Thursday, August 22, 2013

Kentucky Rural Housing USDA loans updated guidelines 2013


Louisville Kentucky Mortgage Lender

Joel Lobb
By Joel Lobb | Mortgage Broker
or Lender in Louisville, KY

Kentucky Rural Housing USDA loans updated guidelines 2013

• In order to be eligible for a Rural Development guaranteed loan, the Borrowers’ adjustable household income cannot exceed the maximum allowable income limit set forth in Rural Development Instruction 1980-D §1980.348, Exhibit C (use moderate-income limits). (
• The borrower must not have sufficient assets to obtain other traditional conventional financing. The borrower may, however, qualify for an FHA or VA loan. In other words, applicants may have liquid assets and be eligible to participate in the GRH Program. Those assets, however, should not be sufficient to meet the down payment and closing cost requirements associated with a conventional uninsured mortgage product (LTV ≤ 80%). This means applicants do have a choice of USDA-Guaranteed Rural Housing, FHA, VA, or a conventional mortgage product with private mortgage insurance.
• In the Kentucky USDA Loan-Rural Development program, the appraisal determines the maximum loan amount. The applicant may borrow up to 102% of the appraised value for purchase transactions, and 102% for refinance transactions if the guarantee fee is included in the loan amount.
Kentucky USDA Loan Guaranteed Rural Housing Purchase Program Features
• Closing costs may be financed when there is equity above the contract price as supported by the appraisal. (Discount points, however, are only eligible for financing for low income households as defined by Rural Development.)
• Seller contributions without any limitation are available to assist the borrower in paying closing costs. If they exceed 6% of the sales price, comparable sales and a comment from the appraiser with respect to the impact to value is required.
The USDA Loan Guaranteed Rural Housing Refinance Program Features
• Loan must be secured by the same property as the original loan. The original loan must be Guaranteed Rural Housing (GRH) or USDA Section 502 Direct only. The Program may not be used to refinance FHA, VA, or other government or conventional mortgages.
• Term of the new loan will be 30 years.
• Interest rate of the new loan cannot exceed the interest rate of the loan being refinanced. However, the interest rate of the new loan does not have to meet the interest rate requirements established in RD Instruction 1980-D, §1980.320 Interest rate.
• Property must be owned and occupied by the borrowers as their principal residence.
• The guarantee fee is 2.00% of the total principal obligation of the new loan.
• The 2.00% guarantee fee may be always financed into any GRH refinancing transaction. As usual, borrowers may finance other closing costs and fees up to 100% of the current appraised value. However, it is possible for the loan-to-value (LTV) of the new loan to reach 102% if the 2.00% guarantee fee is financed. Loans may exceed 100% LTV only to the extent that the excess represents a financed guarantee fee of no more than 2.00%.
• Total household income cannot exceed the moderate level for the area as established in RD Instruction 1980-D, Exhibit C.
• GRH refinance loans are permitted for properties in areas that have been determined to be non-rural since the existing loan was made.
• Applicants are not eligible to receive “cash out” from the refinancing transaction. However, applicants may receive reimbursement from loan proceeds at settlement for their personal funds advanced for eligible loan purposes that are part of the refinance transaction, such as an appraisal fee or credit report fee. At loan closing, a nominal amount of “cash out” to the applicants (beyond reimbursement of these “prepaid” items) may occasionally result due to final escrow and interest calculations. This amount, if any, must be applied to a principal reduction of the new loan.
• Subordinate financing such as home equity seconds and down payment assistance “silent” seconds cannot be included in the new loan amount. Any existing secondary financing must be subordinate to the new first lien.
• Maximum loan amount cannot exceed the balance of the loan being refinanced, plus the guarantee fee, and reasonable and customary closing costs, including funds necessary to establish a new escrow account.
• Unpaid fees, such as late fees due the current servicer, are not eligible to be included in the new loan amount.
• As part of the refinancing transaction, additional borrowers may be added to the new GRH loan or existing borrowers may be deleted from the current loan. All applicants that will be a party to the promissory note for the new loan must meet all eligibility requirements.
 Ratios must meet requirements as stated in RD Instruction 1980-D, §1980.345(c)(3). The monthly housing expense to income ratio should typically not exceed 29% and the total debt to income ratio should typically not exceed 41%. However, originators may request a ratio waiver with documentation of acceptable compensating factors. A satisfactory payment history for the current mortgage will be considered a strong compensating factor by both theRural Housing Service (RHS) and USDA Loan.
• A complete Uniform Residential Appraisal Report (URAR) is required unless the refinance loan amount includes only the unpaid principal balance with or without the 2% guarantee fee.
• No other property inspections or thermal certifications are necessary. However, any conditions noted on an appraisal that are related to the safety or livability of the subject property must be addressed and rectified prior to loan closing. Expenses related to property inspections and property repairs may not be financed into the new GRH refinance loan, or escrowed for prior to closing.
Property Eligibility (GRH Purchase Transactions Only)
• In order for a property to be eligible for a Rural Development guaranteed loan, the property must be located in a rural designated area as defined in Rural Development Instruction §1980.312. You may view eligible areas on USDA Rural Development’s web-site at:
• Property must be a nonfarm, non-income providing tract.
• According to Rural Development Instruction §1980.313 (e) "Generally, the value of the site must not exceed 30 percent of the total value of the property. When the value of the site is typical for the area, as evidenced by the appraisal, and the site cannot be subdivided into two or more sites, the 30 percent limitation may be exceeded."
Joel Lobb (NMLS#57916)
Senior  Loan Officer
502-905-3708 cell
502-813-2795 fax

Key Financial Mortgage Co. (NMLS #1800)*
107 South Hurstbourne Parkway*

Louisville, KY 40222* 

This website is not part of  or affiliated with the USDA or any other government agency.

NMLS# 57916

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