Tag: Oldham County

Kentucky USDA RHS Rural Housing Mortgage Loans for 2013

Kentucky USDA RHS Rural Housing Mortgage Loans for 2013

Kentucky USDA Rural Program Guidelines

Borrower Eligibility
U.S. citizens
Permanent resident aliens
First time homebuyers allowed
Maximum 2 borrowers allowed
Non-occupant co-borrowers NOT allowed
Commitment Fee
USDA Rural Developmet charges a 2% Commitment Fee
Commitment Fee can be financed into the loan
Purchase price – $100,000
Loan amount – $102,040
Commitment Fee – $2,040
Maximum financed loan amount = $102,040 ($100,000 [purchase price]/.98)

This website is not an Government Agency, and does not officially represent the HUD, VA, USDA or FHA

Downpayment Requirement
No down payment is required
If borrower has adequate assets (i.e. 20% of the property purchase price) to obtain conventional financing the borrower may be ineligible for the USDA Rural Development Loan
Eligible Properties
Must be in an eligible Kentucky USDA Rural Development Location
Owner-occupied properties
Existing attached & detached single family residences
New construction with permanent financing only
PUD’s (i.e. Townhomes)
Condo-units. HUD, VA, FNMA or FHLMC approved project
Ineligible Properties
Manufactured homes
Log cabin homes
Single Family Homes where the Land value exceeds 30% of the appraised value AND can be sub divided.
Maximum Income Amount
County specific. Reference the USDA website for adjusted household income limits
Maximum Loan-To-Value
Maximum loan-to-value is 102%
Maximum Mortgage Amount
Minimum Credit Score
Middle Credit Score – 640 for each applicant for GUS automated underwriting approval
Monthly Mortgage Insurance Premium (MIP) Requirements
.40 basis points  USDA Loan require a monthly mortgage insurance premium. For example on a $100,000.00 it would be $33.33 a month
Multiple Property Ownership
Kentucky USDA Rural Development often won’t allow applicants to own other properties
Exceptions include when the other property owned is:
Not owned in the local commuting area as the new property; or
Not structurally sound and/or functionally adequate
Manufactured home not on permanent foundation

This website is not an Government Agency, and does not officially represent the HUD, VA, USDA or FHA

Occupancy Type
Owner occupied only
Qualifying Ratios
29/41% debt-to-income (DTI) – Target
Higher dti allowed on Gus Approvals or With compensating factors such as:
680 or higher credit score
No or low “payment shock” – less than a 100% increase in proposed mortgage payment Vs. current rental housing expenses
Fiscally sound use of credit
Ability to accumulate savings
Stable employment history with 2 or more in current position or continuous employment history with no job gaps
Cash reserves available for use after settlement
Career advancement as indicated by job training or additional education in the applicants profession
Trailing spouse income – as a result of a job transfer, the house is being purchased, prior to the secondary wage-earner obtaining employment. If the secondary wage-earner has an established history of employment and has a reasonable chance to obtain new employment in the area
Low total debt
Seller Contribution
Unlimited Contribution towards closing costs, prepaids, discount points, buydown fees, and upfront Commitment Fee
Transaction Types
Rate/Term Refinance on existing USDA loan

This website is not an Government Agency, and does not officially represent the HUD, VA, USDA or FHA

Kentucky USDA Rural Development Single Family Housing Guaranteed Loan Program

Kentucky USDA Rural Development Single Family Housing Guaranteed Loan Program

Kentucky Guaranteed Loans Offer Affordable Financing To Rural Homebuyers.

The mission of Kentucky Rural Development’s Single Family Housing Guaranteed Loan Program is to assist low to moderate income rural Kentucky  homebuyers achieve their dream of homeownership!

Kentucky Rural Development partners with approved local lenders to extend 100% financing opportunities to eligible rural individuals and families for the purchase of safe and sanitary dwellings. Guaranteed loans have assisted thousands of homeowners to purchase a home with affordable interest rates and loan terms.

