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.

 

USDA Home Loan in Kentucky Compared to FHA loans in Kentucky.

 

Why use USDA financing for your next home purchase in Kentucky?

There are very few ways to purchase a home these days in Kentucky without a typical 3.5% down payment that is required for an FHA loans in Kentucky.  Many home buyers in Kentucky are surprised to find that a USDA Home Loan offers a lower payment than an FHA loan, even with NO DOWN PAYMENT!  “How can this be?” you ask.  The reason is because a Kentucky USDA home loan requires much lower MORTGAGE INSURANCE.

Kentucky FHA Loan vs. Kentucky USDA Loan Comparison

FHA USDA
   
   
$150,000 purchase price $150,000 purchase price
   
4.75% 30 year fixed rate 4.75% fixed rate
   
1.75% up front mortgage insurance (financed) 1.0% Guarantee Fee (financed)
  .85% month mi premium .35% monthly mi premium
$871.19 P&I monthly payment
with monthly mortgage insurance (not including taxes and insurance)
$826.86 P&I monthly payment (not including taxes and insurance
   
$5250.00 required down payment $0 down payment
   

A rural housing USDA loan saved this client $46.74 per month and they made NO DOWN PAYMENT!

Other benefits of Kentucky USDA Home Loans

  • Low up front closing costs
  • In some cases closing costs can be financed if home appraises for more than purchase price 
  • Minor credit problems OK with a minimum credit score of 581***Most lenders will want a 620 or 640 score or higher.
  • No maximum loan amounts just household income limits based on which Kentucky County you are buying a home.
  • Fixed Rates Only for 30 years with no prepay penalty

A Kentucky USDA rural housing loan strive to find anyway possible to approve your loan, however there are some cases where a USDA Loan is not an option;

a previous bankruptcy must be discharged 3 years,

you must occupy the home being purchased as your primary residence,

the home may not be used for income producing purposes (farm, rental, etc.),

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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
kentuckyloan@gmail.com

If you are an individual with disabilities who needs accommodation, or you are having difficulty using our website to apply for a loan, please contact us at 502-905-3708.
Disclaimer: No statement on this site is a commitment to make a loan. Loans are subject to borrower qualifications, including income, property evaluation, sufficient equity in the home to meet Loan-to-Value requirements, and final credit approval. Approvals are subject to underwriting guidelines, interest rates, and program guidelines and are subject to change without notice based on applicant’s eligibility and market conditions. Refinancing an existing loan may result in total finance charges being higher over the life of a loan. Reduction in payments may reflect a longer loan term. Terms of any loan may be subject to payment of points and fees by the applicant  Equal Opportunity Lender. NMLS#57916http://www.nmlsconsumeraccess.org/

Kentucky USDA Rural Housing Service (RHS) Section 502 Guaranteed program

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.

.

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:

https://www.rd.usda.gov/files/3555-1chapter10.pdf

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
.
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.

 

 

http://www.emailmeform.com/builder/form/0bfJs9b6bK8TGoc6mQk9hIu
 
Joel Lobb (NMLS#57916)
Senior  Loan Officer
 
American Mortgage Solutions, Inc.
Company ID #1364 | MB73346
 


Text/call 502-905-3708
kentuckyloan@gmail.com

http://www.nmlsconsumeraccess.org/
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 http://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.
 

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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