Kentucky USDA and Rural Housing Loan Information
Frequently Asked Questions For Kentucky USDA Qualifying Criteria
1 What is the guarantee?
USDA Rural Development 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. Losses exceeding 35% are 85% reimbursed.
2 What is the advantage to the customer?
100 percent financing, fixed interest rate, no first time homeowner requirement, and no restrictions on size or design are a few advantages.
3 What are the eligibility requirements?
Have adequate and dependable income (up to 115 percent of adjusted area median
income), have acceptable credit, do not own a dwelling in the local commuting
area, US Citizen or permanent resident, have the ability to personally occupy the
home on a permanent basis, and do not have funds for a 20% down payment loan
plus closing and moving expenses.
4. What is the maximum loan amount?
The Loan amount is limited by the market value and repayment ability.
5. What is the maximum Loan to Value?
It can be up to 100% LTV plus the Agency guarantee fee
9 What is the Guarantee Fee?
The upfront guarantee fee is 1 percent of the “Total” loan amount. The Lender also has an annual fee of .35 percent based on principal.
10 What are the qualifying ratios?
PITI Ratio 29 percent, TD Ratio 41 percent
Higher ratios may be approved with compensating factors through the Automated Underwriting System Called GUS.
11 Do we show deferred student loans in the debt ratio?
Deferred student loans must be included in the debt ratio calculations for
Guaranteed Loans regardless of the deferment period.
12 What is the minimum credit score?
Under certain criteria, middle credit score of 680 and above no comment required.
For middle credit score of 679 and below document circumstances were
temporary in nature beyond the applicants control and have been removed. In
most cases, loans will not be guaranteed for applicants who have a middle credit
the score of 581 & below.
13 What about location?
The dwelling must be located in eligible rural area (See eligibility site)
http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do
14 What about refinancing?
Limited to existing USDA Rural Development guaranteed or direct loans.
15 Can loans include acreage?
Possibly. The acreage must not contain any income producing facilities and the value of acreage may not exceed 30% of the total property value.
17 What about an in-ground swimming pool?
In-ground pools permitted if the value is NOT financed; Appraiser must document
value.
18 What are the required inspections?
Property must meet HUD Handbook 4905.1 & 4150.2. A FHA roster appraiser
can verify adequacy/working order of electrical, plumbing, heating, water & waste
disposal on existing dwellings.
19 Will the USDA Rural Development issue a letter asking the Approved Lender to make a loan?
No. This is the Approved Lender’s loan. They underwrite the loan and decide if
it meets their standards and Agency standards before submitting them.
21 Are seller concessions allowed?
Yes. Rural Development does not restrict the amount of seller concessions.
22 Who approves the Appraiser? The appraiser must be licensed by the State to complete appraisals.
24 Are alternate documents verifying income allowed?
Yes. Paycheck stubs, payroll earnings statements and W-2 tax forms for previous
2 tax years, and telephone verification of employment.
17 What about an in-ground swimming pool?
In-ground pools permitted if the value is NOT financed; Appraiser must document
value.
18 What are the required inspections?
Property must meet HUD Handbook 4905.1 & 4150.2. A FHA roster appraiser
can verify adequacy/working order of electrical, plumbing, heating, water & waste
disposal on existing dwellings.
19 Will the USDA Rural Development issue a letter asking the Approved Lender to make a loan?
No. This is the Approved Lender’s loan. They underwrite the loan and decide if
it meets their standards and Agency standards before submitting them.
21 Are seller concessions allowed?
Yes. Rural Development does not restrict the amount of seller concessions.
22 Who approves the Appraiser? The appraiser must be licensed by the State to complete appraisals.
24 Are alternate documents verifying income allowed?
Yes. Paycheck stubs, payroll earnings statements and W-2 tax forms for previous
2 tax years, and telephone verification of employment.
These government programs are more liberal in terms of qualifying ratios, credit standards and offer higher loan to value limits than Conventional loans. Someone who lacks traditional credit can still obtain FHA or VA financing.