Any experience with a USDA backed mortgage or a HUD 203k? (loan, credit score)

[IntoTheMystic]

Can you provide any insights into either process?

Does the USDA have the same flexible credit requirements?

Is the 203k difficult to orchestrate? Worth the hassle?

THanks!

[Daddys///M3]

I am not extremely familiar so don't quote me, but I believe tha USDA is very similar to FHA, with the exceptions that it will go to 100% (actually 103% if I'm not mistaken for closing costs) loan to value and that it must be a rural area.

As far as a 203k goes, again not totally familiar. I believe that you must have a licensed contractor provide written estimates of repairs to be made. That and a few (could be more than a few) pieces of paperwork. I don't know if they are difficult to originate (never originated one myself) but I don't think that they are.

[ChipL]

USDA RuralDevelopment loans are very similar to FHA as far as underwriting guidelines go. The previous poster is correct in that you have to be in a rural area. Use the link on the UDA site to see if a particular property qualifies: http://eligibility.sc.egov.usda.gov/eligibility (broken link)

Rural Development income ratios are very similar to FHA, but RD also has HOUSEHOLD income limitations - how much money is brought into the household by all those living there can affect whether or not borrowers qualify.

RD also wants to see that a property meets minimum energy efficiency standards - storm doors and windows and certain levels of insulation.

And yes, 203k loans can be a pain - there's of course, extra paperwork. But that's par for any construction loan. Relatively few lenders are doing these, but it does serve it's purpose under the right scenario. Is this for a rehab or new construction?

[TimtheGuy]

USDA-RD has more restrictive underwriting than FHA because all files are manually underwritten so there are strict DTI restrictions. I believe the max DTI ratios are 30/40 (housing/total). Also has the restrictions that Chip mentions (income limitations and energy efficeincy). Although, I have not had one declined because of the energy efficeincy and I have only done them on old properties. The mortgage insurance on the RD is just like a VA loan. 2.2% is charged up front and added to the loan amount and there is no monthly MI. Lastly, for RD the property has to be in an accepted area (rural/non-metro).

I have always been told that the 203k process is a nightmare and to stay away from it.

[IntoTheMystic]

Thank you for the information. I am within the income guidelines and the house is eligible. It may need some updated systems and I had some information that the USDA might be more flexible in that account.

[Kristynwy]

We are going to try to get a loan through USDA also...
We are going to try to do a Manufactured home on a crawl space foundation...

There are two different kind of USDA loans, one is a "direct loan" that have income guidelines depending on household size... and then "guaranteed loan" that has the income limits a little bit higher so more people can qualify. The direct loans comes directly from them, but the other loan you go through a bank/mortgage lender of your choice, USDA will just guarantee it.

We are going to go for the direct loan, we fall in the income requirements...

I am just curious, do you or anyone know if they are strict on the credit score aspect of it? We got hit with a medical bill, that we were never given an invoice for and it made it to our report... and I had to pay the whole lump sum up front and I am trying to get it off our report now... I have been worried if it will affect our outcome though...

we have the income capability of repaying, I have just been nervous about the whole credit score thing... I am under the impression they are a bit more leaniant than conventional...

[ChipL]

Originally Posted by Kristynwy

We are going to try to get a loan through USDA also...
We are going to try to do a Manufactured home on a crawl space foundation...

There are two different kind of USDA loans, one is a "direct loan" that have income guidelines depending on household size... and then "guaranteed loan" that has the income limits a little bit higher so more people can qualify. The direct loans comes directly from them, but the other loan you go through a bank/mortgage lender of your choice, USDA will just guarantee it.

We are going to go for the direct loan, we fall in the income requirements...

I am just curious, do you or anyone know if they are strict on the credit score aspect of it? We got hit with a medical bill, that we were never given an invoice for and it made it to our report... and I had to pay the whole lump sum up front and I am trying to get it off our report now... I have been worried if it will affect our outcome though...

we have the income capability of repaying, I have just been nervous about the whole credit score thing... I am under the impression they are a bit more leaniant than conventional...

Medical collections won't hurt you and may not even have to be paid off to qualify. Check with the local RD office that you're getting the direct loan through. They are much more lenient than conventional...very similar to FHA. Don't expect crap credit to get you qualified, but if you only have one medical collection issue to worry about, I'm not seeing any propblem with that.

[IntoTheMystic]

It's my understanding that you cannot get a manufactured using USDA, but that may not be the case for the direct loan.

I have started the process and know that you don't need any explanations if your credit score is 620 or above. Below this you may have to write a letter explaining any problems.

[ChipL]

Rural Development does do manufactured homes

[rainmand]

USDA allows Manufactured Homes but they must be brand new - they can't be pre-existing like with the VA or FHA programs (manufactured homes can be done with those two programs if the home was manufactured after June 15, 1976). The USDA program even enables the homeowner to include the price of the land.