Kentucky Mortgage Guide: FHA vs USDA Loans Explained

Kentucky FHA Mortgage Loans vs Kentucky USDA Rural Housing Loans Compared

Kentucky FHA vs. USDA Rural Housing Loans – Side-by-Side Comparison

Feature	FHA Loan (Federal Housing Administration)	USDA Rural Housing Loan
Down Payment	3.5% minimum	0% (100% Financing)
Location Requirements	Available statewide	Must be in USDA-eligible rural areas
Income Limits	No strict limits (but must qualify DTI-wise)	Yes –
Credit Score Requirement	580+ (with 3.5% down); 500–579 with 10% down	Typically 640+ for automated approval
Mortgage Insurance	Upfront: 1.75% + Monthly MIP	Upfront Guarantee Fee: 1% + Annual Fee: 0.35%
Loan Purpose	Purchase or refinance	Purchase only (no cash-out refi)
Debt-to-Income Ratio (DTI)	31/43% standard; higher with compensating factors	32/45% preferred; manual underwrite available
Property Type	1-4 unit primary residence	Must be primary residence, single-family only
First-Time Buyer Friendly	Yes	Yes
Loan Limits	yes	No set loan limit, but income and affordability capped
Closing Costs	Can be rolled into loan if appraisal allows	Can be rolled in if under appraised value

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• USDA is ideal for low-to-moderate income buyers purchasing in rural areas, offering 0% down payment and reduced monthly mortgage insurance.
• FHA loans are more flexible with location. They are slightly more forgiving on credit issues. They are much more favorable on debt ratio requirements. They are also accommodating about past bankruptcy and foreclosure situations. This makes them better suited for urban or suburban buyers. They are also ideal for those with lower credit scores.