Kentucky USDA Rural Housing Update 

August 17, 2012

Purchase and Refinance Funding Update

This announcement is to inform you of the current commitment authorities available for the Single Family Housing Guaranteed Loan Program (SFHGLP) loans.  

Due to a change in Fiscal Year (FY) 2013 fee structure which goes into effect October 1, 2012, Lenders are urged to check with States to determine application processing timeframes before underwriting applications.


FY 2012 refinance funds are nearly exhausted. 
Currently, the balance of available refinance commitment authority is under $15 million.  We are issuing refinance commitment authority at a pace of approximately $10 to $15 million per day.  We expect to run out of refinance commitment authority no later than Monday, August 20, 2012.  When refinance commitment authority is exhausted, refinance loan requests for which a conditional commitment (Form RD 1980-18) has not been issued will be returned to the lender and require underwriting under the FY 2013 fee structure.  The FY 2013 fee structure will require a one-time upfront guarantee fee of 2 percent and an annual fee of 0.40 percent.  At this time, the Agency will not issue conditional commitments “subject to” receipt of FY 2013 funding or commitment authority.


Lenders are urged to be cognizant of the differing backlogs and processing timeframes from state to state.  If it is determined unrealistic that the State will be able to review the loan guarantee application and issue a conditional commitment before September 30, 2012, lenders are urged to underwrite the application at the FY 2013 fee structure.  The FY 2013 guarantee fee structure will require purchase and refinance loans to carry a one-time upfront guarantee fee of 2 percent and an annual fee of 0.40 percent. 

In addition, if the state where the property is located is experiencing longer processing timeframes, lenders should advise the applicant accordingly when discussing interest rate locks and potential loan closing dates. 

The Kentucky USDA program has changed. Effective October 1, 2012 it will no longer be subsidized by the US Taxpayer.

Effective October 1, 2012, USDA mortgage insurance rates are:

For purchases, 2.00% upfront fee paid at closing, based on the loan size.
For refinances, 2.00% upfront fee paid at closing, based on the loan size.
For all loans, 0.40% annual fee, based on the remaining principal balance.

A $100,000 loan would require a $2,000 mortgage insurance payment at closing, and $33.33 of mortgage insurance paid monthly.

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
Oct. 1, 2012
Purchase Transactions (no change)
Refinance Transactions

Annual Fee
Sept. 30, 2012
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.

With the Kentucky USDA Rural Housing Program, your home must be located in a rural area. This is based on the most recent US Census. Follow this link to check a home’s eligibility;

-The USDA has no down payment requirement. You can finance 100% with a USDA loan.

 the Kentucky USDA Rural Housing Program can be used by first-time buyers and repeat buyers.

USDA will let you finance your Upfront Mortgage Insurance payment into your loan size. For example, if you bought a home for $100,000 and borrowed the full $100,000 from your lender, your Upfront Mortgage Insurance would be $2,000. You could then raise your loan size to $102,000.

The USDA / Rural Housing Program offers 30-year fixed rate mortgages only. There is no 15-year fixed rate mortgage.

USDA loans allow gifts from family members and non-family members. You will need a gift letter to accompany your loan application.

There is no minimum score, but 640 is generally regarded to get an Automated Approval through  their online underwriting system named GUS 

If you are a W-2 employee, you are eligible for USDA financing immediately; you don’t need a job history. If you have less than 2 years in a job, however, you may not be able to use your bonus income for qualification purposes.

Self-employed persons can use the USDA Rural Housing Program. If you are self-employed and want to use USDA financing, as with FHA and conventional financing, you will be asked to provide 2 years of federal tax returns to verify your self-employment income.

Joel Lobb (NMLS#57916)Senior  Loan Officer
502-905-3708 cell
502-813-2795 fax

Key Financial Mortgage Co. (NMLS #1800)*
107 South Hurstbourne Parkway*
Louisville, KY 40222*

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