Applicants must purchase a home within the eligible rural areas, and have a household income that does not exceed the established limits where the home is located. Additional Guaranteed Loan Features include but are not limited to:

  • 100% financing, no down payment is required. The loan amount may not exceed 100% of the appraised value, plus the guarantee fee may be included.
  • Guarantee Fee applies: may be rolled into the loan amount.
  • Flexible credit guidelines. Non-traditional credit histories may be accepted.
  • Fixed 30 year interest rates apply. Lenders and applicants agree upon interest rate.
  • Qualifying ratios are 29% for housing costs and 41% for total debt. Lenders may request an exception to exceed these ratios when strong compensating factors are identified.
  • No maximum purchase price. Qualifying ratios and the applicant’s stable and dependable income will determine home affordability.
  • Eligible property types include existing homes, new construction, modular homes, Planned Unit Developments (PUD’s), eligible condominiums and new manufactured homes.
  • Eligible closing costs and lender fees may be included in the loan or paid by the applicant.
  • Gift/Grant Funds/Mortgage Credit Certificates (MCC’s)/Seller Concessions are allowed.
  • Eligible repairs and improvements may be included in the loan.
  • Applicants apply with an approved lender of their choice.
  • Not limited to first time homebuyers.


Changes to RHS Guarantee and Annual Fee

Effective on October 1, 2012, RHS will revise the Up-Front Guarantee Fee and Annual Fee structure as follows:


Up-Front Guarantee Fee


Sept. 30, 2012

Effective  Oct. 1, 2012

Purchase Transactions (no change)



Refinance Transactions




Annual Fee


Sept. 30, 2012

Effective  Oct. 1, 2012

Purchase Transactions



Refinance Transactions




Loan guarantee requests submitted to RHS by September 30, 2012, in which a conditional commitment has not been issued, will be subject to the new, October 1, fee structure.  Lenders are encouraged to plan for the changes because, as mentioned previously, some RHS offices are experiencing extreme backlogs in loan guarantee delivery.


Joel Lobb (NMLS#57916)
Senior  Loan Officer
502-905-3708 cell
502-813-2795 fax
jlobb@keyfinllc.comKey Financial Mortgage Co. (NMLS #1800)*
107 South Hurstbourne Parkway*
Louisville, KY 40222*


