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USDA RURAL DEVELOPMENT RURAL HOUSING LOAN IN KENTUCKY
Can you use Foster Income for a Kentucky Mortgage Loan Approval?
Foster Income for a Kentucky Mortgage
Yes, if it can be documented that foster care income has been received for the last 2 years that income is likely to continue for at least 3 years from the date of the Note, then it can be used to qualify. If it can be verified that income is not taxable, it can be grossed up per 4000.1 II.A.4.c.xii.(P) or II.A.5.b.xii.(P) by either borrower's actual tax rate or 115% whichever is lower.
Foster-Care Income for a Mortgage Loan Approval
✓ | Verification of Foster-Care Income |
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Verify the foster-care income with letters of verification from the organizations providing the income. | |
Document that the borrower has a two-year history of providing foster-care services. If the borrower has not been receiving this type of income for two full years, the income may still be counted as stable income if
|
Senior Loan Officer
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Kentucky Rural Housing USDA Guideline Updates for 2023
As a reminder, annual income differs from repayment income. Annual income for the household will be used to calculate the adjusted annual household income to determine eligibility for a USDA-guaranteed loan. The main purpose of the following revisions in paragraph 9.3 is to ensure that lenders are aware that they are to calculate and properly document all adult household members’ income for annual income eligibility purposes…not just parties to the loan note.
It’s important to be aware of income sources that are counted and NOT counted as well as how to properly determine both “annual” and “repayment” income. I recommend that you thoroughly read Chapter 9 and refer to Attachment 9-A and Attachment 9-D in HB-1-3555 to review income and asset types, guidance for annual and repayment purposes, and documentation options acceptable to verify the income or asset source.
Paragraph 9.3 is being revised as follows:
- To clarify that lenders must verify the income of each adult household member for the previous 2 years.
- To clarify, under “full income documentation”, the lender must obtain W-2s or IRS Wage and Income transcripts in addition to paystubs.
- To change the term “streamlined documentation” to “alternative income documentation” to remove confusion with the streamlined refinance product.
- To clarify under “self-employed income documentation,” if ownership interest is less than 25%, neither the “Business Owner” nor “Self-Employed” options should be selected in GUS (Guaranteed Underwriting System).
- To clarify the Verbal Verification of Employment must be obtained within 10 business days of loan closing, and confirmation a self-employment business remains operational must be obtained within 30 days of loan closing.
- Restructured guidance on tax transcripts to emphasize a failure to timely file tax returns is not an eligible explanation to forgo obtaining tax transcripts.
Paragraph 9.8: STABLE AND DEPENDABLE INCOME
Gaps In Employment: The Agency clarifies that it is the lender’s responsibility to analyze any gaps in employment to make a final determination of stable and dependable income. The Agency does not impose specific criteria regarding when a gap in employment is acceptable. It is the approved lender’s responsibility to analyze the complete employment history to determine stable and dependable income.
Business loss from a closed business:
The Agency clarifies that any loss incurred by a self-employed business (full-time or part-time) that is closed may be removed from consideration when the applicant provides a letter of explanation and documentation to the lender which details:
- When the business was closed;
- Why the business was closed;
- How the business was closed; and
- Evidence satisfactory to the lender to support the closure of the business.
Attachment 9-A: INCOME AND DOCUMENTATION MATRIX
Considerations for Income Calculations: The Agency added additional considerations to the “Considerations for All Income Calculations” section of the matrix to provide important reminders to lenders regarding reviewing and calculating income. The full text of the revision is as follows:
- Annual and adjusted annual income calculations must include all eligible income sources from all adult household members, not just parties to the loan note.
- Annual income is calculated for the ensuing 12 months based on income verifications, documentation, and household composition.
- Include only the first $480 of earned income from adult full-time students who are not the applicant, co-applicant, or spouse of an applicant in annual and adjusted annual income.
- Income from assets that meet the criteria of Section 9.4 must be included in annual and adjusted annual income.
- Repayment income calculations include the income sources of the applicants who will be parties to the note that meet the minimum required history identified in this matrix and have been determined to be stable and dependable income by the approved lender.
