DEFERRED STUDENT LOANS AND DEBT RATIO CALCULATIONS for Kentucky Rural Housing Loans and USDA Loans in KY
RHS Student Loan DTIs
Due to the variable nature of some student loan plans, RHS is standardizing the process of including them in the debt ratio. All student loans will now require documentation verifying the current payment due.
For student loans which are Conventional, Fixed Payment, and/or Deferred:
Account statements will be reviewed and fixed monthly payment will be used with no adjustments.
Deferred student loans not in repayment will use an estimated payment of 1% of the loan balance unless a documented fixed payment from the loan servicer can be provided.
For student loans with Income Based Repayment plans:
If the current payment is greater than $100, that payment can be used.
If the current payment is less than $100 and total loan balance is greater than $10,000, a minimum $100 payment must be included in the debt ratio.
If the current payment is less than $100 and total loan balance is less than $10,000, then the current payment may be used
Please note that documentation of an Income Based Repayment agreement must be provided. Payments of $0 are not eligible to be used in the debt ratio. Verifications are only valid for 120 days, 180 days for new constructions
DEFERRED STUDENT LOANS AND DEBT RATIO CALCULATIONS
. A 100% 30 year fixed interest rate loan with flexible credit and qualifying ratios along with other benefits, will open the door to a new market and new growth possibilities.
We look forward to a long and productive relationship this affordable housing product to the people of Kentucky and to a strong partnership in the Kentucky GRH Program.
For the USDA Rural Development Single Family Housing Guaranteed Loan Program, deferred student loans should be included in the debt ratio calculations for Guaranteed Loans regardless of the deferment period.
Rural Development RD Instruction 1980-D, section 1980.345(c)(1) states:
“Long term obligations include those obligations . . . with a remaining repayment period of more than 6 months and other shorter term debts that are considered to have a significant impact on repayment ability.”
Deferred student loans are long term obligations with remaining repayment periods of more than 6 months, and they must be included as part of the
applicant‟s recurring monthly debt obligations. If the credit report does not reflect a monthly payment due at the end of the deferment period, the lender may request a copy of the applicant‟s payment letter, or utilize the industry standard of estimating student loan payments as 1% of the loan balance. Therefore a deferred student loan balance of $12,000 should have a corresponding monthly payment of $120 if no estimated payment is verified by the lender.
This guidance applies to all manually
DEFERRED STUDENT LOANS AND DEBT RATIO CALCULATIONS Kentucky Rural Housing Loans and USDA Loans in KY
Logo of the USDA Rural Development office, part of the Department of Agriculture. (Photo credit: Wikipedia)
KENTUCKY RURAL DEVELOPMENT QUICK REFERENCE GUIDE
100% * NO MONEY DOWN LOAN and LOW “MI” * Seller Can Pay All CC’s GENERAL INFO
• 29% PITI, 41% TD ratios
• (waivers allowed with good credit)
• Debts with 6 months or more owed will be
counted
• Property must be located in eligible RD areas
• Land value cannot exceed 30% of total value
• In-ground swimming pools may be approved with
waiver
• No substandard homes
• No existing manufactured homes
• CAIVRS number(s) needed ELIGIBILITY
• First time homebuyer not a requirement
• Income must be within RD limits
• Income must be adequate and stable
• Adequate ability to repay the loan
• Acceptable credit history
• Be without an adequate dwelling
• Cannot obtain conventional financing
• Citizen or permanent resident alien
• Owner occupied
• Legal capacity to incur debt
• Bankruptcy OK if discharged for 36 months INCOME ELIGIBILITY
• All household income counted
• Overtime, bonuses, and commissions count, if
supported by history
• Child support counts –may be grossed up 25%
• Self-employment – (use IRS net income) – 2 year
history plus current information needed
• Same job or line of work for past 12 months
(some exceptions allowed)
• Written verification of SS, SSI, etc.
• Degree or certification can substitute for job time
• All income must be verified GROSS INCOME DEDUCTIONS/ADJUSTMENTS
• $480 for each child under 18
• Over 18 counts if full time student living at home
• Actual child care expenses for children 12 or
younger if parents work or attend school
• $400 for applicant or co-applicant if disabled or
elderly
• Medical deductions may be considered for
disabled or elderly applicants (above 3% of gross
income KEY POINTS
• No Down Payment
• 100% Guaranteed financing
• LOW MONTHLY “MI” of .40 basis points . Much lower than FHA which is 1.25% basis points. —Almost $100 cheaper on Kentucky RHS loan vs FHA loan, plus no 3.5% down payment needed like FHA requires.