What is this? After a loan is closed, the subsidized portion of a borrower’s monthly payment will accrue as a separate account. The Government pays this subsidy each month to help very low and low income households
afford to own a home. This account is subject to being repaid or “recaptured” at the time a borrower
sells or transfers the property to another owner, no longer occupy the property, or pays the loan in full.
The maximum amount of recapture due will be the lesser of the amount of subsidy received or up to
50 percent of the Adjusted Value Appreciation in the property.
The Value Appreciation is based on  appraised value and/or sales price at time of sale, refinance, or when the principal and interest balances are paid in full. This value excludes any of the borrower’s original equity or any value that resulted from eligible Capital Improvements that were made by the borrower. Borrowers who
refinance their Rural Development loan and want to pay off the principal and interest balance, have the
option to defer the final amount of Recapture due, or pay it off at closing. (See section below“Deferring
Payment of Recapture Due”).
Understanding your need for getting a payoff.
There are different options provided by our Centralized Service Center (CSC) for payoffs. These are:
􀂾 The Principal and Interest Payoff (P & I) is based on the anticipated principal, interest and
fee balance (if any fees have been added) for the requested date. This form of payoff is used
when the borrower’s account is not subject to recapture or if the borrower is only concerned
with the principal and interest balances due on their loan(s). As a note, all RD Section 504
repair loans are not subject to any recapture due.
􀂾 The Maximum Payoff statement indicates the Maximum amount the borrower may be
required to pay as of a requested date. It includes 100% of all Subsidy Recapture funds
including Principal and Interest and any fees that are due. This statement advises borrowers to
submit additional information to CSC so that Subsidy Recapture can be properly calculated for a
Final Payoff statement.
􀂾 The Estimated payoff is an estimated figure only. The Agency offers an automated Voice
Response Unit (VRU) by calling our toll-free number (1-800-414-1226). It provides an accurate
P&I balance and an estimated Subsidy Recapture amount based on a hypothetical sales price or
appraised value. Please follow the directions (below) for an “Estimated Payoff”.
􀂾 The Final Payoff statement is based on the account balance on the requested payoff date, and
the actual Subsidy Recapture Amount due is calculated based on the final documentation
provided by the borrower/settlement agent. This statement indicates the actual amount the
borrower will be required to pay at loan closing.
“USDA is an equal opportunity provider, employer and lender.”
To file
Getting the Estimated Payoff — (Recommended but not required).
Please note: This is an Estimated Figure AND CANNOT BE USED TO PAYOFF AN ACCOUNT. It
is calculated as of the date of your call. The Subsidy Recapture amount does not include any
value deductions for Capital Improvements.
CALL: 1-800-414-1226 (This is an automated Voice Response Unit (VRU).
You will need the customer’s loan number and the last 4 digits of their Social Security Number
Choose: 1 Touchtone – Then: 1 English Speaking – Then: 2 Payoff Information
Then: You will be asked to input the customer’s loan number and the last four digits
of their Social Security Number. Stay on the line and listen to the entire
explanation of the different types of payoff figures.
Then: Go to Calculated Payoff, “Estimated Loan Balance” – Choice Number 2. You will be
asked to input the Estimated Market Value and the Estimated Closing Costs in
whole dollars.
Getting a Final Payoff—applies to all transactions (ex. sale, refinance, pay in full)
1. A copy of the Residential Appraisal Report and/or a copy of the Signed Contract.
2. A copy of the Estimated Settlement Statement. A Good Faith Estimate from the lending
institution is
3. The Date of the Payoff. Funds are to be received at Rural Development on this date.
4. The reason for paying off the loan: selling, refinancing, pay in full, and paying the recapture, or
refinancing and deferring the Recapture (Subordination).
5. Capital Improvements that the borrower has made to the property can help to reduce the
amount of subsidy that is subject to recapture. If a borrower has made any improvements to the
property, he/she should request that the appraiser provide an addendum to the
appraisal to indicate the value of the improvements. Capital Improvements are additions that
add value to the property above and beyond repairs that maintain the property. General
maintenance to keep the property in good condition is not considered a Capital Improvement.
Examples of Capital Improvements that do not qualify: yard maintenance, painting,
wallpapering, floor coverings, roofing, siding, wells, septic systems, appliances, furnaces or
water heaters. The value of a Capital Improvement must be determined by an appraiser, based
on the increase in the property’s value because of the improvement. The cost of making the
Capital Improvement is not considered when making this assessment, only the value that the
Capital Improvements have added to the property. A copy of the original appraisal can be
requested by the borrower(s) to assist the appraiser in Capital Improvement Determinations.
6. Borrowers who refinance or wish to pay off their loan(s) and subsidy recapture in full
and remain in the property will receive a 25 percent discount on the recapture amount if it is
included in the final payment. Please be aware that the 25 percent discount only applies if the
borrower refinances the loan, or pays the loan in full and continues to occupy and retain title to
the property.
7. Borrower(s) can defer recapture and pay it off later. A mortgage discharge
Borrower(s) can defer recapture and pay it off later. A mortgage discharge is not provided,
however, the Agency can subordinate it’s lien to another lender for the new loan (see below).
8. For unpaid or deferred subsidy, the borrower will establish a “Subsidy Receivable” account
with the Agency which will not be due and payable until the borrower transfers title or
vacates the property. The borrower cannot obtain the 25 percent discount if they voluntarily
decide to pay off the balance at a later date. The “Subsidy Receivable” account will not accrue
any interest or fees.
Deferring Payment of Recapture due.
When a borrower initially refinances their RD loan(s), they have the option to defer their Recapture
payment, or pay it in full. As mentioned above and under current rules, if it is paid in full they will
receive a 25% discount in the amount of recapture owed. A Loan Subordination of the RD debt to
allow another lender to make a loan can be requested by a borrower who wishes to refinance their
Rural Development loan and payoff the principal, interest, and fees (if any) and defer the Subsidy
Recapture Amount. The borrower can receive no “cash out” or consolidate additional debt (including
other liens against the property). Modest real estate improvements may be considered as long as the
Loan to Value for the new loan and the Recapture Receivable Amount are at or below 100% of the
Current “as improved” Market Value of the property. Requests can include reasonable closing costs.
A Subordination Package for refinancing and/or making improvements to the property must be
completed and returned to the Agency for review.
The following must also be included:
􀂾 If Improvements are being done, a Contractor’s Bid must be provided to the agency for
review prior to approval.
􀂾 A signed, dated authorization from the borrower(s) waiving the 25 Percent Recapture
Discount in lieu of a Subordination must be provided to Rural Development. This form is
included in the Subordination Package.
􀂾 A copy of a recent Uniform Residential Appraisal Report (Pages 1 and 2).
􀂾 A copy of the Estimated Settlement Statement from either a lender or a closing
agency. A Good Faith Estimate is acceptable if it includes the proposed loan
If this account is a previously established Recapture Receivable Account, we will also need
a Principal and Interest payoff on the first mortgage.
After the Subordination has been approved and prior to the issuance of the Subordination, the
proposed lienholder must complete Form RD 1927-8, Agreement with Prior Lienholder, which
requires the proposed lienholder to provide at least 30 written days notice to Rural Development,
before any foreclosure actions on the proposed lien are initiated. This form is also included in the
Subordination Package.
Date: _____________
Fax Number___________________
Attention: ____________________
Your payoff request for borrower(s):_____________________________
Account Number(s)______________________ Phone Number:____________
• Sales Contract that includes the sales price (establishing market value) and signatures of both
buyer and seller AND/OR Pages 1 and 2 of the Uniform Residential Appraisal Report (with 1st page
as property description, 2nd page to include comparison approach, the estimated market value and
the appraiser’s signature. The appraisal must be less than one year old).
• Estimated Settlement Statement detailing our borrower’s (the sellers) closing costs. THIS MUST BE
• Authorization to release information signed by the borrower(s). If the request is from a lender or its
agent, Social Security Number(s) and Account Number(s) are acceptable.
• Effective date of payoff requested.
When the above documentation is received together as a package, a Final Payoff will be
calculated. If you are notified by the Centralized Servicing Center (CSC) that additional
information is needed to calculate the payoff, please fax the entire package together again.
Also, please be sure that the account number is written on every piece of paper. This will
expedite your payoff request.
To complete a Final Payoff Statement: PLEASE FAX ALL REQUIRED DOCUMENTATION
For Questions, you may call the Customer Service Department Toll Free at 1-800-414-1226
or TDD (hearing impaired only 1-800-438-1832) 7:00 a.m. to 5:00 p.m. Monday – Friday,
Central Time.
“USDA is an equal opportunity provider, employer and lender.”
To file a complaint of discrimination write USDA, Office of Civil Rights, Programs, 300 7th Street SW, Room 400 (Stop 9430),
Washington, DC 20024 or call (866)632-9992 (Voice), (202) 401-0216 (TDD/TTY Hearing Impaired Only) or (202)720-8046 (FAX

