Kentucky Rural Housing USDA Guidelines 2011


Kentucky Rural Housing USDA  Guidelines 2011
 
Property Eligibility (GRH Purchase Transactions Only)
• In order for a property to be eligible for a Kentucky 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.”

Inspection requirements on Rural Development properties are as follows:
New Construction – If the Builder is providing a one-year warranty, the
following inspections are required:
Framing Inspection
Footing Inspection
Final Inspection
Thermal Certification
 
If a 10-year Builder Warranty is provided, only a Final Inspection and a
Thermal Certification are required

Existing properties must meet the current requirements of HUD Handbooks 4150.2 and 4905.1, typically verified through an RHS Adequacy Certification (Existing Dwelling Inspection Report), or by the appraiser certifying in the comments section of the appraisal that the property meets HUD Handbooks 4150.2 and 4905.1.

Required Repairs/Escrow Agreements

When repairs are required for structural or mechanical deficiencies that exceed the Seller’s contractual obligation, can assist borrowers.  allows the ability to finance required improvements based on an “as improved” appraised value, in combination with an escrow hold-back at closing.

Unless the deficiency is a significant item that negatively impacts the safety or livability of the dwelling, loan closing need not be delayed. For those deficiencies that can be corrected post-closing, Chase will require, in addition to our standard closing items:

A corrected FNMA 1003 (Uniform Residential Loan Application) with the amount of financed improvements listed under the “Repairs” Section.

Estimates/contracts for all repairs financed with loan proceeds.
A -approved escrow hold-back agreement signed by buyer and
seller at closing.
A collection of one and one-half times of the estimated repair cost
retained at closing to be disbursed by the settlement agent.
Final inspection of required repairs will be required.

Rural Development requires all repairs to be completed prior to their issuance of the final Loan Note Guarantee (Rural Development Form 1980- 17). However, external repairs delayed by weather related issues must be completed within 120 days of loan closing as outlined inKentucky Rural Housing USDA  Rural Development Instruction §1980.315 – Escrow accounts for exterior development.

 
Kentucky Rural Housing USDAUNDERWRITING GUIDELINES

For loans closing with  funds, it is our policy to have repairs for internal deficiencies completed within 30 days of loan closing. As Rural Development will require a final inspection once the work is completed, please include this expense as part of the escrow holdback.

Maximum Interest Rate (GRH Purchase Transactions Only)

The maximum interest rate for the Rural Development Guaranteed Rural Housing Program is defined as the FNMA 90-day actual-actual yield requirements plus 60 basis points, rounded up to the nearest quarter percent. 

  
RURAL HOUSINGKentucky Rural Housing USDA
UNDERWRITING GUIDELINES
Assumability
The Guaranteed Rural Housing loan is assumable subject to the following
conditions: Kentucky Rural Housing USDA
Subject property and applicant(s) must meet all criteria for the Rural
Development Guaranteed Housing Program.
Applicant (buyer) must be credit-approved by •
In accordance with Rural Development (FmHA) Instruction 1980-D,
no release of liability will be granted to the original Borrower(s).
A new title policy will be required at closing.
Normal application, processing, and transfer fees will apply.
 
 
RURAL HOUSINGKentucky Rural Housing USDA
UNDERWRITING GUIDELINES
INCOME VERIFICATION/REQUIREMENTS

The Guaranteed Rural Housing loan is documented with both Rural Development and FNMA forms. (Rural Development forms are provided in the Forms Section of this manual.)

All sources of income must be verified using FNMA Form 1005 – “Verification of Employment“. Rural Development, as outlined in Rural Development Instruction §1980.351, will typically review the past 24 months to determine both Income Eligibility, as well as compliance with Monthly Housing (29%) and Total Debt (41%) Ratios. Usually, Chase requires verified primary sources of income for a 24-month period to confirm loan approval.

