Kentucky Rural Housing Development Mortgage Guide for USDA Loans

Kentucky USDA Rural Housing Mortgage Lender

 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
  • Independence
  • Burlington
  • Hebron
  • Highland Heights
  • Walton
  • Alexandria
  • Cold Springs
  • All Of Grant County, Pendleton County And Owen County

Search for Kentucky USDA Eligible Properties 

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!


 Kentucky USDA Rural Max Income Limits:

  • New Income limits for most counties (*) in Kentucky are $103,200 for a  4 unit household and household families of five or more + can make up to  $136,000.
  • The Northern Kentucky Counties (***) of Boon, Kenton, Campbell, Bracken, Gallatin, and Pendleton are $109,500 for a household of four or less and up to $145,400 for a family of five or more.

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.

RHS Student Loans
Effective immediately for all RHS loans, 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.

As a reminder, annual income differs from repayment income. Annual income for the household will be used to calculate the adjusted annual household income to determine eligibility for a USDA-guaranteed loan. The main purpose of the following revisions in paragraph 9.3 is to ensure that lenders are aware that they are to calculate and properly document all adult household members’ income for annual income eligibility purposes…not just parties to the loan note.

It’s important to be aware of income sources that are counted and NOT counted as well as how to properly determine both “annual” and “repayment” income. I recommend that you thoroughly read Chapter 9 and refer to Attachment 9-A and Attachment 9-D in HB-1-3555 to review income and asset types, guidance for annual and repayment purposes, and documentation options acceptable to verify the income or asset source.

Paragraph 9.3 is being revised as follows:

  • To clarify that lenders must verify the income of each adult household member for the previous 2 years.
  • To clarify, under “full income documentation”, the lender must obtain W-2s or IRS Wage and Income transcripts in addition to paystubs.
  • To change the term “streamlined documentation” to “alternative income documentation” to remove confusion with the streamlined refinance product.
  • To clarify under “self-employed income documentation,” if ownership interest is less than 25%, neither the “Business Owner” nor “Self-Employed” options should be selected in GUS (Guaranteed Underwriting System).
  • To clarify the Verbal Verification of Employment must be obtained within 10 business days of loan closing, and confirmation a self-employment business remains operational must be obtained within 30 days of loan closing.
  • Restructured guidance on tax transcripts to emphasize a failure to timely file tax returns is not an eligible explanation to forgo obtaining tax transcripts.

Paragraph 9.8: STABLE AND DEPENDABLE INCOME

Gaps In Employment: The Agency clarifies that it is the lender’s responsibility to analyze any gaps in employment to make a final determination of stable and dependable income. The Agency does not impose specific criteria regarding when a gap in employment is acceptable. It is the approved lender’s responsibility to analyze the complete employment history to determine stable and dependable income.

Business loss from a closed business:

The Agency clarifies that any loss incurred by a self-employed business (full-time or part-time) that is closed may be removed from consideration when the applicant provides a letter of explanation and documentation to the lender which details:

  • When the business was closed;
  • Why the business was closed;
  • How the business was closed; and
  • Evidence satisfactory to the lender to support the closure of the business.

Attachment 9-A: INCOME AND DOCUMENTATION MATRIX

Considerations for Income Calculations: The Agency added additional considerations to the “Considerations for All Income Calculations” section of the matrix to provide important reminders to lenders regarding reviewing and calculating income. The full text of the revision is as follows:

  • Annual and adjusted annual income calculations must include all eligible income sources from all adult household members, not just parties to the loan note.
  • Annual income is calculated for the ensuing 12 months based on income verifications, documentation, and household composition.
  • Include only the first $480 of earned income from adult full-time students who are not the applicant, co-applicant, or spouse of an applicant in annual and adjusted annual income.
  • Income from assets that meet the criteria of Section 9.4 must be included in annual and adjusted annual income.
  • Repayment income calculations include the income sources of the applicants who will be parties to the note that meet the minimum required history identified in this matrix and have been determined to be stable and dependable income by the approved lender.
  • Income used in repayment income calculations must be confirmed to continue a minimum of three years into the mortgage. If the income is tax-exempt, it may be grossed up to 25 percent for repayment income. “Documentation Source Options” lists eligible documentation. Every item listed is not required unless otherwise stated. Lenders must obtain and maintain documentation in the loan file supporting the lender’s income calculations.

Automobile Allowance: Revised “Automobile Allowance” guidance to allow the full allowance to be included as repayment income and the full expense (debt) counted in DTI, as well as updating the required history to two years.

Comment: Previously, a 1-year history was required. The wording in this section is much better in that it clarifies the intent of the agency to allow for the automobile allowance to be counted as income and the debt associated with that income, if any (such as a car payment), counted in the DTI.  

