Category: USDA/RHS Income limits by Ky Counties

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. http://eligibility.sc.egov.usda.gov. 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 OfficerIndividual 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
email:

          kentuckyloan@gmail.com

https://www.mylouisvillekentuckymortgage.com/

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

Click to access 508_RD_FS_RHS_SFH502Direct.pdf

No Money Down Kentucky USDA Rural Loan Program


How USDA Government  Underwriters calculate your Debt-to-Income or DTI ratio.

One of the most frequent questions that come from perspectives Kentucky  home buyers is

“How Much House Can I Afford?”

Answering this question is determined based on calculating what are known as the borrower’s Debt-to-Income or DTI ratios. The established standard DTI ratio used for a USDA Loan is based on two sets of ratios, which are as follows:

  • Front-end or housing ratio – the monthly mortgage payment cannot exceed 29% of the gross monthly income.
  • Back-end or total debt ratio – the total debts, including the new monthly mortgage payment, cannot exceed 41% of the gross monthly income.

A monthly mortgage payment includes the principal and interest payment on the mortgage note, as well as the monthly pro-rated portion of the annual fee, property tax and homeowner insurance premium.

 

Specific to the USDA Rural Loan program is the pro-rate portion of the USDA Annual Fee, which is often referred to as a monthly mortgage insurance payment. If there are any Condominium or Homeowner Association (HOA) fees, these fees must be included in the monthly mortgage payment as well.

Total debts include the anticipated monthly mortgage payment and all monthly re-occurring credit obligations.

 

Examples of reoccurring credit obligations include monthly car payments, minimum payment on credit cards, and student loan payments. If the borrower is obligated to make any alimony or child support payments, these payments will be included within the total debt calculations as well.

If the total debts exceed 41% of the gross monthly income, the maximum monthly mortgage payment must be reduced in order to bring total DTI back down to 41%. For example, assume a monthly income of $5,000.

 

Based on the 29%/41% ratio requirements, the maximum housing expense will be $1,450 and total debts will be $2,050. If the non-housing expense exceeds $600 ($2,050 – $1,450), the housing expense will need to be reduced by an equal amount to keep the total ratio at 41%.

While the 29%/41% ratio is considered to be the Underwriting standard guideline, the USDA Loan Program will allow for DTI ratios as high as 33.99%/45.99%.

 

What determines the ability to qualify at a higher ratio is a combination of factors, such as an approval through Guaranteed Underwriting System, which is USDA’s automated approval, and other compensating factors such as:

  • 680 or higher credit score
  • No or low “payment shock” – less than a 100% increase in proposed mortgage payment vs. current rental housing expenses
  • Fiscally sound use of credit
  • Ability to accumulate savings
  • Stable employment history with 2 or more years in current position or continuous employment history with no job gaps
  • Cash reserves available for use after settlement
  • Career advancement as indicated by job training or additional education in the applicant’s profession
  • Trailing spouse income – as a result of a job transfer, in which the house is being purchased, prior to the secondary wage-earner obtaining employment. This assumes that the secondary wage-earner has an established history of employment and has a reasonable chance to obtain new employment in the area upon relocating to the area
  • Low total debt load

Joel Lobb (NMLS#57916)
Senior  Loan Officer

American Mortgage Solutions, Inc.

10602 Timberwood Circle Suite 3

Louisville, KY 40223Company 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/

When qualifying for a USDA Loan and the borrower already owns another house?


The USDA Loan assumes a very conservative perspective on financing homeowners who already own a home, unless the borrower can prove that the current home is not “adequate or suitable” for the borrower’s needs. Owning a house can be defined as not only being on the mortgage loan but also being on title to the property without being on the mortgage loan for that property. Factors that can determine when a house is not “adequate or suitable” include the following:

  • Household size change in which the borrower’s family size now exceeds the room count of the current house. The assumption being made here is that there is more than 1.5 household residents per room. The room count generally includes a living room, dining room, kitchen, recreation room, and bedroom(s). Room counts do not include bathrooms, hallways, or foyers.
  • In the case of divorce where the borrower remains on the mortgage loan, but the Courts have awarded the house to the ex-spouse.
  • Job transfer in which the borrower has relocated more than 50 miles away from the current residence.
  • Manufactured houses (i.e. doublewides) not on a permanent foundation.
  • The current house is not suitable due to documentable health and safety related issue, which includes the disability or limited mobility of a household resident that cannot be accommodated without substantial retrofitting of the current house.

Under no circumstances will the borrower be able to obtain another USDA Loan if the existing home is already financed using a USDA Loan. When qualifying for a USDA Loan and the borrower already owns another house, the costs associated with the current house, including the mortgage payment, property taxes, homeowner insurance, condo or Homeowner Association Fees, and lot rent in the case of a manufactured home, will be considered a liability to the borrower when calculating their debt-to-income ratio.

If the borrower has two years of rental history, as documented on their tax returns, the mortgage liability can be offset by the rental income. Also, in the case of a court ordered divorce settlement where the borrower can document 12 months of on-time mortgage payments being made by their ex-spouse, the liability can be excluded.

 

Joel Lobb
Mortgage Loan Officer
Individual NMLS ID #57916
 
American Mortgage Solutions, Inc.
 
Text/call:      502-905-3708
fax:            502-327-9119
email:          kentuckyloan@gmail.com
 

Kentucky USDA Rural Development Loan Program:


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