• Terms—30 year fixed
• Guarantee fee of 2% of loan amount
• Refinance Fee 2.0 % of loan amount
• Appraised values can be exceeded by amount of
guarantee fee—up to 102% LTV
• Streamlined credit documentation with FICO of
640 or higher
• Unlimited Gifts or Seller Contributions
• Down-payments accepted up to 19%
• Guarantee Fee is fully Tax Deductible in the year
it is paid
• No Loan Limit (Ratio Determined)
• Partner with other Funding Sources
• AUS System – GUS – Being Developed
• Regular Program updates
• Monthly Newsletter by email EXISTING DWELLINGS
• Satisfactory appraisal
• Thermal certification NOT required
• Well test
• Septic system certification
• Termite letter NEW CONSTRUCTION
• Satisfactory appraisal
• Thermal certification
• Plan certification
• One year warranty on footings, framing, and final
inspection
• Termite Soil Treatment Certificate
• Well test LOAN PURPOSES
• Purchase New
– Stick or Modular
– Manufactured (from approved dealer)
• Purchase Existing
• Stick or Modular
• Repairs/Rehab
• Refinance
• RD Direct Loans
• RD Guaranteed Loan
• Typical Loan Closing Costs USDA Rural Development
October 2012 Kentucky USDA and Rural Housing Loans Changes for Property Eligibility Locations in Kentucky.
October 1, 2012 over 900 communities across the USA will lose their eligibility for 100% USDA Rural Housing loans including cities in Kentucky that where once eligible. If you know of buyers looking in these communities they need to act now. They should probably be under contract by end of August to be safe. There is no indication this expiration will be delayed. See the cities below that will be no longer eligible come 10/1/2012 for a Rural Housing USDA Loan in Kentucky
Brief Pilot Description: The Rural Refinance Pilot is available to eligible borrowers who qualify to refinance their current USDA mortgage loans.
Under the Rural Refinance Pilot program, a lender does not need to submit a new credit report, new appraisal, any HUD Handbook minimum property determinations, or any additional property inspections.
Eligible “Hardest Hit” States: The following states may participate in the Rural Refinance Pilot: Alabama, Arizona, California, Florida, Georgia, Illinois, Indiana, Kentucky, Michigan, Mississippi, Nevada, New Jersey, New Mexico, North Carolina, Ohio, Oregon, Rhode Island, South Carolina, and Tennessee. Additional States are not eligible at this time.
Eligible Borrowers: Current Section 502 Direct or Guaranteed Loan borrowers must:
1. Meet current income eligibility requirements;
2. Reside in an eligible rural area or an area that was eligible at the time of the original loan closing; and
3. Have made timely mortgage payments for the 12-month period prior to the refinance. Overview of Rural Refinance Pilot Guidelines: 1. The existing loan must be a Section 502 Direct or Guaranteed loan. 2. The new interest rate must be a fixed rate 100 basis points below the current interest rate. 3. The new term of the refinance loan may not exceed thirty years from the date of closing
. 4. A Rural Refinance Pilot loan may only include the principal balance of the loan plus a portion of or the full upfront guarantee fee. The applicable upfront refinance guarantee fee is 1.5 percent. No cash out is permitted to the borrower. Accrued interest, closing costs, lender fees, and late fees are not eligible to be part of the refinance loan.
5. An annual fee also applies. For FY 2012 the applicable annual fee is .3 percent.
6. A new appraisal, new credit report, HUD Handbook determination and additional property inspections are not required. The original appraisal amount may be used from Guaranteed Loan System to process the loan.
7. Ratio calculations are not required. Therefore debt ratio waiver requests will not be necessary.
8. Rural Refinance Pilot loans must be manually underwritten. They cannot be processed through the Guaranteed Underwriting System.
9. Customary and reasonable closing costs and other fees may be collected from the borrower by the lender. Such charges may not exceed the cost paid by the lender or charged to the lender by the service provider. An origination fee of up to one percent of the total loan amount may be charged to the borrower.
10. All the following documentation is required:
a. Form RD 1980-21 “Request for Single Family Housing Loan Guarantee”.
b. Income verifications for all adult household members.
c. Uniform Residential Loan Application.
d. Evidence of qualified alien status, if applicable.
e. FEMA Form 81-93 “Standard Flood Hazard Determination.” Appropriate flood insurance must be obtained if the property is in a flood zone at the time of the new loan closing, even if the area was not in a flood zone at the time of the original loan closing. A flood elevation survey is not required.
f. Evidence of previous 12 month mortgage payment history. The lender must secure evidence to document the borrower(s) has paid the loan on time for the previous 12 months. The lender may utilize a Verification of Mortgage obtained from or provided directly by the loan servicer that lists the payment history for each of the previous 12 months. As an alternative, the lender may submit a credit report which reflects a satisfactory mortgage payment history over the past 12 months.
