Friday, August 26, 2016

100 percent Financing Kentucky USDA Rural Development Loans

Kentucky Rural Housing Loans for 2016

USDA home loans in Kentucky are also known as the Rural Development Loan or RHS Loans. It is one of the best options for homebuyers that are currently looking for a home outside the urban areas of Lexington, Louisville, Bowling Green and Northern Kentucky that requires No Money Down. 
Another major advantage of this home loan is it’s fixed interest rate.  The fixed interest rate insulate buyers from interest rate fluctuations. You’ll have the same monthly loan repayment throughout the life of your loan.
100 percent Financing Kentucky USDA Rural Development Loans will allow you to roll up some of your closing cost into your monthly mortgage. While it is impossible to avoid closing costs of the home purchase, it is possible to have the seller pay for some of these cost and or arranged for them to be added to your total loan with minimal impact on your monthly payments.

Eligibility for Kentucky USDA Loans

When applying for eligibility for 100% USDA loans, There are six factors taken into account:
  • Loan income restrictions Most household income limits are set between $75k for a family of four, and up to $98k for a family of five or more see map >>>>>
  • Credit score  You have three credit scores, they throw and the high and low score and take the middle score of each of the three main credit bureaus, experian, equifax, and transunion.Most lenders will want a 640 middle credit score due to the fact that GUS (Guaranteed Underwriting System) will not give you an automated approval upfront if the middle score is below the 640 threshold. You may get a refer eligible on the initial pre-approval but a lot of lenders will not honor a refer eligible USDA file. 
  • Property Ownership (Do you own other Property) In most cases, USDA will not allow you to use their program to purchase another home if you already have a home in your name. In some extreme cases, they will waive this if certain exceptions are met. You can call or email me for more details on this matter. The USDA loans are only available for single family primary residences. No rental homes or working farms are allowed on the USDA Home Loan Program
  • Residential Location (USDA Eligibility:  to checkk click here ) Is the property located in a Eligible area. See link above for eligibility boundaries for counties in Kentucky
  • Debt to Income Ratios: If your credit score is above 640, GUS will typically limit your backend ratio to 45% of your total gross income. The front end ratio, or the housing ratio, usually is centered around 30% to 35% range, with compensating factors such as assets or money in bank to cover your new house payment, disposable income, high credit scores, and no rent payment shock. Rent payment shock is where your new house payment is much larger than your current rent payment. This only comes into play on lower credit scores.
  • Assets  I have noticed that with 3 or 4 months reserves you can typically get a loan approved with lower credit scores with payment shock on the new loan. Additionally, if you have access to 20% down payment in your checking or savings account, they will make you use your own money. If the money is in a 401k or other tax deferred savings accounts this will not factor in and you can use the USDA loan program.
  • I can explain this more in detail if you want to call or email me. 


Joel Lobb
Senior  Loan Officer

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

USDA slashing mortgage fees

USDA slashing mortgage fees: Borrowers who use the U.S. Department of Agriculture’s Rural Housing Service to get a mortgage could soon pay significantly less for their loan, as the USDA announced that it is about to cut its loan fees for lenders who use the Single Family Housing Loan Guarantee Program. Here are all the details.

According to the announcement, the USDA is set to cut its upfront guarantee fee from 2.75% of the loan-at-close amount to 1%. Additionally, the USDA is cutting its annual fee from reduced from 0.45% of the unpaid principal loan balance to 0.35%.

Tuesday, August 23, 2016

Great News for Kentucky Rural Housing Home Buyers using the USDA Loan Program!

Kentucky Rural Housing USDA Rural Development Guarantee Upfront and Annual Fees are going down October 2016 for all Kentucky Rural Home loans!

On October 1, 2016, the first day of Fiscal Year 2017 (FY17), both the upfront guarantee fee and annual fee (collectively the “fee schedule”) for purchase and refinance loans will decrease.

We are reducing the upfront guarantee fee from 2.75% to 1%, and the annual fee from .5% to .35%.

In real money terms, this is $3,500 Upfront & $58.33 per month on a $200,000 Home Purchase.

The Guaranteed Underwriting System (GUS) will be updated on August 31, 2016, to allow lenders to select and underwrite using either the FY16 or FY17 fee schedule. The determination will be based on the current processing timeframes in each state.

Debt Ratios–29/41% on manual underwrites – max to 45% Debt to Income ratios with GUS Approve/Eligible Finding.

ZERO down payment – 100% LTV ok

Income Eligibility Limits do apply. Usually to $75k for a family of four and up to $98k for a household family of five or more.

Lender Credit from the interest rate may be used to pay closing costs.

Gifts ok! Usually not needed for USDA loans because 100% Financing offered. Gift funds cannot be used for reserves to get a GUS approval.

Applicants with > 20% of the sales price in assets (exclude retirement accounts) are not eligible for USDA financing.

Clear CAIVRS required – CAIVRS is a Federal Government-wide data base of information regarding individuals where an insurance claim or guarantee loss was paid.

2 tradelines with > 12 months of repayment history – installment or revolving and trade lines may be open, closed or paid in full by applicant.

