Kentucky USDA Mortgage Loans
What is a Kentucky USDA loan?
A Kentucky USDA loan is a home loan that gives significant benefits to those who want to buy a single-family primary residence in the eligible rural development areas of Kentucky. The mortgage is backed by the U.S. Department of Agriculture and given through private financial institutions and straight through the USDA government itself with the Direct USDA loans.
For purposes of this article, I will talk mainly about the Guarantee USDA Loan offered by lenders.
USDA loans require no money down, and they are mainly for families/households making less than the following:
Income Limits – The Kentucky Rural Housing USDA program is intended to assist low and moderate-income Kentucky households, therefore to be eligible for a USDA loan, your household income may not exceed the moderate-income limits established for the specific county in which you are financing a home. you may view the eligibility requirements on this page of the USDA website:
New Income limits for most counties (*) in Kentucky are $90,200 for a household family of four and household families of five or more can make up to $119,100.
The Northern Kentucky Counties (***) of Boon, Kenton, Campbell, Bracken, Gallatin, and Pendleton are $99,000 for a household of four or less and up to $129,000 for a family of five or more.
What Kind of home loans are offered by USDA?
The loan program focuses on stimulating economic growth and rural development in the United States. You can get a USDA loan as a 30-year fixed-rate mortgage. They do not offer shorter term loans than 30 year fixed rates and can only be used to buy a home or refinance an existing USDA loan.
You cannot take a cash out refinance or refinance another type of loan to a USDA loan.
For you to qualify for USDA loans you should satisfy the income and credit requirements set by the USDA and financial institutions. To get a USDA mortgage:
Kentucky USDA loan eligibility and qualifying Guidelines
For you to qualify for USDA loans you should satisfy the income and credit requirements set by the USDA and financial institutions. To get a USDA mortgage:
You must be a U.S. citizen or have a permanent residence.
You should have a stable and sustainable income that should be consistent for two years. Does not have to be same job, but must have worked for the last two years with stable employment, meaning no job gaps, and reliable income
You should have an acceptable debt-income ratio that is determined and varies depending on the lender. Most lenders will use GUS, the Automated Underwriting Engine to determine your credit and income worthiness for a mortgage pre-approval.
Your adjusted annual income should not be more than 115% of the region median income, according to your family’s size.
The property you are purchasing should be ineligible in suburban or in rural development areas and must be your primary residence. No rental properties or second homes allowed for this loan program.
Manufactured homes that are not brand new from the dealer lot are not acceptable.
The property must meet FHA appraisal guidelines.
The USDA has not set any rules on the acceptable minimum credit score, although most lenders want a minimum score of 640 so that they can use the USDA Guaranteed Underwriting System.
The USDA has not set any rules on the acceptable minimum credit score, although most lenders want a minimum score of 640 so that they can use the USDA Guaranteed Underwriting System.
You can still be eligible for USDA loans with a credit score less than 640 but the file will need manual underwriting.
On paper, USDA says they don't have a minimum credit score, but most lenders will want a 640 credit score and some going down to 620. The trick is getting it approved with the Automated Underwriting system with USDA and if the score is below 640, they make it very difficult to qualify for with a lot of added conditions.
The USDA includes all the annual income of each adult member of your households when calculating the income limit even if they are not a part of the mortgage. USDA does not just look at your yearly earnings; the limit comprises the adjusted income after putting into account the allowable deductions such as medical expenses.
Direct loans- these are loans available for low and very low-income earners, and the USDA issues them. The earnings requirement varies with locations. The interest rate is also variable and with subsidies, it can go as low as 1% sometimes with the rate and costs being subsisted by the Gov't. They take on average 3-6 months to close and are for very low income.
Home improvement loans and grants- these are financial awards or loans that allow homeowners to renovate and improve their houses. The package can come as a combination of a grant and a loan, that gives up to $27,500 as help.