- Income used in repayment income calculations must be confirmed to continue a minimum of three years into the mortgage. If the income is tax-exempt, it may be grossed up to 25 percent for repayment income. “Documentation Source Options” lists eligible documentation. Every item listed is not required unless otherwise stated. Lenders must obtain and maintain documentation in the loan file supporting the lender’s income calculations.
Automobile Allowance: Revised “Automobile Allowance” guidance to allow the full allowance to be included as repayment income and the full expense (debt) counted in DTI, as well as updating the required history to two years.
Comment: Previously, a 1-year history was required. The wording in this section is much better in that it clarifies the intent of the agency to allow for the automobile allowance to be counted as income and the debt associated with that income, if any (such as a car payment), counted in the DTI.
Boarder Income: The Agency clarified that “Boarder Income” refers to rental income received from an individual renting space inside the dwelling, making the property income-producing and, therefore, ineligible.
Comment: This revision to attachment 9-A, “Boarder Income,” makes it clear that boarder income will render the property ineligible for a guaranteed loan. The previous guidance made it somewhat appear as if boarder income was acceptable. It’s not.
Bonus Income: Revised “Bonus” income to clarify the one-year history must be in the same or similar line of work.
Comment: This is a significant revision in that previously, the guidance made it appear the income had to be on the same job…not the same or similar line of work. This gives the lender greater flexibility in counting this type of income.
Child Support: Revised the “Child Support” guidelines to simplify the guidance and remove inconsistencies. The Agency stated that child support that meets the minimum history but the payment amounts are not consistent must use an average consistent with the payor’s current ability/willingness to pay.
Comment: While perhaps not readily apparent, the wording in this revised guidance is significant in that it gives lenders greater latitude in using “Child Support” income.
Employee Fringe Benefits: The Agency clarified that employer-provided fringe benefits that are reported as taxable income may be included in repayment income. The actual guidance states the following: Employer-provided fringe benefit packages documented on earning statements as taxable income may be included.
Expense Allowance: Revised “Expense Allowance” guidance to allow the full allowance to be included as repayment income and the full expense (debt) counted in DTI, as well as updating the required history to two years.
Comment: Previously, a 1-year history was required. The wording in this section is much better in that it clarifies the intent of the agency to allow for the expense to be counted as income and the debt associated with that income, if any, counted in the DTI.
Guardianship/Conservatorship Income: The Agency added a category providing guidance on “Guardianship/Conservatorship Income.” This guidance does not apply to income earned from foster care. Include amounts that will be received in the ensuing 12 months. Exclusions may apply under 7 CFR 3555.152(b)(5).
Required History: None; the income must be received at the time of submission to the Agency. Lenders must document:
- The applicant is currently receiving the income; and
- The amount of income received each month.
Continuance: Benefits that do not include expiration dates on the documentation will be presumed to continue.
Documentation Source Options:
- Documentation to support payment amounts and duration, such as a court order, legal documents, or other supplemental information
- Online payment schedule from the Agency, bank statements, etc.
- Federal income tax returns or IRS tax transcripts with all schedules.
Individual Retirement Account (IRA) Distributions: The Agency added a category providing guidance on “Individual Retirement Account (IRA) Income.” Include amounts that will be received in the ensuing 12 months. Lump sum withdrawals or sporadic payments may be excluded under 7 CFR 3555.152(b)(5).
Required History: None; the income must be received at the time of submission to the agency. The lender must document:
- The applicant is currently receiving the income; and
- The amount of income received each month.
Documentation Source Options:
- IRA documents, IRS 1099, evidence of current receipt, bank statements, etc.
- Federal income tax returns or IRS tax transcripts with all schedules.
Mileage: The Agency is simplifying the guidance on considering mileage income and deductions. For deductions claimed on tax returns, the Agency now refers to IRS guidance when a mileage deduction is claimed on income tax returns.
Mortgage Credit Certificate: The Agency removed the requirement to obtain a copy of the IRS W-4 document when an applicant uses a Mortgage Credit Certificate as income.
