Kentucky Rural Housing and USDA has published Underwriting Updates

 Kentucky USDA Rural Housing Guidelines Updated 

As previously announced, USDA has published Chapter 6 updates which are effective for all loan commitments issued on and after 11/12/2020. The key updates are as follows:

Seller Contributions

USDA has clarified that seller contributions cannot be used to pay personal debt or as an inducement to purchase by including personal items that can be removed from the property.


USDA previously provided eligible discount point options; however, USDA has removed and discount points are no longer eligible to be financed to permanently “buy-down” the interest rate.
The Up-Front Guarantee Fee and Annual Fee is to be included in the 3% lender fee calculation, whereas it previously was not included.

Contract for Deed

USDA has added the allowance of loan funds to be used for the conversion of seller-financed mortgages with an existing dwelling, also known as a conversion of a contract for deed or land contract. This was not previously addressed by USDA, but was reviewed on a case-by-case basis in certain instances.

Refinance Transactions

USDA previously required on a rate/term refinance transaction that the interest rate of the new loan to be at least 100 bps below the original rate of the loan refinanced. This guidance has changed to provide that the interest rate of the new loan must not exceed the rate of the loan refinanced.

Additionally, because the Borrower is unable to receive cash-out from a rate/term or streamline refinance transaction, any excess funds must now be applied as a principal reduction.
Form RD 3555-21 being required on a Streamline Assist Refinance has been removed.




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