Kentucky USDA Rural Development Fee Reduction
USDA has just announced that they are planning to lower both the Guarantee Fee and the Annual Fee for RHS loans in Fiscal Year 2017. Effective for loans receiving commitments from RHS on or after October 1, 2016, the following fee changes will be in effect
Category: Current USDA and RHS Guidelines
- If the credit report on a loan with RHS approval will expire prior to loan closing, a new credit report outside of GUS can be pulled. If the new report shows no changes to credit, then the loan does not need to be resubmitted to RHS for re-approval.
- RHS considers a loan as qualifying for conventional credit if all of the following are true
- Borrower has eligible assets to meet a 20% down payment AND reasonable closing costs; AND
- The loan meets all current FNMA guidelines
- Assets should be calculated using the lesser of a two month average balance or the current bank statement/recent VOD.
- Debts omitted in GUS now require that reason for omission be listed in the “Notes” section.
- Military applicants are no longer required to provide evidence of pending discharge.
- The following are now considered part of the Household income when determining income eligibility
- Documented pay raise/cost of living raise to occur on or prior to closing
- Income from spouse living apart less than 3 months, unless divorce or legal separation proceedings have been commenced
- Continuance is automatically assumed on Social Security income unless the benefit letter specifically states an expiration date.
- Payments for the care of foster children or adults cannot be used as income.
- Authorized User accounts can be used to meet tradeline requirements if 12 months payment can be documented by the borrower.
- 30 day accounts paid each month do not have to be included in the DTI.
- Previous mortgage liabilities disposed of without release of liability (i.e. divorce, assumed, etc.) can be excluded from the debt calculation if the transaction can be fully documented along with 12 months of mortgage payments by the remaining party
- Judgments accounts may be excluded from the debt calculation if less than 10 months remain on the repayment plan.
- Charge-off accounts should not be included as a liability or a debt.
- Debts incurring a significant impact on repayment are now defined as being 5% or more of the gross monthly income.
- USDA does not have to be added to the appraisal as an intended user.
- Specific photograph requirements have been added to include
- Front view
- Rear View
- Street scene identifying location and showing neighboring improvements
- Kitchen, main living area, bathrooms, bedrooms
- Any other rooms representing overall condition, recent updates, restoration, remodeling, and renovation
- Basement, attic, and crawl space
- At least a front view of each comparable used in determining the valuation
- Common areas and shared amenities (Condos only)
- Additional safety measures are required for properties in a flood zone which also use private septic & water systems.
Use the greater of one percent (1%) of the outstanding loan balance or the verified fixed payment as reflected on the credit report.
Income Based Repayment (IBR) plans, graduated plans, adjustable rates, interest only and deferred plans are examples of repayment plans that are subject to change. These types of repayment plans are unacceptable to represent a long term fixed payment plan.
February 12, 2016
KY USDA Rural Housing Credit Report Update 2016
Effective immediately, an applicant’s credit score may be validated with at least two eligible trade lines instead of three trade lines as previously required. Such trade lines consist of credit accounts (revolving, installment, etc.) with at least twelve months of repayment history reported on the credit report. Corresponding revisions to the 3555 Handbook will be posted on the USDA Rural Development’s Regulation and Guidance website on March 9, 2016.
At least one applicant whose income or assets are used for qualification must have a valid credit report score or have at least two historical trade line references that have existed for at least 12 months to establish a credit reputation.
For applicants without an established credit history and unable to establish the required number of eligible trade lines to validate the credit score, alternative methods may be used to evidence an applicant’s willingness to pay, such as a non-traditional mortgage credit report or multiple independent verifications of trade references per 7 CFR 3555, Section 3555.151 (i)(6).
Non-traditional credit may not be used to enhance poor payment records or low credit scores. GUS applications receiving an “Accept” underwriting recommendation, but which fail to meet the credit score validation test using a traditional credit report, must be downgraded to a “Refer” by the lender. In these instances the use of a non-traditional credit history will be required in order to proceed.
Joel Lobb (NMLS#57916)
Senior Loan Officer
American Mortgage Solutions, Inc.
10602 Timberwood Circle Suite 3
Company ID #1364 | MB73346
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). I lend in the following states: Kentucky
2015 Kentucky Rural Housing USDA Changes
KY USDA Up-Front Guarantee Fee Increase Effective October 1st, 2015
Any Kentucky RHS USDA loan that has not received conditional commitment from state Rural Development Offices in Lexington, KY by end of business on 9/30 will be subject to the 2.75% up-front guarantee fee increase.
