Joel Lobb Appraisals & Property Requirements, Credit Scores & Bad Credit, Down Payment Assistance & KHC, FHA Guidelines & Requirements, HUD Homes & $100 Down, Income, Employment & DTI, Kentucky First-Time Home Buyers, Kentucky Mortgage Rates

Understanding USDA Loan Asset Requirements in Kentucky

USDA Loan Asset Requirements in Kentucky: What First-Time Homebuyers Need to Know

If you’re applying for a USDA Rural Housing loan in Kentucky, understanding the asset documentation requirements is a critical step in the approval process. Whether you’re a first-time homebuyer in Louisville, Lexington, or a rural Kentucky community, here’s exactly what you need to know about assets when applying for a USDA mortgage loan.

Do You Need Assets to Qualify for a USDA Loan in Kentucky?

Good news for many Kentucky homebuyers — assets are not required to qualify for a USDA Rural Housing loan. However, if you do disclose assets on your loan application, every asset listed must be supported with proper documentation. Incomplete or unsupported asset disclosures can delay or jeopardize your approval.

USDA Loan Asset Documentation Requirements

Below is a complete breakdown of how different types of assets are handled under USDA Rural Housing loan guidelines in Kentucky:

1. Bank Accounts (Checking & Savings)

To verify funds held in a bank account, your lender will require one of the following:

  • A completed Verification of Deposit (VOD) showing the average 2-month balance, or
  • Two consecutive months of bank statements dated within 45 days of the loan application date

Important: Cash on hand is not acceptable as a verified asset for USDA loan purposes. All funds must be traceable and documented.

2. Large Deposits or Sudden Increases in Liquid Assets

If your bank statements show large, unexplained deposits or a significant jump in your account balance, your lender will require a satisfactory written explanation along with supporting documentation. This is a standard USDA underwriting requirement designed to ensure the source of funds is legitimate and not a loan.

3. Earnest Money Deposits

Your earnest money deposit (the good-faith deposit made when you go under contract on a home) may be counted as an asset — provided it is not already reflected in your existing liquid asset balances. Be sure to provide a copy of your cancelled check or wire confirmation as documentation.

4. Retirement Accounts (401k, IRA, Pension)

Retirement accounts such as a 401(k) or IRA can be used as assets for USDA loan qualification, but only at 60% of the vested account balance. This adjustment accounts for early withdrawal penalties and taxes. A current account statement is required.

5. Gift Funds

Gift funds from a family member or approved donor are allowed under USDA guidelines. To properly document a gift, you will need:

  • A signed gift letter from the donor clearly stating the amount of the gift
  • Confirmation that the gift does not need to be repaid
  • Documentation showing the transfer of funds (bank statements, wire transfer, etc.)

6. Proceeds from the Sale of Real Property

If you are using proceeds from the sale of a home or other real estate, you must provide a HUD-1 Settlement Statement or equivalent closing disclosure showing the actual net cash proceeds received by the borrower after all costs and payoffs.

7. Stocks, Bonds, and Investment Accounts

Stocks, bonds, and brokerage accounts must be documented with an official statement from the stockbroker or financial institution managing the portfolio. The statement should show current market value and be dated within 45 days of application.

8. Net Family Assets Greater Than $5,000 — Income Calculation Rule

This is an often-overlooked USDA guideline. If a household’s net family assets exceed $5,000, USDA requires that the greater of the following be counted as income:

  • The actual income earned from those net family assets (e.g., interest, dividends), or
  • A percentage of the asset value based on the current passbook savings rate

This imputed income is added to your annual household income and can affect USDA income eligibility. Be sure to discuss this with your loan officer if you have significant savings, investments, or property holdings.

Why Asset Documentation Matters for Your Kentucky USDA Loan Approval

USDA underwriters review asset documentation not just to verify your down payment and closing costs, but also to ensure your loan complies with federal housing guidelines. Incomplete or missing asset paperwork is one of the most common reasons for loan delays in Kentucky. Working with an experienced local mortgage loan officer who knows USDA guidelines inside and out can make all the difference.