Boarder Income: The Agency clarified that “Boarder Income” refers to rental income received from an individual renting space inside the dwelling, making the property income-producing and, therefore, ineligible.

Comment: This revision to attachment 9-A, “Boarder Income,” makes it clear that boarder income will render the property ineligible for a guaranteed loan. The previous guidance made it somewhat appear as if boarder income was acceptable. It’s not.

Bonus Income: Revised “Bonus” income to clarify the one-year history must be in the same or similar line of work.

Comment: This is a significant revision in that previously, the guidance made it appear the income had to be on the same job…not the same or similar line of work. This gives the lender greater flexibility in counting this type of income.

Child Support: Revised the “Child Support” guidelines to simplify the guidance and remove inconsistencies. The Agency stated that child support that meets the minimum history but the payment amounts are not consistent must use an average consistent with the payor’s current ability/willingness to pay.

Comment: While perhaps not readily apparent, the wording in this revised guidance is significant in that it gives lenders greater latitude in using “Child Support” income. 

Employee Fringe Benefits: The Agency clarified that employer-provided fringe benefits that are reported as taxable income may be included in repayment income. The actual guidance states the following: Employer-provided fringe benefit packages documented on earning statements as taxable income may be included.

Expense AllowanceRevised “Expense Allowance” guidance to allow the full allowance to be included as repayment income and the full expense (debt) counted in DTI, as well as updating the required history to two years.

Comment: Previously, a 1-year history was required. The wording in this section is much better in that it clarifies the intent of the agency to allow for the expense to be counted as income and the debt associated with that income, if any, counted in the DTI.  

Guardianship/Conservatorship Income: The Agency added a category providing guidance on “Guardianship/Conservatorship Income.” This guidance does not apply to income earned from foster care. Include amounts that will be received in the ensuing 12 months. Exclusions may apply under 7 CFR 3555.152(b)(5).

Required History: None; the income must be received at the time of submission to the Agency. Lenders must document:

  • The applicant is currently receiving the income; and
  • The amount of income received each month.

Continuance: Benefits that do not include expiration dates on the documentation will be presumed to continue.

Documentation Source Options:

  • Documentation to support payment amounts and duration, such as a court order, legal documents, or other supplemental information
  • Online payment schedule from the Agency, bank statements, etc.
  • Federal income tax returns or IRS tax transcripts with all schedules.

Individual Retirement Account (IRA) Distributions: The Agency added a category providing guidance on “Individual Retirement Account (IRA) Income.” Include amounts that will be received in the ensuing 12 months.  Lump sum withdrawals or sporadic payments may be excluded under 7 CFR 3555.152(b)(5).

Required History:  None; the income must be received at the time of submission to the agency. The lender must document:

  • The applicant is currently receiving the income; and
  • The amount of income received each month.

Documentation Source Options:

  • IRA documents, IRS 1099, evidence of current receipt, bank statements, etc.
  • Federal income tax returns or IRS tax transcripts with all schedules.

Mileage: The Agency is simplifying the guidance on considering mileage income and deductions. For deductions claimed on tax returns, the Agency now refers to IRS guidance when a mileage deduction is claimed on income tax returns.

Mortgage Credit Certificate: The Agency removed the requirement to obtain a copy of the IRS W-4 document when an applicant uses a Mortgage Credit Certificate as income.

Comment: THANK GOODNESS!!! This was one of the biggest pains ever. No other agency required evidence that a new W4 form was filed with the employer in order to use a Mortgage Credit Certificate as additional income. This is a common-sense welcome revision.

Non-Occupant Borrower: The Agency removed the “Non-Occupant Borrower” category on the matrix since non-occupant borrowers are not permitted anyway.

Overtime: Revised “Overtime” income to clarify the one-year history must be in the same or similar line of work.

Comment: This is a significant revision in that previously, the guidance made it appear the income had to be on the same job…not the same or similar line of work. This gives the lender greater flexibility in counting this type of income.

Rental Income: Updated “Rental Income” guidelines regarding corresponding mortgage liabilities to be consistent with the guidance in Chapter 11.

Secondary Employment: Revised “Secondary Employment” guidance to clarify that the applicant must have a one-year history of working the primary and secondary jobs concurrently for the lender to be able to consider the secondary employment for repayment income.

Section 8 Housing Vouchers: Revised “Section 8 Housing Vouchers” to permit Section 8 vouchers to be treated as a reduction of the PITI when the benefit is paid directly to the servicer rather than solely an addition to repayment income. Subsequently, the Agency provided clarification that a manual file submission is required in this instance, and clarified that when lenders use the benefit as a reduction of the PITI, they must maintain documentation in their permanent loan file to support the benefit is paid directly to the servicer.

