How long does it take to close a Kentucky Rural Housing Loan in Kentucky?

Current Underwriting Turn Times on Rural Housing USDA Loans in Kentucky
Kentucky Rural Housing USDA Turn Times

Are you interested in knowing the current status of USDA’s turn times? USDA provides this information on their website.

 How long  will it take to close on your Rural Development USDA Loan in Kentucky?

On average, 30 to 45 days is usually okay. Sometimes quicker than 30 days, if the file is clean and submitted early to USDA office and the appraisal comes back okay.

It may take a 2-3 day longer turn time to Underwrite a USDA loan vs FHA, VA, Conventional loan. Not that big of a difference

The loan approval process for a USDA Loan is not like any other loan. Like all loan programs, the USDA Loan will have a lender that will assign the loan file to an Underwriter, who in turn will determine if the loan meets the loan program guidelines for approval.

Unlike other loan program, once the loan is approved by the lender/Underwriter, the file will be sent to one of the  centralized processing sites for the  Rural Development Offices in the Country. The turn time for loan approval varies  for Rural Development state offices, but most are on a 2-4 day turn time usually.

While some state offices have same day turn times, other states can take several weeks to sign off on the loan.

**Very Important ** Effective February 16th, 2020, all states were aligned to one of four production teams. Each production team has their own email inbox as shown below.

Production Teams States
Production Team One SFHGLPONE@usda.gov AK, AL, AZ, CA, CO, GU, HI, IA, ID, KS, MT, NM, NV, OR, SD, TX, UT, WA, WI, WP, WY
Production Team Two SFHGLPTWO@usda.gov AR, KY, LA, MN, MO, MS, ND, NE, NJ, NY, OK
Production Team Three SFHGLPTHREE@usda.gov CT, DE, GA, IL, MA, MD, ME, MI, NC, NH, RI, SC, VT, WV
Production Team Four SFHGLPFOUR@usda.gov FL, IN, OH, PA, PR, TN, VA, VI

Current USDA Turn times for Kentucky is listed below. Click on the link.

Loan Status

We are currently reviewing new loan applications and conditions received on or

Click on the link.

👇

https://www.rd.usda.gov/page/sfh-guaranteed-lender

 

Kentucky Rural Housing USDA loans require One of the biggest eligibility requirements is that the property be located in a designated rural area of Kentucky. 
You can use this map for Kentucky USDA Rural Housing Eligible Areas for 2022  below to determine if the property you have your eye on is eligible for a Kentucky USDA home loan.
 
 

Generally, these areas are outside of major metropolitan areas of Kentucky to include Jefferson County, Fayette County, and parts of Northern Kentucky are not eligible.  

There are some smaller towns like Frankfort, Richmond,  Winchester, Bowling Green, Paducah, Owensboro, Henderson and Radcliff that are not eligible for the USDA loan program–(see brown shaded areas on map link)
 
The second crucial element for qualifying or a USDA in Kentucky is the income limits. USDA income limits can’t make more than 115% of the median family household income for the area in which you wish you purchase the home.
 

The base USDA income limits are for most Kentucky counties below:

 

 

Kentucky Rural Housing ​USDA ​Loan Program for 2022 ​ust recently increased their income limits Families of 4 or less people can now have a maximum annual income of $103,500 (used to be $90,000) in most counties and 5 or more people in the household income can now be a maximum of $136,600  What does that mean? It means if before you were told you make too much to qualify for a ​Kentucky ​USDA loan, you might qualify now

 

New Income limits for most counties (*) in Kentucky are $103,500 for a household family of four and household families of five or more can make up to $136,600 with the new changes for

 

 

2022 Kentucky USDA Income limits, the Jefferson County Louisville, KY Metro area (**) saw an increase of$103,500for a family of four and up to $136,600 for a family of five or more. The metro area surrounding counties of Jefferson County includes Oldham, Bullitt, Spencer are included in these higher income limits for USDA loans.

 

 

Remember, the entire Jefferson County and Fayette County Kentucky counties are not eligible for USDA loans. Along with parts of the following counties Daviess (Owensboro), Mccracken (Paducah), Madison County, (Richmond), Clark County (Winchester), Warren (Bowling Green), Hardin (Fort Knox and Radcliff), Bullitt(Hillview, Maryville, Zoneton, Fairdale, Brooks), Franklin, (Frankfort), Henderson (Henderson City Limits)…

 
With regard to income, the max DTI ratio is 29/41, meaning the housing payment can’t exceed 29% of gross monthly income and total liabilities can’t exceed 41% of income. You can go higher with an automated GUS approval. 
You must also occupy the property you’re buying – no second homes or investment properties are permitted. But manufactured homes are USDA eligible. And there area loan limits just like there are on conventional mortgages and FHA loans..
 The Kentucky USDA home loan program is not limited to just first-time home buyers. Repeat buyers are also eligible!

