I specialize in Kentucky USDA Rural Housing mortgage loans in KY. Apply for free today for a Rural Housing loan Pre-Approval Letter. Same day approvals. I offer the USDA Rural Development Guaranteed Housing Loans for all counties in Kentucky that are eligible. Put my expert advice to use. Call or text 502-905-3708 or email kentuckyloan@gmail.com
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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.
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.
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.
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:
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 returnsfor 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.
Information on the Kentucky USDA Rural Development Loan, I am providing you with a series of informational on the Kentucky Money Down USDA Rural Loan Program.
Yesterday I provided a quick overview of Kentucky USDA Loans minimum credit score requirements.
Today I will like to discuss how a perspective home buyer can purchase housing using the USDA Loan program with no-to-minimal cash required at settlement.
Since the USDA Rural Development Loan will finance 100% of the purchase price there is no down payment required on the loan. The only remaining items with out-of-pocket cash requirements by the buyer are the settlement related closing costs and escrows.
USDA allows these items to be paid for by the seller or financed into the new mortgage loan using flexible guidelines that can virtually eliminate the buyer's out-of-pocket cash requirements.
Like every type of purchase transaction USDA Loans have closing costs.
However, the USDA Loan Program allows for the closing costs to be either (1) paid for by the seller, (2) paid for by the lender via a lender credit, (3) under certain circumstances financed into the mortgage loan, or (4) a combination of the above. To understand how this works reference the following three scenarios based on a purchase price of $200,000 and $10,000 in theoretical closing costs (such as lenders fees, settlement/title fees, taxes, escrows, homeowner's insurance, warranties, etc.).
Scenario 1 - Seller Agrees To Pay All Closing Costs:
The USDA Loan Program allows up to 6% of the purchase price to cover your closing costs. By working with a knowledgeable Lender and Realtor you should know upfront how much the settlement costs will be to purchase a house. When making the offer to purchase a home the sales contract will be written to include the requirement that the seller agrees to pay up to a specific dollar amount or a percent of the purchase price to cover these costs.
Scenario 2 - Lender Agrees To Pay A Portion Or All Of The Closing Costs:
Every state has different closing costs requirements. Based on the total amount of closing costs required, the lender may be able to pay a portion or all of the closing costs by charging the borrower a higher interest rate than their normal rate, and applying the "excess compensation" received from the investor for the higher interest rate toward the borrowers closing costs. Typically for every quarter point increase in rates, the lender will have between half to one percent of the loan amount that can be applied toward the buyers overall closing costs.
Scenario 3 - House Appraises For More Than The Purchase Price:
The USDA Loan Program is the only major loan program that allows for the difference between the appraised property value and the contract sales price to be applied toward settlement closing costs. The maximum loan amount, excluding the USDA Guarantee Fee, can be the combination of the sales contract price plus the settlement closing costs; provided this amount doesn't exceed the appraised property value.
Scenario 4 - Combination Of Multiple Scenarios:
If the seller paid closing costs are not enough to pay all closing costs and the property appraised for more than the sales price, the home buyer can use a combination of seller paid closing cost assistance/lender paying a portion of the closing cost/and (or) finance the remaining closing cost up to the appraised property value.
With flexible requirements, USDA loans feature: 100% financing + required guarantee fee = 102% of the appraised value No minimum score but most lenders want a 620 or above, or 640 sometimes 30 year fixed rates Closing costs can be added into the loan if home appraises more than purchase price No max loan limits, only household max income requirements based on location Property must be in rural housing area No used mobile homes Property must not be incoming producing 3 years from Chapter 7 bankruptcy and 1 year In Chapter 13 possible 3 years removed from Foreclosure Debt to income ratio requirements based on GUS Automated Underwriting Findings
USDA Loan Eligibility
Eligibility is based on the property size, location and condition along with income and other qualifying factors. Some of these requirements include: Property must be located in a USDA designated rural area Maximum loan limits vary based on location Household members can have a total income of up to 115% of the medial income for the area Household must be able to afford the mortgage payment, including property taxes, homeowners insurance and the annual guarantee fee payable on a monthly basis
Joel Lobb Mortgage Loan Officer Individual NMLS ID #57916
Potential homeowners in rural areas often struggle to accumulate enough funds for down payments and closing costs, but there are several programs to help.
