Kentucky USDA Loans vs Louisville Kentucky FHA Loans.

Q: Differences between Rural Development and FHA Loans?
An Kentucky FHA loan is a loan that is made by a bank but insured by the Federal Housing Administration (FHA). The FHA guarantees the bank who lends the money in case of loan default.
Kentucky FHA loans require 3.5% down payment and will allow for the seller to pay some closing costs thru a process called ‘seller concessions.’ Seller concessions are limited to 6% of the sale price. 

Kentucky FHA loans have a mortgage insurance premium of 1.75% of the loan balance financed into the loan. Additionally, FHA loans carry a monthly mortgage insurance premium of 1.35%  (in other words, you pay an additional $112.50 a month for ever $100,000 financed).
FHA loans have lending limits based on the county you live in, and generally require a 620-640 or greater credit score. No bankruptcies in last 2 years and no foreclosures in last 3 years.

Lastly, FHA loans can be done in any location without the restrictions of being in a rural area like USDA loans have.
A: What is a Rural Development Loan?
Like a FHA loan a Rural Development Loan (also called USDA Loan) is also insured by the US Government.  Rural development loans offer 100% and will allow all closing costs to be paid by the seller, or can be rolled into your loan. Kentucky Rural Development loans are truly NO MONEY DOWN Loans!
Rural Development Loans have a one-time ‘funding fee’ of 2.0% that is financed into the loan amount on a purchase loanon a Rural Development refinance loan   In addition to the 100% financing, Rural Development Loans has a low monthly mortgage insurance of only .50 bps per month or $41.66  a month on a $100,000 sales price loan . 
Rural Development loans can only be done in certain rural areas, and they have income limit thresholds set by which County you are looking to buy in.

In order to qualify for the credit portion of the USDA Rural Development Loan, they generally will want a 640 or higher credit score with no bankruptcies or foreclosures in last 3 years. 

The “Farm Bill” revised the eligible rural area definition for USDA housing programs by amending population limits used to determine eligibility for program benefits.  It also retained the requirement for eligible areas to be rural in character and have a serious lack of mortgage credit.  However, on August 21, 2014, the Secretary of Agriculture suspended any changes to an eligibility determination based solely on the “rural in character” clause through September 30, 2015

On October 1, 2014, the USDA Rural Housing Service will update maps used to determine property eligibility.  The updated maps will include all eligibility changes.  Changes that were originally slated to take effect due to the "rural in character" clause will not be implemented at this time.  In advance of the upcoming map changes, future eligibility maps will be posted to the Eligibility Website on or about September 22, 2014.  A notification will be sent once the new future eligibility maps have been posted.

Joel Lobb
Senior  Loan Officer

American Mortgage Solutions, Inc.
800 Stone Creek Pkwy, Ste 7,
Louisville, KY 40223

 phone: (502) 905-3708
 Fax:     (502) 327-9119

 Company ID #1364 | MB73346

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