I am a Kentucky based USDA Mortgage Lender that has originated over 200 KY Rural Housing Mortgage Loans in Kentucky, Put my expert advice to use. Kentucky Rural Development RHS loans give KY Rural Homebuyers a zero down mortgage loan with a low 30 year fixed rate loan. A Local Kentucky Rural Housing Mortgage Lender offering same day free approvals and credit report. This website is not affiliated with USDA or any other government agency. NMLS#57916 Equal Housing Lender Text or call today 502-905-3708 with your mortgage questions about USDA Rural Housing Loans in Kentucky. Free Pre-Approvals on most applications within the same day. Kentuckyloan@gmail.com NMLS# 57916 Joel Lobb Loan Originator, American Mortgage Solutions NMLS ID. 1364 Equal Housing Lender
Here are the most common loan programs and their general guidelines on credit scores:
FHA Loans in Kentucky
FHA mortgage loans are issued by federally qualified lenders and insured by the U.S. Federal Housing Authority, a division of the U.S. Department of Housing and Urban Development. These loans are an attractive option for many borrowers, not just first-time homeowners.
FHA loans are available to borrowers with credit scores as low as 500. Borrowers with scores under 580 will need to have a 10% down payment.
VA Loans In Kentucky
VA Loans are designed to offer long-term financing to American Veterans. These loans are issued by federally qualified lenders and are guaranteed by the United States Veterans Administration. The Veterans Administration determines eligibility and issues a certificate to qualifying applicants to submit to their mortgage lender of choice.
The Veterans Administration does not set a minimum credit score; however, lenders do impose their own limits. Some lenders will go down to a 500 credit score and will also do loans for borrowers without a credit score.
Conventional Loans In Kentucky
Conventional loans are mortgage loans offered by private lenders that are not guaranteed or insured by a government agency. These loans may also be referred to as conforming loans.
Conventional loans are available to borrowers with credit scores as low as 620.
USDA Loans in Kentucky
The United States Department of Agriculture offers a home loan program designed to help individuals living in small towns or rural areas. This loan program is designed to help qualifying applicants, who may not be able to qualify for other types of mortgage loans, purchase homes as their primary residences.
USDA Guaranteed loans are available to borrowers with credit scores as low as 581 and borrowers with no credit scores.
A note for Borrowers with No and Low Credit Scores
While it’s not impossible to qualify for a home loan with a low credit score or no credit score, it does make it harder to qualify. If you have a low credit score or you do not have a credit score, lenders will look more critically at other risk factors that you may have. This includes recent late payments, collection accounts, the amount of funds you have saved up, employment history and the time at your current job, etc.
If you do not have a credit score, it means that the credit bureaus do not have enough information about you to give you a score. While there are some options available to borrowers without a credit score, most lenders will require that you provide proof of payment history on “alternative trade lines”. These are lines of credit or utilities that do not report to the credit bureaus, such as rent, cell phone, electric, cable/internet, car insurance, etc. Acceptable “alternative trade line” accounts must meet certain criteria. The account must be in your name, it must be 12 months old, every payment must have been made on time every single month, and proof of payment must be provided on the creditor’s letterhead.
GETTING APPROVED WITH LOW OR NO CREDIT SCORES
You are more likely to be approved with low or no credit scores if you:
Make a larger down payment than is required.
Have sufficient reserves in checking and/or savings accounts.
Have low debt-to-income ratios, which is the percentage of your income that needs to be used towards paying your proposed mortgage and other lines of credit such as auto loans, student loans, credit cards, etc. Paying down existing debt will improve your debt-to-income ratio.
The best part about credit scores is that they aren’t set in stone! It’s never too late start working on improving your credit. If our team can’t pre-approve you today, we’ll come up with a custom plan to help you get to where you need to be. There’s nothing to lose, so apply today!
I can answer your questions and usually get you pre-approved the same day. Call or Text me at 502-905-3708 with your mortgage questions.
A Kentucky USDA home loan is a zero-dollar-down mortgage option provided by USDA’s Department of Rural Development.
This government-backed loan program comes in two types: direct loan, which is reserved for lower-income households and issued by USDA, and the guaranteed loan, which is reserved for low- to moderate-income families. The guaranteed loan is funded by private lenders, and USDA guarantees a portion of the loan against default.
The KY USDA home loan program is generally more beneficial to rural families than a conventional lending program, particularly for first-time homebuyers with lower- to median-level incomes.
Some of the benefits of Kentucky Rural Housing USDA loans include: • zero down payment • competitive interest rates • lower-than-average monthly mortgage insurance • relaxed credit requirements versus conventional loans
• no loan limits
How do I determine eligibility for a Kentucky Rural Housing USDA loan? To be eligible for a USDA home loan, borrowers must meet the program’s basic eligibility requirements. These requirements are relaxed compared to other mortgage options and are in place to ensure borrowers can make their monthly mortgage payments.