Student Loan Payments – important recent change to Kentucky Mortgage RHS USDA Loans. The change no longer allows for student loan payments that are IBR (Income Based Repayment), graduated, adjustable, interest only and deferred. USDA now requires a payment equal to 1% of the balance reflected on the applicant’s credit report.

Kentucky Rural Development USDA Changes Coming soon below:

Kentucky USDA Streamlined-Assist refinances – similar to an FHA Kentucky Streamline…details coming soon!

Upfront Fee and the Annual Premiums will be reducing in the Fall of 2016 for a new Kentucky Rural Housing Mortgage Loans!

To be eligible for the KY Rural Housing USDA program, properties must be outside the major metropolitan areas and income requirements be met.

Click here to go to the KY USDA Income & Property Eligibility site >>>>

KY USDA Income Limit Chart (Example – A family of 4 can make no more than $75,650 and a family of 5 can make up to $99,850 for eligible homes outside the Jefferson County Kentucky Metro area)

Joel Lobb
Senior Loan Officer
phone: (502) 905-3708
Fax: (502) 327-9119

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, ( USDA Mortgage loans only offered in Kentucky.

All loans and lines are subject to credit approval, verification, and collateral evaluation and are originated by lender. Products and interest rates are subject to change without notice. Manufactured and mobile homes are not eligible as collateral.

Sunday, August 21, 2016

Kentucky USDA Rural Development Housing Guideline Changes for 2016

Kentucky Rural Housing Loans  has made changes to the program guidelines for guaranteed loans, which will include the changes described below.
The 1980-D and all associated publications are replaced by the 7 CFR Part 3555. All effective Administrative Notices must reflect "3555". The new handbook is the HB-1-3555 and can be accessed by clicking the link here.
Existing properties located in a flood zone are now eligible as long as flood insurance is available through FEMA's NFIP program.
New or proposed homes in a flood zone must still meet additional flood zone requirements.
Flood coverage must cover the lesser of the total loan amount or maximum allowed by NFIP.Maximum deductible is $1000 or 1% of the face amount of the policy
Maximum deductible is $1000 or 1% of the face amount of the policy
The subject property cannot contain any land or buildings that will be used principally for income. Minimal income producing activity is allowed (a garden, but not a farm). The value of the buildings no longer needs to be deducted from the appraised value.
Any request to release GUS for data updates after the issuance of a Conditional Commitment will be treated as a new request, processed in date order of applications received.

Current homeowners are eligible for a guaranteed loan if ALL of the following are met:
                Applicants are not financially responsible for another RD direct or guaranteed loan at closing.
                Current home no longer meets applicants' needs.
                Occupy the subject as primary residence.
                Applicants are without resources or credit to obtain home.
                Only one home may be retained.
Applicants must be financially qualified to own more than 1 home.
The commuting area restriction has been removed.
In order to meet the above requirement for the current home no longer meeting applicants' needs, the borrower must document a significant status change that requires immediate remedy. For example:
Severe overcrowding - Defined as more than 1.5 household members per room (not bedroom, just room)*, document overcrowding has existed for more than 90 days and will persist for 9 months into the future.

