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Kentucky Single Family Housing Guaranteed Loan Program
– 25 Frequently Asked Questions

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25 Questions and Answers

1 What is the guarantee?
USDA Rural Development provides the full faith and assurance of the U.S Government
that any financial loss resulting from servicing the loan will be reimbursed in full up to
an amount not exceeding 90% of the original loan amount. All loss up to an amount not
exceeding 35% of the original loan is fully reimbursed. Losses exceeding 35% are 85%
reimbursed.
2 What is the advantage to the customer?
100 percent financing, fixed interest rate, a low annual fee of 0.35% of your loan balance, an upfront guarantee fee of 1.00%, and no restrictions on size or design are just a few of the advantages.
3 What are the eligibility requirements?
Have adequate and dependable income (up to 115 percent of adjusted area median
income), have acceptable credit, do not own a dwelling in the local commuting area, US
Citizen or permanent resident, have the ability to personally occupy the home on a
permanent basis, and do not have funds for a 20% down payment loan plus closing and
moving expenses.
4 Can a Broker originate Guaranteed loans? Yes, however only Approved lenders may underwrite & submit loans.
5 How long does it take to get an answer?
Our goal is a 2 to 5 day turnaround. Time will be longer in some offices due to the large
number of guarantee requests received.
6 What is the maximum fixed Interest Rate and term?
Fannie Mae 90 day delivery rate plus 60 basis points rounded up to nearest quarter of
one percent Or no more than the Lender’s published VA rate for first mortgage loans
with no discount points. The term is 30 years.
7 What is the maximum loan amount? The Loan amount is limited by the market value and repayment ability.
8 What is the maximum Loan to Value? It can be up to 100% LTV plus the Agency guarantee fee.

9 What is the Guarantee Fee? The upfront guarantee fee is 1.00 percent of the “Total” loan amount. There is also an annual fee of 0.35% of the loan balance, collected monthly.
10 What are the qualifying ratios? On a manual underwrite, PITI Ratio 29 percent, TD Ratio 41 percent.
Those ratios can be waived up to 32% PITI and 44% TD when every applicant on the loan has a 680 or higher credit score and the file has a compensating factor.
11 Do we show deferred student loans in the debt ratio?
Deferred student loans should be included in the debt ratio calculations for Guaranteed
Loans regardless of the deferment period.
12 What is the minimum credit score?
There is not one. USDA does not publish a minimum credit score anywhere in Handbook HB-1-3555. What drives your file is the underwriting recommendation you get back from GUS, USDA’s automated system. A 640 middle score will usually get a GUS Accept. Below 640 the file has to be manually underwritten, which is still possible. Most lenders hold you to a 640 floor, but that is the lender’s own overlay, not a USDA rule.
13 What about location? The dwelling must be located in eligible rural area (See eligibility site) http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do
14 What about refinancing? Limited to existing USDA Rural Development guaranteed or direct loans.
15 Can loans include acreage?

Possibly. The acreage must not contain any income producing facilities and the value of
acreage may not exceed of the total property value.
16 Can Manufactured Homes be financed? Yes. New units from an approved dealer are eligible, and since May 5, 2025 existing (used) manufactured homes are eligible too, in all 50 states including Kentucky. A used unit has to have been manufactured within 20 years of your loan closing date, sit on a permanent foundation, never have been installed at another homesite, be at least 400 square feet, carry both the HUD certification label and the HUD data plate, and have no alterations made after it left the factory other than an engineered porch or deck.

17 What about a swimming pool? Pools are fine. In-ground and above-ground pools are both eligible, and on an existing home there is no requirement to subtract the value of the pool. You just cannot use repair or rehab funds to install a new pool.

18 What are the required inspections?Property must meet the minimum property requirements in HUD Handbook 4000.1. Any appraiser licensed or certified in Kentucky can verify adequacy/working order of electrical, plumbing, heating, water & waste disposal on existing dwellings. USDA sets no age limit on a site-built home either — it only has to appraise and meet those HUD minimum property requirements. The only age cap in the program is the 20-year rule on existing manufactured homes.
19 Will USDA Rural Development issue a letter asking the Approved Lender to make a loan? No. This is the Approved Lender‟s loan. They underwrite the loan and decide if it meets their standards and Agency standards before submitting.
20 Is homebuyer education required? Homebuyer education is not required, however it is recommended.
21 Are seller concessions allowed? Yes. Rural Development restricts the amount of seller concessions to 6% of sales price
22 Who approves the Appraiser? Nobody at USDA does. Any appraiser licensed or certified in Kentucky can perform a USDA appraisal. USDA does not maintain an approved appraiser list and does not require an FHA roster appraiser.
23 Can necessary repairs be included in loan? Yes. An „as improved‟ appraisal will be needed to include cost of repairs.
24 Are alternate verifying income documents allowed

Yes. Paycheck stubs, payroll earnings statements and W-2 tax forms for previous 2 tax

years, and telephone verification of employment.

25 Who buys Guaranteed Housing Loans?

FHLB, Fannie Mae, Ginnie Mae, and other