Here are a few of the basic Kentucky RHS USDA eligibility requirements:
• Income. Applicants must not have annual adjusted income greater than 115% of the median household income for the area. Check your county’s USDA income limit. This called compliance income.
• Credit. USDA’s guaranteed underwriting credit requirements. However, most lenders will want a 620 or preferably to get an Automated Approval 640 is the magic number in most cases. With regards to bankruptcy, 3 years is usually the date needed to lapse since your discharge. They actually require no minimum score but no lenders that I know of will do a no score loan.
• Employment. Applicants must have proof of two years of stable income and employment.
: Income: They will take your gross monthly income and develop two ratios for you: The front end ratio, which is called your housing ratio, and then the back-end ratio or total debt ratio is the house payment plus the total monthly payments listed on the credit report. If you pay child support, this is included in the qualifying ratios but utility bills, car insurance, cell phone bills, water bills etc, is not included. Typically 28% is used for the housing ratio, and
Student Loans: They are pretty tough on student loans and qualifying with your current student loan debts. They will make us use 1% of your outstanding balance on student loans, so sometimes this will cause the loan to get denied because your debt to income ratio is too high. If they are in an Income-Based repayment plan they will still make us use the .5% balance so keep this in mind. For example, let’s say you owe $50k in outstanding student loans, and your IBR plan calls for a $50 monthly payment. RHS will make us use $250, not the $50 IBR payment so you can see where this will cause issue on higher debt to income ratios on some loans.**********
If you are a Kentucky USDA Mortgage applicant who has student loan calculations will be changed to the following 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.
• Property location. Homes must be located within a rural area, as defined by USDA. Rural areas are any that have a population less than 35,000 depending on the area’s designation. Use this tool from USDA to determine if a specific address is eligible.
• Physical property. Homes must be the borrower’s primary residence, have direct access to a street, and have adequate utilities and water and wastewater disposal, among other things No working fams allowed or properties that income producing livestock or crops.
For those with lower incomes, a USDA direct loan provides greater opportunities for lending, as its credit and income requirements are more lax than the guaranteed loan option.
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/
Here are a few reminders about the Kentucky USDA Rural Housing Service (RHS) Section 502 Guaranteed program which provides very-low-, low- and moderate-income rural residents access to affordable housing finance options with little or no down payment or out-of-pocket costs.
• Eligibility Link – Access the USDA Home page, click here.
• Income – To determine eligibility of an applicant/household, click here.
• Property Eligibility – To determine whether the property is located in a designated rural area, click here.s
30 year fixed rate loan terms only, Purchase or refinance, If refinancing must be existing USDA home loan. No cash out allowed.
• Occupancy – Owner occupied only.
• Maximum Loan Amount-No max loan amount
• Max DTI – GUS approved, generally 45% (front end sensitive)/ Manual 29/41.
• Guaranty Fee/Annual Fee – there is a 1.00%/ 0.35% (monthly).
• Down Payment – Down payment not required but if any cash to close, must be borrowers own funds. Gifts are not allowed.
• Interested Third Party Contributions – An amount of 6% of the sales price can be contributed towards closing costs.
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If you meet income eligibility requirements and are looking to settle in a rural area, you might qualify for the KY USDA Rural Housing program. The program guarantees qualifying loans, reducing lenders’ risk and encouraging them to offer buyers 100% loans. That means Kentucky home buyers don’t have to put any money down, and even the “upfront fee” (a closing cost for this type of loan) can be rolled into the financing.
Fico scores usually wanted for this program center around 620 range, with most lenders wanting a 640 score so they can obtain an automated approval through GUS. GUS stands for the Guaranteed Underwriting system, and it will dictate your max loan pre-approval based on your income, credit scores, debt to income ratio and assets.
CREDIT SCORES UNDERWRITING USDA MORTGAGE FOR RURAL HOUSING
This attachment illustrates the approach to reviewing credit history when a loan is
manually underwritten by an approved lender. Credit score over 680: Perform a basic level of underwriting to confirm the
applicant has an acceptable credit reputation. Perform additional analysis if the
applicant’s credit history has indicators of unacceptable credit as noted in Paragraph 10.7 of this Chapter. Credit score 679 to 640: Perform a comprehensive level of underwriting.
