30 year fixed rate only for Purchases and Existing USDA loans Refinances.
2020 Kentucky Rural Development Mortgage Guide
Zero down Mortgage loan with no loan limits in Kentucky for USDA Rural Housing Loans
Upfront funding fee is 1.0% and annual mi fee is .35% (very low compared to FHA)
Typically cannot own other real estate. There are exceptions to this.
You do not have to be a first-time home buyer in Kentucky
Can refinance existing USDA loan as long as lowering rate by 1% and can do without an appraisal. There are overlays to this by lenders.
Closing costs and prepaids can be paid by seller but must be put into contract
Closing costs may be financed into the loan up to the appraised value.
You will need two credit trade lines reporting at least for 12 months on your credit file. They don't have to be open and active. Just reporting on your credit report.
All Guaranteed Mortgage Loans are ran through GUS. GUS stands for the Guaranteed Underwriting System. USDA and their underwriters use this system to pre-approve you. They review credit score/history, income, debt to income ratio and assets to determine your loan eligibility. If your credit score is below 640 or your debt to income ratio is over 45%, it will get a refer and you will find most lenders will not approve the loan.
Some lenders will do a credit score down to 600, but they will want a lot of documentation to overturn the refer and compensating factors for the lower credit score. They typically will need to verify rent for last 12 months, with no lates, cash payments are not acceptable, and debt to income ratios are set at 29% and 41% respectively. Reserves are typically helpful too on lower credit scores, so keep in that in mind, if you have money in a savings account, for a rainy day fund, this will help sometimes get the loan approved.
If you have access to 20% down payment you cannot use the USDA Program. Money in a retirement account does not account toward the 20% rule.
Properties must be located in an eligible area of Kentucky. Typically the large metro areas of Kentucky including the following: all of Jefferson County, all of Fayette County, Owensboro, Paducah, Hopkinsville, Bowling Green, Richmond, Frankfort and Northern KY cities of Covington, Florence, Erlanger, Beechwood, Richwood are not eligible
USDA Eligible Areas In Northern Kentucky for Boone, Kenton, Campbell, Grant Counties
All Of Grant County, Pendleton County And Owen County
Search for Kentucky USDA Eligible Properties
A property must be located in an eligible area in order to use a USDA loan to purchase a home. Contrary to belief, Rural Development loans are not only for farms or very rural homes.
Actually, a property with an operating and income producing farm is not eligible for these loans!
Kentucky USDA Rural Max Income Limits:
The total household income must be within the county limits for household size. Typically a family household of 4 can make up to around $82,700 and a family of five or more can make up to $109,250 for a household- Some KY counties allow for higher like Shelby County, and the Northern Kentucky Counties of Boone, Kenton, Campbell allow $90,000 (household income of four) up to $118,250 (household income of five or more)
Check Your Kentucky County for USDA Rural Housing Income Limits
Some More Facts about a Kentucky USDA loan:
It's a two step approval process. The chosen USDA lender must first underwrite the file and get it approved based on the income, assets, and credit report submitted. Then, the lenders must submit to USDA for a "conditional commitment". This conditional commitment is the final loan approval paperwork you are looking for.
Even though the lender may have approved the file, it still must go to USDA office in Lexington for an assignment to SFH underwriter for the final approval process. They typically are checking the appraisal and income at this stage. There have been instances where the lender would approve the file but USDA would not due to appraisal issues or income and job history.
This is very rare instances, so keep that in mind when it comes to final loan approval.
This two-step approval process usually adds 4-6 days to the final loan approval process, so keep that in mind when you are writing up your contract because it takes a little longer to close these loans vs FHA, VA, and Fannie Mae loans.
Well Test Treatments: Properties with a well as the primary drinking source will require a well water test. There are local labs to perform this test and the water must pass.
Septic Test: Sometimes they will require the septic tank to be inspected if called for in the appraisal report or home inspection.
Older Homes: As a general rule, USDA does not like homes older than 100 years old. They will sometimes require a home inspection in addition to the mandatory appraisal on older homes.
USDA Loan After a Short Sale: A short sale is not the end of the world. So it is very possible to obtain a USDA loan if 3 years have passed after the short sale. But a buyer would need re-established good rent and other credit history.
Bankruptcy and Foreclosure: If the mortgage debt that was foreclosed, was included in a Bankruptcy – then the USDA Home Loan waiting periods after foreclosure “waiting period” of 3 years, starts from the date of the discharge of the Bankruptcy. Because it can take 6 months or more for Banks to process the Foreclosure, and transfer title, this is a tremendous plus.
Put my experience of originating KY USDA loans to work for you. I have successfully originated over 200 Rural Housing Mortgage Loans in Kentucky. I offer free pre-approvals and will help you from start to finish and I usually attend all my closings in Kentucky.
Get Qualified for a Kentucky USDA Loan Now!
Senior Loan Officer