Theoretically, Kentucky USDA Loans are not credit score driven. Borrowers with no credit scores are even eligible for this loan program.
However, most investors that fund USDA Loans want to see a minimum middle credit score of 620. A 640 middle credit score is preferred, since this is the minimum credit score required for a USDA loan to receive an automated underwriting approval through the USDA Guaranteed Underwriting System or GUS.
Better yet, a borrower with a 680 middle credit score, can obtain a "credit waiver" on all minor derogatory credit items, such as late payments on the credit report and small collection accounts. Borrowers with major credit issues such as bankruptcies, short sales, or foreclosures within the last three years will not be eligible for a USDA Loan regardless of the credit score.
If a borrower has a middle credit score less than 640, the loan request will be manually underwritten. As long as the borrower meets a more rigorous approval process, they still may be eligible for a USDA Loan. Borrowers with a middle credit score less than 640 or have a GUS "Refer" approval will need to ensure that:
- Total debt-to-income ratio for their housing expense cannot exceed 29% of the borrower's gross income, and total debt load including the housing expense cannot 41% of the borrower's gross income or 29%/41%. If the borrower's middle credit score is 680 or higher the debt-to-income ratio can be as high as 32%/44%
- Minimal credit card late payments within the last 12 months
- No accounts placed in collections status within the last 12 months
- All judgment must be paid off for at least 12 months
- Verification of rent or "rent free" letter required
Mortgage Loan Officer
email: kentuckyloan@gmail.com