Comment: Wow! I cannot stress how significant this change is. Allowing for the Section 8 Voucher amount paid directly to the servicer to be a direct reduction to PITI instead of counted as additional income will help a tremendous amount of applicants obtain an agency-guaranteed loan.

Separate Maintenance/Alimony: Revised the “Separate Maintenance/Alimony” guidelines to simplify the guidance and remove inconsistencies. The Agency stated that “Separate Maintenance/Alimony” that meets the minimum history, but the payment amounts are not consistent, must use an average consistent with the payor’s current ability/willingness to pay.

Comment: While perhaps not readily apparent, the wording in this revised guidance is significant in that it gives lenders greater latitude in using “Separate Maintenance/Alimony” income.

Unreimbursed Employee or Business Expenses: Revised the “Unreimbursed Employee or Business Expenses” guidance to reflect instances where the IRS continues to allow these deductions.

Variable Income: The Agency added a category providing guidance on “Variable Income.” i.e., piece rate, union work, and other similar types of pay structures.

Annual Income:  Include amounts that will be received in the ensuing 12 months.  Exclusions may apply under 7 CFR 3555.152(b)(5).

Repayment Income:

Required History:  One year in the same or similar line of work.  Underwriters must analyze variable income earnings for the current pay period and YTD earnings.  Significant variances (increase or decrease) of 20 percent or greater in income from the previous 12 months must be analyzed and documented (i.e., variances due to seasonal/holiday, etc.) before considering the income stable and dependable.

Continuance:  Income will be presumed to continue unless there is documented evidence the income will cease.

Required Documentation:

  • Paystub(s), Earning Statement(s)
  • W-2s
  • Written VOE or Electronic Verifications
  • Federal Income Tax Returns or IRS Tax Transcripts with all Schedules
  • Section 9.3E provides additional information on employment verification options.

Assets and Reserves: In the “Assets and Reserves” portion of the matrix, the Agency reiterated that lenders have the option to underwrite to the most conservative approach, with no consideration of assets entered into GUS. The full wording of the text is as follows: “Although all household assets must be verified and documented in the permanent loan file, the lender may underwrite to the most conservative approach with no consideration of assets entered into GUS.”

Comment: the agency has always said Lenders must use caution and not overstate assets utilized for reserves. It’s good practice not to overstate assets, as that could lead to a GUS finding that will ultimately be determined to be in error. The bottom line, excess assets utilized for reserves can lead to a Gus “Accept” finding that could potentially move to a “Refer” finding with the corrected entry of borrower assets. Don’t fall into the trap of overstating assets/reserves.  

Depository Accounts: Checking, Money Market Accounts, and Savings: The Agency revised guidance for sourcing deposits in depository accounts. I’m going to start off by simply providing a clip of the exact wording for this revision.

Documentation:

Two months of recent bank statements; or

  • Verification of Deposit (VOD) and a recent bank statement; or
  • Alternate evidence (i.e., statement printouts stamped by the lender) to support account activity and monthly balances.
  • Investigate all recurring deposits on the account statements that are not attributed to wages or earnings to confirm the deposits are not from undisclosed income sources.  There is no tolerance or percentage of the amount of a recurring deposit that is not required to be investigated.
  • Investigate individual (non-recurring) deposits greater than $1,000 on the account statements that are not attributed to wages or earnings to confirm the deposits are not from undisclosed income sources.
  • If the source of a deposit is readily identifiable on the account statement(s), such as a direct deposit from an employer, the Social Security Administration, an IRS or state income tax refund, or a transfer of funds between verified accounts, and the source of the deposit is printed on the statement, the lender does not need to obtain further explanation or documentation.  However, if the source of the deposit is printed on the statement, but the lender still has questions as to the source of the deposit, the lender should obtain additional documentation.

Reserves:  Eligible

Lenders must use the lesser of the current month’s balance or the previous month’s ending balance when calculating reserves.  Deposited gift funds require further documentation and calculation.  Refer to the “Gift Funds” section of the attachment for further guidance.

Funds to Close:  Eligible

Comment: Holy cow! It’s about time. I’ve been preaching for years that this guidance needed to be revised. I’m literally dancing with joy along with every mortgage processor and underwriter. Previously a lender had to investigate all deposits on the account statements that were not attributed to wages or earnings. Since a USDA Guaranteed Housing loan has income eligibility limits, the Agency wanted lenders to confirm that deposits were not from undisclosed income sources. They gave us no tolerance or percentage of the deposit amount that was not required to be investigated. This means that lenders were required to have the borrower’s address/document every single non-payroll deposit…no matter how small… even deposits as little as $1. In a world of cash payment apps such as Zelle, Venmo , and PayPal, where a borrower can have numerous cash deposits, this became a daunting task. In other words…it really sucked.