Comment: THANK GOODNESS!!! This was one of the biggest pains ever. No other agency required evidence that a new W4 form was filed with the employer in order to use a Mortgage Credit Certificate as additional income. This is a common-sense welcome revision.
Non-Occupant Borrower: The Agency removed the “Non-Occupant Borrower” category on the matrix since non-occupant borrowers are not permitted anyway.
Overtime: Revised “Overtime” income to clarify the one-year history must be in the same or similar line of work.
Comment: This is a significant revision in that previously, the guidance made it appear the income had to be on the same job…not the same or similar line of work. This gives the lender greater flexibility in counting this type of income.
Rental Income: Updated “Rental Income” guidelines regarding corresponding mortgage liabilities to be consistent with the guidance in Chapter 11.
Secondary Employment: Revised “Secondary Employment” guidance to clarify that the applicant must have a one-year history of working the primary and secondary jobs concurrently for the lender to be able to consider the secondary employment for repayment income.
Section 8 Housing Vouchers: Revised “Section 8 Housing Vouchers” to permit Section 8 vouchers to be treated as a reduction of the PITI when the benefit is paid directly to the servicer rather than solely an addition to repayment income. Subsequently, the Agency provided clarification that a manual file submission is required in this instance, and clarified that when lenders use the benefit as a reduction of the PITI, they must maintain documentation in their permanent loan file to support the benefit is paid directly to the servicer.
Comment: Wow! I cannot stress how significant this change is. Allowing for the Section 8 Voucher amount paid directly to the servicer to be a direct reduction to PITI instead of counted as additional income will help a tremendous amount of applicants obtain an agency-guaranteed loan.
Separate Maintenance/Alimony: Revised the “Separate Maintenance/Alimony” guidelines to simplify the guidance and remove inconsistencies. The Agency stated that “Separate Maintenance/Alimony” that meets the minimum history, but the payment amounts are not consistent, must use an average consistent with the payor’s current ability/willingness to pay.
Comment: While perhaps not readily apparent, the wording in this revised guidance is significant in that it gives lenders greater latitude in using “Separate Maintenance/Alimony” income.
Unreimbursed Employee or Business Expenses: Revised the “Unreimbursed Employee or Business Expenses” guidance to reflect instances where the IRS continues to allow these deductions.
Variable Income: The Agency added a category providing guidance on “Variable Income.” i.e., piece rate, union work, and other similar types of pay structures.
Annual Income: Include amounts that will be received in the ensuing 12 months. Exclusions may apply under 7 CFR 3555.152(b)(5).
Repayment Income:
Required History: One year in the same or similar line of work. Underwriters must analyze variable income earnings for the current pay period and YTD earnings. Significant variances (increase or decrease) of 20 percent or greater in income from the previous 12 months must be analyzed and documented (i.e., variances due to seasonal/holiday, etc.) before considering the income stable and dependable.
Continuance: Income will be presumed to continue unless there is documented evidence the income will cease.
Required Documentation:
- Paystub(s), Earning Statement(s)
- W-2s
- Written VOE or Electronic Verifications
- Federal Income Tax Returns or IRS Tax Transcripts with all Schedules
- Section 9.3E provides additional information on employment verification options.
Assets and Reserves: In the “Assets and Reserves” portion of the matrix, the Agency reiterated that lenders have the option to underwrite to the most conservative approach, with no consideration of assets entered into GUS. The full wording of the text is as follows: “Although all household assets must be verified and documented in the permanent loan file, the lender may underwrite to the most conservative approach with no consideration of assets entered into GUS.”
Comment: the agency has always said Lenders must use caution and not overstate assets utilized for reserves. It’s good practice not to overstate assets, as that could lead to a GUS finding that will ultimately be determined to be in error. The bottom line, excess assets utilized for reserves can lead to a Gus “Accept” finding that could potentially move to a “Refer” finding with the corrected entry of borrower assets. Don’t fall into the trap of overstating assets/reserves.
