I am a Kentucky based USDA Mortgage Lender that has originated over 200 KY Rural Housing Mortgage Loans in Kentucky, Put my expert advice to use. Kentucky Rural Development RHS loans give KY Rural Homebuyers a zero down mortgage loan with a low 30 year fixed rate loan. A Local Kentucky Rural Housing Mortgage Lender offering same day free approvals and credit report. This website is not affiliated with USDA or any other government agency. NMLS#57916 Equal Housing Lender Text or call today 502-905-3708 with your mortgage questions about USDA Rural Housing Loans in Kentucky. Free Pre-Approvals on most applications within the same day. Kentuckyloan@gmail.com NMLS# 57916 Joel Lobb Loan Originator, American Mortgage Solutions NMLS ID. 1364 Equal Housing Lender
Effective January 1, 2024, the current interest rate for Single Family Housing Direct home loans is 5.125% for low-income and very low-income borrowers.
Fixed interest rate based on current market rates at loan approval or loan closing, whichever is lower
Interest rate when modified by payment assistance, can be as low as 1%
Up to 33 year payback period – 38 year payback period for very low income applicants who can’t afford the 33 year loan term
Fixed interest rate based on current market rates at loan approval or loan closing, whichever is lower
Interest rate when modified by payment assistance, can be as low as 1%
Up to 33 year payback period – 38 year payback period for very low income applicants who can’t afford the 33 year loan term
Not the same as the USDA Rural Housing Guaranteed Program. These rates follow the secondary market and change daily like FHA, VA, Conventional Mortgage Loans and set by individual lenders based on lock period, credit score, loan amount, state, and other incentives
the current interest rate for Single Family Housing Direct Home Loans
The USDA 502 Direct Loan Program helps low- and very-low-income applicants in federally-determined rural areas of the state obtain decent, safe and sanitary housing in eligible rural areas by providing payment assistance to increase an applicant’s repayment ability. This payment assistance is a type of subsidy that reduces the mortgage payment. The amount of assistance is determined by the adjusted family income.
A number of factors are considered when determining an applicant’s eligibility for this loan. At a minimum, applicants interested in obtaining a direct loan must have an adjusted income that is at or below the applicable low-income limit for the area where they wish to buy a house and they must demonstrate a willingness and ability to repay debt.
There are two types of Kentucky USDA Rural Housing Home loans available to rural Kentucky Home buyers through Rural Development:
Direct homeownership loans and guaranteed home ownership loans.
Let’s first look at the 502 Direct USDA Loan in Kentucky
502 Direct USDA Loan in Kentucky:
With a Kentucky Direct Loan 502, the applicant applies directly to the USDA office serving their location in Kentucky. There are about 13 different locations . They lend the money direct from USDA , 100 percent financing, for the low rate currently at 3 percent on a 33 year term.
For a direct home loan, the purchase, construction, repair and rehabilitation of a single family home in rural areas must be used for the applicant’s permanent residence. “For manufactured housing, only new construction can be funded,” he explained.
Credit scores of 640 or greater are typically acceptable with a minimum number of trade lines (2 usually for 12 months can be opened or closed) that have been open and active.
No down payment typically is required- Loans may be up to 100 percent of the appraised value. Homebuyer education is required prior to closing for the Direct USDA Loan 502 program
Mortgage payments are based on what the applicant can afford to pay. USDA offers payment assistance/subsidies to make it affordable. When you go to payoff the USDA Direct loan, you may incur a subsidy recapture fee.
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There are two types of Kentucky USDA Rural Housing Home loans available to rural Kentucky Home buyers through Rural Development:
Direct homeownership loans and guaranteed home ownership loans.
