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Hi everyone! I've been looking into the USDA loan requirements and it seems like DH and I may qualify. I was hoping some of you could lend any advice or information about where we might sit on this.
The only real stickler that I'm worried about is not having any credit history. Neither of us have built up any credit whatsoever because we lived in the UK most of our adult lives--but we have no credit built up there to use as a reference, either. We moved to Arkansas in October 2008 and have applied for the odd credit card once or twice since then, but never got approved because of lack of a credit history. I think we might have a chance of sliding by on "unconventional credit" such as utilities and rent, but all we have in that department is rent (our rental history dates back to July 2009, so nearly a year), water, and electric, which also dates back to July 2009. Is it possible that this will be enough to satisfy the credit requirements? Has anyone had success getting a USDA loan without a conventional credit history?
Another question I have is a little on the odd side. I understand that with a USDA loan, one can borrow 100% of the value of the house. Well, the home we are interested in is listed at $85,000, but has been reduced from $99,900. That leads me to believe the home is worth at least $99,900. If we were approved for this USDA loan, would we be able to take out a little more than is necessary to cover the cost of the house as well as closing and application fees? I'm just wondering if it would be possible to take out an extra grand or two to fix up the place (mainly paint, as it needs a paint job pretty badly), as well as purchase a fridge and stove (which don't come with the house), and take care of any other little nuances that may need repair, but which aren't "necessities".
I'm sorry for being so long-winded! I'm afraid I've gotten my hopes up about the house and our appointment with the loan officer isn't until Monday. I just want a better idea of where we sit on this.
Thanks for reading and for any input you can offer!
USDA is what is called a "manual underwrite." The lenders that require a minimum credit score are overlays, the banks individual requirements, not USDA's. They require a credit score so they can underwrite the loan using the automated underwriting system (AUS). The trick is finding a lender that will let you do a manual underwrite. But let's say you find one, you still must provide at least 3 credit references with a 12 month history. Typically, electric, cell phones, landline phones, water and sewer bills are used as an alternative credit reference. The other roadblock you face right now is the USDA loan program does not have funds at present. There are 2 bills I am aware of that include funding for the USDA loan program, but they have yet to pass. As for the appraisal/loan amount question......if the appraisal comes in higher than the sales price, USDA will allow you to use the difference for closing costs.
The bill for more money passed in the House and is expected to pass in the Senate. There will be little if any break in the action as far as funds available and a few banks are still doing USDA loans so I guess they're not out of money yet anyway.
My question is, why do banks generally choose not to do a manual underwrite? More work for them? They figure its probably hopeless since the file didn't pass AUS?
On the credit question, you can get an alternate credit score of 620 (which is high enough to qualify for a USDA loan) if you provide 3 alternate 12 month credit references (12 months rental history + 12 months on 2 utilities ought to do it.) The USDA also has some other credit requirements pertaining to any negative items on your credit. I seem to remember something about not having any charge offs for a certain period of time after a bankruptcy.
On the loan value question, the answer is yes. You can borrow 100% of the value, some closing costs, and can even borrow for some home improvements.
On the funding issue brought up, I know someone who closed on a USDA RD loan last week in the morning, and the loan funded that afternoon.
Hope this information, and the visit with the lender, helped.
We had our appointment and although we didn't qualify for the guaranteed loan, we did qualify for the direct. We ended up going through a local USDA office, and they never uttered a word of concern about the USDA program running out of funds. Anyway, thought I would post the items we needed in case anyone else runs into the same problem.
Documentation needed:
2 years of W-2 for my husband
2 years of tax forms for myself (I'm self-employed)
A credit statement of good standing from three different companies (we used rent, electric, and water)
Contact information for landlord
Bank account information (name of bank, address, and account number)
Employers' names, addresses, phone numbers, and monthly income for past 2 years of employment
Social security cards
Photo ID
Permanent resident card (for my husband, as he's here on a PR visa)
Also if you're on food stamps, SSI income, or anything like that, you'll need to have documentation stating how much you get each month.
I don't mean to be the rain on your parade but I'd ask.
Funds are expected to run out by tomorrow.
At first lenders were optomistic because they thought USDA would continue to guarantee the loans. In fact, they sent out this notice yesterday:
[CENTER][CENTER]05/11/2010[/CENTER][/CENTER]
Fiscal Year 2010 Appropriated Funds - Issuing Conditional Commitments once Appropriated Funds are Exhausted
The Single Family Housing Guaranteed Loan Program (SFHGLP) will issue Conditional Commitments once currently appropriated funds for FY 2010 are exhausted. Conditional Commitments will be issued “subject to the availability of funds and Congressional authority to charge a 3.5 percent guarantee fee for purchase loans and a 2.25 percent guarantee fee for refinance loans.” Please see the attached document for further details.
Questions regarding this notice may be directed to any representative of the SFHGLP or your State SFHGLP Coordinator.
But, today they sent out a new notice:
[CENTER][CENTER]05/12/2010[/CENTER][/CENTER]
Fiscal Year 2010 Appropriated Funds – Issuing Conditional Commitments once Appropriated Funds are Exhausted
The purpose of this notice is to recall and void the guidance that was released on May 11, 2010, regarding Fiscal Year 2010 Appropriated Funds - Issuing Conditional Commitments once appropriated funds are exhausted. The guidance provided in the notice will be revised and released within the next 24 to 48 hours. We apologize for any inconvenience this may cause, and reiterate that the guidance provided on May 11, 2010 is hereby void.
We appreciate your continued participation in the Single Family Housing Guaranteed Loan Program. If there are questions regarding this notice please contact our office at 202-720-1452.
I used USDA on my purchase and I think it's a great program, but I can't help but think they are looking to tighten things up a bit before putting in more funding. Their definition of "rural" is rather liberal and with FHA tightening their guidelines, I can't help but think USDA is next. The program has certainly grown beyond it's intention.
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