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USDA Loans in Kentucky: New Income Thresholds Explained


USDA Loans in Kentucky

What is KY USDA Rural Development Guarantee in Kentucky?

Kentucky USDA Rural Development Guarantee USDA loans offer 100% financing options on home purchases in rural areas. Properties though can be located within city limits and in subdivisions depending on population density of that area.
The RDG loan program is primarily used to help low to moderate income individuals or households to purchase homes and the applicants need to be within 115% of the median income for the area. Effective July 13, 2026, most Kentucky counties are $122,800 for a household of one to four people, and up to $162,100 for a household of five to eight people. In Boone, Bracken, Campbell, Gallatin, Kenton and Pendleton counties the limits are $128,600 and $169,800.
Some highlights of the are:
  • 100% financing on purchases and 100% Zero Money Down
  • Low 30 year fixed rates on all loans. They don’t offer any other terms or offer cash-out refinancing.
  • A small Rural Housing monthly guarantee fee or sometimes called annual fee of .35% of the loan amount divide by 12 months to get total monthly mi payment.
  • Upfront Rural Housing funding fee of 1% of the loan amount and is financed into new loan
  • USDA does not publish a minimum credit score in HB-1-3555. What drives the file is the automated underwriting recommendation from Rural Housing’s underwriting engine – GUS–GUS stands for the Guaranteed Underwriting System. A 640 middle score typically gets a GUS Accept. Below 640 the file is manually underwritten, which is still possible. Most lenders impose a 640 floor as their own overlay, not a USDA rule.
  • No rental verification needed with GUS approval if Approved Eligible Findings.
  • Flexible trade line requirements with GUS approval with only 1 trade line needed on credit for 12 months
  • No foreclosures in the last 36 months, but need explanation if < 36 months
  • Bankruptcy discharged at least 36 months
For a Kentucky USDA Rural Housing property and income eligibility search, please click HERE.

Issues to avoid or be aware of with Rural Housing property search:

  • Avoid homes with any income producing activities such as working farms, detached buildings with offices or car lifts for auto repairs, or anything else related to income producing activities.
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Kentucky Rural Housing USDA Loan Student Loan Debt Calculations


How to Qualify for a Rural Housing Loan in Kentucky with Student Loans.

For potential home buyers with student loans that are either in a deferred payment status or being paid back through an income based or graduated repayment program, the treatment of this liability needs to be considered.

When student loan debts are not currently being paid upon, due to the loan applicant still being in school or recently graduating from school, the monthly liability will be calculated based on the lower of 1/2 of 1% of the outstanding loan balance or the monthly payment listed on the credit report.

Example if you owe $100,000 in student loan debt the monthly payment will be $500. Also, if the student loan is being paid upon, but at a lesser amount than originally agreed, such as the payment being determined based on repayment ability (i.e. Income Based Repayment Plan), the monthly payment will be calculated the same as above (monthly liability = 1/2 of 1% of the outstanding loan balance).

This offers a significant improvement compared to the FHA Loan guidelines, in which student loans that are in deferment or under an income based repayment plan will have the monthly payment calculated at 1% of the outstanding loan balance.

If the student loan is being paid upon as originally agreed upon when the loan was first obtained, the monthly liability will be the amount specified on the credit report.

Or if the student loans have been consolidated into a new loan, so long as the monthly payment is based on a fixed repayment schedule, that payment will be used when calculating the borrower’s debt to income ratio.

If you have yet to apply for your Kentucky USDA Loan pre-qualification request, you can do so online

 
Joel Lobb
Mortgage Loan Officer
Individual NMLS ID #57916
 
EVO Mortgage
911 Barret Ave, Louisville, KY 40204
Company NMLS #1738461
 

Text/call:      502-905-3708

email:          kentuckyloan@gmail.com
Equal Housing Lender
 

 

 
 
 
Posted by Joel Lobb, Mortgage Broker FHA, VA, KHC, USDA
Kentucky Debt To Income Ratios for FHA, VA, USDA
https://kentuckyusdaloan.com/2018/10/18/debt-to-income-ratio-for-kentucky-mortgage-loans/

EVO Mortgage
911 Barret Ave, Louisville, KY 40204
NMLS #57916 | Company NMLS #1738461

Text or call: 502-905-3708
email: kentuckyloan@gmail.com
http://www.nmlsconsumeraccess.org
Equal Housing Lender

http://www.mylouisvillekentuckymortgage.com/