Types of Kentucky USDA Home Loans

The USDA home loan only comes in one flavor; a 30-year fixed-rate mortgage. Nothing fancy or exotic here to ensure borrowers don’t get into any trouble with an ARM.
The 15-year fixed also isn’t an option because such a loan would imply that the borrower could afford a conventional loan and not need to rely on the USDA and its zero down financing program.
However, you can use a USDA home loan to both purchase a new property or refinance your current mortgage under certain circumstances. But no cash out is permitted if you perform the latter.
There is a sister program known as the Section 502 Direct Loan Program that assists low- and very-low income borrowers by providing subsidies that lower monthly mortgage payments for a select period of time.
The income limits for this program are significantly lower than those for the main USDA loan program, but the benefits are pretty amazing. For example, you can obtain an interest rate as low as 1% and get a 38-year loan term.

Minimum Credit Scores for a Kentucky USDA Home Loan Approval

Technically, there is no minimum credit score required to obtain a USDA home loan. However, lenders often impose overlays over USDA guidelines to ensure the borrowers are creditworthy.
Generally, you’ll need a credit score of 640 or higher to get approved for a USDA loan, though it’s possible to go lower with an exception or a manual underwrite.
When doing a manual underwrite, you should have compensating factors (such as long-term employment, assets, decent income, positive rental history etc.) to allow for the lower credit score. Your mortgage rate will also be higher to account for increased risk.
Also note that a higher credit score may be required if your DTI exceeds the allowable ratios.
In any case, you should really try to attain much higher credit scores if you want to get any type of mortgage, and favorable terms on said loan.
As with any other mortgage, it’s advisable to check your credit several months in advance to ensure your credit is on good shape, and if not, take steps to improve it before applying.
 

 

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 verification or cancelled checks. Due to
impartiality issues, third party verification 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. 

Validating the Credit Score. 


Two or more eligible trade lines are necessary to validate
an applicant’s credit report score. Eligible trade lines consist of credit accounts
(revolving, installment etc.) with at least 12 months of repayment history reported on the
credit report. At least one applicant whose income or assets are used for qualification
must have a valid credit report score. 

Confirm the applicant has at least two eligible tradelines reported to the credit bureau.
The tradeline may be open, closed and/or paid in full by the applicant. Eligible tradelines
include:

 Loan (secured or unsecured);
 Revolving (generally a credit which is not repaid by a certain number of
installments);
 Installment credit (generally repaid through a specified number of
installments such as automobile, recreational vehicle, or student loans);
 Credit card (offered by banking institutions, commercial enterprises and
individual retail stores. Consumers make purchases on credit and if payment
is made within a stipulated period of time, no interest is charged);
 Collection (an account whereby an original creditor transfers an unpaid,
delinquent balance to a collection agency to retrieve any monies owed);
 Charge-off (is the declaration by a creditor that an amount of debt is unlikely
to be collected)
 Authorized user accounts may not be considered in the credit score and credit
reputation analysis unless the applicant provides documentation that they have
made payments on the account for the previous 12 months prior to

application. 

Indicators of unacceptable credit.



 Foreclosure within 3 years:
 Including pre-foreclosure activity, such as a pre-foreclosure sale or short sale
in the previous 3 years\
 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;
\

 

 

 

Kentucky USDA  Home Loan Mortgage Insurance Costs

One of the upside of the USDA home loan is the fact that there’s an upfront guarantee fee that the borrower must pay. It is currently set at 1.0% of the loan amount, and .35% monthly mi premium called the annual fee, which is much cheaper than FHA and Conventional loans on lower credit scores. 
This can be financed into the loan amount so it’s paid off over time, as opposed to upfront out-of-pocket at closing. And if the USDA guarantee fee is financed the LTV can exceed 100%.
 

Refinancing a Kentucky USDA Home Loan

It’s also possible to refinance an existing USDA home loan into another USDA loan, and actually quite easy thanks to a streamlined program that doesn’t require an appraisal, credit report, or a debt-to-income calculation.
The only requirement is that you must have been current on your mortgage for the past 12 months, and it must lower your interest rate by at least 1%. 
There is also a non-streamlined USDA refinance option that requires an appraisal to gain approval, but allows you to roll closing costs into the new loan.

