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:
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.”
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.
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.
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 in Kentucky Rural Housing USDA Rural Development Instruction §1980.315 – Escrow accounts for exterior development.
Kentucky Rural Housing USDA UNDERWRITING GUIDELINESFor 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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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