Kentucky USDA Rural Housing Development Loans for 2014

Effective May 1, 2013, Agency concurrence of a debt ratio may be granted if all of
the following conditions are met:

1. The PITI is between 29 and 32 percent or the TD ratio is between 41and 44
percent;
2. The credit score of all applicant(s) is 680 or greater; and
3. At least one of the acceptable compensating factors listed below is identified and
supporting documentation is provided to the Agency.

Acceptable Compensating Factors and Supporting Documentation:

 The proposed PITI (proposed housing expenses) is equal to or less than the
applicant’s current verified housing expense for the 12 month period preceding loan
application. Verification of housing expenses may be documented on a Verification
of Rent (VOR) or credit report. The VOR or credit report must include the actual
payment amount due and report no late payments or delinquency for the previous 12
months. Rent or mortgage payment histories from a family member will not be
considered.

 Accumulated savings of liquid assets or cash reserves available post loan closing are
equal to or greater than 3 months of PITI payments. A Verification of Deposit or two
consecutive bank statements, dated within 45 days of loan application, that document
the average balance held by the applicant is required. Cash on hand is not eligible for
consideration as a compensating factor.

 The applicant(s) (all employed applicants) has been continuously employed with their
current primary employer for a minimum of 2-years. A “Request for Verification of
Employment” (VOE) (Form RD 1910-5, equivalent HUD/FHA/VA or Fannie Mae
form, or other equivalent), or VOEs prepared by an employment verification service
(The Work Number, etc.) must be provided. This compensating factor is not
applicable for self-employed applicants.

Debt Ratio Waiver Request and Agency Approval:

Debt ratio waivers must be requested and documented by the approved lender, otherwise
the loan file will be denied. The Agency will review the debt ratio waiver request when
all of the following conditions are met:

1) The lender requests Agency concurrence with the debt ratio waiver by submitting
a signed underwriting analysis that captures one or more of the above
compensating factors. Lenders may utilize Fannie Mae 1008 / Freddie Mac 1077,
“Uniform Underwriting and Transmittal Summary,” or similar form;

2) The PITI is between 29 and 32 percent or the TD ratio is between 41 and 44
percent;

3) The underwriting credit score is 680 or greater for all applicants; and

4) The lender provides evidence of the compensating factor(s).

The Agency will notify the lender of concurrence with the debt ratio waiver request by
issuance of Form RD 1980-18, “Conditional Commitment for Single Family Housing
Loan Guarantee.” The Agency must check the ratio waiver box in the Guaranteed Loan
System for manually underwritten loans or on the USDA Administration page in GUS for
“Refer” or “Refer with Caution” underwriting recommendation files. All supporting
documentation of the compensating factors must be imaged as an essential document in
the Rural Development Imaging Repository.

Summary

There will be no exceptions to the defined ratio thresholds and minimum credit score
requirements. Only the compensating factors listed in this AN with supporting
documentation will be considered for Agency concurrence with a debt ratio waiver.

This AN does not apply to any GUS loan file that receives an “Accept” underwriting
recommendation.

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This website is not acting on behalf of or at the direction of HUD/FHA, USDA, KHC,  VA  or the Federal Government.