Krista Mettscher, a single family housing specialist for USDA Rural Development promoted a few of those programs last week during a visit to Chadron, noting that communities need a successful housing market to thrive.
USDA Rural Development offers two programs for individuals looking to purchase single family homes, both of which offer 100 % financing, thereby making a large down payment unnecessary. In conjunction with a lack of available housing, a down payment and the availability of financing are the largest barriers to home ownership, Mettscher said.
Her agency works to provide financing and find ways for homeowners to be successful by staying in their homes long-term.
“We do give our homeowners a lot of different options to stay in their homes,” she said.
USDA Rural Development’s Direct Loan Program offers 100% financing with no down payment and a current interest rate of 3.5%. Subsidies for low-income levels can make the interest rates as low as 1%.
“This program works really well for people on a fixed income,” she said.
There are income qualifications, but many people in rural areas fall within the guidelines. A household of up to four people can earn $54,400, while a household of five to eight individuals can earn up to $71,800 to qualify for the Direct Loan.
A credit score of 640 and above requires less documentation, but the agency doesn’t ask for potential home buyers to have perfect credit for the Direct Loan Program. In fact, there is no credit score requirement at all, Mettscher said, as financial ability is determined on a case-by-case basis.
The maximum mortgage allowed under the Direct program is $195,000, and home buyers are encouraged to keep their mortgage at no more than 30% of their income. The payment assistance subsidy, which can decrease the interest rate down to as low as 1%, can help home buyers who may struggle with their payments, but the goal is to remove the subsidy as soon as possible, Mettscher said. A portion of the subsidy – generally 20%- must be repaid to USDA Rural Development as soon as the home buyer sells the house, pays off the loan or no longer occupies the home.
The Direct program is a 33-year loan term and requires a whole-home inspection. Home buyers who qualify can use the loan for any modest (2,000 square feet), residential home in good condition, of either existing or new construction.
USDA Rural Development’s other program is its Guaranteed Loan Program, which does require some fees but is still cheaper than most traditional financing options. It’s not available for first-time home buyers, but still provides 100% financing with no maximum mortgage limits. Income guidelines are in place for this program as well. A family of up to four individuals can earn up to $82,700, while a family of five to eight individuals can earn up to $100,150. This program, however, requires a minimum credit score of 580, Mettscher said, but a whole-home inspection of the to-be-purchased property is not necessary. Instead, an appraiser must certify that it meets HUD standards.
The Guaranteed Loan Program also allows potential purchasers to consider buying acreages, but they must be residential, non-income producing properties.
Finally, USDA Rural Development can also help elderly homeowners (age 62 and above) with its Repair Loan Program and Repair Grant Program. The loan program allows homeowners to secure up to $20,000 in financing at 1% interest to make any repairs and improvements to their home. The income guidelines for this program are lower than those for the loans, set at $34,000 and $44,900. The grant program has the same income requirements, but is targeted to repair health and safety issues only by providing up to $7,500 in forgivable financial assistance.
“(The repair/grant programs) are very low-income categories,” Mettscher said.
Other assistance is available in Dawes, Sheridan, Sioux, Box Butte and Morrill counties through the High Plains Community Development Corporation, which is located in Chadron. Rita Horse said home buyers in those counties who meet certain eligibility requirements may qualify for closing cost assistance and down payment assistance. Horse also serves as a loan packager for USDA Rural Development, assisting prospective buyers with all of the paperwork to determine if they are eligible for the Direct or Guaranteed loans through the agency.