|Loan Purpose||Loans obligated at RD on and after 10/01/2014||Loans obligated at RD on and after10/01/2015|
|Purchase Up-Front Guarantee Fee||2.0%||2.75%|
|Refinance Up-Front Guarantee Fee||2.0%||2.75%|
Senior Loan Officer
CONFIDENTIALITY NOTICE: This message is covered by the Electronic
|—||Kentucky USDA Guaranteed Rural Housing LoansDid you know that Kentucky home buyers can still get a mortgage with no money down, even with less than perfect credit? The Kentucky Guaranteed Rural Housing Loan Program offers these options in a wide range of areas, including many suburbs outside the major metro areas of Louisville, Lexington, Bowling Green, Owensboro, Paducah, Hopkinsville, and Northern Kentucky cities of Florence, Covington and Newport.This loan program is offered through the Kentucky Rural Housing Service, an agency of the U.S. Department of Agriculture and designed to assist low and moderate-income residents by providing better access to affordable housing finance options including little or no out-of-pocket costs in eligible areas.
One borrower must have 3 tradelines that have existed for 12 months. If this requirement cannot be met, an accept decision must be downgraded to a refer and treated as a manual underwrite.
VERIFICATION OF RENT:
Scores 680 and above OR GUS accept = No VOR required.
Scores 679 and below = VOR required.
Determine if the total outstanding balance of all collections accounts and charge offs of all applicants is equal to or greater than $2,000. Unless excluded by state law, collection accounts and charge offs of a non-purchasing spouse in a community property state are included in the cumulative balance of all collections and charge offs.
Remove all medical collections and medical charge off accounts from the total balance. Medical collections and medical charge off accounts must be clearly identifiable on the credit report.
If the remaining outstanding balance of collection accounts and charge offs are equal to or greater than $2,000, any of the following actions will apply:
Payment in full of all collection accounts and charge offs at or prior to closing.
Payment arrangements are made with each creditor for each collection account and charge offs remaining outstanding. A letter from the creditor or evidence on the credit report is required to validate the payment arrangements. The agreed upon monthly payment for each outstanding collection account and charge off will be included in the borrower’s debt-to-income ratio.
In the absence of a payment arrangement, the lender will utilize in the debt-to-income ratio a calculated monthly payment. For each collection and charge off utilize 5% of the outstanding balance to represent the monthly payment.
Senior Loan Officer
If you have a credit score below 640 you will probably get referred for a manual underwrite which means the income and credit requirements are much tougher for scores below 640. We can do scores down to 620 but usually it is best to try and raise your score to 640 so we can get an automated approval thru GUS.
If GUS returns an refer/eligible, then we can consider doing a manul underwrite on your loan approval. This usually entails a verifiable rent history over the last 12 months with no lates, and the debt to income ratios are usually tied to the industry old standard of 29% and 41% respectively.
If GUS returns an ineligible status, then your loan is automatically denied and there is no chance of getting approved when this result shows.
If you have any delinquent back taxes, student loans they would need to be paid or brought current so you don’t have any liens to the government.
Delinquent Government Debt (back taxes, student loans
Medical bills are usually okay if they are not showing as a garnishment against you or on the title search.
Large unpaid utility bills, credit card charge offs, and car repos will usually have to be paid before closing. You will have to show you have funds to pay these off before closing.
You have to be 3 years removed from a foreclosure to qualify for a Kentucky RHS loan.
- Chapter 7 Bankruptices require a 3 year wait after the bankruptcy was discharged.
- Chapter 13 bankruptices only require 1 year wait after discharge.
Senior Loan Officer
KENTUCKY RURAL HOUSING CHANGES TO ANNUAL USDA GUARANTEE FEE STRUCTURE
The new fee structure is applicable to all Conditional Commitments issued by Kentucky Rural Development Loans on or after October 1, 2014.
Loan guarantee requests submitted to Rural Development (RD) on which a conditional commitment has not been issued by September 30, 2014, will be subject to the 2014 annual guarantee fee structure.
There is no exception to the new annual guarantee fee structure regardless of the date the file was submitted/received by RD . Inc. If the Conditional Commitment has not been issued before October 1, 2014, the file will need to be revised to reflect the correct fees and this will require re-disclosure, re-underwriting and resubmission to RD.
The Guarantee Fee change will take effect 10/1/2014.
On Wednesday, October 1, 2014, the annual fee for both purchase and refinance loans will increase from .4 percent to .5 percent. The Guaranteed Underwriting System (GUS) has been updated to allow lenders to select and underwrite at either the .4 percent or .5 percent annual fee structure. Lenders should communicate with Rural Development (RD) offices to understand current processing time-frames.
GUS “Final Submissions” with an annual fee of .4 percent, that areissued a conditional commitment by RD prior to the close of business on Tuesday, September 30, 2014, will not be affected by the annual fee change. Those submissions that are not issued a conditional commitment by RD prior to the close of business on Tuesday, September 30, will be affected by the annual fee change.
Lenders must underwrite the loan using an annual fee of .5 percent and resubmit the application to RD in GUS.
Senior Loan Officer