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Quick Guide to Kentucky USDA Rural Development Loans Approval Requirements

Quick Guide to USDA Rural Development Loans
Not every community qualifies—but if it does, it’s the best thing since sliced bread!
Check your listings to see if the property location qualifies. http://eligibility.sc.egov.usda.gov. Generous household income limits also apply, and you can check them out at this link as well.
Generate phone calls by letting everyone know 100% financing is still available for eligible properties and borrowers.
Add an additional note to the listing info and mention it in your ads.
Buyer Qualifications Highlights
• No down payment required, and zero move-in cost is possible.
• 30-year fixed rate loan.
• 6% seller contribution limit allowed.
• Lender closing cost contribution by premium pricing allowed. Does not count against 6% seller limit.
• 100% Loan up to appraisal allowed plus you can add the 1.00% Guarantee Fee on top of that.
• Low .35% Annual Fee included in monthly payment.
• Finance closing costs & prepaids if appraisal Is higher than sales contract.
• No stated maximum loan amount; maximum loan based on repayment ability.
• No cash contribution required from borrower.
• No pre-payment penalty
• Liberal income limits (by county)
• Gift funds and grants allowed.
• No cash reserve requirements.
Property Qualification Highlights
• Existing Home
• New Construction
• Manufactured Homes, new or existing. Since May 5, 2025, existing (used) manufactured homes are eligible in all 50 states, Kentucky included. The unit has to be manufactured within 20 years of the loan closing date, sit on a permanent foundation, have never been installed at another homesite, be at least 400 square feet, carry both the HUD certification label and the HUD data plate, and have no alterations made after it left the factory other than an engineered porch or deck. New units off a dealer lot are still eligible too.
• Modular Homes
• Town Homes. An attached townhome that is not part of a condominium regime does not need any project approval.
• Condos. The project can be approved by FHA, VA, Fannie Mae or Freddie Mac, or it can instead be shown to meet one of those agencies’ standards rather than already sitting on an approved list.
Prohibited Loan Purposes
• Co-signors not residing in the household
• Furniture and personal property
• Income-producing property unless minimal income-producing activity.
• Previously occupied manufactured homes are no longer prohibited. That restriction and the old 22-state pilot ended May 5, 2025, and existing manufactured homes meeting the property rules above are now eligible nationwide.

—

Joel Lobb
Mortgage Loan Officer

EVO Mortgage

911 Barret Ave, Louisville, KY 40204

Text or call:      502-905-3708
email:

          kentuckyloan@gmail.com

NMLS #57916 | Company NMLS #1738461
www.nmlsconsumeraccess.org
Equal Housing Lender

https://www.mylouisvillekentuckymortgage.com/

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Kentucky USDA Guideline Updates for

  • Annual Qualifying Income – The requirement for calculations to be included on the Income Calculation worksheet have been removed and should now be included on Attachment 9-B, the underwriter transmittal summary, FNMA form 1008/Freddie form 1077, or equivalent
  • 4506-T – The requirement for asset statements to be reviewed to ensure borrowers have no additional income sources has been removed.
  • Repayment Income – MCC income must now be included in repayment income.
  • Boarder Income – USDA now considers a boarder as a household member and a boarder’s income must now be included in annual income calculation. Rent paid by boarders that is reported on tax returns must also be included in annual income.
  • Capital Gains – USDA removed requirement from Repayment Income to provide evidence showing borrowers own additional property or assets that may be sold if additional income is needed to support the mortgage obligation
  • Commission – The borrower must now show one year history in same or similar line of work to include commission in repayment income.
  • Fellowship, Stipend, Scholarship – Scholarship award letters must now provide date of termination and USDA will no longer presume benefits with no expiration date will continue. USDA also added guidelines for GI Bill income and stated it cannot be included in annual or repayment income.
  • MCC – This income must now be included in repayment income, but no history is required. A copy of the W-4 from employer is required to verify borrower is taking tax credit on monthly basis. Note: MCC’s are ineligible with FWL as qualifying income.
  • Unreimbursed Business Income – only taxable income is allowed to be included in repayment income
  • Section 8 – USDA removed requirement for section 8 income to be deducted from the monthly PITI to determine DTI if it is paid directly to the loan servicer when included in the repayment income.
  • Self Employed Income – Federal tax returns must now be reviewed to determine gross income for annual calculations. Removed requirement to deduct business loss before entering as repayment income into GUS or on loan application. Clarified documentation requirements as most recent 2 years of federal tax returns / transcripts & YTD P&L may be audited or unaudited
  • Social Security Income – clarified documentation options and will allow social security benefit statement or form SSA-1099/1042S to source
  • Temporary Leave – The history requirements for repayment income has been changed and now income must be received by loan closing.
  • Cash on Hand – The underwriter must review the reasonableness of accumulation based upon income stream, spending habits, etc. and cash on hand can no longer be included in reserves
  • Gift Funds – Clarification provided on how gift funds must be sourced when gift funds have been deposited into borrower’s account, not deposited into borrower’s account, or if funds are being wired directly to the settlement agent.
  • Large Deposits – USDA no longer addresses lump sum additions.