Alternate documentation is permitted in place of FNMA Form 1005. Alternate documentation must include: two years W-2’s, 30 days paystubs with year-to-date information, and a Processor’s Certification of Employment.

The following should serve as a guideline for handling income-related issues:
Full Time – For borrowers whose income is derived from full-time
employment, two (2) years of full employment history must be verified
on FNMA Form 1005 (Verification of Employment).
Borrowers are not required to have 24 months continuous
employment with their current employer.

Where there has been a change in employers in the last 24 months, the borrower must explain any gap in employment that extends beyond one (1) month.

Two (2) years of tax returns will only be required for:
Self-employed borrowers
Commissioned borrowers
Borrowers employed by a relative or closely-held family
business.
 
 
RURAL HOUSING Kentucky Rural Housing USDA
UNDERWRITING GUIDELINES
Borrowers who are not commissioned, but need to
validate their expenses.
Part-Time – Part-time or second job income with duration of 24 months
may be used.
Overtime and Bonus Income – Overtime and bonus income can be

used to qualify the applicant if the employer verifies that the applicant has received it during the last 24 months and indicates that the overtime or bonus income will in all probability continue. The lender must develop an average of the last 24 months overtime and bonus income to determine the amount of income that can be considered in evaluating the borrower’s qualifications.

Self-Employed Income – Two (2) previous years 1040’s are required.

They must be signed and certified by the applicant. Additionally, a year-to-date Profit & Loss Statement with Balance Sheet, prepared and signed, must be submitted. If the applicant has 25 percent or more ownership interest in any business entity, the applicant must also provide the most recent two (2) years’ business tax returns (Corporate, Sub-S Corporate, or Partnership) along with a current Profit and Loss Statement with a Balance Sheet prepared and signed by an accountant.

Alimony, Child Support, and Separate Maintenance – Chase

requires documentation that child support, alimony, or separate maintenance will continue for three (3) years after the date of the mortgage application or it will not be considered as income. The borrower must also provide evidence that the funds have been received for the last 12 months. Acceptable evidence includes deposit slips, canceled checks, court records, or tax returns.

Retirement Income – Retirement income, i.e., pensions, annuities,

401K distribution, etc., may be verified by letters from the organizations providing the income, copies of the retirement award letters (with photocopies of canceled checks attached), tax returns, or IRS W-2 forms. This evidence must confirm a continuation of this income for a minimum of three (3) years.

 
RURAL HOUSING Kentucky Rural Housing USDA
UNDERWRITING GUIDELINES
Social Security Income – Acceptable verification includes a
photocopy of the Social Security Administration’s award letter or copies
of the borrower’s last 2 bank statements to confirm the

regular deposit of the payments. Benefits that have defined expiration dates must have a remaining term of at least three (3) years to be considered as income.

Disability Income – Disability income will be considered acceptable

income provided it can be documented by furnishing a recent copy of respective letter of benefits or allotment setting forth the terms of the income. The benefits must be on-going for a minimum of three (3) years.

Unemployment And Public Assistance Benefits – Unemployment

And Public Assistance benefits will be considered as income if they are properly documented by letters or exhibits by the paying agency. The amount, frequency and duration of payments must be stated in the verifying documents. If an individual receives unemployment benefits as a regular part of his/her income, Chase requires copies of tax returns for the past two (2) years to establish a history of receipt. This income must be documented as on-going for a minimum of three (3) years.

Dividends/Interest Income – Dividends and interest may be used as

income provided the assets that are generating the dividend/interest income will not be used for the down payment or closing costs on the proposed loan. The applicant must provide tax returns for the previous two (2) years along with verification of current assets via bank statements, verification of deposits, etc. This income will be averaged over two (2) years or calculated at current market interest rates, whichever is less.

 Kentucky Rural Housing USDA
 
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14 thoughts on “Kentucky Rural Housing USDA Guidelines 2011

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  11. Great Article. Thanks for the info. Does anyone know where I can find a blank “1996 Fannie Mae 1005” to fill out?

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