Joel Lobb NMLS# 57916

Key Financial Mortgage NMLS# 1800

502-905-3708 ph#

502-813-2795 Fax#

107 South Hurstbourne Parkway

Louisville Ky 40222

Subsidy Recapture

Payment subsidies received on loans approved after October 1, 1979 are subject to recapture. This means that when the property is sold, transferred, or no longer occupied by the customer, all or part of the subsidy granted must be repaid to the government. The amount of subsidy recapture will be determined by the increase in property value since the loan originated. Subsidy recapture must be calculated when the loan is paid off.

Not all USDA Rural Development Loans are subject to recapture. Please call our Customer Service Department at 1-800-414-1226 or 1-800-438-1832 (TDD/TTY Hearing Impaired Only) to find out if your loan is subject to recapture or to receive payoff information. We are available from 7:00 A.M. to 5:00 P.M. Central Standard Time (CST), Monday through Friday.

Subsidy Recapture Payment

Subsidy recapture must be paid when the property is sold, transferred, or no longer occupied by the customer.

If the loan is being paid off but the customer continues to live in the property there are two payment options:

  • Pay the subsidy recapture when the loan is paid off
    The subsidy recapture will be discounted by 25% if this option is chosen.

  • Defer payment of the subsidy recapture until the property is sold, transferred, or no longer occupied by the customer
    The subsidy recapture will not be discounted when the loan is paid off, nor will the discount apply in the future if this option is chosen.

Statement of Loan Balance(s) for Loans Subject to Recapture

With a touch-tone telephone, call 1-800-414-1226, and select option #2 from the Main Menu, and select option #1 from the Payoff Information Menu. Through our Interactive Voice Response system you can request a Statement of Loan Balance be mailed to the homeowner of record. The Statement of Loan Balance(s) provides the current outstanding balances of the loan, which includes principal, interest, fees, late charges, and escrow (if applicable). The statement also includes the total amount of payment assistance (subsidy) granted. The amount of subsidy can be quite large, but in many cases this amount is reduced when subsidy recapture is calculated.