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Kentucky Mortgage Broker Offering FHA, VA, USDA, Conventional, and KHC Down Payment Assistance Home Loans 2022 Kentucky USDA Income and Property Guidelines, 2022 Kentucky USDA Income Limits Increased, Debt Ratio and Deferred Student Loans, debt ratios, Income Based Repayment (IBR) plans, INCOME ELIGIBILITY, Income Limits, USDA/RHS Income limits by Ky Counties

No Money Down Kentucky USDA Rural Loan Program

How USDA Government Underwriters calculate your Debt-to-Income or DTI ratio.

One of the most frequent questions that come from perspectives Kentucky home buyers is

“How Much House Can I Afford?”

Answering this question is determined based on calculating what are known as the borrower’s Debt-to-Income or DTI ratios. The established standard DTI ratio used for a USDA Loan is based on two sets of ratios, which are as follows:

  • Front-end or housing ratio – the monthly mortgage payment cannot exceed 29% of the gross monthly income.
  • Back-end or total debt ratio – the total debts, including the new monthly mortgage payment, cannot exceed 41% of the gross monthly income.

A monthly mortgage payment includes the principal and interest payment on the mortgage note, as well as the monthly pro-rated portion of the annual fee, property tax and homeowner insurance premium.

Specific to the USDA Rural Loan program is the pro-rate portion of the USDA Annual Fee, which is often referred to as a monthly mortgage insurance payment. If there are any Condominium or Homeowner Association (HOA) fees, these fees must be included in the monthly mortgage payment as well.

Total debts include the anticipated monthly mortgage payment and all monthly re-occurring credit obligations.

Examples of reoccurring credit obligations include monthly car payments, minimum payment on credit cards, and student loan payments. If the borrower is obligated to make any alimony or child support payments, these payments will be included within the total debt calculations as well.

If the total debts exceed 41% of the gross monthly income, the maximum monthly mortgage payment must be reduced in order to bring total DTI back down to 41%. For example, assume a monthly income of $5,000.

Based on the 29%/41% ratio requirements, the maximum housing expense will be $1,450 and total debts will be $2,050. If the non-housing expense exceeds $600 ($2,050 – $1,450), the housing expense will need to be reduced by an equal amount to keep the total ratio at 41%.

While the 29%/41% ratio is considered to be the Underwriting standard guideline, the USDA Loan Program will allow for DTI ratios as high as 33.99%/45.99%.

What determines the ability to qualify at a higher ratio is a combination of factors, such as an approval through Guaranteed Underwriting System, which is USDA’s automated approval, and other 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 years 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 applicant’s profession
  • Trailing spouse income – as a result of a job transfer, in which the house is being purchased, prior to the secondary wage-earner obtaining employment. This assumes that the secondary wage-earner has an established history of employment and has a reasonable chance to obtain new employment in the area upon relocating to the area
  • Low total debt load

Joel Lobb (NMLS#57916)
Mortgage Loan Officer

EVO Mortgage

911 Barret Ave, Louisville, KY 40204

NMLS #57916 | Company NMLS #1738461

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

http://www.nmlsconsumeraccess.org/
If you are an individual with disabilities who needs accommodation, or you are having difficulty using our website to apply for a loan, please contact us at 502-905-3708.
Disclaimer: No statement on this site is a commitment to make a loan. Loans are subject to borrower qualifications, including income, property evaluation, sufficient equity in the home to meet Loan-to-Value requirements, and final credit approval. Approvals are subject to underwriting guidelines, interest rates, and program guidelines and are subject to change without notice based on applicant’s eligibility and market conditions. Refinancing an existing loan may result in total finance charges being higher over the life of a loan. Reduction in payments may reflect a longer loan term. Terms of any loan may be subject to payment of points and fees by the applicant  Equal Opportunity Lender. NMLS#57916http://www.nmlsconsumeraccess.org/
Kentucky Mortgage Broker Offering FHA, VA, USDA, Conventional, and KHC Down Payment Assistance Home Loans 2022 Kentucky USDA Income and Property Guidelines, Current USDA and RHS Guidelines, Uncategorized, USDA, USDA /Rural Housing Loan Offices in Ky, USDA Loan, USDA RURAL DEVELOPMENT DIRECT HOUSING LOANS, USDA/RHS Income limits by Ky Counties

Kentucky Rural Housing USDA loan program

What are the eligibility requirements for a Kentucky USDA loan?

Kentucky Rural Housing USDA loan program

Kentucky Rural Housing USDA loan program
Kentucky Rural Housing USDA loan program

The Kentucky Rural Housing USDA loan program has certain eligibility requirements .

