USDA RURAL HOUSING MORTGAGE GUIDELINES
USDA allows an LTV of 100%. Therefore, the borrower would only need to bring closing cost to the table.
You can also have 6% Seller concession. On CONV its only 3%.
Your USDA Guarantee fee can be financed into the loan.
Closing Cost can be a gift from a relative
Finance 100% of Appraised Value – when home appraises for more than Purchase Price the closing costs and prepaids can be financed into the loan (up to the appraised value)
CAIVRS-All must reviewed and acceptable. Individuals who have been suspended or debarred from participation in Federal programs or they have delinquent federal debt are not eligible for a USDA Guarantee Loan.
Guarantee Fee
USDA requires the borrower to pay an upfront Guarantee Fee and an annual fee.
• The USDA Guarantee Fee is 1% • The Annual Fee is .35% • The maximum LTV/CLTV for transactions is 100% of the appraised value if the Guarantee Fee is not financed
The USDA Guarantee Fee is 1%. The initial guarantee fee may be financed in the loan transactions. Please note that, when financed, there is an additional fee charged. The Annual Fee is .35% If the borrower does not finance the Guarantee Fee, The maximum LTV/CLTV for transactions is 100%. The total loan amount may exceed 100% LTV but this is only if the Guarantee Fee is financed into the loan amount.
GUS—Automated Underwriting System
USDA GUS (Guaranteed Underwriting System) must be used for all transactions
GUS AUS Recommendations: • Accept/Eligible: Eligible for financing provided that the loan does not require a manual downgrade and all conditions noted in the GUS findings are met. • Refer/Eligible: Loan must meet manual underwriting guidelines as noted in the Product Guide and the USDA Handbook • Refer with Caution: Not eligible for financing
GUS AUS Recommendations: Accept/Eligible: Eligible for financing provided that the loan does not require a manual downgrade and all conditions noted in the GUS findings are met. Refer/Eligible: Loan must meet manual underwriting guidelines as noted in the Product Guide and the USDA Handbook Refer with Caution: Not eligible for financing
Borrower Requirements
Borrower Eligibility: • Must be a U.S. Citizen, U.S. non-citizen Nationals or a Qualified Alien • Borrower may not own other residential property except under specific circumstances. • If borrower is eligible for Conventional Financing, they are not eligible for USDA financing.
Must be a U.S. Citizen, U.S. non-citizen national or a Qualified Alien Borrower may not own other residential property except under specific circumstances: Other residential property owned is not financed by a RD guaranteed or direct Section 502 or 504 loan or an active grant (the grant agreement has not expired); Borrower(s) must be financially qualified to own more than one house (limited to owning one single family housing unit in addition to the subject property); Borrower(s) will occupy the subject property as their primary residence throughout the term of the loan; Current home owned no longer adequately meets the borrowers’ need. The determination that the current home no longer adequately meets the borrower’s needs must include documentation of a significant status change in the circumstances of the borrower that require immediate remedy. Borrower must meet ALL of the above circumstances.
If borrower is eligible for Conventional Financing, the are not eligible for USDA financing. For more information on how conventional financing is defined, please refer to the USDA Handbook 3555 Chapter 8.
Borrower Eligibility Requirements-Credit
• The minimum credit score on USDA loans is a 620 • USDA requires a Tri-Merged credit report unless certain circumstances apply • Credit Reports can be no greater than 120 days old at the time of closing • All borrowers must have at least two credit scores
Minimum credit score is a 620--This is on Full docs loans and streamline transactions.