Verbal Estimated Payoff Quotes

With a touch-tone telephone, call 1-800-414-1226, and select option #2 from the Main Menu, and select option #2 from the Payoff Information Menu. Our Interactive Voice Response (IVR) system can provide a verbal estimated payoff amount based on the information you enter. The IVR is easy to use and will provide instructions when you call. To calculate the estimated payoff amount you will need to enter the estimated value of the property and estimated closing costs that may be incurred as a result of selling or refinancing the loan. This information is necessary to estimate the subsidy recapture to be paid. The estimated payoff should not be used to pay off your loan.

How to Receive a Final Payoff Statement

In order to calculate subsidy recapture and provide a payoff statement, certain documents need to be submitted to our Payoff Department. The type of transaction (refinancing, selling, or paying off) will determine the documents needed. The payoff statement will be faxed or mailed to the address of record within 5 business days of receipt.


  • Customer�s name, loan number(s) and written authorization to release payoff(s).

  • A copy of a Uniform Residential Appraisal Report (usually available from the lender). Any capital improvements must be itemized on a separate addendum to the appraisal.

  • A copy of the Good Faith Estimate or estimated settlement statement from the lender.

  • Payoff good thru date.


  • Customer�s name, loan number(s) and written authorization to release payoff(s).

  • A copy of the signed sales contract and/or a copy of a Uniform Residential Appraisal Report. Any capital improvements must be itemized on a separate addendum to the appraisal.

  • A copy of the estimated settlement statement from the closing agent.

  • Payoff good thru date.

    Paying off the loan and not refinancing or selling

  • Customer�s name, loan number(s) and written authorization to release payoff(s). Include a statement that the customer is staying in the property and not transferring title.

  • A copy of a Uniform Residential Appraisal Report. Refer to the local yellow pages or the internet for appraisers in your area. Any capital improvements must be itemized on a separate addendum to the appraisal.

  • Payoff good thru date.

    Not Subject to Recapture

  • Customer�s name, loan number and written authorization to release payoff(s).

  • Payoff good thru date.

    Not all USDA Rural Development loans are subject to recapture. Please call our Customer Service Department at 1-800-414-1226 to find out if your loan is subject to recapture and to confirm the documents needed for you to receive final payoff(s). We are available from 7:00 A.M. to 5:00 P.M. Central Standard Time (CST), Monday through Friday.

Capital Improvements

If certain improvements, referred to as capital improvements, are made to the property, the value of the improvements added may be used to reduce subsidy recapture owed. To receive credit for capital improvements, the appraiser should submit an addendum to the appraisal. Instruct the appraiser that an itemized list of the improvements or additions and the value the improvements or additions added to the property should be submitted along with the appraisal. The cost of the improvements or additions should not be submitted and will not be used. Replacement items such as kitchen cabinets, floor coverings, roofing, siding, furnaces, appliances, and water heaters are not considered capital improvements. Maintenance items or repairs that maintain the property in good condition, such as yard maintenance, painting, and wallpapering, are also not considered capital improvements in our calculation of subsidy recapture. Examples of capital improvements include, but are not limited to, room additions, adding a fence, deck or enclosed porch.

Section 502 USDA Guaranteed Loan Program Rural Refinance Pilot Guidelines for Kentucky Mortgages

Section 502 Guaranteed Loan Program Rural Refinance Pilot Guidelines for 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.


Kentucky Appraisal and Property Requirements for a USDA Guaranteed Rural Housing Loan in Ky

 Kentucky Appraisal and Home Requirements for a USDA Guaranteed Rural Housing Loan

Dwelling Requirements


USDA Rural Development for Kentucky homes  regulations contain very few restrictions on the type, size, style, and age of the homes that can be financed.

You as a Kentucky homebuyer have a responsibility to insure the home you wish to purchase or build will adequately meet your family needs. You must consider the size, age, overall condition, and ownership cost in making your decision. Cost of ownership increases with the size and age of the dwelling. The mortgage payment should not be your only factor in determining cost. If you are unsure of your ability to assess the home, seek assistance from someone with experience in these matters. Do not sign a purchase contract until you have investigated the home and are sure you wish to purchase and live in it.