Underwrite all aspects of the applicant’s credit history to establish the applicant has an
acceptable credit reputation. Credit scores in this range indicate the applicant’s
reputation is uncertain and will require a thorough analysis by the underwriter of the
credit to draw a logical conclusion about the applicant’s commitment to making
payments on the new mortgage obligation. The applicant’s credit history should
demonstrate his or her past willingness and ability to meet credit obligations. Credit score less than 640: Perform a cautious level of underwriting. Perform a
detailed review of all aspects of the applicant’s credit history to establish the applicant’s
willingness to repay and ability to manage obligations as agreed. Unless there are
extenuating circumstances documented in accordance with this Chapter, a credit score in this range is generally viewed as a strong indication that the applicant does not have an acceptable credit reputation. Little or no credit history: The lack of credit history on the credit report may be
mitigated if the applicant can document a willingness to pay recurring debts through
other acceptable means such as third party verifications or cancelled checks. Due to
impartiality issues, third party verifications from relatives of household members are not
permissible. Lenders can develop a Non-Traditional Credit Report for applicants who
do not have a credit score in accordance with Paragraph 10.6 of this Chapter.
An applicant with an outstanding judgment obtained by the United States in a
Federal court, other than the United States Tax Court, is not eligible for a guarantee
unless otherwise stated in this Chapter.They also allow for a manual underwrite, which states that the max house payment ratios are set at 29% and 41% respectively of your income.
See link here for more detailed guidelines for credit score, disputed accounts, foreclosures, trade line requirements bankruptcies below:
Indicators of unacceptable credit. The following indicators require documentation
meeting the criteria of Section 10.8 to approve an applicant’s loan request for manually
underwritten loans: Foreclosure and Bankruptcy Guidelines
Foreclosure within 3 years:
Including pre-foreclosure activity, such as a pre-foreclosure sale or short sale
in the previous 3 years (refer to Attachment 10-B for additional guidance);
Bankruptcy within 3 years:
Chapter 7 bankruptcy discharged in the previous 3 years;
An elapsed period of less than 3 years, but not less than 12 months, may
be acceptable if the applicant meets the criteria of Section 10.8 of this
Chapter.
Chapter 13 bankruptcy that has yet to complete repayment (repayment plan in
progress) or has completed payment in the most recent 12 months.
Plans that are completed for 12 months or greater do not require a credit
exception in accordance with Section 10.8;
Late mortgage payments if any mortgage trade line during the most recent 12
months shows 1 or more late payments of greater than 30 days
Collections Accounts
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In an effort to minimize future risk of open collections left unpaid, the lender will
consider the following during the capacity analysis of the loan request, regardless of the
method utilized to underwrite:
1) Determine if the total outstanding balance of all collections accounts of all
applicants is equal to or greater than $2,000. Unless excluded by state law,
collection accounts of a non-purchasing spouse in a community property state are
included in the cumulative balance of all collections.
2) Remove all medical collections and all types of charge off accounts from the total
balance. Medical collections and charge off accounts must be clearly identifiable
on the credit report.
3) If the remaining outstanding balance of collection accounts are equal to or greater
than $2,000, any of the following actions will apply:
a. Payment in full of all collection accounts at or prior to closing.
b. Payment arrangements are made with each creditor for each collection
account remaining outstanding. A letter from the creditor or evidence on
the credit report is required to validate the payment arrangements. The
agreed upon monthly payment for each outstanding collection account
will be included in the borrower’s debt-to-income ratio.
c. In the absence of a payment arrangement, the lender will utilize in the
debt-to-income ratio a calculated monthly payment. For each collection
utilize 5% of the outstanding balance to represent the monthly payment.
They loan requires no down payment, and the current mortgage insurance is 1% upfront, called a funding fee, and .35% annually for the monthly mi payment. Since they recently reduced their mi requirements, USDA is one of the best options out there for home buyers looking to buy in a rural area.
A rural area typically will be any area outside the major cities of Louisville, Lexington, Paducah, Bowling Green, Richmond, Frankfort, and parts of Northern Kentucky.
There is also a max household income limits with most cutoff starting at $87,000 for a family of four, and up to $115,000 for a family of five or more.
Kentucky FHA, VA, USDA & Rural Housing, KHC and Fannie Mae mortgage loans.
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/
— Some products and services may not be available in all states. Credit and collateral are subject to approval. Terms and conditions apply. This is not a commitment to lend. Programs, rates, terms and conditions are subject to change without notice. The content in this marketing advertisement has not been approved, reviewed, sponsored or endorsed by any department or government agency. Rates are subject to change and are subject to borrower(s) qualification.
The total household income must be within the county limits for household size. Typically a family household of 4 can make up to around $75,650 and a family of five or more can make up to $99,850 for a household- Some KY counties allow for higher like Shelby County, and the Northern Kentucky Counties of Boone, Kenton, Campbell allow $82,000 (household income of four) up to $108,250 (household income of five or more)
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.
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). Mortgage loans only offered in Kentucky.
All loans and lines are subject to credit approval, verification, and collateral evaluation and are originated by lender. Products and interest rates are subject to change without notice. Manufactured and mobile homes are not eligible as collateral.
Kentucky USDA Mortgage Lender for Rural Housing Loans 