Category: Guarantee Fee and the Annual Fee for RHS loans
Kentucky USDA Rural Housing Loans Direct Programs Interest Rates
What is the interest rate and payback period?
- Effective January 1, 2024, the current interest rate for Single Family Housing Direct home loans is 5.125% for low-income and very low-income borrowers.
- Fixed interest rate based on current market rates at loan approval or loan closing, whichever is lower
- Interest rate when modified by payment assistance, can be as low as 1%
- Up to 33 year payback period – 38 year payback period for very low income applicants who can’t afford the 33 year loan term
- Fixed interest rate based on current market rates at loan approval or loan closing, whichever is lower
- Interest rate when modified by payment assistance, can be as low as 1%
- Up to 33 year payback period – 38 year payback period for very low income applicants who can’t afford the 33 year loan term
Not the same as the USDA Rural Housing Guaranteed Program. These rates follow the secondary market and change daily like FHA, VA, Conventional Mortgage Loans and set by individual lenders based on lock period, credit score, loan amount, state, and other incentives
The USDA 502 Direct Loan Program helps low- and very-low-income applicants in federally-determined rural areas of the state obtain decent, safe and sanitary housing in eligible rural areas by providing payment assistance to increase an applicant’s repayment ability. This payment assistance is a type of subsidy that reduces the mortgage payment. The amount of assistance is determined by the adjusted family income.
A number of factors are considered when determining an applicant’s eligibility for this loan. At a minimum, applicants interested in obtaining a direct loan must have an adjusted income that is at or below the applicable low-income limit for the area where they wish to buy a house and they must demonstrate a willingness and ability to repay debt.
This is a zero down payment loan.
Click here for the current rate for the USDA 502 Direct Loan Program
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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Kentucky USDA Rural Development Loan Program:
Single Family Housing Guaranteed
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
Rural Housing Funds for Kentucky USDA Loans Now Available
RHS Funding Now Available for Kentucky Rural Housing Mortgage Loans for 2022
Funding has now been authorized for RHS loans.
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 views of my employer. Not all products or services mentioned on this site may fit all people
Kentucky USDA Mortgage Lender for Rural Housing Loans 