Loan guarantees- these are loans available from local lenders and USDA guarantees the mortgage such that you will get a low mortgage interest rate with no money down. However, you will have to pay a mortgage insurance premium if you give little or no down payment.
The current mortgage insurance upfront is 1% and .35% monthly, which is very cheap when compared to FHA loans.
The differentiating factor between the two loan options is who funds the loan. The USDA gives the direct loan and offers payment assistance through subsidies. However, with a guaranteed loan, a USDA-approved lender offers the loan.
The aim of the two loan programs is to make homeownership affordable for low to moderate-income households in rural development areas. There are multiple differences between the two loan options and they are designed for two different financial bodies. For instance, with the USDA direct loan you must meet the following requirements:
The USDA includes all the annual income of each adult member of your households when calculating the income limit even if they are not a part of the mortgage. USDA does not just look at your yearly earnings; the limit comprises the adjusted income after putting into account the allowable deductions such as medical expenses.
There are three USDA home loan options:
Direct loans- these are loans available for low and very low-income earners, and the USDA issues them. The earnings requirement varies with locations. The interest rate is also variable and with subsidies, it can go as low as 1% sometimes with the rate and costs being subsisted by the Gov't. They take on average 3-6 months to close and are for very low income.
Home improvement loans and grants- these are financial awards or loans that allow homeowners to renovate and improve their houses. The package can come as a combination of a grant and a loan, that gives up to $27,500 as help.
Loan guarantees- these are loans available from local lenders and USDA guarantees the mortgage such that you will get a low mortgage interest rate with no money down. However, you will have to pay a mortgage insurance premium if you give little or no down payment.
The current mortgage insurance upfront is 1% and .35% monthly, which is very cheap when compared to FHA loans.
Guaranteed vs. Direct USDA loan program.
The differentiating factor between the two loan options is who funds the loan. The USDA gives the direct loan and offers payment assistance through subsidies. However, with a guaranteed loan, a USDA-approved lender offers the loan.
The aim of the two loan programs is to make homeownership affordable for low to moderate-income households in rural development areas. There are multiple differences between the two loan options and they are designed for two different financial bodies. For instance, with the USDA direct loan you must meet the following requirements:
Kentucky Mortgage USDA loan rates
The primary determining element for the interest rates is your credit profile, loan amount, when you are closing, and the lender you choose. USDA does not set the rates, they're set by the lender.
It is crucial to note that the USDA does not set the interest rates. The participating lenders have the liberty to set their own rates, hence the quotes will vary depending on various factors.
Kentucky USDA Underwriting Process:
Does it take longer to close a USDA loan?
The experience with the USDA loan process varies with each home buyer but the process basically includes:
The experience with the USDA loan process varies with each home buyer but the process basically includes:
Prequalification with a USDA verified lender through GUS automated engine.
How to apply for a Kentucky USDA loan
In order to get you pre-approved for your max loan amount, I will need the following items from you. This is a free process and I will give you a copy of your credit report for free!
MORTGAGE PRE-APPROVAL CHECKLIST
- Most recent 30 days of pay stub(s)
- W-2s and 1099's if applicable for most recent two years
- 1040 tax returns for last two years
- Most recent 60 days bank statements all pages
- Most recent 401(k)/retirement statement if applicable
Once I get the information above, I can usually get you pre-approved in one to two days, and get your loan closed in 30-45 days after you get an accepted offer on a home. Your first house payment usually starts 30-60 days after you close.
Your loan pre-approval is usually good for 120 days.
I don't need originals, copies are fine. You can fax or email me the above documents, or meet me face-to-face if you wish to make copies and go over your options.
Let me know your questions.
Thanks and look forward to helping you.
Joel Lobb
Mortgage Loan Officer
Individual NMLS ID #57916
American Mortgage Solutions, Inc.
10602 Timberwood Circle
Louisville, KY 40223
Company NMLS ID #1364
click here for directions to our office
Text/call: 502-905-3708
email: kentuckyloan@gmail.com
https://www.mylouisvillekentuckymortgage.com/
