New USDA Loan Rules Could Limit Your Home Buying Power in Kentucky

How to Get Approved for a USDA Mortgage Loan in Kentucky

 How to Get Approved for a USDA Mortgage Loan in Kentucky

If you're considering buying a home in Kentucky and looking for a mortgage loan with favorable terms, a Kentucky USDA loan could be a great option. Kentucky USDA loans, backed by the U.S. Department of Agriculture, are designed to help low to moderate-income borrowers in Kentucky rural areas achieve homeownership. Here's a comprehensive guide on how to get approved for a USDA mortgage loan in Kentucky in regards to credit score, income, work history, debt to income ratios, bankruptcy and foreclosure :

1. Kentucky USDA loans Credit Score Requirements:

   • While Kentucky USDA loans are known for their lenient credit score requirements compared to conventional loans, having a good credit score can still improve your chances of approval. Aim for a credit score of 640 or higher for smoother processing. On paper USDA says there is no minimum score, but it is very difficult to get approved with lenders with no score.

2. Kentucky USDA loans Income Eligibility:

   • USDA loans have income eligibility criteria based on the area's median income. To qualify, your household income should fall within the USDA's income limits for the specific county or area in Kentucky where you plan to buy a home.

3. Kentucky USDA loans Work History:

   • Lenders typically look for a stable work history, preferably with at least two years of consistent employment in the same field or industry. This demonstrates your ability to repay the loan.

4. Kentucky USDA loans Property Location (Counties 120 in Kentucky):

   • USDA loans are specifically designed for properties located in eligible rural areas or designated suburban areas. Before applying, ensure that the property you're interested in is within a USDA-eligible location in Kentucky.

5. Kentucky USDA loans Income Ratio:

   • Your debt-to-income (DTI) ratio is an important factor in loan approval. Generally, USDA loans require a DTI ratio of 41% or lower, although some lenders may allow higher ratios with compensating factors.

6. Kentucky USDA loans Income Limits:

   • USDA loans have income limits based on family size and county location. These limits vary by area, so check the current income limits set by USDA for the county where you plan to purchase your home.

7. Kentucky USDA loans Property Type:

   • USDA loans are intended for primary residences, including single-family homes, townhouses, and eligible condominiums. Investment properties and vacation homes are not eligible.

8. Kentucky USDA loans Bankruptcy and Foreclosure Requirements:

   • Having a bankruptcy or foreclosure in your financial history doesn't necessarily disqualify you from a USDA loan. However, there are waiting periods after these events before you can apply:
     • Chapter 7 bankruptcy: 3 years from the discharge date.
     • Chapter 13 bankruptcy: 1 year of on-time payments and court approval.
     • Foreclosure: 3 years from the sale date.

9. Kentucky USDA loans Closing Time:

   • USDA loans typically take around 30 to 45 days to close, although this timeline can vary based on factors such as application volume and the efficiency of document processing.

10. Kentucky USDA loans Appraisal Requirements:

    • A professional appraisal is required for USDA loans to determine the fair market value of the property. The appraisal ensures that the property meets USDA standards and is worth the loan amount.

11. Kentucky USDA loans Termite Inspections:

    • USDA loans may require a termite inspection, especially in areas where termite infestations are common. The inspection aims to identify and address any termite-related issues in the property.

12. Kentucky USDA loans GUS (Guaranteed Underwriting System):

    • GUS is a tool used by lenders to process USDA loan applications. It evaluates the borrower's credit, income, and other factors to determine eligibility and streamline the underwriting process.

13. Kentucky USDA loans Manual Underwriting:

    • In some cases, USDA loans may undergo manual underwriting, especially if the borrower's application doesn't meet automated approval criteria. Manual underwriting involves a more thorough review of the borrower's financial situation by the lender.

To get a Kentucky USDA loan, potential Kentucky rural housing borrowers must follow this sequence of steps:

1. Determine eligibility by consulting online USDA maps.
2. Decide whether you want a guaranteed or direct loan. Guaranteed loans will have higher income limits, which you’ll work out with the lending institution.
3. Submit all applicable paperwork, including income, debts, and credit reports.
4. After pre-approval, begin searching for new homes (or launch renovations on your current home).

Keep in mind that you’ll have fees associated with your loan. Guaranteed loans require an upfront 1% fee and annual fees of 0.35% for as long as the mortgage is active.

USDA program for properties located outside urban areas of Kentucky areas where you can secure a no money down loan at a  fixed rate of on 30 years.  

The max household income limits usually are between  $112,450 to $148,450 for most rural area counties depending on household family size. 

