Saturday, August 22, 2015

Kentucky Rural Housing USDA Guarantee Fee Increasing in October 2015

Kentucky RHS Guarantee Fee Increases Starting in October 1, 2015

The Kentucky Rural Development Loan upfront guarantee fee will change from 2 percent of the loan amount to 2.75 percent of the loan amount, starting on October 1st. The annual fee will remain unchanged. This increased fee will be applicable starting October 1, 2015 and ends at the close of business on September 30, 2016. 

The monthly mortgage insurance is still set at .05%; with these new changes, see below example for what the result would be on a $100k sales price home, going no money down.  

For example, on a $100,000 sales price home with zero down, the upfront mortgage insurance fee would be $2750, and the monthly mi fee would be $41.66.

The total loan amount would be $102,750.00

Kentucky Rural Housing Loans will still offer the following benefits:

Down Payment/Fees – USDA loans require no down payment, and since the 2% mortgage insurance fee can also be financed, it is possible to borrow up to 102% of the home price. The overall size of the insurance fee compares favorably to Private Mortgage Insurance (PMI) applied to traditional loans with less than 20% down.
Easier Qualification – The requirements for overall income, debt-to-income (DTI) ratio, and minimum acceptable credit score are far more forgiving for USDA loans compared to conventional loans.

Credit Score/DTI – The true limit on the price will be set by the traditional risk factors of credit score and debt-to-income (DTI) ratio since they will dictate the acceptable amount of risk. The lower qualification limits are usually a credit score of 640 or higher, and a DTI of 29% with mortgage costs or 45% including all debt. However, the USDA has been known to stretch these requirements to accommodate those in worse shape.

Income Limits – Guaranteed loans generally require that your income be less than 115% of the area median household income; direct loans require less than 80%. At less than 50%, you probably do not have sufficient income to qualify for a loan at all. You still have to convince a USDA lender, whether it is a third party or the government, that you are capable of paying back the loan.

Direct loans are made directly by USDA, Rural Development and are available to households whose adjusted income does not exceed 80 percent of the area median.  Eligible applicants can obtain modest and affordable housing by taking advantage of the direct program:
·       No down payment requirement.
·       Fixed promissory note interest rate that considers the Treasury benchmark interest rate.  (The rate in effect for August and September 2015 is 3.25 percent.)
·       Payment assistance that reduces the borrower’s mortgage payments to an effective interest rate as low as one percent.
·       Standard loan term of 33 years.

Joel Lobb (NMLS#57916)
Senior  Loan Officer

 Cell  (502) 905-3708 
 Company ID #1364 MB73346