Depository Accounts: Checking, Money Market Accounts, and Savings: The Agency revised guidance for sourcing deposits in depository accounts. I’m going to start off by simply providing a clip of the exact wording for this revision.
Documentation:
Two months of recent bank statements; or
- Verification of Deposit (VOD) and a recent bank statement; or
- Alternate evidence (i.e., statement printouts stamped by the lender) to support account activity and monthly balances.
- Investigate all recurring deposits on the account statements that are not attributed to wages or earnings to confirm the deposits are not from undisclosed income sources. There is no tolerance or percentage of the amount of a recurring deposit that is not required to be investigated.
- Investigate individual (non-recurring) deposits greater than $1,000 on the account statements that are not attributed to wages or earnings to confirm the deposits are not from undisclosed income sources.
- If the source of a deposit is readily identifiable on the account statement(s), such as a direct deposit from an employer, the Social Security Administration, an IRS or state income tax refund, or a transfer of funds between verified accounts, and the source of the deposit is printed on the statement, the lender does not need to obtain further explanation or documentation. However, if the source of the deposit is printed on the statement, but the lender still has questions as to the source of the deposit, the lender should obtain additional documentation.
Reserves: Eligible
Lenders must use the lesser of the current month’s balance or the previous month’s ending balance when calculating reserves. Deposited gift funds require further documentation and calculation. Refer to the “Gift Funds” section of the attachment for further guidance.
Funds to Close: Eligible
Comment: Holy cow! It’s about time. I’ve been preaching for years that this guidance needed to be revised. I’m literally dancing with joy along with every mortgage processor and underwriter. Previously a lender had to investigate all deposits on the account statements that were not attributed to wages or earnings. Since a USDA Guaranteed Housing loan has income eligibility limits, the Agency wanted lenders to confirm that deposits were not from undisclosed income sources. They gave us no tolerance or percentage of the deposit amount that was not required to be investigated. This means that lenders were required to have the borrower’s address/document every single non-payroll deposit…no matter how small… even deposits as little as $1. In a world of cash payment apps such as Zelle, Venmo , and PayPal, where a borrower can have numerous cash deposits, this became a daunting task. In other words…it really sucked.
This revision, while still requiring analysis and possible explanation/documentation, will give us some well-deserved relief.
Under the new guidance, lenders now have to investigate all “RECURRING” deposits on the account statements that are not attributed to wage and earnings to confirm that the deposits are not from undisclosed income sources. As before, the agency has provided no tolerance or percentage of the amount of a recurring deposit that is not required to be investigated. The key here is the word “recurring”. When analyzing the account statements, a lender now has to simply address “recurring” deposits. This will simplify the analysis and process tremendously.
As for “NON-RECURRING” deposits…the Agency requires lenders to investigate individual “non-recurring” deposits greater than $1,000 on the account statements that are not attributed to wages or earnings to confirm the deposits are not from undisclosed income sources.
They go on to say that if the source of a deposit is readily identifiable on the account statement(s), such as a direct deposit from an employer, the Social Security Administration, an IRS or state income tax refund, or a transfer of funds between verified accounts, and the source of the deposit is printed on the statement, the lender does not need to obtain further explanation or documentation. However, if the source of the deposit is printed on the statement, but the lender still has questions as to the source of the deposit, the lender should obtain additional documentation.
Bottom line, this will make all our lives much easier. Thank goodness! God bless USDA.
Gift Funds: The Agency revised additional guidance for Gift Funds as follows:
Documentation:
- Gift funds are considered the applicant’s own funds; therefore, excess gift funds are eligible to be returned to the applicant at loan closing.
- Gift funds may not be contributed from any source that has an interest in the sale of the property (seller, builder, real estate agent, etc.).
- Gift Funds must be properly sourced.
- If the funds have been deposited to the borrower’s account, obtain a gift letter to state the funds do not have to be repaid and a bank statement as evidence of funds from the donor’s account. Cash on hand is not an acceptable explanation for the source of funds.
- If the funds have not been deposited in the borrower’s account, obtain a gift letter to state the funds do not have to be repaid, a certified check, money order, or wire transfer, and a bank statement showing the withdrawal from the donor’s account. Cash on hand is not an acceptable explanation for the source of funds.