This revision, while still requiring analysis and possible explanation/documentation, will give us some well-deserved relief.

Under the new guidance, lenders now have to investigate all “RECURRING” deposits on the account statements that are not attributed to wage and earnings to confirm that the deposits are not from undisclosed income sources. As before, the agency has provided no tolerance or percentage of the amount of a recurring deposit that is not required to be investigated. The key here is the word “recurring”. When analyzing the account statements, a lender now has to simply address “recurring” deposits. This will simplify the analysis and process tremendously.

As for “NON-RECURRING” deposits…the Agency requires lenders to investigate individual “non-recurring” deposits greater than $1,000 on the account statements that are not attributed to wages or earnings to confirm the deposits are not from undisclosed income sources.

They go on to say that if the source of a deposit is readily identifiable on the account statement(s), such as a direct deposit from an employer, the Social Security Administration, an IRS or state income tax refund, or a transfer of funds between verified accounts, and the source of the deposit is printed on the statement, the lender does not need to obtain further explanation or documentation. However, if the source of the deposit is printed on the statement, but the lender still has questions as to the source of the deposit, the lender should obtain additional documentation.

Bottom line, this will make all our lives much easier. Thank goodness! God bless USDA.

Gift Funds: The Agency revised additional guidance for Gift Funds as follows:

Documentation:

  • Gift funds are considered the applicant’s own funds; therefore, excess gift funds are eligible to be returned to the applicant at loan closing.
  • Gift funds may not be contributed from any source that has an interest in the sale of the property (seller, builder, real estate agent, etc.).
  • Gift Funds must be properly sourced.
    • If the funds have been deposited to the borrower’s account, obtain a gift letter to state the funds do not have to be repaid and a bank statement as evidence of funds from the donor’s account.  Cash on hand is not an acceptable explanation for the source of funds.
    • If the funds have not been deposited in the borrower’s account, obtain a gift letter to state the funds do not have to be repaid, a certified check, money order, or wire transfer, and a bank statement showing the withdrawal from the donor’s account.  Cash on hand is not an acceptable explanation for the source of funds.
    • If the gift funds will be sent directly to the settlement agent, the lender must obtain a gift letter to state the funds do not need to be repaid, a bank statement as evidence of funds from the donor’s account, and verification that the funds have been received by the settlement agent. Cash on hand is not an acceptable explanation for the source of funds.

Reserves:  Ineligible

Funds to Close:  Eligible

GUS Instructions: • Gift funds should be entered in the “Gifts or Grants You Have Been Given or Will Receive for This Loan” section of the “Loan and Property Information” GUS application page. If the funds have already been deposited into an asset account, select “deposited” and include the amount of the gift in the applicable asset account on the “Assets and Liabilities” GUS application page. If the funds have not been deposited into an asset account, select “not deposited” and do not include the gift in an asset account on the “Assets and Liabilities” GUS application page. • Gift funds applied as Earnest Money should not be reflected in the “Gifts or Grants You Have Been Given or Will Receive for This Loan” section of the “Loan and Property Information” GUS application page.

Comment: You need to read this one thoroughly. This is much better guidance than previously provided, offering details for sourcing gift funds as well as how to enter gift funds into the Agency’s Guaranteed Underwriting System (GUS).

Lump Sum Additions: IRS Refunds, Lottery Winnings, Inheritances, Withdrawals from Retirement AccountsThe Agency added a category providing guidance on “Lump Sum Additions.”

Documentation:

  • Document the applicant’s receipt of funds.
  • Verify where the proceeds are held and confirm they are available to the applicant.
  • One-time deposits may not require annual income considerations under 7 CFR 3555.152(b)(5)(vi).
  • Do not enter into GUS separately if it is already included in the borrower’s depository account.

Reserves:  Eligible

Funds to Close:  Eligible

Comment:  Note that it says that withdrawals from retirement accountsare eligible as cash reserves; however, under the “Retirement: 401(k), IRA, etc.” section of the matrix, the Agency says that funds borrowed on retirement accounts are NOT allowed for cash reserves. To be clear, apparently, the term withdrawal does not include borrowing funds from the retirement account. In order to be able to use 401(k) funds as cash reserves, a borrower would have to either withdraw funds from the retirement account (not borrow) or leave the money in the retirement account so that 60% of the vested amount available to the borrower could be counted as cash reserves.

Retirement: 401(k), IRA, etc.: The Agency clarified that funds borrowed against retirement accounts (e.g., 401(k), IRA, etc.) are eligible for funds to close but are not considered in reserves.