Let’s first look at the 502 Direct USDA Loan in Kentucky
502 Direct USDA Loan in Kentucky:
Rural Home Loans (Direct Program) What does this program do? Also known as the Section 502 Direct Loan Program, this program assists low- and very-low-income applicants obtain decent, safe, and sanitary housing in eligible rural areas by providing payment assistance to increase an applicant’s repayment ability. Payment assistance is a type of subsidy that reduces the mortgage payment for a short time. The amount of assistance is determined by the adjusted family income. Who may apply for this program? A number of factors are considered when determining an applicant’s eligibility for Single Family Direct Home Loans. At a minimum, applicants interested in obtaining a direct loan must have an adjusted income that is at or below the applicable low-income limit for the area where they wish to buy a house and they must demonstrate a willingness and ability to repay debt. Applicants must: • Be without decent, safe, and sanitary housing • Be unable to obtain a loan from other resources on terms and conditions that can reasonably be expected to meet • Agree to occupy the property as your primary residence • Have the legal capacity to incur a loan obligation • Meet citizenship or eligible noncitizen requirements • Not be suspended or debarred from participation in federal programs Properties financed with direct loan funds must: • Be modest in size for the area • Not have market value in excess of the applicable area loan limit • Not have in-ground swimming pools • Not be designed for income producing activities Borrowers are required to repay all or a portion of the payment subsidy received over the life of the loan when the title to the property transfers or the borrower is no longer living in the dwelling. Applicants must meet income eligibility for a direct loan. Please contact your local RD office to ask for additional details about eligibility requirements. What is an eligible area? Generally, rural areas with a population less than 35,000 are eligible. Visit the USDA Income and Property eligibility website for complete details. How may funds be used? Loan funds may be used to help low-income individuals or households purchase homes in rural areas. Funds can be used to build, repair, renovate, or relocate a home, or to purchase and prepare sites, including providing water and sewage facilities. How much may I borrow? The maximum loan amount an applicant may qualify for will depend on the applicant’s repayment ability. The applicant’s ability to repay a loan considers various factors such as income, debts, assets, and the amount of payment assistance applicants may be eligible to receive. Regardless of repayment ability, applicants may never borrow more than the area loan limit (plus certain costs allowed to be financed) for the county in which the property is located. Rural Home Loans (Direct Program) What is the interest rate and payback period? • Fixed interest rate based on current market rates at loan approval or loan closing, whichever is lower. • The monthly mortgage payment, when modified by payment assistance, may be reduced to as little as an effective 1% interest rate. • Up to 33 year payback period – 38 year payback period for very low income applicants who can’t afford the 33 year loan term. How much down payment is required? No down payment is typically required. Applicants with assets higher than the asset limits may be required to use a portion of those assets. Is there a deadline to apply? Applications for this program are accepted through your local RD office year round. How long does an application take? Processing times vary depending on funding availability and program demand in the area in which an applicant is interested in buying and completeness of the application package. What governs this program? • The Housing Act of 1949 as amended, 7 CFR, Part 3550 • HB-1-3550 – Direct Single Family
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 views of my employer. Not all products or services mentioned on this site may fit all people
This program once accounted for almost all the Section 502 loans, but the number of guaranteed loans has greatly increased in the last few years. In Fiscal Year 2001, the guaranteed program obligated approximately $2.3 billion for 29,326 loans, while the direct program obligated approximately $1.07 billion for a total of 14,789 loans. The important differences between the Section 502 guaranteed and direct loan programs are as follows:
Income levels for Section 502 guaranteed borrowers are capped at 115 percent of the area median income. Income levels for the direct program must be no more than 80 percent of the AMI. Payment assistance subsidy is not available through the guaranteed program. Payment assistance, which can reduce the interest paid on the mortgage to as low as 1 percent, is available for borrowers in the direct program and is based on the borrower’s income as a percent of AMI. Borrower protections differ between the programs. Applicants for guaranteed loans do not have the rights of moratorium or of appeal that accompany the direct program. Also, in the case of default, Section 502 guaranteed loans are liquidated by the commercial lender, while direct loans are liquidated by the government
Be a U.S. Citizen, qualified alien, or be legally admitted to the United States for permanent residence;
Have an adjusted annual household income that does not exceed the moderate income limit established for the area. A family’s income includes the total gross income of the applicant, co-applicant and any other adults in the household. Applicants may be eligible to make certain adjustments to gross income – such as annual child care expenses and $480 for each minor child – in order to qualify.USDA Rural Development field offices can provide information on the moderate income limits for the areas that fall within their jurisdiction, and can provide further guidance on calculating household income.
Have a credit history that indicates a reasonable willingness to meet obligations as they become due;
Have repayment ability based on the following ratios: Principle, Interest, Taxes, and Insurance (PITI) divided by gross monthly income must be equal to or less than 29 percent. Total debt divided by gross monthly income must be equal to, or less than, 41 percent.
A Kentucky USDA Guaranteed Loan is a Government Insured 100% Purchase Loan. These loans are only offered in rural areas.
There are no prepayment penalties for USDA Rural Home Loans.
A USDA Rural Development Loan has low monthly mortgage insurance.
A USDA Rural Development Mortgage 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 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.
Kentucky USDA Loan FAQ’s
What is Considered a Kentucky 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 for USDA home loans at: http://eligibility.sc.egov.usda.gov.
What is the Maximum Loan Amount for a Kentucky USDA Loan?
There is no maximum loan amount for a USDA rural mortgage. However, it is limited by the appraised value and repayment ability (determined by your household income).
What is the Maximum LTV for a Kentucky 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 Kentucky 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 Lender for Rural Housing Loans 