Kentucky USDA Underwriting Guideline Mortgage Changes for Income, Credit, Work History and Assets

2023 Kentucky USDA Underwriting Guideline Mortgage Changes for Income, Credit, Work History and Assets

Rural Development Kentucky Underwriting Guideline Mortgage Changes for Income, Credit, Work History and Assets

Chapter 9 – Income Analysis

  • Paragraph 9.3 is being revised as follows:
    o To clarify that lenders must verify the income of each adult household member for the previous 2
    years, which is consistent with the requirements in 7 CFR 3555.
    o To clarify under “full income documentation”, the lender must obtain W-2s or IRS Wage and Income
    transcripts, in addition to paystubs.
    o To change the term “streamlined documentation” to “alternative income documentation” to remove
    confusion with the streamlined refinance product.
    o To clarify under “self-employed income documentation” that if ownership interest is less than
    25%, neither the “Business Owner” or “Self-Employed” options should be selected in GUS.
    o 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, which may differ than the note date that is currently referenced.
  • Paragraph 9.8 is being revised to clarify it is the lender’s responsibility to review gaps in
    employment and determine if the income is stable and dependable. In addition, this paragraph is
    being revised to clarify a business loss from a closed business may be removed from consideration
    under the same circumstances that self-employment income from a closed business can be removed from
  • Attachment 9-A is being revised as follows:
    o Revising “Automobile Allowance” and “Expense Allowance” guidance to allow the full expense
    allowance to be included as repayment income and the full debt counted in DTI, as well as updating
    the required history to two years.
    o To clarify that “Boarder Income” refers to rental income received from an individual renting
    space inside the dwelling, making the property income producing and therefore ineligible.
    o Revising “Bonus” and “Overtime” income to clarify the one year history must be in the same or
    similar line of work.
    o Revising the “Child Support” and “Separate Maintenance/Alimony” guidelines to simplify the
    guidance, remove inconsistencies within the current guidance, and clarify that income 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 for repayment income.
    o To clarify that employer-provided fringe benefits that are reported as taxable income may be
    included in repayment income.
    o Simplifying the guidance on considering mileage deductions, referring to IRS guidance when a
    mileage deduction is claimed on income tax returns.

USDA is an equal opportunity provider, employer, and lender.
o Removing the requirement to obtain a copy of the IRS W-4 document when using a Mortgage Credit
Certificate as income.
o Revising “Secondary Employment” guidance to clarify that the applicant must have a one year
history of working the primary and secondary jobs concurrently to be considered for repayment
o Revising “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, 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
o Revising the “Unreimbursed Employee or Business Expenses” guidance to reflect instances where the
IRS continues to allow these deductions.
o Adding categories providing guidance on Guardianship/Conservatorship Income, Individual
Retirement Account (IRA) Distributions, and Variable Income.
o Revising guidance for sourcing deposits in depository accounts to simplify the process and become
more consistent with the lending industry. Clarified that all recurring deposits, as well as
non-recurring deposits greater than $1,000, need to be reviewed to confirm the deposits are not
from undisclosed income
o To clarify that gift funds applied as Earnest Money should not be entered on the “Loan and
Property Information” GUS application page.
o Adding a category providing guidance on “Lump Sum Additions.”
o To clarify in the “Retirement” section that funds borrowed against retirement accounts (e.g.
401(k), IRA, etc.) are eligible for funds to close, but are not considered in reserves.

  • Attachment 9-E is being 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

  • Attachment 15-A is being revised as follows:
    o Removing 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.
    o To change the term “streamlined documentation” to “alternative income documentation” on page 2,
    to remove confusion with the streamlined refinance product.
    o Rent is required for manually underwritten loans less than 680.

Have Questions or Need Expert Advice? Text, email, or call me below:

Joel Lobb
Mortgage Loan Officer

Individual NMLS ID #57916

American Mortgage Solutions, Inc.
10602 Timberwood Circle
Louisville, KY 40223
Company NMLS ID #1364

Text/call: 502-905-3708
fax: 502-327-9119

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 approvalnor 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, (

$0 Down, 100% Financing for Kentucky USDA Rural Housing Loans

$0 Down, 100% Financing for Kentucky USDA Rural Housing Loans


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Out of Pocket Costs
$0 Down, 100% Financing for Kentucky USDA Rural Housing Loans


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Home Qualifications
Single & Multi-Family Rural Homes and Condos that meet FHA Guidelines or Fannie Mae Guidelines

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Competitive Interest Rates
Often Lower than Conventional Loans with lower mortgage insurance requirements than FHA and Fannie Mae.


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Flexible Credit Guidelines
640 Credit Score Requirement* Can go lower possibly if the loan meets credit and debt to income ratio requirements. 


*Scores below 640 may be eligible via manual underwriting. 