 This changes every year so make sure you are using updated USDA Income Limits for this year 

A 620-640 middle credit score is needed for loan approval on this program. They're no max loan limits on USDA loans. You just need to qualify based on your debt to income ratio (see below under income section)-----USDA will go down to 580 on scores but it has to pass 👉 USDA Manual Underwriting guidelines

Need to be 3 years removed from a Chapter 7 Bankruptcy and 3 years from a foreclosure

🏡 Kentucky USDA Loans

Your Path to Rural Homeownership with $0 Down

Why Choose USDA Loans?

💰

$0 Down Payment

100% financing available

📈

Fixed Rate

30-year stable payments

🎯

Flexible Credit

Scores as low as 580*

🌾

Rural Focus

120 eligible KY counties

Key Requirements

📊

Credit Score

640+ for automated approval
580+ for manual underwriting

💵

Income Limits

$112,450 - $148,450
Varies by county & family size

📋

Debt-to-Income Ratio

Maximum 41% DTI
Total debt ÷ gross income

💼

Employment History

2+ years consistent work
Same field preferred

📍

Property Location

Must be in USDA-eligible rural area
Primary residence only

⏰

Bankruptcy/Foreclosure

3 years from Chapter 7 or foreclosure
1 year from Chapter 13 + payments

Application Process

1

Check Eligibility

Verify location & income limits

2

Get Pre-Approved

Submit documentation

3

House Hunt

Search eligible properties

4

Close

30-45 day timeline

Quick Qualification Check

✅Credit score 580+

✅Income within limits

✅DTI under 41%

✅2+ years employment

✅Eligible property location

✅Primary residence use

Ready to Get Started?

📧 Email
kentuckyloan@gmail.com

📞 Call/Text
502-905-3708

🌐 Website
mylouisvillekentuckymortgage.com

📍 Location
Louisville, KY

Joel Lobb - NMLS# 57916 | Evo Mortgage - NMLS# 1738461

Joel Lobb  Mortgage Loan Officer

Text/call: 502-905-3708

email: kentuckyloan@gmail.com

http://www.mylouisvillekentuckymortgage.com/

Big News for Kentucky Homebuyers: USDA Rural Housing Loans Just Got More Accessible With Higher Debt to Income Ratios

Debt to Income Changes for Kentucky USDA Loans

The Kentucky USDA Rural Housing Loan program has recently updated its guidelines for it's housing ratios for debt to income purposes , making it easier for more Kentuckians to qualify. Let's dive into the details of these changes and what they mean for you.

The Headline: Higher PITI Ratio Now Allowed

The biggest change is the increase in the maximum PITI (Principal, Interest, Taxes, and Insurance) ratio. This ratio, also known as the front-end ratio, has been bumped up to 34%. But what does this actually mean for you?

• More Buying Power: With a higher PITI ratio, you may be able to qualify for a larger loan amount. This could mean the difference between settling for a fixer-upper and landing your dream home.
• Easier Qualification: If you were previously on the edge of qualifying, this increase might just push you over the line into homeownership.

Understanding the Changes

Let's break down the key updates:

1. Maximum PITI Ratio Increase:
   • Old limit: 29%
   • New limit: 34%
   • Impact: You can now allocate up to 34% of your gross monthly income towards your mortgage payment, property taxes, and insurance.
2. Clarification on Business Debts:
   • The USDA has provided additional guidance on how business debts reported on your personal credit report are treated.
   • This could be particularly beneficial for small business owners and self-employed individuals.
3. Ratio Waivers for Purchases:
   • Important note: Waivers are not permitted to increase the PITI ratio above 34% for purchase transactions.
   • This ensures responsible lending practices while still providing flexibility.
4. New Compensating Factors:
   • The USDA has added more compensating factors that can support the approval of a ratio waiver.
   • This means more opportunities for approval if you have strengths in other areas of your financial profile.

What This Means for Kentucky Homebuyers

These changes are a game-changer for many potential homeowners in rural Kentucky. Here's why:

• More Flexibility: The higher PITI ratio gives you more wiggle room in your budget when shopping for a home.
• Clearer Guidelines: With better clarification on business debts and compensating factors, you'll have a clearer picture of where you stand.
• Responsible Lending: The cap on ratio waivers for purchases ensures that the program remains sustainable and responsible.

How the New 34% PITI Ratio Benefits USDA Loan Applicants: A Practical Example

To understand the real-world impact of the increased PITI (Principal, Interest, Taxes, and Insurance) ratio for USDA loans, let's walk through a hypothetical example. We'll compare how a potential buyer would fare under the old 29% ratio versus the new 34% ratio.