- If the gift funds will be sent directly to the settlement agent, the lender must obtain a gift letter to state the funds do not need to be repaid, a bank statement as evidence of funds from the donor’s account, and verification that the funds have been received by the settlement agent. Cash on hand is not an acceptable explanation for the source of funds.
Reserves: Ineligible
Funds to Close: Eligible
GUS Instructions: • Gift funds should be entered in the “Gifts or Grants You Have Been Given or Will Receive for This Loan” section of the “Loan and Property Information” GUS application page. If the funds have already been deposited into an asset account, select “deposited” and include the amount of the gift in the applicable asset account on the “Assets and Liabilities” GUS application page. If the funds have not been deposited into an asset account, select “not deposited” and do not include the gift in an asset account on the “Assets and Liabilities” GUS application page. • Gift funds applied as Earnest Money should not be reflected in the “Gifts or Grants You Have Been Given or Will Receive for This Loan” section of the “Loan and Property Information” GUS application page.
Comment: You need to read this one thoroughly. This is much better guidance than previously provided, offering details for sourcing gift funds as well as how to enter gift funds into the Agency’s Guaranteed Underwriting System (GUS).
Lump Sum Additions: IRS Refunds, Lottery Winnings, Inheritances, Withdrawals from Retirement Accounts: The Agency added a category providing guidance on “Lump Sum Additions.”
Documentation:
- Document the applicant’s receipt of funds.
- Verify where the proceeds are held and confirm they are available to the applicant.
- One-time deposits may not require annual income considerations under 7 CFR 3555.152(b)(5)(vi).
- Do not enter into GUS separately if it is already included in the borrower’s depository account.
Reserves: Eligible
Funds to Close: Eligible
Comment: Note that it says that withdrawals from retirement accountsare eligible as cash reserves; however, under the “Retirement: 401(k), IRA, etc.” section of the matrix, the Agency says that funds borrowed on retirement accounts are NOT allowed for cash reserves. To be clear, apparently, the term withdrawal does not include borrowing funds from the retirement account. In order to be able to use 401(k) funds as cash reserves, a borrower would have to either withdraw funds from the retirement account (not borrow) or leave the money in the retirement account so that 60% of the vested amount available to the borrower could be counted as cash reserves.
Retirement: 401(k), IRA, etc.: The Agency clarified that funds borrowed against retirement accounts (e.g., 401(k), IRA, etc.) are eligible for funds to close but are not considered in reserves.
Documentation:
- Recent account statement (monthly, quarterly, etc.) to evidence the account balance, vested balance available for withdrawal, and early withdrawal penalty, if applicable.
- Funds borrowed against these accounts may be used for funds to close but are not considered in reserves. The borrowed funds should not be reflected in the balance of any asset entered on the “Assets and Liabilities” application page.
Reserves: Eligible
- 60% of the vested amount available to the applicant may be used as reserves.
- Funds borrowed against these accounts are not eligible for reserves. The borrowed funds should not be reflected in the balance of any asset entered on the “Assets and Liabilities” application page.
Funds to Close: Eligible
Comment: I personally think this guidance is kind of weird. I can use 60 % of a vested 401(k), IRA, etc., as cash reserves, but if I borrow against it and put the cash into the bank, I can’t use any of those borrowed retirement funds beyond the amount of cash needed to close as cash reverse? Maybe it’s just me…but that does not totally make sense to me…but it’s their call.
Strategically, if you need cash to close from your retirement account and you need cash reserves, then you would need to only borrow just enough cash to close and leave the remaining funds in your retirement account, so it could be classified as cash reserves once the proper percentages (less the amount borrowed) are calculated.
Attachment 9-E: Information for Analyzing Tax Returns for Self-Employed Applicants
Attachment 9-E was revised to reflect a two-year required history for “Capital Gain or Loss” to be consistent with the current guidance in Attachment 9-A.