Kentucky Rural Housing USDA Home Loan Frequently Asked Questions

Do I need to make a down payment on a USDA home loan?
No, you can obtain 100% financing with a USDA loan, which is the main draw of the program. The only other government housing loans that provide zero down financing are VA mortgages.
What credit score do I need to get a USDA loan?
You need a 640 credit score to get an automated approval for a USDA loan, but some lenders will go to 581 with expensive pricing adjustments. If you have bad credit, you may want to take a hard look at your credit history and clean it up as much as possible before applying.
Do I need two years of job history to get approved for a USDA loan?
Not necessarily. If you’re new to the workforce or returning after a reasonable and explainable absence and likely to continue working it may be permitted.
Can I get a USDA loan if I’m self-employed?
Yes, but you’ll need to provide two years of tax returns to ensure it is stable and in the same line of work.
Are USDA mortgage rates high or low?
They’re generally pretty low relative to conventional mortgage rates (Fannie and Freddie) and pretty close to FHA mortgage rates. If an FHA 30-year fixed is 4.5%, the USDA 30-year fixed rate might be 4.5%. In other words, they’re low and competitive.
But you have to factor in the upfront and monthly mortgage insurance premiums as well.
Additionally, USDA loan rates can’t be more than 1% above the current Fannie Mae yield for 90-day delivery for 30-year fixed rate conventional loans. This regulates how high the rate can be based on the market average.
What loan types are available via the USDA loan program?
Just the 30-year fixed. No adjustable-rate mortgages and no other fixed products are available. Additionally, balloon mortgages and interest-only mortgages aren’t permitted, nor are prepayment penalties.
Can you buy a condo with a USDA home loan?
Yes, but it must be on the approved list from Fannie/Freddie, the FHA, or VA, and it must be located in a rural area.
Can I get a USDA loan on a second home or investment property?
No, USDA loans are only available on owner-occupied primary residences.
Can I get cash out via a USDA loan?
No, only rate and term refinances are available, along with purchase financing.
Can I roll closing costs into a USDA loan?
Yes, as long as the property appraises for more than the purchase price and the DTI isn’t exceeded as a result. You can also use seller concessions or a lender credit to cover closing costs.
Is there mortgage insurance on a USDA loan?
It’s technically called a guarantee fee, and includes both an upfront fee at closing (that can be financed) and a monthly fee that is ongoing.
!
How long does it take to get a USDA loan in Kentucky?
Like all other mortgages, it depends on your specific scenario, but the USDA loan approval process does require an extra step in sending the loan to the USDA for final approval. They basically check the lender’s work before they allow them to fund the loan. This step can add an extra few days to few weeks (or more) onto your closing date, so beware!
 

On average it takes 30-45 days to close a USDA loan in Kentucky, so about the same as any other government-backed mortgage loan like FHA, VA KHC etc. 

 
Kentucky USDA Rural Housing Map Below:👇 Click on link below to see if the home is located in a Rural Housing Area.
 
  •  
 
 
American Mortgage Solutions, Inc.
10602 Timberwood Circle Suite 3
Louisville, KY 40223
Company ID #1364 | MB73346
 

Text/call 502-905-3708
kentuckyloan@gmail.com
 
 
 
http://www.nmlsconsumeraccess.org/
 

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/

 
 

 

Joel Lobb (NMLS#57916)
Senior Loan Officer

American Mortgage Solutions, Inc.

10602 Timberwood Circle Suite

Louisville, KY 40223

Company ID #1364 | MB73346

Text/call 502-905-3708

kentuckyloan@gmail.com

 

Mortgage Application Checklist of Documents Needed below  👇

 

W-2 forms (previous 2 years)
Paycheck stubs (last 30 days – most current)
Employer name and address (2 year history including any gaps)
Bank accounts statement (recent 2 months – all pages
Statements for 401(k)s, stocks and other investments (most recent)
federal tax returns (previous 2 years)
Residency history (2 year history)
Photo identification for applicant and co-applicant (valid Driver’s License

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/

— 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.

 

 

 

 

 
 

502 Direct USDA Loan in Kentucky:

NMLS 57916

There are two types of Kentucky USDA Rural Housing Home loans available to rural Kentucky Home buyers through Rural Development:

Direct homeownership loans and guaranteed home ownership loans.

Let’s first look at the 502 Direct USDA Loan in Kentucky

502 Direct USDA Loan in Kentucky:

With a Kentucky  Direct Loan 502, the applicant applies directly to the USDA office serving their location in Kentucky. There are about 13  different locations . They  lend the money direct from USDA , 100 percent financing, for the low rate currently at 3 percent on a 33 year term.

For a direct home loan, the purchase, construction, repair and rehabilitation of a single family home in rural areas must be used for the applicant’s permanent residence. “For manufactured housing, only new construction can be funded,” he explained.

Credit scores of 640 or greater are typically acceptable with a minimum number of trade lines (2 usually for 12 months can be opened or closed) that have been open and active.

