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Okay so I'm in the process of buying a house with a usda loan. We found a house and are under contract now with a closing date of October 21st and have already had an inspection and ordered an appraisal. However I'm really nervous that we may not be approved. My LO ran All My Information Through gus. It came back as a refer/eligible. Okay, so I asked her what was the reason she said everything was okay and came back good besides my credit report with my collections. I wrote a letter of explanation already but here is what is on it a collection for $370 from 5 years ago because of an account that was overdrawn, one was 2 30 day late payments on an installment loan from 2013 which was paid and then the rest are all medical nothing else. My credit score isn't great either but it met guidelines. What are my chances of this not being approved because of my report? My debt to income ratio with the estimate mortgage is 19%/29%. Also I have 2 tradelines opened but aren't exactly 12 months yet but do have past tradelines that are reported as on time and paid. I have non traditional tradelines such as 12 months rent verification, 12 months utilities and 12 months car insurance premiums. I also have the reserves I need. I have already paid $300 for an inspection and then will have to pay another $475 for the appraisal so I'm worried of being out quite a bit of money if I don't get approved. Could anyone tell me if they think the odds are slim of not getting approved? My LO said she wouldn't have wasted her time if she thought we weren't good candidates but also she she just can't tell me she can guarantee anything because it is in the underwriters hands. I can hardly sleep over this whole thing and not knowing. She said the longest to hear from the underwriter will be 7 to 10 days although it could be sooner. Please could anyone give me some kind of piece of mind????
Credit Score requirements for USDA Loans 2016 can no longer go below 640 for automatic approval. You can go below that for a Manually Underwritten loan.
You didn't say what your score is, but the loan officer would not have wasted your time if they thought you would not qualify.
Just explain what needs to be explained and don't worry until you are told it's not gonna happen.
FHA only required 580 so maybe you can switch the loan if the USDA does not go thru.
In my area, USDA is denying many loans. They aren't just looking at the 640 anymore. I've been told from many agents that their clients have had 680+ scores and USDA is denying. The LO's don't know why some are getting approved and some aren't, otherwise they wouldn't suggest someone go USDA just to get denied. For some reason, the past year, it's been a crap-shoot. Turn around and go FHA.
I know it's difficult, but try not to worry. With your ratios, you meet manual underwriting guidelines for USDA. Medical collections are ignored, so you don't need to worry about those. Your other collections are small enough and old enough not to matter, either.
Your lender will get a VOR (verification of rent) and as long as you've not been late on your rent, you'll be ok there, too. You'll probably have to write a statement explaining your derogatories. Be honest and state what happened and what steps you've taken to ensure you that your payments are made on time.
I do a lot of USDA loans and it's a far better loan program than FHA. You don't need a down payment and your pmi is much lower than with FHA. It's also declining pmi, which means it's going to go down a little each year whereas FHA's pmi stays the same for the life of the loan. I absolutely would not flip to an FHA without knowing whether or not you are approved for USDA.
Listen to your loan officer. She sounds like she knows what she's doing. Their turn times are awful, though! Our underwriting turn times are 24-48 hours, which makes that nervous waiting period so much easier to stomach! Hang in there. Sounds to me like you're going to be fine.
USDA has a whole host of reasons they will deny a loan, the biggest being if you are eligible for any other type of loan your not eligible for USDA. So if you have a good score and good savings, you are not eligible for USDA, poor score is okay but you must have the ability and demonstrated willingness to repay the loan so collections and lates are big issues with USDA. If you have a safe home currently then it is a no go. A lot of this is in the lender handbook and application packet but I think since zero down is so attractive to so many people lenders just try to get the application to go through anyways.
I would be far more concerned if your loan officer was telling you no problem. She knows you are making major financial decisions, so she has the guts to tell you she cannot make any guarantees. Good for her. The money you've spent cannot be a consideration evaluating your loan. Did you by any chance jump the gun between being told, yeah, we can get you qualified for a loan, but we need to clean up a couple things first? Think hard, because I am betting you moved up the timeline on her. If I am right, I get the sense of a strong work ethic and suspect your best bet is with her.
Couple of questions, what is your current housing payment? How much is your new housing payment? How long has you loan officer been in the business? I can't give you the warm fuzzy you seek, and anyone knowing less than you loan officer certainly should not be commenting publically on your file. But I will say it sounds like you have a good loan officer in your corner.
Not completely related here, but I believe the USDA guarantee fee is getting ready to come down quite a bit.