*Based on USDA's clarification of 1.5 per room, we do not anticipate many of these scenarios being acceptable and approved.
One borrower must have 3 trade lines that have existed for 12 months. If this requirement cannot be met, an accept decision must be downgraded to a refer and treated as a manual underwrite.
Scores 680 and above OR GUS accept = No VOR required.
Scores 679 and below = VOR required.
Determine if the total outstanding balance of all collections accounts and charge offs of all applicants is equal to or greater than $2,000. Unless excluded by state law, collection accounts and charge offs of a non-purchasing spouse in a community property state are included in the cumulative balance of all collections and charge offs.
Remove all medical collections and medical charge off accounts from the total balance. Medical collections and medical charge off accounts must be clearly identifiable on the credit report.
If the remaining outstanding balance of collection accounts and charge offs are equal to or greater than $2,000, any of the following actions will apply:
Payment in full of all collection accounts and charge offs at or prior to closing.
Payment arrangements are made with each creditor for each collection account and charge offs remaining outstanding. A letter from the creditor or evidence on the credit report is required to validate the payment arrangements. The agreed upon monthly payment for each outstanding collection account and charge off will be included in the borrower's debt-to-income ratio.
In the absence of a payment arrangement, the lender will utilize in the debt-to-income ratio a calculated monthly payment. For each collection and charge off utilize 5% of the outstanding balance to represent the monthly payment.
Include the greater of 1% of the outstanding loan balance or the verified fixed payment reflected on the credit report.
Exception: Monthly payment amounts listed on the credit report, which are less than one percent of the outstanding balance may be used when evidence from the loan servicer is obtained indicating; 1)the applicant is on a fixed repayment plan not subject to change under the terms of the current agreement and 2) and the monthly payment amount due. Fixed payments have a monthly amount that is not subject to change through the fixed repayment time frame. Income Based Repayment (IBR) plans, graduated plans, adjustable rates, interest only and deferred plans are examples of repayment plans that are subject to change and do not qualify for the exception.
Long-term obligations with more than 10 months repayment remaining, including all installment loans, revolving charge accounts, alimony, child support or separate maintenance payments, student loans and other continuing obligations. GUS will determine if the debt can be excluded. If GUS does not exclude the debt, we cannot override it and exclude.
Use the greater of 5% of the balance or $10.
Current payment from current monthly statement.
All household members must have 2 years IRS tax return transcripts pulled  even if they are not a borrower on the loan. Transcripts for all household members are required prior to submission to USDA for conditional commitment. If the household member(s) is not a borrower on the loan, a separate 4506T form will be required.
If any adult member of the household is not presently employed but there is a recent history of such employment, that person's income will be considered in the calculation of annual household income. If the person involved is not presently employed and does not intend to resume employment in the foreseeable future, or if interest assistance is involved, during the term of the Interest Assistance Agreement, the applicant(s) and the person involved must sign a statement to such. The statement will be filed in the permanent loan file.
Household members now can provide gifts.
May be grossed up 25% for repayment income, cannot be grossed up for household income.
30% land value restriction has been removed.
Cannot include income producing land or buildings that use used principally for income purposes. No reduction of value is required for outbuildings.
No active farms are commercial enterprises.
Home based operations are allowed (home daycare).
Shared Driveways and private roads must have a recorded agreement/easement.
Swimming pool restrictions have been removed. Value reduction no longer required.
If any of these items exist on the credit report or other documentation provided, the loan is ineligible for USDA financing with Platinum Mortgage.
Foreclosure within 3 years of application date
Chapter 7 BK within 3 years of application date
Chapter 13 BK within 12 months of application date
Late mortgage payments if any mortgage trade line during the most recent 12 months of application date shows 1 or more late payments of greater than 30 days.
Late rent payments paid 30 or more days late within the last 12 months of application date.
A minimum of 2 scores required per borrower.
USDA has placed a limit of 6% for seller concessions.
All documents expire after 120 days for both existing and new construction.
If the applicant pays for application fee/closing cost/appraisal with a credit card and new charges are not reflected in the credit report balance these new charges must be included in the total balance and the payment must be recalculated. The new payment must be included in the DTI.

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Sunday, August 14, 2016

What are the qualifications for a Kentucky Rural Housing USDA Mortgage Loan Approval?

When it comes to qualify for a Kentucky Rural Housing Development Loan backed by USDA,  these are the things to keep in mind so you can know what to expect once you make that step to get pre-approved :

The income limits for all household members that currently have an income limitations (maximum family income of a family 1-4 people is roughly $75,000 in Kentucky and 5 or more up to $98,000 roughly), and location (house must be located in an approved area).

In Kentucky  the main counties of Jefferson, Fayette are not eligible for USDA financing, while like smaller counties of Warren, Mccracken, Daviess, Hopkins, Boone, Kenton, Campbell  and Bullitt only part of the county is eligible for USDA financing.  Bottom line, the closer you get to a major metropolitan area, your chances decrease of qualifying due to the eligibility maps. 
To see if a home is eligible simply click this link enter in your property address and it will tell you whether or not that address is eligible for a Kentucky USDA guaranteed home loan.
Here’s the link to the maximum Kentucky  income limits for 
In addition to the income limits and property maps, these are the other things to consider:

  • Monthly mortgage insurance to begin fiscal 2016, which October 1, 2016.  The Guarantee fee will drop to 1% and a monthly MI premium of .35 will be added to all USDA loans.  It currently stands at 2.75% upfront mi premium with .50 monthly fee. This is a BIG SAVINGS for Kentucky USDA Rural Housing Home Buyers and Owners.
  • Education for first-time homebuyers is no longer required by USDA in Indiana.  Some investors overlays may still require it, however.
  • Can finance closing costs up to 100% of appraised value, not including Guarantee Fee. the Guarantee Fee can finance 102.750% of appraised value
  • seller contributions allowed
  •  gift funds, can come from any source other than an interested party.
  • Extra ways you can stay under the maximum income:  Can deduct child care costs dollar for dollar from household income for children 12 and under. You can deduct $480 per dependent under 18. You can also deduct $400 per household member over 62 off of the annual household income.
  • Bankruptcies and Foreclosure require 3 years seasoning; if the mortgage was in the bankruptcy, then you can go off the discharge date and not sale date of home. This is different from FHA and Conventional because they go off sale date of home.
  • A mid 640 score with two trade lines for 12 months will be required for a Automated GUS Approval. Some lenders will go below that on a refer eligible basis with compensating factors such as not payment shock, low debt to income ratios, and a lot of reserves with a 12 month verifiable rent history. Cancelled checks allowed but no cash payments.
  • No Pest Inspection will be required unless addressed in appraisal.
  • A Water test and Septic test sometimes  is  required on private wells and septics tanks  for a Kentucky USDA home loan.

Questions about qualifying? CAll or text, email me below your questions. 
I have been doing Kentucky USDA Rural Housing Loans since 1998. 

Joel Lobb
Senior  Loan Officer

 Text or call phone: (502) 905-3708

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 views of my employer. Not all products or services mentioned on this site may fit all people