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USDA Defined Rural & Suburban Areas See may below for approved areas in Kentucky for USDA loans. 👇 click on link

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Closing Cost Opportunities
Roll Closing Costs into Mortgage and seller can pay for your closing costs and prepaids or if home appraises for more, can lump in the costs to higher appraised value. 

Kentucky USDA Loan Eligibility Requirements

As with any loan, you must meet certain requirements to confirm USDA loan eligibility. To be an eligible candidate for a USDA loan, consider these general requirements:

Be a legal U.S. resident.
Show two years of income history.
Demonstrate a willingness to repay the loan as proven by no late payments or collections within the prior 12 months.
Have an acceptable debt ratio.
Possess an adjusted annual income of no more than 115% above the median income for the area as related to family size.
Be interested in a property in an area certified by USDA loan agreements.

Frequently Asked Questions

What’s a government-backed mortgage?

These mortgage loans are insured by an agency of the federal government, protecting the lender in the event a borrower can’t repay the debt. This significantly reduces the risk to the lender and may make it easier for borrowers to take out a loan by offering more lenient credit guidelines, interest rates, and down payment options.

What’s the difference between Kentucky USDA loans and other types of government-backed mortgage loans like Kentucky FHA loans?

While both are government-backed mortgages, Kentucky USDA loans are run by a different government agency than Kentucky FHA loans and has different application, underwriting, appraisal, lending amount, and mortgage insurance requirements. To be eligible for a Kentucky Rural Housing USDA loan, borrowers must be purchasing or refinancing property in rural areas that the USDA has defined as eligible.

Do I have to be a farmer or rancher to get a Rural Kentucky USDA loan?

No, despite what the name implies. As long as you meet the property and eligibility qualifications for a Rural Kentucky USDA loan, you can apply.

How do I know if a home is eligible for a USDA loan?

You can navigate to the link here👉  Rural Development Kentucky USDA’s eligibility website and type in the exact address of the home you want to purchase to find out if it’s in an approved area.

Are there maximum lending amounts for KY Rural Development USDA mortgage loans?

There are no set loan limits for USDA loans in Kentucky, but the maximum amount is set based on your ability to qualify for a USDA loan based on borrower’s income and work history over the last two years. and debt to income ratios. The max back-end debt ratio on USDA loans is set at 45.9% of a borrower’s gross monthly income while the front-end debt ratio centers around 28% to32% depending on credit score, ratios, assets. 

Do USDA loans require private mortgage insurance (PMI)?

Yes, Kentucky USDA mortgage loans have an upfront funding fee of 1% currently with a monthly mortgage insurance premium of .35%– mortgage insurance is required by the USDA and pays your lender if you default on your loan.

What’s a USDA guarantee fee and annual fee?

These are fees involved during the USDA home loan process. The upfront guarantee fee is normally equal to 1% of the loan amount. It’s usually added to the initial loan amount and paid at closing. The annual fee is normally equal to 0.35% of the loan amount and some is financed into your loan.


Have Questions or Need Expert Advice? Text, email, or call me below:

Joel Lobb
Mortgage Loan Officer

Individual NMLS ID #57916

American Mortgage Solutions, Inc.
10602 Timberwood Circle
Louisville, KY 40223
Company NMLS ID #1364

Text/call: 502-905-3708
fax: 502-327-9119

Rural Housing Requirements For USDA Loans In Kentucky

seller concessions to pay mortgage closing costs in Kentucky for FHA, VA, USDA and Fannie Mae Home Loans

Kentucky Rural  Housing Loans


Kentucky USDA loans are mortgages made by lenders and guaranteed by the U.S. Department of Agriculture. They are available to moderate- and low-income borrowers to build, rehabilitate, improve or relocate a primary residence in eligible rural and suburban areas. The income limit is 115 percent of the median income in your area. You can check the income limits for your area here.


It can be closed with zero down. USDA loans do have a monthly insurance requirement, but the upfront fee is significantly lower than on the VA loan and the mortgage premiums are lower than on the FHA loan.

The problem is that the number of buyers who qualify for a USDA loan is much smaller. Unlike on other loans where more income is better, a USDA loan has strict income maximums.

Fees for Kentucky USDA Loans

USDA loan borrowers pay an upfront fee of 1 percent of the loan amount, and this fee can be added to the loan balance. Borrowers also pay a mortgage insurance premium of 0.35 percent of the loan balance per year in 12 equal installments. This fee is based on the current balance and added to the monthly payment.


Down Payment Requirements for Kentucky USDA Loans


USDA loans are available with up to 100 percent financing (zero down).


Credit Score Required for Kentucky Rural Housing Loans


There is no minimum credit score for a USDA loan, but you are automatically ineligible if you are presently delinquent on a nontax federal debt.

Automated approval is available if you have two tradelines reported on your credit history and acredit score of 640 or higher.