Documentation:

  • Recent account statement (monthly, quarterly, etc.) to evidence the account balance, vested balance available for withdrawal, and early withdrawal penalty, if applicable.
  • Funds borrowed against these accounts may be used for funds to close but are not considered in reserves.  The borrowed funds should not be reflected in the balance of any asset entered on the “Assets and Liabilities” application page.

Reserves:  Eligible

  • 60% of the vested amount available to the applicant may be used as reserves.
  • Funds borrowed against these accounts are not eligible for reserves.  The borrowed funds should not be reflected in the balance of any asset entered on the “Assets and Liabilities” application page.

Funds to Close:  Eligible

Comment: I personally think this guidance is kind of weird. I can use 60 % of a vested 401(k), IRA, etc., as cash reserves, but if I borrow against it and put the cash into the bank, I can’t use any of those borrowed retirement funds beyond the amount of cash needed to close as cash reverse? Maybe it’s just me…but that does not totally make sense to me…but it’s their call.

Strategically, if you need cash to close from your retirement account and you need cash reserves, then you would need to only borrow just enough cash to close and leave the remaining funds in your retirement account, so it could be classified as cash reserves once the proper percentages (less the amount borrowed) are calculated.

Attachment 9-E: Information for Analyzing Tax Returns for Self-Employed Applicants

Attachment 9-E was revised to reflect a two-year required history for “Capital Gain or Loss” to be consistent with the current guidance in Attachment 9-A.

Chapter 15 – Submitting the Application Package

The following updates were made to HB-1-3555, Chapter 15 to make minor grammatical and formatting changes, correct discrepancies, and provide clarification for easier understanding of guidance.

Paragraph 15.7 C: Requesting Changes in Conditions: The Agencyclarifies that Conditional Commitment change requests should be made via email.

Attachment 15-A was REVISED as follows:

  • In Lender Instructions, the Agency states that electronic delivery to Rural Development is the preferred method for submission.
  • The Agency removed the requirement to submit evidence of qualified alien requirements on page 1, as it is not required to be submitted to the Agency on GUS Accept files.
  • The Agency changed the term “streamlined documentation” to “alternative income documentation” on page 2 to remove confusion with the streamlined refinance product.
  • The Agency clarified that a Verification of Rent is required for manually underwritten loans with credit scores less than 680.

Comment: Previously, the “Loan Origination Checklist” attachment 15-A stated that verification of rent “MAY” be applicable for a manually underwritten loan with a credit score of less than 680. Now the Agency states that it “IS” required for a credit score of less than 680 on a mainly underwritten loan.

 

Kentucky USDA Guideline Updates for

Kentucky USDA Homes for Sale

  • 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.

click link below

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Can you get A Kentucky USDA Loan after  bankruptcy, foreclosure, or short sale?

Getting Approved for a Kentucky USDA Loan after bankruptcy, foreclosure, or short sale. 
Getting Approved for a Kentucky USDA Loan after bankruptcy, foreclosure, or short sale.


The Kentucky USDA Rural Loan program requires a minimum of three years from the date of a bankruptcy, foreclosure, or short sale to the borrower being eligible for a USDA Loan.  

For both Chapter 7 and Chapter 13 bankruptcies the borrower must allow three years from the discharge date prior to submitting a new loan request.

 If the bankruptcy included a property, whether a primary residence or investment property, the earliest a new loan can be obtained is based on USDA Loan short sale and foreclosure guidelines.

When the borrower experienced either a short sale, foreclosure, or surrenders the property through the bankruptcy process, there will be a three year waiting period between the date of property transfer from the borrower to a new entity, and the date the new loan application can be processed.  

The most conservative stance by a Kentucky USDA Loan Underwriter for defining the date of the negative occurrence is the legal recorded transfer date, which is the date the property has been transferred out of the borrowers name and either back to the bank that holds the mortgage note or a subsequent home buyer. From this date the borrower will not be eligible for a USDA Loan for a period of time no less than three years.

However, one of my investors will allow a Chapter 7 bankruptcy discharge date to be considered the date of foreclosure, provided the borrower didn’t re-affirm the mortgage liability.  This differs from when the property transfer date is recorded at the County Clerks Office. This is especially helpful in circumstances where the home owner legally removed their ownership rights to a property, through a Chapter 7 bankruptcy, but the mortgage lien holder was slow to transfer the mortgage back into the name of the bank or sell the property.

If the foreclosed property was secured by a government backed mortgage loan such as a FHA or VA Loan, the property transfer date is no longer considered relevant.  The date that now becomes important is the date when the mortgage lender that held the mortgage note received compensation for their mortgage insurance claim through either The Department of Housing and Urban Development for a FHA Loan or The Veterans Administration for a VA Loan.  

