Tag: Bowling Green Kentucky

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

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

Income Requirements for a Kentucky USDA Rural Housing Loan.


Key reminders for income calculations:


• Look at the date of employment, date the recent pay stub pays through, and the VOE.
• Look for overtime, bonus, commission, or any additional income that should be counted and count it.
• Make sure you are calculating your days correctly when averaging the income.
• If there has been a recent increase in salary or hourly rate, use the higher salary or hourly rate when calculating the Annual Household Income.
• #1 Reminder: Document your process. USDA reviewers look for Underwriter notes and any sort of explanation. It helps them to review a file faster if they don’t have to recreate what has already been done. 

Q. The applicant has a history of overtime, with a substantial amount received year to date; however, the VOE states the overtime is unlikely to continue. Do I need to include overtime in the annual income calculation?

A. Annual income is calculated based on what is expected to be received in the ensuing 12 months. If there is a history of overtime, it would need to be considered by the underwriter when calculating annual
income. Ultimately it is the approved lender’s responsibility to review the complete income history to determine what is expected to be received in the ensuing 12 months and to document the permanent loan file
to support their lending decisions.

Q. Does the IRS child tax credit need to be included in the annual income calculation?

A. No, tax credits, including the Child Tax Credit are not included in the Annual income calculation.

Q. Is per diem considered in annual income calculations?

A. If the per diem is taxable income, then it must be included in annual income. If the per diem is non-taxable income, it is considered reimbursement and therefore not included in annual income.

Q. The VOE states the applicant is expected to receive a 3% pay raise within the next 3 months. Do we have to count this expected increase in annual income?

A. Annual income is calculated based on what is expected to be received in the ensuing 12 months, including bonus income, projected pay raises, etc. If a pay raise is expected within the next 12 months, it would need to be included in the annual income calculation.

Q. We have a borrower that is divorced and has joint custody of a child that is only claimed on the tax returns as a dependent every other tax year. Can we consider this child a household member for the calculation of family size and income eligibility?

A. Applicants with shared custody may include their children as household members and receive the $480 per
child deduction.
 Annual household income for Kentucky USDA Loans

All files must include an income calculation worksheet.
Lenders may document their income calculations on their own in-house income worksheet

Defines Annual Income as: Income from all household members who live or propose to live in the dwelling as their primary residence for all or part of the ensuing 12 months. Adjusted annual income is used to determine whether an applicant is income-eligible for a guaranteed loan, or interest assistance, if applicable.

Adjusted annual income provides for deductions to account for varying household circumstances and expenses.

Kentucky Rural Housing USDA loan program


What are the eligibility requirements for a Kentucky USDA loan?

Kentucky Rural Housing USDA loan program

Kentucky Rural Housing USDA loan program
Kentucky Rural Housing USDA loan program

The Kentucky Rural Housing USDA loan program has certain eligibility requirements .

Must be located in a eligible USDA Rural Housing Area.

The home would be your primary residence, not a rental property
Household income requirements beginning around $91, 000for a family of four and up to $120,400 for a family of five or more

Clear Cavirs Numbers.

No minimum credit score requirement but most lenders that offer USDA loans will want a 620 credit score or higher

What are USDA loan fees in Kentucky?

There are two fees on a USDA loan. An upfront fee, called the Guarantee fee and the monthly annual fee.

The upfront guarantee fee for fiscal year 2020 is 1 percent of the loan amount. This fee can often be rolled into the mortgage, instead of paying it out of pocket. The annual fee for  is .35 percent of the loan amount.

It’s important to check the maximum income limits   for your family size and where you live to get the most accurate data.

Advantages of USDA Loans

Zero Down Payment

Low Credit Score Requirements

Can finance closing costs up to appraised value

Streamline refinance an existing USDA with less documentation

No max loan amount

Disadvantages  of USDA Loans

only eligible in rural areas

Must be 3 years removed from bankruptcy or foreclosure

Limited to Income Requirements

Debt to income ratios tighter qualifying guidelines than FHA, Fannie Mae

Joel Lobb Mortgage Loan Officer Individual NMLS ID #57916 American Mortgage Solutions, Inc. 10602 Timberwood Circle Louisville, KY 40223 Company NMLS ID #1364 click here for directions to our office Text/call: 502-905-3708 fax: 502-327-9119 email: kentuckyloan@gmail.com https://www.mylouisvillekentuckymortgage.com/

Joel Lobb
Mortgage Loan Officer
Individual NMLS ID #57916
 
American Mortgage Solutions, Inc.
10602 Timberwood Circle 
Louisville, KY 40223
Company NMLS ID #1364
 

Text/call:      502-905-3708


email:          kentuckyloan@gmail.com