USDA requires a TriMerge report to insure that no items are missed when reviewing the credit history--However, under certain circumstances a full RMCR (Residential Mortgage Credit Report) can be used. The circumstances are when An applicant disputes accounts; An applicant claims that collections, judgments, or liens reflected as open on the credit report have been paid and cannot provide separate supporting documentation; Borrower claims that a debt shown on the credit report has a different balance and/or payment and cannot provide a statement less than 30 days old; or Underwriter determines that it would be prudent to utilize a RMCR rather than a tri-merged report to properly underwrite the loan
Credit Reports can be no greater than 120 days old at the time of closing
All borrowers must have at least two credit scores to be eligible--however, borrower(s) with only one score may be permitted with a GUS Accept recommendation. This file will be downgraded to a Manual Underwrite and will require additional information
Borrower Eligibility Requirements-Credit
• Two or more trade lines that have existed for a minimum of twelve months must be present on the borrowers credit report to establish a credit reputation and validate the credit score regardless of GUS recommendation • Files can be manually underwritten under certain circumstance and will require additional documents • Borrowers with credit scores 680 or greater or have a GUS “Accept” recommendations are not subject to verification of rent or housing history
One of the borrowers qualifying for the loan must have Two or more trade lines that have existed for a minimum of twelve months must be present on the borrowers credit report to establish a credit reputation and validate the credit score regardless of GUS recommendation. The trade lines may be open, closed, and/or paid in full by the applicant. Acceptable Trade lines are: Loans (secured or unsecured) Revolving Installment credit Credit Card Collection Charge-off Authorized user accounts may not be considered in the credit score and credit reputation analysis unless the applicant provides documentation that they have made payments on the account for the previous twelve (12) months prior to application Non-Acceptable Trade Lines are: Public records such as bankruptcies, tax liens or judgements Any disputed accounts
Files can be manually underwritten under certain circumstance and will require additional documents.
Borrowers with credit scores 680 or greater or have a GUS “Accept” recommendations are not subject to verification of rent or housing history.
Borrower Eligibility Requirements-Credit
• Student Loans must be included in the debt ratio calculations regardless of the deferment period • Collection/Charged Off Accounts-Excessive collection and charged-off accounts can indicate an unwillingness to repay obligations and are to be treated accordingly. • Bankruptcy—Chapter 7 and Chapter 13 Bankruptcy does not disqualify the borrower
Student Loans must be included in the debt ratio calculations regardless of the deferment period. All files must be documented to verify the current payment due. Calculation must include the greater of one percent (1%) of the outstanding loan balance or the payment as reflected on the credit report if it represents a fixed payment. Fixed payment is defined as a fixed payment, interest rate and repayment term. There must be no future adjustments to the terms of the student loan payment. Documentation is required to verify the fixed rate terms. Income Based Repayment (IBR) plans, graduated plans, adjustable rates, interest only and deferred plans are examples of repayment plans that are subject to change and do not represent a fixed payment or repayment plan. These types of repayment plans are unacceptable to represent a long term fixed payment repayment plan and will require 1% of the loan balance reflected on the credit report to be used as the monthly qualifying payment. No additional documentation is required
Collection/Charged Off Accounts--The borrower's overall credit profile must be carefully reviewed to ensure he/she has the ability and willingness to repay obligations. Excessive collection and charged-off accounts can indicate an unwillingness to repay obligations and are to be treated accordingly. Letters of Explanation for Collection/Charge Off Accounts: For Manually Underwritten loans, the borrower must provide an acceptable explanation and supporting documentation for each outstanding collection account.
For GUS loans, a letter of explanation or documentation from the borrower is not required when the underwriting recommendation is an “Accept”. Regardless of underwriting method, the underwriter must document reasons for approving a loan request when collection accounts are present and remain unpaid and ensure guidelines are being met.