Meet Our Hypothetical Buyer: The Johnson Family

• Annual Gross Income: $60,000
• Monthly Gross Income: $5,000
• Credit Score: 680
• Existing Monthly Debts: $500 (car loan and credit card payments)

Scenario 1: Old 29% PITI Ratio

Under the old rules, here's how the Johnsons' maximum mortgage payment would be calculated:

1. Maximum PITI payment:
   • 29% of $5,000 = $1,450 per month
2. Maximum loan amount (assuming a 3.5% interest rate, 30-year term, and estimated taxes and insurance of $250/month):
   • Maximum P&I payment: $1,450 - $250 = $1,200
   • This translates to a maximum loan amount of approximately $268,000

Scenario 2: New 34% PITI Ratio

Now, let's see how the Johnsons fare under the new 34% PITI ratio:

1. Maximum PITI payment:
   • 34% of $5,000 = $1,700 per month
2. Maximum loan amount (same assumptions as above):
   • Maximum P&I payment: $1,700 - $250 = $1,450
   • This translates to a maximum loan amount of approximately $324,000

The Benefit: Increased Buying Power

The difference is significant:

• Increase in maximum PITI payment: $250 per month
• Increase in maximum loan amount: $56,000

This means the Johnson family can now qualify for a home that's about $56,000 more expensive than they could under the old rules. In many rural areas of Kentucky, this could be the difference between a modest starter home and a more spacious family home, or a home with desirable features like an extra bedroom, a larger lot, or modern amenities.

Additional Considerations

1. Debt-to-Income Ratio: Remember, USDA loans also consider the overall debt-to-income ratio. In this case:
   • Old rule: ($1,450 + $500) / $5,000 = 39% DTI
   • New rule: ($1,700 + $500) / $5,000 = 44% DTI Both are within USDA's typical maximum of 41-46% DTI.
2. Affordability: While the Johnsons can qualify for a larger loan, they should carefully consider if the higher payment fits comfortably within their budget.
3. Home Price Variations: In some rural areas of Kentucky, a $56,000 increase in buying power could significantly expand housing options.

Conclusion

The increase in the PITI ratio from 29% to 34% provides substantial benefits to USDA loan applicants like the Johnson family. It increases their buying power and expands their options in the rural housing market. However, it's crucial for buyers to consider their overall financial picture and ensure they're comfortable with the monthly payments before maxing out their borrowing capacity.

Next Steps: Is a USDA Rural Housing Loan Right for You?

If you've been on the fence about applying for a USDA Rural Housing Loan, now might be the perfect time to take action. Here's what you can do:

1. Check if your desired area qualifies as "rural" under USDA guidelines.
2. Review your current debt-to-income ratio and see how it fits with the new 34% PITI limit.
3. Gather documentation on your income, including any business debts if you're self-employed.
4. Speak with a USDA-approved lender to get a more detailed assessment of your eligibility.

Remember, while these changes make it easier to qualify, it's still important to borrow responsibly and ensure that your mortgage payments are comfortably within your budget.

Conclusion

The Kentucky USDA Rural Housing Loan program's new guidelines offer a fantastic opportunity for many Kentucky residents to achieve their dream of homeownership. With higher ratios allowed and clearer guidelines, the path to your rural Kentucky home just got a little smoother. Don't wait – start exploring your options today!

Joel Lobb  Mortgage Loan Officer

American Mortgage Solutions, Inc.
10602 Timberwood Circle
Louisville, KY 40223
Company NMLS ID #1364

Text/call: 502-905-3708

email: kentuckyloan@gmail.com

http://www.mylouisvillekentuckymortgage.com/

NMLS 57916  | Company NMLS #1364/MB73346135166/MBR1574

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 view of my employer. Not all products or services mentioned on this site may fit all people.
NMLS ID# 57916, (www.nmlsconsumeraccess.org).

Kentucky VA loans Compared to Kentucky USDA, FHA, and Fannie Mae loans in Kentucky

When comparing Kentucky VA loans to Kentucky USDA, FHA, and Fannie Mae loans in Kentucky, several factors come into play, including credit score requirements, income considerations, work history, debt ratios, and how each loan type treats bankruptcy and foreclosure. Let's delve into the benefits and differences of each loan type:

Kentucky Mortgage Credit Score Requirements:

• Kentucky VA Loan: VA loans typically have more flexible credit score requirements compared to conventional loans. While there's no specific minimum score set by VA , most Kentucky VA lenders often look for a credit score of 620 or higher. I can do VA loans down to a 580 credit score.
• Kentucky USDA Loan: USDA loans also offer flexibility, with no minimum score required per USDA guidelines, but most Kentucky USDA lenders will want a 640 score or higher. I Can do Kentucky USDA loans down to a 580 credit score on a manual underwrite.
• Kentucky FHA Loan: FHA loans are known for accommodating borrowers with lower credit scores, often accepting scores as low as 500 with a 10% down payment or 580 with a 3.5% down payment.
• Kentucky Fannie Mae Loan: Fannie Mae loans usually require a minimum credit score of 620 or higher, although some lenders may have slightly different requirements.