The date of the mortgage insurance claim is identified through a CAIVRS search, which is required on all Kentucky Rural Housing  USDA Loans.

If you have yet to apply for your Kentucky USDA Loan pre-qualification request, you can do so online by clicking here. If you have any Kentukcy USDA Loan or other loan specific questions please, email me at kentuckyloan@gmail.com or text/call 502-905-3708

USDA Rural Housing Lender for Kentucky

Foreclosure and Bankruptcy Guidelines for Kentucky Rural Housing Loans

 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 for Rural Housing Loans in Kentucky

.

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.


http://www.emailmeform.com/builder/form/0bfJs9b6bK8TGoc6mQk9hIu

Joel Lobb
Senior Loan Officer
(NMLS#57916
text or call my phone: (502) 905-3708
email me at kentuckyloan@gmail.com

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). USDA 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.

KY USDA Single Family Housing Homes for Sale in 2017 Currently.

Your properties subscription for USDA Single Family Housing is kentuckyloan@gmail.com as of 10/24/2017
State Days Old Counties
KY 365 ADAIR, ALLEN, ANDERSON, BALLARD, BARREN, BATH, BELL, BOONE, BOURBON, BOYD, BOYLE, BRACKEN, BREATHITT, BRECKINRIDGE, BULLITT, BUTLER, CALDWELL, CALLOWAY, CAMPBELL, CARLISLE, CARROLL, CARTER, CASEY, CHRISTIAN, CLARK, CLAY, CLINTON, CRITTENDEN, CUMBERLAND, DAVIESS, EDMONSON, ELLIOTT, ESTILL, FAYETTE, FLEMING, FLOYD, FRANKLIN, FULTON, GALLATIN, GARRARD, GRANT, GRAVES, GRAYSON, GREEN, GREENUP, HANCOCK, HARDIN, HARLAN, HARRISON, HART, HENDERSON, HENRY, HICKMAN, HOPKINS, JACKSON, JEFFERSON, JESSAMINE, JOHNSON, KENTON, KNOTT, KNOX, LARUE, LAUREL, LAWRENCE, LEE, LESLIE, LETCHER, LEWIS, LINCOLN, LIVINGSTON, LOGAN, LYON, MADISON, MAGOFFIN, MARION, MARSHALL, MARTIN, MASON, MCCRACKEN, MCCREARY, MCLEAN, MEADE, MENIFEE, MERCER, METCALFE, MONROE, MONTGOMERY, MORGAN, MUHLENBERG, NELSON, NICHOLAS, OHIO, OLDHAM, OWEN, OWSLEY, PENDLETON, PERRY, PIKE, POWELL, PULASKI, ROBERTSON, ROCKCASTLE, ROWAN, RUSSELL, SCOTT, SHELBY, SIMPSON, SPENCER, TAYLOR, TODD, TRIGG, TRIMBLE, UNION, WARREN, WASHINGTON, WAYNE, WEBSTER, WHITLEY, WOLFE, WOODFORD, WOODFORD
To change your preferences, click here.
Address Bed/Bath Price
117 Dove Drive 3/1 $34,840.00 – GovtBid
Lawrenceburg, KY 40342 Foreclosure Sale
301 Eastview Circle 2/1 $51,135.00 – GovtBid
Shelbyville, KY 40065 Foreclosure Sale
1006 Twelve Oaks Dr 3/2 $67,000.00 – GovtBid
Lawrenceburg, KY 40342 Foreclosure Sale
117 Western Ave 3/2 $26,800.00 – GovtBid
Cynthiana, KY 41031 Foreclosure Sale
427 Earl St. 3/1.5 $30,150.00 – GovtBid
Danville, KY 40422 Foreclosure Sale
200 Verde Dr. 3/2 $36,850.00 – GovtBid
Padacah, KY 42003 Foreclosure Sale
136 Fuller Way 3/1 $28,810.00 – GovtBid
Mount Sterling, KY 40353 Foreclosure Sale
139 Pearl Street 2/1.5 $30,820.00 – GovtBid
London, KY 40741 Foreclosure Sale
609 Ridgeview Drive 3/2 $46,230.00 – GovtBid
London, KY 40741 Foreclosure Sale
261 Bridlewood Ave 3/2 $114,330.00 – GovtBid
Shelbyville, KY 400657222 Foreclosure Sale
265 Meadowbrook Rd. 2/1 $13,400.00 – GovtBid
Vanceburg, KY 41179 Foreclosure Sale
50 Crabtree Rd 3/2 $43,515.00 – GovtBid
Strunk, KY 42649 Foreclosure Sale
412 Chestnut St. 3/1 $12,060.00 – GovtBid
Vanceburg, KY 41179 Foreclosure Sale
508 Hickory Hill Drive 3/1 $13,400.00 – GovtBid
Monticello, KY 42633 Foreclosure Sale
105 Woodland Place 3/1.5 $18,090.00 – GovtBid
Mt Vernon, KY 40456 Foreclosure Sale
502 N. Main St. 2/1.5 $25,795.00 – GovtBid
Brownsville, KY 42210 Foreclosure Sale
66 Craycraft Rd 2/1 $47,280.00 – GovtBid
Tollesboro, KY 41189 Foreclosure Sale
328 E. Legend Dr 3/2 $40,200.00 – GovtBid
Mount Sterling, KY 40353 Foreclosure Sale
90 Brewer Subdivision 3/1 $21,440.00 – GovtBid
Campton, KY 41301 Foreclosure Sale
RR 746 Box 5230 3/1.5 $16,750.00 – GovtBid
Campton, KY 41301 Foreclosure Sale
234 Gardner Lane 3/1 $25,460.00 – GovtBid
Mt Sterling, KY 40353 Foreclosure Sale
221 Man O War Dr 3/2 $103,525.00 – GovtBid
Lawrenceburg, KY 40342 Foreclosure Sale
111 Beechmount Drive 3/1 $54,885.00 – GovtBid
Nicholasville, KY 40356 Foreclosure Sale
5915 Woodcreek Crossing W 3/2 $46,900.00 – GovtBid
Crestwood, KY 400148229 Foreclosure Sale