Get Pre-Approved for a USDA Loan in Kentucky Today

With over 20 years of experience helping Kentucky families achieve homeownership, I specialize in USDA Rural Housing loans, FHA, VA, KHC (Kentucky Housing Corporation), and Conventional mortgage loans. I offer free mortgage pre-qualifications with same-day approvals on most applications.

If you’re a first-time homebuyer in Kentucky with little or no money saved for a down payment, ask me about Kentucky Housing Corporation (KHC) down payment assistance programs — funds are still available and can significantly reduce your upfront costs.

Contact Joel Lobb — Kentucky Mortgage Loan Officer

Joel Lobb | Senior Mortgage Loan Officer

📞 Call or Text: (502) 905-3708

📧 Email: kentuckyloan@gmail.com

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This website is not affiliated with or endorsed by HUD, FHA, VA, USDA, or any government agency. It is an independent platform created to educate and assist Kentucky homebuyers.

Joel Lobb Collections, Student Loans & Debts, Credit Scores & Bad Credit

The Best Kind of Loan for Your Credit Score

The Best Kind of Loan for Your Credit Score.

 

I’m often asked if having certain types of credit or loans is better or worse than other types of credit or loans.

I get questions like, “John, is it better to have a car loan or a mortgage for my scores?” I also hear, “John, is it better to have a secured card or an unsecured card for my scores?”

In fact, you can swap in almost any type of credit-related account and I’ve been asked about that scenario.

I’ve been getting this type of question for almost 15 years now, and it seems that people believe there’s value or a penalty for having certain types of loans or accounts on your credit reports. That’s completely understandable and, thankfully, almost a complete myth.

Credit Cards

First, let’s tackle the secured credit card, versus the unsecured credit card, versus the charge card question. The assumption is that the type of card has a direct impact on your credit scores. That’s an incorrect assumption, meaning, you’re not penalized or rewarded for having one type of card over another.

That doesn’t mean one form of plastic isn’t better or worse for your credit than another.  For example, a secured credit card is easier to max out than an unsecured credit card.

Why? The reason is because secured cards have considerably lower credit limits than unsecured credit cards. It has nothing to do with the fact that one is secured and one isn’t. It has everything to do with the credit limits.

Installment Loans

When it comes to installment loans, the issue of credit limits disappears because installment loans don’t have credit limits. They do, however, have original loan amounts.

An auto loan is likely to have a considerably lower loan amount than a mortgage, home equity loan and perhaps even a student loan. And, balances do matter on installment loans, albeit slightly.

Exactly like credit cards, credit scores do not treat installment loans of one variety or another differently. The collateral issue of balances can cause variable score impact, however.

Defaulting

One thing we haven’t addressed yet is the issue of missing payments and defaulting. Defaulting on a credit card, secured card, charge card, auto loan, mortgage, or any other kind of credit card, is treated equally — as one default.

You’re not penalized because you’ve defaulted on one variety of credit account versus another. You can, however, have a much larger default amount on a mortgage than any other type of credit account and that’s where the score impact can be variable.

The bottom line is: it’s not really the type of account that’s important, but it’s the incident that matters.

One Exception to the Rule

There is one very small exception to this rule. In fact, it’s so small that I thought very hard about omitting it.

There’s a chance your score could be negatively impacted if you have too many finance company accounts on your credit reports. These are the loans offered by consumer finance lenders who often target the near or subprime consumer.

Notwithstanding the consumer finance issue, the lender is also meaningless in your scores. So, you don’t get rewarded for doing business with a large, well-known credit card issuer and you don’t get penalized for doing business with a subprime credit card issuer.

In fact, credit scores are brand agnostic when it comes to your credit accounts. The most important factor is how you manage them.

Editor’s Note: This article by John Ulzheimer was originally published on MintLife.