No down payment typically is required- Loans may be up to 100 percent of the appraised value. Homebuyer education is required prior to closing for the Direct USDA Loan 502 program

Mortgage payments are based on what the applicant can afford to pay. USDA offers payment assistance/subsidies to make it affordable. When you go to payoff the USDA Direct loan, you may incur a subsidy recapture fee. KY RD Offices_August2014.jpg

There are two types of Kentucky USDA Rural Housing Home loans available to rural Kentucky Home buyers through Rural Development:

Direct homeownership loans and guaranteed home ownership loans.

Let’s first look at the 502 Direct USDA Loan in Kentucky

502 Direct USDA Loan in Kentucky:

Rural Home Loans (Direct Program)
What does this
program do?
Also known as the Section
502 Direct Loan Program, this
program assists low- and
very-low-income applicants
obtain decent, safe, and sanitary
housing in eligible rural areas by
providing payment assistance
to increase an applicant’s
repayment ability. Payment
assistance is a type of subsidy
that reduces the mortgage
payment for a short time.
The amount of assistance is
determined by the adjusted
family income.
Who may apply for this program?
A number of factors are considered
when determining an applicant’s
eligibility for Single Family Direct Home
Loans. 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.
Applicants must:
• Be without decent, safe, and
sanitary housing
• Be unable to obtain a loan from
other resources on terms and
conditions that can reasonably be
expected to meet
• Agree to occupy the property as
your primary residence
• Have the legal capacity to incur a
loan obligation
• Meet citizenship or eligible
noncitizen requirements
• Not be suspended or debarred from
participation in federal programs
Properties financed with direct loan
funds must:
• Be modest in size for the area
• Not have market value in excess of
the applicable area loan limit
• Not have in-ground swimming pools
• Not be designed for income
producing activities
Borrowers are required to repay all or a
portion of the payment subsidy received
over the life of the loan when the title to
the property transfers or the borrower is
no longer living in the dwelling.
Applicants must meet income eligibility
for a direct loan. Please contact your
local RD office to ask for additional
details about eligibility requirements.
What is an eligible area?
Generally, rural areas with a population
less than 35,000 are eligible. Visit the
USDA Income and Property eligibility
website for complete details.
How may funds be used?
Loan funds may be used to help
low-income individuals or households
purchase homes in rural areas. Funds
can be used to build, repair, renovate,
or relocate a home, or to purchase
and prepare sites, including providing
water and sewage facilities.
How much may I borrow?
The maximum loan amount an
applicant may qualify for will depend
on the applicant’s repayment ability.
The applicant’s ability to repay a loan
considers various factors such as
income, debts, assets, and the amount
of payment assistance applicants
may be eligible to receive. Regardless
of repayment ability, applicants may
never borrow more than the area loan
limit (plus certain costs allowed to be
financed) for the county in which the
property is located.
Rural Home Loans (Direct Program)
What is the interest rate and
payback period?
• Fixed interest rate based on current
market rates at loan approval or loan
closing, whichever is lower.
• The monthly mortgage payment,
when modified by payment
assistance, may be reduced to as
little as an effective 1% interest rate.
• Up to 33 year payback period – 38 year
payback period for very low income
applicants who can’t afford the 33 year
loan term.
How much down payment
is required?
No down payment is typically required.
Applicants with assets higher than the
asset limits may be required to use a
portion of those assets.
Is there a deadline to apply?
Applications for this program are
accepted through your local RD office
year round.
How long does an application take?
Processing times vary depending on
funding availability and program demand
in the area in which an applicant is
interested in buying and completeness
of the application package.
What governs this program?
• The Housing Act of 1949 as
amended, 7 CFR, Part 3550
• HB-1-3550 – Direct Single Family

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

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 $90,200 for a  4 unit household and household families of five or more + can make up to  $119,200.
  • The Northern Kentucky Counties (***) of Boon, Kenton, Campbell, Bracken, Gallatin, and Pendleton are $99,500 for a household of four or less and up to $129,400 for a family of five or more.
  • With the new changes for 2019 USDA Income limits, the Jefferson County Louisville, KY Metro area (**) saw an increase of $90,200 for a family of four and up to $119,100 for a family of five or more. The metro area includes Oldham, Bullitt, Spencer, Hardin, Larue and Meade are including in these higher income limits for USDA loans.Remember,  Jefferson County Kentucky, Fayette County Kentucky are not eligible for USDA loans.,Below is the website where you can check and make sure

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.

Kentucky USDA Rural Housing Loans Direct Programs Interest Rates

What is the interest rate and payback period?

  • Effective January 1, 2022, the current interest rate for Single Family Housing Direct home loans is 2.50% 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

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 current interest rate for Single Family Housing Direct Home Loans

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.

Program Fact Sheet

Program Forms & Resources

Click here for the current rate for the USDA 502 Direct Loan Program

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