If you do not have sufficient credit data, the underwriter can assess your creditworthiness other ways, such as by examining your history with rent payments. Applicants with a credit score lower than 640 will undergo additional underwriting steps.


Loan Limits for Kentucky USDA Loans


They are no loan limits for Kentucky USDA loans backed-up the guarantee loan program. The Direct USDA loan program does have loan limits.

Why Would a Seller Agree to a Seller Credit? Seller Benefits: ~ Seller credits help a home sell faster in buyer markets. Price Reductions are costlier to a seller than credits. ~ Innovative “Good Will” to support a new homeowner adjusting to homeownership. When the housing market turns into a buyer’s market, selling a home can be quite competitive. The seller is no longer expecting to receive 100% or more of their asking price and instead expects to take less than their asking price to sell their property. Therefore, they may offer a credit to attract more people to buy their home. After all, the seller is only concerned about selling their home at a reasonable price and selling it as quickly as possible. Seller credits and concessions are a very popular tactic to give the perception that buying their home is better. Seller credits work because many first-time buyers struggle to come up with the down payment and closing costs, and seller credits ease that burden. Buyer Benefits: ~ Allows the buyer to ease into homeownership by paying below fixed-rate payments. ~ Does not increase the loan amount. The loan amount amortizes as a standard fixed-rate loan. ~ Safe way to take advantage of a lower payment in a rising rate environment. A Seller Credit Can: = Offset closing costs = Permanentlv Reduce an interest rate = Temporarily Reduce an interest rate In all three scenarios, this helps your buyers. Each buyer has different needs, so it is up to you to help them In all three scenarios, this helps your buyers. Each buyer has different needs, so it is up to you to help them figure out how to best apply a seller credit.

Joel Lobb (NMLS#57916)
Senior Loan Officer

American Mortgage Solutions, Inc.
10602 Timberwood Circle Suite 3

Louisville, KY 40223
Company ID #1364 | MB73346

Text/call 502-905-3708

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#57916
— 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.

Kentucky USDA Home Loan Program Zero Down





  • 620+ GUS ACCEPTS – NO OVERLAYS – follow GUS findings
  • 101% LTV of appraised value
  • Ratios to 32/44 w/ 620+ and GUS approval w/ comp. factors for debt waiver
  • 35% Annual Fee, 1% Guarantee Fee
  • We Accept Transfer Appraisals – No Problem on all loans
  • File sent to RD within 24 Hours of UW clear!
  • File sent to docs within 24 Hours of Receipt of the RD commitment
  • Up to 6% seller concessions allowed
  • 620+ – GUS Accept – must have 2 trades for 12 months(open/closed) – or manual downgrade


  • 620– scores OK!
  • 29/41 max ratios
  • VOR or 12 months cancelled rents checks required
  • Tradelines or alt tradelines required
  • Medical collections & charge off accounts ignored – consumer collections follow HUD $2000 guidelines (Call us for details!)
  • Minimal lates allowed in past 12 months

Quick Guide to Kentucky USDA Rural Development Loans Approval Requirements

Quick Guide to Kentucky USDA Rural Development Loans Approval Requirements

Quick Guide to USDA Rural Development Loans
Not every community qualifies—but if it does, it’s the best thing since sliced bread!
Check your listings to see if the property location qualifies. Generous household income limits also apply, and you can check them out at this link as well.
Generate phone calls by letting everyone know 100% financing is still available for eligible properties and borrowers.
Add an additional note to the listing info and mention it in your ads.
Buyer Qualifications Highlights
• No down payment required, and zero move-in cost is possible.
• 30-year fixed rate loan.
• 6% seller contribution limit allowed.
• Lender closing cost contribution by premium pricing allowed. Does not count against 6% seller limit.
• 100% Loan up to appraisal allowed plus you can add the 1.00% Guarantee Fee on top of that.
• Low .35% Annual Fee included in monthly payment.
• Finance closing costs & prepaids if appraisal Is higher than sales contract.
• No stated maximum loan amount; maximum loan based on repayment ability.
• No cash contribution required from borrower.
• No pre-payment penalty
• Liberal income limits (by county)
• Gift funds and grants allowed.
• No cash reserve requirements.
Property Qualification Highlights
• Existing Home
• New Construction
• New Manufactured Homes (Existing MH allowed under test program in 22 states)
• Modular Homes
• Town Homes
• Condos (Must be approved projects)
Prohibited Loan Purposes
• Co-signors not residing in the household
• Furniture and personal property
• Income-producing property unless minimal income-producing activity.
• Previously occupied manufactured homes…unless refinancing existing Agency loan or home built on or after 2006 and in the certain states (22 test states).

Joel Lobb
Mortgage Loan Officer
Individual NMLS ID #57916

American Mortgage Solutions, Inc.

10602 Timberwood Circle 

Louisville, KY 40223Company NMLS ID #1364

click here for directions to our office
Text/call:      502-905-3708fax:            502-327-9119

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