Chapter 15 – Submitting the Application Package
The following updates were made to HB-1-3555, Chapter 15 to make minor grammatical and formatting changes, correct discrepancies, and provide clarification for easier understanding of guidance.
Paragraph 15.7 C: Requesting Changes in Conditions: The Agencyclarifies that Conditional Commitment change requests should be made via email.
Attachment 15-A was REVISED as follows:
- In Lender Instructions, the Agency states that electronic delivery to Rural Development is the preferred method for submission.
- The Agency removed the requirement to submit evidence of qualified alien requirements on page 1, as it is not required to be submitted to the Agency on GUS Accept files.
- The Agency changed the term “streamlined documentation” to “alternative income documentation” on page 2 to remove confusion with the streamlined refinance product.
- The Agency clarified that a Verification of Rent is required for manually underwritten loans with credit scores less than 680.
Comment: Previously, the “Loan Origination Checklist” attachment 15-A stated that verification of rent “MAY” be applicable for a manually underwritten loan with a credit score of less than 680. Now the Agency states that it “IS” required for a credit score of less than 680 on a mainly underwritten loan.
Kentucky USDA Rural Development Single Family Housing Guaranteed Loan Program
Kentucky USDA Rural Development Single Family Housing
Guaranteed Loan Program
APPLICANT BENEFITS
100 percent financing available with no down payment required. Eligible repairs and
closing costs may be included in the loan up to the appraised value of the property.
Upfront guarantee fee may be included in the loan amount above the appraised value.
Existing or new construction homes including all Planned Unit Development’s (PUD’s) are
eligible.
Condominiums may be eligible.
30 year loan terms with fixed interest rates.
No pre-payment penalties.
Satisfactory credit and qualifying ratios apply. Nontraditional credit histories may be
eligible.
APPLICANT REQUIREMENTS
The following information is not all inclusive. For complete information refer to RD
Instruction 1980-D, supplemented by applicable Administrative Notices (AN) available
online at http://www.rurdev.usda.gov/RegulationsAndGuidance.html. http://www.rurdev.usda.gov/RegulationsAndGuidance.html.
APPLICANT ELIGIBILTY
The applicant must:
Be a U.S. Citizen, legally admitted as a permanent resident, or be a qualified alien.
Have the legal capacity to incur the loan obligation.
Be unable to secure credit with rate and terms reasonable to the applicant without a
guarantee from the Single Family Housing Guaranteed Loan Program (SFHGLP).
Not own a home within the local commuting area at the time of loan closing. Applicants that
do own a home that is structurally unsound or functionally inadequate, or is located outside
of the local commuting area may still be eligible for guaranteed loan consideration.
Occupy the home purchased in an eligible rural area as their permanent primary residence.
Have stable and dependable income to ensure repayment ability. Households may not
exceed the moderate income limit established for the applicable rural area.
Have an acceptable credit history that demonstrates the willingness and ability to meet
financial obligations as they become due. If applicants exhibit unacceptable credit per RD
Instruction 1980-D, section 1980.345(d) the approved lender may still consider the
applicant if documented evidence of strong compensating factors as outlined in section
1980.345(d)(3) exists.
ANNUAL INCOME LIMITS
Annual income includes the total gross income of the applicant, co-applicant, and any other
adult (age 18 and up) household members.
Adjustments to annual income may be deducted for program eligibility determination.
Deductions may be made for dependants, eligible annual childcare expenses, disability
expenses, and annual medical expenses for elderly families. Please discuss eligible
deductions with your SFHGLP contact.
Income limits are published for each county as an Exhibit to RD Instruction 1980-D and are
available online at: http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do
REPAYMENT ABILITY: DEBT/INCOME RATIOS
Repayment ability is determined by calculating the following ratios:
- PITI (Principal, Interest, Real Estate Taxes, and Homeowner Insurance): The total PITI
payment divided by the repayment income must be 29 percent or less.
- Total Debt (TD): The PITI payment plus all other monthly debt obligation payments
divided by the repayment income must be 41 percent or less.