If the lender submits a credit report to Rural Development as proof of payment history, only the payment history of the current mortgage will be considered.
Credit waivers or explanations for adverse credit that may be present on the report are not required.
11. All additional requirements of RD Instruction 1980-D and applicable Administrative Notices continue to apply. Rural Development Responsibilities:
1. Request funding for the refinance if necessary by sending an email request to: sfhgld@wdc.usda.gov. Please include the State and the amount of funding needed.
2. Retrieve original appraisal amounts in GLS when processing Rural Refinance Pilot transactions.
3. Review the previous 12-month mortgage payment history. If a credit report is submitted, only review the 12-month mortgage payment history.
If the mortgage account is currently delinquent or has been reported delinquent in the previous 12 months, the borrower is not eligible. Agency staff should use the “Borrower ID” with GLS Report “GLSST01: Status of a GRH Loan Account” to ensure the loan is currently active and not in default.
4. Enter 0 in the “FICO Score” data field when processing a Rural Refinance Pilot application. 5. Enter the repayment income calculation in GLS, but do not include any “Additional Liabilities” amounts.
In the event the new mortgage payment results in ratios above 29 and/or 41 percent, check the box that indicates a debt ratio waiver has been issued by the Agency. 6.
In the “Agency Notes” section of the GLS Application screen enter “Rural Refinance Pilot Loan.” This will identify the loan as part of this pilot in the event of a loan review. 7.
What are the Kentucky USDA Mortgage Loan Requirements?
To decide if you qualify for an USDA Mortgage Loan, we will look at:
Your income and your monthly expenses. Standarddebt-to-income ratios are 29/41 for USDA Loans. These ratios may be exceeded with compensation factors.
Your credit history (this is important, but USDA’s credit standards are flexible). A FICO score of 640 or above is required for all loans
Your overall pattern rather than to individual problems you may have had.
To be eligible for an Kentucky USDA Mortgage, your monthly housing costs (mortgage principal and interest, property taxes and insurance) must meet a specified percentage of your gross monthly income (29% ratio). Your credit background will be fairly considered. At least a 640 FICO credit score is required to obtain an USDA approval through Lending. You must also have enough income to pay your housing costs plus all additional monthly debt (41% ratio). These percentages may be exceeded with compensating factors. Applicants for loans may have an income of up to 115% of the median income for the area. Maximum USDA Loan income limits for your area can be found at below Families must be without adequate housing, but be able to afford the mortgage payments, including taxes and insurance.
Can I get an USDA Mortgage Loan after bankruptcy?
Criteria for USDA loan approvals state that if you have been discharged from a Chapter 7 bankruptcy for three years or more, you are eligible to apply for an USDA mortgage. If you are in a Chapter 13 bankruptcy and have made all court approved payments on time and as agreed for at least one year, you are also eligible to make an Kentuck USDA Loan application
What are the USDA Down Payment Requirements? USDA Mortgages have no down payment requirement. Other loan programs don’t allow this.
What types of property are eligible?
While USDA Mortgage Guidelines do require that the property be Owner Occupied (OO), they do allow you to purchase condos, planned unit developments, manufactured homes, and single family residences.
What is the maximum amount that I can borrow?
The maximum amount for an Kentucky USDA Mortgage Loans are determined by:
Maximum loan amount: The is no set maximum loan amount allowed for an USDA Mortgage. Instead, your debt-to-income ratios will dictate how much home your can afford (29/41 ratios). Additionally, your total household monthly income must be within USDA allowed maximum income limits for your area. Maximum USDA Loan income limits for your area can be found at here.
Maximum financing: The maximum USDA Mortgage amount will be 100% of the appraised value of the home.
What kinds of loans does USDA offer?
Fixed rate loans – All Rural Housing and USDA loans are fixed-rate mortgages. In a fixed rate mortgage, your interest rate stays the same during the whole loan period, normally 30 years. The advantage of a fixed-rate mortgage is that you always know exactly how much your monthly payment will be, and you can plan for it.
What is Considered a Rural Area by the USDA?
Rural areas include open country and places with population of 10,000 or less and—under certain conditions—towns and cities. There is an automated rural area eligibility calculator at:http://eligibility.sc.egov.usda.gov.
Kentucky USDA Loans
What are USDA Home Loans?
USDA stands for United States Department of Agriculture. A USDA Mortgage provides a low-cost insured home mortgage loan that suits a variety of options. A USDA mortgage is likely the best home loan option if you want to purchase a home with no down payment. If you’re unsure about your credit rating, or have concerns about a down payment when you’re doing a home loan comparison,
What Types of Loans does USDA offer in Kentucky?