Rural Development finances the purchase, construction and/or repair of single family dwellings and condominiums. Dwelling must provide decent, safe and sanitary housing and be in good overall repair. Loans cannot exceed the market value by more than the cost of the Rural Development appraisal, initial escrow fee and deposit. The following requirements are not all-inclusive but represent areas most commonly questioned:


Dwelling site

  • Located in a eligible rural community
  • Minimum size that cannot be subdivided into an additional site under existing zoning requirements
  • Contiguous to and have direct access from an all weather road developed in compliance with public body requirements and is dedicated for public use and maintained by a public body or homeowners association that has clearly demonstrated ability to maintain the street(s)
  • Capable of providing an adequate water and wastewater disposal system
  • Property located in a 100 year flood hazard zone area may not be eligible for financing.

Purchase of existing dwellings

  • The greater of the market value or purchase price cannot exceed the Rural Development loan limit for the respective area.
  • In ground swimming pools are not eligible
  • Structures such as barns and outbuildings designed for income production are not eligible
  • Must meet Rural Development thermal performance standards of minimum R rating of 38 in attic and 19 in basement ceilings over unheated space and have functional storm windows and doors
  • Must be structurally sound, functionally adequate for the family and in good repair or be repaired with loan funds. Certification from a disinterested third party inspector such as a home inspection service or qualified tradesmen is required for:
  • Structural soundness, electrical, heating, plumbing and roof cover
  • Water test required for private water system
  • Statement or certification on the functional adequacy of private wastewater disposal system from a qualified source such as a contractor who has completed an inspection during a pump out or by a local health organization
  • Certification that the home is free of termites or other wood damaging pests
  • Property located in a 100 year flood hazard zone may not be eligible for financing.
  • A loan may be made on an existing condominium in a project approved by HUD, Fannie Mae or Freddie Mac. Evidence of approval could be documented sales financed by these entities in the project. Condominium documents and association bylaws must be approved by Kentucky Rural Development’s counsel prior to approval.

Home inspections and certifications may indicate the need for repairs. Rural Development will request the applicant obtain estimates for the repairs. The cost of the repair must be considered in determining the final loan amount. Repair funds may decrease the loan available for purchase of the home. Funds needed for repair must be placed in escrow at closing and are released upon satisfactory completion and inspection by Rural Development.

Items needed by Rural Development to further processs the loan and complete an appraisal

  • Signed copy (both buyer and seller) of purchase contract (P&S) – faxes must be followed up with mailed, acceptable copy
  • Legal description
  • Directions to the property
  • Home inspection and other tests or certifications- optional at this time although early receipt of the information will expedite processing your request. Participation loan applicants should provide this documentation with the P&S.
  • Person to be contacted by Rural Development to schedule a preliminary evaluation of the subject property
  • Rural Development will generally visit and complete a preliminary evaluation of the subject property within 7 days of receipt of the above information. Loan approval will occur after estimates (if any) of repairs are reviewed and loan amount is established. This occurs generally within 35 days of receipt of the P&S subject to the availability of funds. Participation loans may take slightly longer.

    Construction of new dwellings


  • The greater of the market value, purchase price or total development cost cannot exceed the Rural Development loan limit for the respective area. 
  • In ground pools are prohibited
  • Must meet state and local building codes
  • Building permit required prior to closing of the loan
  • Minimum of the equivalent of an R-38 rating in all ceilings; R-19 in exterior walls and floors over unheated spaces; insulated windows with a storm or “low E’ rating and insulated exterior doors or doors with storms required
  • Owner construction not permitted. Construction must be the responsibility of a licensed contractor only operating under a single signed contract or by purchase of pre-approved completed dwelling.
  • Contract must be for a complete and finished home to include painting, finish grade, raking and lawn seeding
  • Bids for construction recommended
  • In most cases 40% of contract cost is held as retainage until home is substantially complete. Contractor must allow for this in the bidding process.


    Items needed by Rural Development to further process the loan and complete the appraisal

  • Detailed plot plan and a survey
    • Specific floor plans (nothing generic) to include all floors, basement, porches, kitchen, and bath(s)
    • Exterior elevations – front, rear and side of dwelling
    • Detailed specific cross section from basement footings through the roof deck
    • Electrical, plumbing and heating plans
    • Form RD 1Kentucky Appraisal and Property Requirements for a USDA Guaranteed Rural Housing Loan in Ky924-2 “Description of Materials” completed by contractor and buyer
    • Kentucky Appraisal and Property Requirements for a USDA Guaranteed Rural Housing Loan in Ky