Repayment ratios that exceed 29 and/or 41 percentmay be approved by Rural
Development when a ratio waiver request is provided by the approved lender. The ratio
waiver must document and provide evidence of strong compensating factors to support the
request. USDA Rural Development Single Family Housing Guaranteed Loan Division October 2012
1400 Independence Ave., S.W. Washington D.C. 20250-0784
202.720.1452
Examples of strong compensating factors include but are not limited to:
- Current rent/housing payment is equal to or less than the proposed PITI.
- Applicant has a history of devoting a similar percentage of income to housing expense
similar to the PITI over the previous 12 months.
- Strong credit score and repayment history.
- Reserves are available post loan closing, which evidence the applicant’s ability to
accumulate savings.
PROPERTY REQUIREMENTS
ELIGIBLE RURAL AREA
The property must be located in an eligible rural area as defined in 7 CFR 3550.10 as:
1. Open country which is not part of or associated with an urban area.
2. Any town, village, city or place, including the immediate adjacent densely settled area,
which is not part of or associated with an urban area and which:
a. Has a population not in excess of 10,000 if it is rural in character, or
b. Has a population in excess of 10,000 but not in excess of 20,000, is not contained within
a Standard Metropolitan Statistical Area, and has a serious lack of mortgage credit for
very low, low and moderate income households as determined by the Secretary of
Agriculture and the Secretary of HUD.
Property eligibility is available online and through GUS.
EXISTING HOMES
Properties must meet HUD Handbooks 4150.2 and 4905.1. An FHA Roster appraiser or
licensed residential appraiser deemed qualified by the approved lender may certify to this
determination.
A separate home inspection report prepared by the appraiser or a home inspector deemed
qualified by the approved lender is an acceptable option to ensure properties meet
minimum standards.
Homes must be structurally sound, functionally adequate and in good repair, or will be
improved to meet good repair.
There are no thermal performance standards for existing homes.
Private water systems/wells: The local health authority or state certified laboratory must
perform a water quality analysis, which must meet state and local standards.
Private septic systems: The septic system must be free of observable evidence of failure. An
FHA Roster appraiser, government health authority, licensed septic professional or
qualified home inspector may perform the septic system evaluation.
Termite: If required by the lender, appraiser, inspector, or State law, a pest inspection must
be obtained to confirm the property is free of active termite infestation.
Repairs: Any repairs necessary for the dwelling to be structurally sound, functionally
adequate and in good repair must be completed prior to the request of the loan note
guarantee. Exception: Escrow accounts that meet the requirements of RD Instruction
1980-D, section 1980.315 are allowed for exterior weather delayed repairs. When eligible
escrow accounts are established per section 1980.360(2)(ii) the loan note guarantee will be
issued without the repairs complete.
Existing homes have been completed for more than 12 months or have been completed for
less than 12 months but have been previously occupied. USDA Rural Development Single Family Housing Guaranteed Loan Division October 2012
NEW CONSTRUTION
Evidence the home was built in accordance with certified plans and specifications (e.g.,
International Residential Building Code, CABO, BOCO, etc.) must be obtained through an
eligible building permit, certificate of occupancy, or certification for a qualified individual or
organization that reviews plans and specifications.
Evidence of construction inspections performed throughout the project in accordance with
section 1980.341(b)(2) must be retained. Acceptable documentation includes an eligible
certificate of occupancy or copies of three inspections performed: (1) inspections prior to
footing and foundation poured, (2) inspections of plumbing, electrical, and mechanicals
before the shell is enclosed, and (3) a final inspection will meet requirements.
Evidence of a builder’s warranty. Minimum one year issued by the builder. If the builder
has offered a 10 year insured builder’s warranty acceptable to the Agency, this may be
accepted and evidence of construction inspections will be waived.
Thermal performance requirements must meet the 2006 IECC code. An eligible building
permit, certificate of occupancy, final inspection, or 10 year insured builder’s warranty is
acceptable evidence this requirement has been met.
New construction homes have been completed (as evidenced by a certificate of occupancy)
for less than 12 months and have never been occupied.