Currently, there are two kinds of USDA Homeo Loans available in Kentucky for single family households:
USDA Guaranteed Rural Housing Loans
USDA Guaranteed Kentucky USDA Mortgage are the most common type of USDA loanin Kentucky and allow for higher income limits and 100% financing for home purchases. USDA Guaranteed Loan applicants may have an income of up to 115% of the median household income for the area. Area income limits for this program can be viewed here. All USDA Guaranteed Loans carry 30 year terms and are set at a fixed rate.
USDA Direct Rural Housing Loans
USDA Direct Housing Loans are less common than USDA Guaranteed Loans and are only available for low and very low income households to obtain homeownership, as defined by the USDA. Very low income is defined as below 50 percent of the area median income (AMI); low income is between 50 and 80 percent of AMI; moderate income is 80 to 100 percent of AMI. Click here to see area income limits for this program.
What factors determine if I am eligible for a USDA Loan in Kentucky?
To be eligible for A USDA Kentucky USDA Mortgage Loans | Rural Housing Ky Loans in Kentucky, your monthly housing costs (mortgage principal and interest, property taxes, and insurance) must meet a specified percentage of your gross monthly income (29% ratio). Your credit background will be fairly considered. A 620 FICO credit score is required to obtain a USDA Kentucky USDA Mortgage Loans | Rural Housing Ky Loans approval . You must also have enough income to pay your housing costs plus all additional monthly debt (41% ratio). These ratios can be exceeded somewhat with compensating factors. Applicants for loans may have an income of up to 115% of the median income for the area. Maximum USDA Guaranteed Loan income limits for your area can be found at here. Maximum USDA Direct Loan income limits for your area can be found at here. Families must be without adequate housing, but be able to afford the mortgage payments, including taxes and insurance.
What is the maximum amount that I can borrow?
The maximum amount for an USDA home loan is determined by:
Maximum Loan Amount: The is no set maximum loan amount allowed for USDA Kentucky USDA Mortgage Loans | Rural Housing Ky Loans. Instead, your debt-to-income ratios will dictate how much home your can afford (29/41 ratios). Additionally, your total household monthly income must be within USDA allowed maximum income limits for your area. Maximum USDA Guaranteed Loan income limits for your area can be found at here.
Maximum financing: The maximum USDA Kentucky USDA Mortgageamount is 102% of the appraised value of the home (100% plus the 2% USDA Kentucky USDA Mortgage RD Loan guarantee fee).
How much money will I need for the down payment and closing costs?
USDA Kentucky USDA Mortgage Loans require no down payment and they allow for the closing costs to be included in the loan amount (appraisal permitting).
What property types are allowed for USDA Rural Loan Mortgages?
While USDA mortgage guidelines do require that the property be Owner Occupied (OO), they do allow you to purchase condos, planned unit developments, manufactured homes, and single family residences.
Additional offers from other lenders.
This website is not an Government Agency, and does not officially represent the HUD, VA, USDA or FHA
Kentucky USDA Loan Adjusted Maximum Income Limits by County\\\\\\\\\
Kentucky USDA Mortgage Loans | Rural Housing Ky Loans
Why choose a USDA Mortgage?
The loans require no down payment.
There are no prepayment penalties for USDA Kentucky USDA Mortgage Rural Home Loans
A USDA Kentucky USDA Mortgage Rural Housing has no monthly mortgage insurance.
A USDA Kentucky USDA Mortgage Rural Housing is available all rural areas of the country, provided a market exists for the property and the home meets HUD’s minimum property standards.
A USDA Kentucky USDA Mortgage Rural Housing Loan can be used to purchase a new or existing one family home in rural areas.
USDA RD LOANS are offered at terms of 30 years with a fixed interest rate.
USDA Loan FAQ’s
Kentucky USDA Mortgage Loans | Rural Housing Ky Loans
What is the Maximum LTV for a USDA Loan?
The maximum USDA rural loan LTV can be up to 100% LTV plus the Agency guarantee fee.
Can Closing Costs be Financed into the Loan?
Yes, any difference between the contract price and the appraisal value can be used to finance normal closing costs for a Kentucky USDA Mortgage
What is a USDA Loan Guarantee?
USDA Rural Development Single Family Housing Program serves as a safety net for mortgage lenders. The USDA 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. Any loss amount exceeding the 35% is 85% reimbursed. This leaves the lender only 15% exposed on the loss amount above the 35% of original loan. In the majority of cases, the total loss does not exceed 35% of the original loan and the lenders are fully reimbursed. This guarantee provides lenders an expanded level of protection against losses. The quality of this guarantee allows lenders to easily sell the loans on the secondary market.
Kentucky USDA Mortgage Loans | Rural Housing Ky Loans
USDA Guaranteed Rural Housing Loans
USDA Loan FAQ’s 
Kentucky USDA Mortgage Lender for Rural Housing Loans 