Rural Development Kentucky Underwriting Guideline Mortgage Changes for Income, Credit, Work History and Assets

Chapter 9 – Income Analysis

• Paragraph 9.3 is being revised as follows:
  o To clarify that lenders must verify the income of each adult household member for the previous 2
  years, which is consistent with the requirements in 7 CFR 3555.
  o To clarify under “full income documentation”, the lender must obtain W-2s or IRS Wage and Income
  transcripts, in addition to paystubs.
  o To change the term “streamlined documentation” to “alternative income documentation” to remove
  confusion with the streamlined refinance product.
  o To clarify under “self-employed income documentation” that if ownership interest is less than
  25%, neither the “Business Owner” or “Self-Employed” options should be selected in GUS.
  o 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, which may differ than the note date that is currently referenced.
• Paragraph 9.8 is being revised to clarify it is the lender’s responsibility to review gaps in
  employment and determine if the income is stable and dependable. In addition, this paragraph is
  being revised to clarify a business loss from a closed business may be removed from consideration
  under the same circumstances that self-employment income from a closed business can be removed from
  consideration.
• Attachment 9-A is being revised as follows:
  o Revising “Automobile Allowance” and “Expense Allowance” guidance to allow the full expense
  allowance to be included as repayment income and the full debt counted in DTI, as well as updating
  the required history to two years.
  o To clarify that “Boarder Income” refers to rental income received from an individual renting
  space inside the dwelling, making the property income producing and therefore ineligible.
  o Revising “Bonus” and “Overtime” income to clarify the one year history must be in the same or
  similar line of work.
  o Revising the “Child Support” and “Separate Maintenance/Alimony” guidelines to simplify the
  guidance, remove inconsistencies within the current guidance, and clarify that income 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 for repayment income.
  o To clarify that employer-provided fringe benefits that are reported as taxable income may be
  included in repayment income.
  o Simplifying the guidance on considering mileage deductions, referring to IRS guidance when a
  mileage deduction is claimed on income tax returns.

USDA is an equal opportunity provider, employer, and lender.
o Removing the requirement to obtain a copy of the IRS W-4 document when using a Mortgage Credit
Certificate as income.
o Revising “Secondary Employment” guidance to clarify that the applicant must have a one year
history of working the primary and secondary jobs concurrently to be considered for repayment
income.
o Revising “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, 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.
o Revising the “Unreimbursed Employee or Business Expenses” guidance to reflect instances where the
IRS continues to allow these deductions.
o Adding categories providing guidance on Guardianship/Conservatorship Income, Individual
Retirement Account (IRA) Distributions, and Variable Income.
o Revising guidance for sourcing deposits in depository accounts to simplify the process and become
more consistent with the lending industry. Clarified that all recurring deposits, as well as
non-recurring deposits greater than $1,000, need to be reviewed to confirm the deposits are not
from undisclosed income
sources.
o To clarify that gift funds applied as Earnest Money should not be entered on the “Loan and
Property Information” GUS application page.
o Adding a category providing guidance on “Lump Sum Additions.”
o To clarify in the “Retirement” section that funds borrowed against retirement accounts (e.g.
401(k), IRA, etc.) are eligible for funds to close, but are not considered in reserves.

• Attachment 9-E is being 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

• Attachment 15-A is being revised as follows:
  o Removing 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.
  o To change the term “streamlined documentation” to “alternative income documentation” on page 2,
  to remove confusion with the streamlined refinance product.
  o Rent is required for manually underwritten loans less than 680.

Have Questions or Need Expert Advice? Text, email, or call me below:

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
fax: 502-327-9119
email: kentuckyloan@gmail.com

http://www.mylouisvillekentuckymortgage.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).