New manufactured homes must be purchased from an approved dealer –contractors (your
SFHGLP contact can provide a list of those approved in your state). A unit is considered
new if the purchase agreement is dated within 12 months of the date the unit was
manufactured. The date of manufacture is available on the factory installed plate on the
unit.
LOAN REQUIREMENTS
LOAN PURPOSES
Loans must be secured by a first lien on real property in an eligible rural area.
Loan funds may be used to:
Purchase an existing or new construction (stick built, modular, or manufactured) home.
Purchase or pay off a site as part of a new construction package.
Purchase and improve an existing home. Improvements must be complete before a loan
note guarantee will be issued. Exception: Escrow accounts are allowed for weather delayed
exterior repairs only.
Include eligible loan fees, including legal fees, title services, and eligible closing costs.
Refinance existing Section 502 Direct and Guaranteed loans. If only the principal balance
and the guarantee fee will be financed, no new appraisal is required. If the applicant wishes
to include eligible closing costs into the loan, a new appraisal is required. A new appraisal is
always required for Section 502 Direct loan refinances.
LOAN LIMITS
The maximum loan amount is 100 percent of the appraised value plus the upfront
guarantee fee.
Joel Lobb (NMLS#57916)Senior Loan Officer
502-905-3708 cell
What do I need to get approved for a Rural Housing Loan in Kentucky?
What do I need to get approved for a Rural Housing Loan in Kentucky?
Kentucky USDA Mortgage Loans get Drastically Lowering Costs for Buyers
Not only buyers looking for a no money down purchase at a great fixed rate can take advantage of this but also borrowers with a current USDA loan can use these features to refinance to a new USDA loan even with no appraisal.
Call us for questions/scenarios you have and approving buyers up-front or if you have an issue on a borrower.
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100% Financing for Kentucky Home Buyers. VA, KHC, USDA,
Buy a home without draining your savings account. The following attractive Kentucky home loan programs below requires no down payment:
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Senior Loan Officer
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New Rural Housing and USDA Property Eligibility guidelines for Kentucky Cities Bardstown,Burlington,Elizabethtown,Georgetown,Independence,Nicholasville,Shelbyville,Shepherdsville
- Bardstown
- Burlington
- Elizabethtown
- Georgetown
- Independence
- Nicholasville
- Shelbyville
- Shepherdsville
Joel Lobb (NMLS#57916)Senior Loan Officer
502-905-3708 cell
502-813-2795 fax
jlobb@keyfinllc.com
Key Financial Mortgage Co. (NMLS #1800)*
107 South Hurstbourne Parkway*
Louisville, KY 40222*
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USDA Rural Housing’s Streamline Refinance Pilot Program has great news for homeowners with a USDA home loan......
- The interest rate on the new USDA loan must be a minimum or 1.00% lower than the existing USDA loan
- Pilot eligible states include AL, AZ, CA, FL, GA, IL, IN, KY, MI, MS, NV, NJ, NM, NC, OH, OR, RI, SC, & TN. All other states are ineligible
- Rural Refinance Pilot loans must meet basic eligibility: Property must be in a USDA eligible area and the household income must be under the USDA county income limit
- New term of the refinance loan must be 30 years
- Upfront USDA Guarantee fee is 2.00% of the loan amount which can be financed on top of the base loan amount
- Annual fee of 0..40%. This would be new for most USDA borrowers since this is fairly new for USDA guaranteed loans. This fee is paid monthly in the payment. For example: $100,000 loan would be $30 per month. $100,000 x .40% / 12 = $30..00
- New USDA loan refinance loan may include the principal balance of the existing USDA guaranteed loan plus accrued interest through the payoff date, and any eligible closing costs
- No cash out is permitted
- Reasonable and customary closing costs and other fees may be collected from the borrower by the originating company
- Income verification for all adult household members is required for income eligibility determination only, not for determining repayment ability
- Ratio waivers are not required as income is just used for compliance income calculation only for verifying the income is under the county USDA household income limit
Apply for a home loan by clicking the link below:It's free and takes less than 5 minutesOr call us at 502-905-3708 for your free application over the phone