. So it is very possible to obtain a USDA loan if 3 years have passed after the short sale. But a buyer would need re-established good rent and other credit history.
Bankruptcy and Foreclosure: If the mortgage debt that was foreclosed, was included in a Bankruptcy – then the USDA Home Loan waiting periods after foreclosure “waiting period” of 3 years, starts from the date of the discharge of the Bankruptcy. Because it can take 6 months or more for Banks to process the Foreclosure, and transfer title, this is a tremendous plus.
- Fixed Payment Loans: A permanent amortized, fixed payment may be used when it can be documented that the payment is fixed, the interest rate is fixed, and the repayment term is fixed.
- Non-Fixed Payment Loans (i.e. deferred, income based, graduated, adjustable, etc.): The payment should be calculated as the greater of 0.5% of the loan balance or the actual payment reflected on the credit report. No additional documentation is required.