Requirements of Collection/Charge Off Accounts: If the remaining outstanding balance of collection accounts are equal to or greater than $2,000 (excluding medical collections), the following will apply: Payment in full of all collection accounts at or prior to closing with proof provided. Fully documented payment arrangements made with each creditor for each collection account remaining outstanding. The documented payment must be included in the borrower’s debt-toincome ratio. In the absence of a payment arrangement, 5% of the outstanding balance of each collection account must be included in the borrower’s debt-to-income ratio. Charge-off accounts are considered to be already reflected in the credit score and do not need to be included in the Borrower’s long term liabilities or debt. If the Borrower has entered into an agreed upon repayment plan with the creditor, a liability payment will be included in the long term liability/debt. For manually underwritten loans, a charge-off will considered a derogatory credit item, GUS Accept recommendations will not require additional credit documentation
Bankruptcy--A Chapter 7 bankruptcy (liquidation) does not disqualify a borrower if at least three years have elapsed since the date of the discharge of the bankruptcy. During this time, the borrower must have re-established good credit or chosen not to incur new credit obligations. An elapsed period of less than 3 years, but not less than 12 months, may be acceptable if the borrower meets the certain criteria If the Chapter 7 bankruptcy included the borrower’s mortgage debt, any foreclosure or remaining foreclosure pending is an action against the property, not the borrower. The foreclosure action is not considered as an indicator of unacceptable credit in the borrower’s evaluation. A loan underwritten through GUS will not be required to be manually down-graded when the bankruptcy discharged included the mortgage debt. A Chapter 13 bankruptcy plan in progress does not disqualify a borrower provided 12 months of the debt restructuring plan has elapsed, the borrower’s payment performance has been satisfactory and all required payments were made on time and the borrower must receive written permission from the bankruptcy court to enter into a mortgage transaction. A credit waiver will be required for a manually underwritten loan. A completed Chapter 13 bankruptcy plan will not require a credit waiver provided the borrowers have demonstrated a willingness to meet obligations when due for the 12 months prior to the date of loan application.
Borrower Eligibility Requirements-Credit
• Judgements/Liens-If the account is Federal, it must be paid in full before the loan can close. If the account is not Federal, a payment arrangement must be in place and show at least 3 months worth of payment history. • Foreclosure—Generally the borrower is not eligible for a Guarantee Loan if during the prior three years the borrower’s previous real property was foreclosed on or they have given a deed-in lieu of foreclosure
Judgment Accounts--Judgment accounts with a repayment plan already established and a history of consistent repayment underway will be included as a long-term obligation, unless less than 10 months of the repayment plan remains and the debt does not have a significant impact on the repayment of the Borrower. Outstanding Federal debts, recorded outstanding Federal judgments, and/or Federal tax liens must be satisfied prior to loan approval. If the outstanding debt is specifically with the United States Tax Court, evidence of payment arrangements may be acceptable for IRS Federal tax judgments. All supporting documentation must be provided, including satisfactory payment history. Non-federal, court ordered judgments must be paid in full prior to loan approval. An exception to payment in full can be made when the borrower(s) have a payment arrangement with the creditor and have made regular and timely payments for the three (3) most recent months prior to loan application. Prepaying schedule payments as a means of meeting the minimum requirements is not permitted. Documentation of payment arrangements is required and the payment will be included in the debt-to-income ratio.
Foreclosure—Generally the borrower is not eligible for a Guarantee Loan if during the prior three years the borrower’s previous real property was foreclosed on or they have given a deedin-lieu of foreclosure
An exception may be considered if: If the occurrence resulted from a temporary situation beyond the borrower’s control and the circumstances have been removed and resolved for a minimum of 12 months prior to application; OR A significant reduction (50% or more) in housing expense will result from the new guaranteed loan.
Joel Lobb
Mortgage Loan Officer
Mortgage Loan Officer
Individual NMLS ID #57916
American Mortgage Solutions, Inc.
10602 Timberwood Circle
Louisville, KY 40223
Company NMLS ID #1364
Text/call: 502-905-3708
Mortgage loans only offered in Kentucky.
All loans and lines are subject to credit approval, verification, and collateral evaluation and are originated by lender.
Products and interest rates are subject to change without notice.
Products and interest rates are subject to change without notice.
The view and opinions stated on this website belong solely to the authors, and are intended for informational purposes only. The posted information does not guarantee approval, nor does it comprise full underwriting guidelines. This does not represent being part of a government agency. The views expressed on this post are mine and do not necessarily reflect the view of my employer. Not all products or services mentioned on this site may fit all people.
NMLS ID# 57916, (www.nmlsconsumeraccess.org).
NMLS ID# 57916, (www.nmlsconsumeraccess.org).