Kentucky Mortgage Income and Work History:

• Kentucky VA Loan: VA loans consider your stable income and employment history but may be more lenient if you have a history of military service or steady employment. 2 years of employment needed for loan application-minimal job gaps
• Kentucky USDA Loan: USDA loans often have income limits based on the area's median income, and you need a stable income source. 2 years of employment needed for loan application-minimal job gaps
• Kentucky FHA Loan: FHA loans consider your income stability and work history, with guidelines that vary by lender. 2 years of employment needed for loan application-minimal job gaps
• Kentucky Fannie Mae Loan: Fannie Mae loans typically require a stable income and employment history, similar to conventional loans. 2 years of employment needed for loan application-minimal job gaps

Kentucky Mortgage Debt Ratio Requirements:

• Kentucky VA Loan: VA loans generally have more lenient debt-to-income (DTI) ratio requirements, often allowing for a higher DTI compared to conventional loans. VA loans can get approved on much higher debt to income ratios vs FHA, USDA and Fannie Mae loans. 65% or higher in some situations but if manual underwrite, will want the ratios closer to 41% with good residual income for VA loan. VA loans are the only type of loans that require a residual income...FHA, Fannie Mae, USDA does not have residual income requirements
• Kentucky USDA Loan: USDA loans have very strict DTI ratio limits, typically around 41% to 45% max on the backend ratio and 33% or less on the front end. By far the most restrictive on debt ratios vs FHA, VA, and Fannie Mae loans
• Kentucky FHA Loan: FHA loans also have relatively flexible DTI ratio limits (56% back end ratio possible on a AUS approval), making them accessible to borrowers with moderate levels of debt. Front end ratio max 45%
• Fannie Mae Loan: Fannie Mae loans follow standard DTI ratio guidelines similar to conventional loans. TYpically the second most restrictive on debt ratios right behind USDA loans on tighter debt to income ratio requirements, with the max back-end ratio no more than 50% --Front end ratio max 45%

Kentucky Mortgage Bankruptcy and Foreclosure Requirements:

• Kentucky VA Loan: VA loans are more forgiving of past bankruptcy or foreclosure, often requiring a waiting period of 2 years for Chapter 7 bankruptcy and 1-2 years for foreclosure.
• Kentucky USDA Loan: USDA loans have specific waiting periods after bankruptcy (3 years for Chapter 7) and foreclosure (3 years).
• Kentucky FHA Loan: FHA loans have shorter waiting periods after bankruptcy (2 years for Chapter 7) and foreclosure (3 years).
• Kentucky Fannie Mae Loan: Fannie Mae loans typically require longer waiting periods after bankruptcy (4-7 years) and foreclosure (7 years).

Advantages and Disadvantages of Kentucky VA loans, USDA, Fannie Mae and FHA:

• Kentucky VA Loan Advantages: Zero down payment, competitive interest rates, no private mortgage insurance (PMI) requirement, lenient credit and DTI ratios, and flexible eligibility criteria for veterans and active-duty service members.
• Kentucky VA Loan Disadvantages: Funding fee (although it can be rolled into the loan), limited to eligible veterans, service members, and some spouses.
• Kentucky USDA Loan Advantages: Zero down payment, lower interest rates, flexible credit requirements, and available in eligible rural areas.
• Kentucky USDA Loan Disadvantages: Limited to rural properties, income limits, and property eligibility criteria.
• Kentucky FHA Loan Advantages: Low down payment (3.5%), flexible credit requirements, competitive interest rates, and accessible to first-time homebuyers.
• Kentucky FHA Loan Disadvantages: Mortgage insurance premiums (MIP), stricter property standards, and limits on loan amounts.
• Kentucky Fannie Mae Loan Advantages: Available for a wide range of properties, competitive interest rates, and options for low down payments.
• Kentucky Fannie Mae Loan Disadvantages: Stricter credit and DTI requirements, potential for private mortgage insurance (PMI), and limited flexibility for borrowers with past financial challenges.

In summary, choosing the right loan type depends on your specific financial situation, eligibility criteria, and property location. VA loans offer excellent benefits for eligible veterans and service members, while USDA, FHA, and Fannie Mae loans provide alternatives with their own advantages and considerations.

Joel Lobb  Mortgage Loan Officer

American Mortgage Solutions, Inc.
10602 Timberwood Circle
Louisville, KY 40223
Company NMLS ID #1364

Text/call: 502-905-3708
fax: 502-327-9119
email: kentuckyloan@gmail.com

http://www.mylouisvillekentuckymortgage.com/

NMLS 57916  | Company NMLS #1364/MB73346135166/MBR1574

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 view of my employer. Not all products or services mentioned on this site may fit all people.
NMLS ID# 57916, (www.nmlsconsumeraccess.org).