Yes it is for loans originated after Oct. 1st. The guarantee fee is dropping from 2.75% down to 1% and the mortgage insurance is being reduced from 0.50% annually to 0.35%. I'm thrilled because this is going to be a huge savings for the people who qualify for this program!
There are many factors that have to be taken into consideration when qualifying for a USDA loan, and current savings and even savings in some retirement accounts matter. If someone has too much money saved, then they might not qualify for the program as it is designed to help low to moderate income families purchase a home in areas designated as "rural," as per data from the 2000 Census (they are way behind in updating their designations thankfully, otherwise a whole lot of the area I originate would no longer be eligible).
I originate many USDA loans and I find credit score to be an important factor in qualifying; the borrower does indeed need to have good credit. Low scores (under 640) will often be the reason for a denial or "refer" findings, which means a manual underwrite and even tighter guidelines being applied to underwriting the loan. Other important guidelines are household income and debt-to-income ratios.
USDA is a great program for many people and in my professional opinion, it beats FHA every single time. FHA is the loan of last resort, when a borrower can't qualify for any other type of program.
We pay $550 in rent and our estimate for mortgage was $515.so here is the rundown of our situation. We looked at a house we wasn't planning on trying to buy just yet but we fell in love with it and it is big enough for our 4 kids to have their own rooms. So on a whim we decided to go ahead and try for a usda loan because we fell in the minimum guidelines. So we find a lender th mat doesn't have any overlays and sign a contract with the seller for a closing date and all of that. We didn't have to put any earnest money down so we went ahead and went on with the process. The lender got all of our documents and such and ran them through gus which came out refer/eligible. I asked her why it was a refer and she said because of the credit score and credit history but they manually underwrite. Per contract we had to have an inspection done in 10 days which it is done. Then an appraisal in 21 days so the lo has made an order for that and told us that if we get cleared to close then we can roll that into our closing cost or loan (can't remember exactly ). She said normally they would ask for a check upfront but she is trusting that if the loan doesn't go through that we will pay them. I'm not sure if that is okay but anyway she is our lo and an account executive for the company* (not sure if that makes a difference. But anywho, let me let you all know everything I can.
Credit scores.
Tu. 620
Eq. 587
Ex. 585
(I know these are low but I was one to always pay everything in cash when I was younger and have had a few collection )
Collections.
1. Bank that was overdrawn to $370 back in 2013 but was reported or refreshed June 2016
2. Installment loan that I was late on 2 times in 2012 or 2013 and it was paid off.
3. The rest are all medical collections
Debt to income ratio.
19%/29%
Open tradelines.
1.Credit card. Opened in December 2015 The minimum payment is $25. I keep utilization* under 30%
2. Car loan. Opened in February 2016. Payments on time.
Closed tradelines.
1. Installment loan. Paid off April 2016. Payments on time
2. Matco tools. Paid off 2015. Payments on time.
Credit inquiries.
1. Direct tv. Obtained service.
2. Roadloans. Was going to refinance car for cheaper rate but didn't go through with it.
3. Snap on tools. No new credit
4. 3 of them was mortgage shopping.
Non traditional tradelines
1. Utility bull past 24 months always on time
2. Rent verification for 12 months can go back to other landlord to make it 24 months and always on time.
3. Gas company. 24 months paid on time
4. Car insurance premiums.* Have paid 2 six month premiums in full which will equal 12 months.
Income.
$36,000 roughly with no overtime
House price.
$74,000
Reserves.
$2000
Gift funds.
$1000
The seller will pay $4000 of closing costs.I have been upfront and honest and have provided every document or lo has asked for that same day. If I missed anything that will help answer my questions please let me know.
I would be far more concerned if your loan officer was telling you no problem. She knows you are making major financial decisions, so she has the guts to tell you she cannot make any guarantees. Good for her. The money you've spent cannot be a consideration evaluating your loan. Did you by any chance jump the gun between being told, yeah, we can get you qualified for a loan, but we need to clean up a couple things first? Think hard, because I am betting you moved up the timeline on her. If I am right, I get the sense of a strong work ethic and suspect your best bet is with her.
Couple of questions, what is your current housing payment? How much is your new housing payment? How long has you loan officer been in the business? I can't give you the warm fuzzy you seek, and anyone knowing less than you loan officer certainly should not be commenting publically on your file. But I will say it sounds like you have a good loan officer in your corner.
Our payment is $550. New would be $515. She has been in business for awhile couldn't tell you exactly. She was a real estate agent before this and she is the account executive for the company. She is an amazing loan office. We also told her on the loe that we will pay off the $370 that is on my report if needed.
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