See more from Mint.com:

Read more: http://www.minyanville.com/trading-and-investing/personal-finance/articles/credit-score-credit-score-meaning-installment/10/25/2012/id/45351#ixzz2APp8zSGT

Joel Lobb FHA Guidelines & Requirements

Kentucky Mortgage FHA Guidelines updated 2011

Mortgages

Dealing With Higher Costs of F.H.A. Loans

The New York Times
By MARYANN HAGGERTY
Published: May 6, 2011

THE increased cost of F.H.A. mortgages has shifted the math a bit for would-be borrowers.

A home buyer with a down payment of less than 20 percent generally has to pay up in some other way to ensure that lenders are protected against default. (This requirement slipped during the housing boom; see “financial crisis.”)

The most popular low-down-payment loans have been those insured by the Federal Housing Administration. Borrowers can make down payments as low as 3.5 percent; they pay an upfront fee (often rolled into the loan) and a monthly premium. An alternative is private mortgage insurance, or P.M.I., available to those who put down at least 5 percent.

As the name implies, the insurance is provided by a private company rather than the government. Premiums can be paid up front, each month, or in a mix. The amount of the premium drops as the size of the down payment rises. Use of these loans has fallen off sharply in recent years as the P.M.I. companies tightened standards and F.H.A. gained popularity.

Effective on April 18, F.H.A.’s annual premium on a 30-year loan rose to 1.1 or 1.15 percent of the loan value, up from 0.85 or 0.9 percent. (The higher rates are for down payments below 5 percent.) On a $400,000 loan with the minimum down payment, that’s $83 more per month.

The monthly fee is in addition to the up-front premium, equal to 1 percent of the loan value. Which loan to go with may depend on the answer to a question: “how long is it going to take to recoup that 1 percent up front?” said Matt Hackett, an underwriting manager at Equity Now, a direct mortgage lender based in New York.

In the first quarter, 17.7 percent of new loans were F.H.A., according to Inside Mortgage Finance, an industry data provider, while P.M.I. had a 5.4 percent market share. Applications for F.H.A. loans jumped 20 percent in the month preceding the price increase, then tumbled when it went into effect, according to the Mortgage Bankers Association.

In addition to lower minimum down-payment requirements, F.H.A. has laxer rules for credit scores and debt-to-income ratios. Right now, it also has lower interest rates, said Thatcher Zuse, the president of Sound Mortgage, a lender and broker in Guilford, Conn. “Almost as a rule, as the rates stand right now, the less equity you’re putting down, the better the F.H.A. deal becomes.”

Mr. Zuse ran the numbers for two buyers able to put 5 percent down. For a buyer with a 780 credit score, the cost difference between F.H.A. and P.M.I. was negligible, but a buyer with a 650 score could save about $200 a month on a $400,000 F.H.A. loan.

There are circumstances peculiar to the New York area that could push a borrower to F.H.A., said Robert Donovan, a Bank of America senior vice president and regional sales executive. For one thing, the region has a high concentration of two- to four-unit homes, popular with buyers who want to live in one apartment while renting out another. Loans in such cases are treated much more liberally by F.H.A., he said.

The same goes for new-construction condominiums of any size: until more than half a project is sold, conventional loans may not be an option. F.H.A.-backed loans are available even if as little as 30 percent of the project is sold, Mr. Donovan said.

In the broadest terms, for someone with no special circumstances, great credit and a more-than-minimum down payment — say, 10 or 15 percent — P.M.I. may turn out to be the better deal. Someone with weaker credit or less cash may find F.H.A. works better.

To generalize, “if you qualify for P.M.I.,” Mr. Hackett said, “you should usually choose the P.M.I., because it is going to be less.”

Circumstances vary, though, so ask any lender to produce a written comparison, said Michael Moskowitz, the president of Equity Now, “just to keep the lender honest.”

 

 

A version of this article appeared in print on May 8, 2011, on page RE9 of the New York edition with the headline: Dealing With Higher Costs.

 
 
 
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