How long does it take to close a USDA Loan in Kentucky?

How long does it take to close a USDA Loan in Kentucky?

Today I would like to discuss how long you should anticipate that it will take to close on your Kentucky Rural Housing USDA Loan. 

The loan approval process for a USDA Loan in Kentucky is not like any other loan when compared to FHA, VA, Fannie Mae Conventional loans..

Like all loan programs, the Kentucky  USDA Loan will have a lender that will assign the loan file to an Underwriter, who in turn will determine if the loan meets the loan program guidelines for approval using the automated software system called GUS, which stands for the Guarantee Underwriting System.. Unlike other loan program, once the loan is approved by the lender/Underwriter, the file will be sent to the local Kentuck USDA Rural Development Office for final approval.

The turn time for final loan approval for a rural housing loan varies greatly for Rural Development state offices. While some state offices have same day turn times, other states can take several weeks to sign off on the loan. In Kentucky, they usually are on a 4 day turn time or less in most cases. All the files once underwritten by the lender, will go to the Lexington, KY office for final approval and the conditional  commitment. 

The biggest thing during this last final process is for USDA to sign off on the appraisal. In most cases, USDA will go along with the credit and income findings from the lender, but I have seen them sometimes turn-down the appraisal. In most cases, they don't though, so keep that in mind.

It is important to discuss the local Kentucky Rural Development Office’s turn times with your Loan Officer prior to making an offer on a property. This way you can establish the time frame that you will need to close on the loan, which is then used to establish the legally contractual settlement date in the sales agreement. Being realistic on the time frame to close on the loan, and knowing that the seller understands upfront that it will take longer to close on a USDA Loan, will create a less stressful financing experience.

How long does it take to close a USDA Loan in Kentucky?

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.

** 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.

Minimum Credit Scores for a Kentucky USDA Rural Housing Loan Approval

Labels: bankruptcydebt ratiofirst time buyer kentucky usdaforeclosureGUS approvalKentucky Rural Housing and USDA LoansKentucky USDA Rural Development For 2017 Guiderdrhs

Condo or town homes must be FHA approved

Manufactured homes must be from dealer lot and brand new. No existing manufactured homes are allowed

Property must be in good condition. “As is” appraisal not acceptable when repairs


Homes with in-ground pools are eligible on a case-by-case and value of pool must be

subtracted as no financing available for pools.

All appraisers must be currently approved by FHA. See most current list dated

October1, 2009.

The property must be non-farm, non-income providing tract.

Appraiser to certify property meets current requirements of HUD Handbooks–

150.2 and 4905.1.

If the builder is providing a one-year warranty for new construction, the following

inspections are required: framing inspection, footing inspection and final inspection. If

the builder is providing a 10-year warranty, only the final inspection and the thermal

certification are required.

Properties having community wells or sewage systems will require a state operating

permit, evidence of compliance with the Safe Drinking Water Act and Clean Water

Act and a legal binding contract to enforce the obligation of the operator to provide

satisfactory service at reasonable rates-must be maintained in our file.


Borrower must be within income limits. Refer to: for validation.

Salary Income– VOE – 24 month-history plus most recent pay-stub or 2 paycheck stubs

covering most recent 30 days and W2 for previous 2 years and processor

certification of employment within 10 business days of closing. Any gap of

employment beyond one (1) month must be explained by borrower.

Self-employed and Commissioned borrowers or employed by a relative– 2-year tax

returns required to reflect income is stable and will continue.

Part-time jobs–24-month history required.

Alimony, child support– must have received for 12 months and will continue for 3

years after application. Must document receipt for last 12 months consecutive

Reflecting no breaks in income.

3-year continuation for social security income, disability income, retirement income, etc.

Borrower’s adjusted annual income cannot exceed the appropriate moderate income

limit. Refer to

All household income must be included in the total eligibility income, even if not on the

loan, however, for qualifying purposes, use the income for borrowers signing

the Note.

All qualifying income must be stable and likely to continue for the next 3 years.

Significant increase /decrease must be analyzed closely to make sure income used

to qualify will continue.


 Only USDA Guaranteed loans eligible

 The value of the new mortgage loan request can be supported by the original appraisal

report obtained in connection with the existing mortgage.

 The maximum loan amount cannot exceed the principal balance of the existing loan to be

refinanced, plus the guarantee fee. The new loan amount cannot include any accrued

interest, closing costs or lender fees.

 Loan must be manually underwritten (GUS is not run).

 Subject property must still be the borrower’s primary residence

 Any late mortgage payments within the past 36 months on the existing USDA loan, with

emphasis on the most recent 12 month period, must be analyzed and addressed by the

lender to determine if any late payments were a disregard for financial obligations, an

inability to manage debt, or factors beyond the control of the borrower when considering

the underwriting decision.

 Maximum ratios 29/41

 30 year fixed rate loan only

 Interest rate must be lower than the existing loan to be refinanced

 If the final settlement statement shows nominal cash back to the borrower, that amount

must be applied as a principal curtailment. The borrower can receive no cash back from

the transaction.

Debt ratio waivers may be requested for loans with ratios exceeding program guidelines

of 29/41 when compensating factors are present in the file. Applicants with credit

scores of 660 and higher do not require additional compensating factors to be identified

for debt ratio waiver requests. If co-applicants have a credit score of 659 or below,

additional compensating factors should be documented to further support the ratio

waiver request. There is no minimum credit score required to be eligible for a debt ratio

waiver request. Compensating factors include, but are not limited to, the following:

 Credit score of 660 or higher for any applicant

 Cash reserves after closing

 Potential for increased earnings and career advancement\

 Similar housing expenditure

 Conservative use of credit

 Additional compensation not included in qualifying income, such as part time job

income that lacks a stable job history, potential bonus or commission income

from a job.

 Low total obligation ratio. (A low total obligation ratio does not compensate for a

high PITI ratio; however, when other strong compensating factors are present a

low total obligation ratio should be viewed as a positive mitigating factor.

Debt ratio waiver requests are submitted by the lender in writing with the complete

submission package

 Applicants must have adequate and dependable income, typically with a history

of 24 months

 Qualifying ratios are 29/41; however, higher ratios considered with strong

compensating factors, including good credit scores (660+), stable employment

history, potential for increased earnings, and ability to save.

 Income to be verified with a written VOE and one month’s current paystubs, OR

one month’s paystubs and two years of W2’s.

 2/1 buydowns qualifying ratios are calculated using note rate.

 Debts with more than 6 monthly payments remaining must be included in

qualifying ratios

 Student loan payments must be included in ratios even if loans are currently in


 Self employed borrowers require two year history with 1040’s

 Disability and Social Security benefits – 3 year continuance documented with

award letter or 2 months bank statements, grossed up 125%

 Salary increases within 60 days of the first payment due date are acceptable

 Part time employment must have a history of no less than 12 months

 Alimony and child support income must continue for 3 years and have no less

than a 12 month history

 Any income of a non-purchasing spouse must be verified to make sure income

limits are not exceede

Please note that the USDA Refinance Pilot program has different guidelines.

Kentucky RHS USDA Mortgage Insurance Changes Below and Important Dates to Keep in Mind that could affect your loan closing and approval!

Joel Lobb

Senior Loan Officer


American Mortgage Solutions, Inc.

10602 Timberwood Circle, Suite 3

Louisville, KY 40223

text or call my phone: (502) 905-3708

email me at

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, ( Mortgage loans only offered in Kentucky.