Must be located in a eligible USDA Rural Housing Area.

The home would be your primary residence, not a rental property

Household income limits effective July 13, 2026 are $122,800 for a household of 1 to 4 people and $162,100 for a household of 5 to 8 people in most Kentucky counties. In Boone, Bracken, Campbell, Gallatin, Kenton and Pendleton counties the limits are $128,600 and $169,800. The cap counts every adult living in the home, not just the borrowers.

Clear CAIVRS Numbers.

No minimum credit score requirement. USDA does not publish one. A 640 middle score typically earns a GUS “Accept”; below 640 the file is manually underwritten. Most lenders apply their own 640 floor as an overlay.

What are USDA loan fees in Kentucky?

There are two fees on a USDA loan. An upfront fee, called the Guarantee fee and the monthly annual fee.

The upfront guarantee fee is 1.00 percent of the loan amount and can be financed into the mortgage instead of paid out of pocket. The annual fee is 0.35 percent, divided into 12 monthly payments and calculated on the average scheduled unpaid balance, so it shrinks every year.

It’s important to check the maximum income limits for your family size and where you live to get the most accurate data.

Advantages of USDA Loans

Zero Down Payment

No published minimum credit score

Can finance closing costs up to appraised value

Streamline refinance an existing USDA with less documentation

No max loan amount

Disadvantages of USDA Loans

only eligible in rural areas

Generally 36 months removed from a Chapter 7 bankruptcy discharge, foreclosure, deed-in-lieu or short sale. A Chapter 13 only needs 12 months of on-time plan payments with trustee permission, and a GUS Accept does not require a credit exception even inside those windows.

Limited to Income Requirements

Debt to income ratios tighter qualifying guidelines than FHA, Fannie Mae

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

Text/call: 502-905-3708

Kentucky Mortgage Broker Offering FHA, VA, USDA, Conventional, and KHC Down Payment Assistance Home Loans 100% Financing Zero Down, 2022 Kentucky USDA Income and Property Guidelines, 2022 Kentucky USDA Income Limits Increased, 2022 Kentucky USDA Mortgage Guides Updated

Kentucky USDA Guideline Changes for Income, Student Loans, and total debt ratios.

Updated HB-1-3555, Chapter 11, Ratio Analysis

The Single Family Housing Guaranteed Loan Program (SFHGLP) is pleased to announce revisions to technical HB-1-3555, Chapter 11, Ratio Analysis. An advance copy of the proposed changes was made available on July 20, 2021.  These changes became effective upon the recent issuance of a Procedure Notice (PN).  Below are the highlighted revisions:

Chapter 11- Ratio Analysis

11.2 B. The Total Debt Ratio:

  • Student Loans: Removed the phrase “the greater of” from Non-Fixed payment loans and added guidance regarding “when the payment is above zero” and “when the payment is zero”.
  • Revolving accounts: “with no outstanding balance” are not required to be closed.
  • Mortgages: Rental Property – Eliminated language regarding omission of mortgage debt.  Guidance for entry of rental income in GUS is provided in the GUS Lender User Guide under Section 4.1.4.1.1, Retained Investment Properties.
  • Added: Debt management plans:
    • Include the monthly payment amount due from the counseling plan.
    • Refer to Chapter 10 for guidance on credit exception and documentation requirements.

11.3 DEBT RATIO WAIVERS AND COMPENSATING FACTORS

A. Purchase Transactions: Debt Ratio Waivers

  • GUS Refer, Refer with Caution, and manually underwritten loans without GUS assistance:
    • Added: “The lender must document eligible compensating factors to support a debt ratio waiver.”
    • Added: “all” of the following conditions are met to the first paragraph.
  • Debt Ratio Waiver Request and Agency Approval:
    • Added: “The issuance of the Conditional Commitment for a Loan Note Guarantee represents Agency approval of the ratio waiver.”

B. Refinance Transactions: Debt Ratio Waivers

  • Added a bullet:  GUS files that receive a GUS recommendation of Refer, Refer with Caution, or are not supported by GUS, require debt ratio waivers, and supporting documentation must be submitted to the Agency.
  • Added: “The issuance of the Conditional Commitment for a Loan Note Guarantee represents Agency approval of the ratio waiver”. 

11.7 OBLIGATIONS NOT INCLUDED IN DEBT-TO-INCOME RATIOS

  • Added: “unless a payment plan is in place” to the second bullet concerning Federal, state, and local taxes.

Joel Lobb
Mortgage Loan Officer
EVO Mortgage
911 Barret Ave, Louisville, KY 40204
Text or call:      502-905-3708
email:          kentuckyloan@gmail.com
NMLS #57916 | Company NMLS #1738461
http://www.nmlsconsumeraccess.org
Equal Housing Lender

https://www.mylouisvillekentuckymortgage.com/