Seller Concessions for Real Estate Commission Fees for 6% Cap on Kentucky USDA Mortgage Loans

The U.S. Department of Agriculture (USDA) has approved a new exemption on seller concessions to meet industry standards while ensuring Kentucky Mortgage borrowers for rural homebuyers in Kentucky remain eligible for affordable financing under the Single Family Housing Guaranteed Loan Program.

This exemption enables Kentucky USDA homebuyers to exclude real estate commission fees from the 6 percent cap on seller, or other interested party, allowances to incentivize a buyer to purchase a home. These concessions may include funding toward the buyer’s mortgage financing costs or loan closing costs.

Under the exemption, real estate commission fees paid by the seller on behalf of the homebuyer will be exempt from this cap to ensure that rural homebuyers will retain affordable access to Kentucky USDA guaranteed home loan financing regardless of changes to real estate commission requirements.

 

Kentucky Rural Housing USDA’s Single Family Housing Guaranteed Loan Program assists lenders in providing low- and moderate-income households the opportunity to purchase safe and affordable homes in rural areas. This change further demonstrates the Biden-Harris Administration's commitment to ensuring that all Americans have an affordable place they can call home and opportunities to build generational wealth through homeownership. 

Joel Lobb  Mortgage Loan Officer

American Mortgage Solutions, Inc.

10602 Timberwood Circle

Louisville, KY 40223

Company NMLS ID #1364

Text/call: 502-905-3708

fax: 502-327-9119

email: kentuckyloan@gmail.com

http://www.mylouisvillekentuckymortgage.com/ 

NMLS 57916  | Company NMLS #1364/MB73346135166/MBR1574

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, (www.nmlsconsumeraccess.org).

 appraisal fees, closing costs, good faith estimate, home insurance, kentucky housing, Kentucky Mortgage Closing Costs, Kentucky Rural Housing and USDA Loans, points, survey, title insurance

 

Kentucky USDA Rural Development Loan

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.

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

fax:            502-327-9119
email:          kentuckyloan@gmail.com

https://www.mylouisvillekentuckymortgage.com/

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.

Fees

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.

Refer to KENTUCKY USDA RURAL HOUSING QUALFYING GUIDELNES for details.

 

If you have questions about qualifying as first time home buyer in Kentucky, please call, text, email or fill out free prequalification below for your next mortgage loan pre-approval.

Text or call phone: (502) 905-3708

email me at kentuckyloan@gmail.com

http://www.mylouisvillekentuckymortgage.com/


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 views of my employer. Not all products or services mentioned on this site may fit all people

This web site is not the FHA, VA, USDA, HUD or any other government organization responsible for managing, insuring, regulating or issuing residential mortgage loans.

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