 

 

 

***********Please Do Not Reply To This Message**********
Your properties subscription for USDA Single Family Housing is kentuckyloan@gmail.com as of 07/09/2017
State Days Old Counties
KY 365 ADAIR, ALLEN, ANDERSON, BALLARD, BARREN, BATH, BELL, BOONE, BOURBON, BOYD, BOYLE, BRACKEN, BREATHITT, BRECKINRIDGE, BULLITT, BUTLER, CALDWELL, CALLOWAY, CAMPBELL, CARLISLE, CARROLL, CARTER, CASEY, CHRISTIAN, CLARK, CLAY, CLINTON, CRITTENDEN, CUMBERLAND, DAVIESS, EDMONSON, ELLIOTT, ESTILL, FAYETTE, FLEMING, FLOYD, FRANKLIN, FULTON, GALLATIN, GARRARD, GRANT, GRAVES, GRAYSON, GREEN, GREENUP, HANCOCK, HARDIN, HARLAN, HARRISON, HART, HENDERSON, HENRY, HICKMAN, HOPKINS, JACKSON, JEFFERSON, JESSAMINE, JOHNSON, KENTON, KNOTT, KNOX, LARUE, LAUREL, LAWRENCE, LEE, LESLIE, LETCHER, LEWIS, LINCOLN, LIVINGSTON, LOGAN, LYON, MADISON, MAGOFFIN, MARION, MARSHALL, MARTIN, MASON, MCCRACKEN, MCCREARY, MCLEAN, MEADE, MENIFEE, MERCER, METCALFE, MONROE, MONTGOMERY, MORGAN, MUHLENBERG, NELSON, NICHOLAS, OHIO, OLDHAM, OWEN, OWSLEY, PENDLETON, PERRY, PIKE, POWELL, PULASKI, ROBERTSON, ROCKCASTLE, ROWAN, RUSSELL, SCOTT, SHELBY, SIMPSON, SPENCER, TAYLOR, TODD, TRIGG, TRIMBLE, UNION, WARREN, WASHINGTON, WAYNE, WEBSTER, WHITLEY, WOLFE, WOODFORD, WOODFORD
To change your preferences, click here.
Address Bed/Bath Price
245 Miller Lane 3/2 $34,170.00 – GovtBid
London, KY 40741 Foreclosure Sale
6080 Franklintown Road 3/1 $22,780.00 – GovtBid
Pleasureville, KY 40057 Foreclosure Sale
197 Reynolds Hill 3/1 $26,800.00 – GovtBid
Allen , KY 41601 Foreclosure Sale
335 Harrisburg Ave 2/1 $14,740.00 – GovtBid
Owingsville, KY 40360 Foreclosure Sale
1026 Raceland Ave 3/1 $18,760.00 – GovtBid
Raceland, KY 41169 Foreclosure Sale
98 Thompson Ridge Rd 4/2 $23,450.00 – GovtBid
Germantown, KY 41044 Foreclosure Sale
12016 Bethlehem Road 3/1 $66,585.00 – GovtBid
Bethlehem, KY 40007 Foreclosure Sale
5442 Scenic Vista Dr. 3/1.5 $38,190.00 – GovtBid
Somerset, KY 425018138 Foreclosure Sale
25 River Valley Run 3/2 $80,550.00 – GovtBid
Ghent, KY 41045 Foreclosure Sale
3175 State Rt.2 3/2 $27,470.00 – GovtBid
Greenup, KY 41144 Foreclosure Sale
1019 Parkside Drive 2/1 $33,500.00 – GovtBid
Georgetown, KY 40324 Foreclosure Sale
69 Veterinarian Lane 2/1 $77,835.00 – GovtBid
West Liberty, KY 41472 Foreclosure Sale
283 Simmons Lane 3/2 $86,200.00 – GovtBid
Flemingsburg, KY 41041 Foreclosure Sale
11 Roe Street 2/1 $36,850.00 – GovtBid
Walton, KY 41094 Foreclosure Sale
4837 Elkwood Dr 3/1.5 $38,190.00 – GovtBid
Burlington, KY 41005 Foreclosure Sale
3008 Allens Fork Dr 4/1 $44,220.00 – GovtBid
Burlington, KY 41005 Foreclosure Sale
5 Terence Dr. 2/1 $24,120.00 – GovtBid
Williamstown, KY 41097 Foreclosure Sale
132 OI’ Stable Drive 3/2 $45,560.00 – GovtBid
Somerset, KY 42503 Foreclosure Sale
10897 Pleasant Ridge Rd 3/1 $21,440.00 – GovtBid
Alexandria, KY 41001 Foreclosure Sale
78 Cedar Brook Way 3/2 $48,240.00 – GovtBid
Morehead, KY 403517242 Foreclosure Sale

Kentucky USDA Rural Single Family Foreclosed Homes For Sale as of 04/09/2017

 

Kentucky Mortgage Usda Loan Zero Down Home Loans Still Exist

Kentucky USDA Rural Single Family Housing is kentuckyloan@gmail.com as of 04/09/2017
S
Address Bed/Bath Price
871 Palmyra Rd 3/1 $62,310.00 – GovtBid
Bedford, KY 40006 Foreclosure Sale
281 Elkhorn Green Pl 4/2.5 $101,595.00 – GovtBid
Georgetown, KY 40324 Foreclosure Sale
3429 Stevenson Mill Rd 3/2 $40,200.00 – GovtBid
Russellville, KY 42276 Foreclosure Sale
302 9th Street 2/1 $24,100.00 – GovtBid
Carrollton, KY 41008 Foreclosure Sale
3079 Pope Road 4/2 $68,065.00 – GovtBid
Scottville, KY 42164 Foreclosure Sale
302 Circle Dr. 3/1 $30,485.00 – GovtBid
West Liberty, KY 41472 Foreclosure Sale
37 Old High Top Road 3/1 $20,770.00 – GovtBid
Corbin, KY 40701 Foreclosure Sale
71 Apricot Lane 4/2 $62,685.00 – GovtBid
Flemingsburg, KY 41041 Foreclosure Sale
30 Turkey Run Road 3/2 $38,860.00 – GovtBid
Campton, KY 41301 Foreclosure Sale
760 Andrew Mason Rd 2/1 $21,440.00 – GovtBid
Vanceburg, KY 41179 Foreclosure Sale
48 Turner Lane 3/2 $75,180.00 – GovtBid
Monticello, KY 42633 Foreclosure Sale
1026 Raceland Ave 3/1 $18,760.00 – GovtBid
Raceland, KY 41169 Foreclosure Sale
1729 Hillsboro Rd 3/1 $23,450.00 – GovtBid
Flemingsburg, KY 41041 Foreclosure Sale
208 Shannon Court 3/2 $66,605.00 – GovtBid
Winchester, KY 40391 Foreclosure Sale
735Ray Smith Road 3/1 $32,160.00 – GovtBid
Corbin, KY 40701 Foreclosure Sale
35 Smith St. 2/1 $68,275.00 – GovtBid
Monticello, KY 426338366 Foreclosure Sale
255 Meadow Grove Road 3/1 $26,800.00 – GovtBid
Pine Knot, KY 42635 Foreclosure Sale
182 Honeysuckle Lane 3/1 $15,410.00 – GovtBid
Mt. Vernon, KY 40456 Foreclosure Sale
230 Grantland Drive 3/1 $42,880.00 – GovtBid
Dry Ridge, KY 41035 Foreclosure Sale

 

 

Joel Lobb
Senior  Loan Officer

(NMLS#57916)

American Mortgage Solutions, Inc.

10602 Timberwood Circle, Suite 3

Louisville, KY 40223

text or call my phone: (502) 905-3708
email me at kentuckyloan@gmail.com

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.

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