USDA Loans are perfect for people who want a home in a little more rural area. USDA Loans have no down payment requirement, and Sellers can pay closing costs… meaning you can buy a home with a USDA Loan with PENNIES out-of-pocket! The payments and Mortgage Rates for USDA Loans are some of the lowest available. Because there’s no down payment, the Government does require a slightly higher credit score than some other mortgage programs. However, minimum Credit Score requirements for USDA Loans 2015 can no longer go below 640.
The program’s full name is the USDA Rural Development Guaranteed Housing Loan program. Most people call them “USDA loans” or “USDA RD Loans”. USDA home loans NC are insured by the U.S. Department of Agriculture. Again, the USDA’s loan’s biggest feature is that it is a No Money Down Home Loan!
Is the USDA loan program limited to First Time Home Buyers?
No, the USDA RD Loan can be used by First Time Home Buyers and repeat buyers. We’ve done several loans for folks who currently have a house (in Tennessee for instance) and get transferred to NC – meaning that when they buy in NC… they’ll have 2 houses. There are some ways for this to work. (Call us 919 649 5058)
Minimum Credit Score Requirements for USDA Loans 2015
- For an “Automated” (Automatic) Approval on a USDA Home Loan in NC, a minimum credit score of 640 is needed. We will also need a 640 credit score if you are applying for the NCHFA Mortgage Credit Certificate / the 2015 Mortgage Tax Credit. IF YOU ARE OVER THE 29/41 Ratio requirements for a USDA Home Loan, you might need a credit score as high as 680 for an “Automatic Approval.” Without the Automatic (read: An approval spit out by the Computer system they have) then you will get a MANUAL Underwrite for your USDA Home Loan.
- We CAN do a Manual Underwriting of your USDA Loan if the Middle score of all applicants is at least 640. We need some strong Compensating Factors to ask for an approval on loans with middle credit scores between 659 and 640. A college degree, or Job training that provides some potential for increased earnings MIGHT be considered a compensating factor. There’s a pretty long list of USDA Loan compensating factors that we use to help borrowers with lower credit scores. Another factor we are seeing important for Manual Underwriting Approval is little to NO Payment Shock.
- With a Manually Underwritten USDA Loan, the minimum credit score requirements are tied to over-all debt ratios. Like Compensating Factors, we can ask for a Debt Waiver from the USDA Loan Underwriters, and we will go over all of your options if your scores are lower than USDA is looking for, or your ratios are higher. We WILL work with folks who do not CURRENTLY meet the minimum credit scores requirements for a USDA Loan 2015, to help you get them higher so you can buy. We can run “simulators” that tell us exactly what you need to do to get your scores higher. We are not a Credit “fixing” fill in the blank company. We are not charging you for our time, or expertise – we just hope you WILL use us when you’ve gotten your credit fixed and you’re ready to buy a house We are genuinely here to help!
- No more than one payment in the last 12 months can show as having been more than 30 days late. In general though, minimum Credit Score requirements for USDA Loans 2015 mean that you need 12 months of “Clean Credit” with no bad information added to your credit file. “Clean Credit” is a slang term used OFTEN in mortgage lending. It refers most often to someone who has 12 months with no late payments. But it’s not just late payments, it also refers to 12 months with no new collections filed against you. 12 months with no judgments of liens filed on your credit report. 12 months with no one writing anything to your credit report except GOOD STUFF.If you had some late payments on a couple of credit cards in the middle of 2006… and then you hit another rough patch in 2008, and then AGAIN in 2010 and 2011… we refer to that as “sloppy” credit. You could still have a credit score of 620 – but it shows a history of not paying on time. For THIS type of borrower – the underwriter might require us to have 18 to 24 months of CLEAN CREDIT!
- Chapter 7 and 13 must be DISCHARGED for 3 years – Foreclosures must have been completed 3 years ago. This is significantly more strict than FHA or VA loans, and while the Underwriting Manual says you can get an exception – we’ve had no luck getting one of their Underwriters to approve a loan with less than 3 full years.
- Collections – Accounts cannot have been placed in collection status within the last 12-months. So again, they want to see 12 months of good stuff being added to your credit report. Collections May not need to be paid off. This is especially true for Medical Collections.
- Judgements – Must should be paid off for at least 12 months. Because Judgements can attach to the property you purchase and become a first lien, this can be kind of a big deal… This requirement is non-negotiable, because you can not get Title Insurance if you have a Judgement or Lien against you. Remember, you can not dispute a Judgement or Lien. A Judge had to see the documentation for that to be on your report, so you have the option of Settling it – or leaving it on the report until it ages off. Unpaid Taxes (a tax lien) will stay on your credit report for 15 years.
- If the applicant’s middle credit score is 640 a written verification of rent is required for the most recent 12 months.
- USDA Loan Underwriters no longer accept non-traditional credit. Traditional Credit Scores are needed. We need at least two trade lines. We can no longer build credit, using your cell phone bill as proof that you make your payments on time. If you are a first time home buyer, and you don’t have much credit – or if most of the credit you do have is Student Loans, well then call us. You can sometimes get added to a family member’s credit card, or you can get started with a couple of secured credit cards. The problem is that USDA Home Loan Underwriters (as of December 2014) require us to back out the credit you’ve gotten as an Authorized User.
- You need at least TWO trade lines that are at least 12 months old. Some loan officers reported that they need 2 years of credit history. We don’t. NC USDA Loan Underwriters will approve loans with a 12 month history of on time charges, payments on at least 2 accounts.
To qualify for a USDA Loan, you must buy a house within the USDA Loan “Footprint.” Every County in North Carolina has some portion that qualifies for the program. These mortgage loans are for owner occupied properties, and they are really not designed for a Horse Farm. In fact Outbuildings can detract from the value USDA places on the home.
- Non-occupant co-borrowers are not permitted
- Generally, borrowers must sell their existing home – although, if it is a Company Directed Relocation, and you can not logically commute, you may be able to keep the existing home.
You must also be under the Household Income Limit for the County you are buying a home in. The USDA Loan Underwriter looks at Income from two different perspectives:
- Eligibility Income – Includes all income (salary, tips, bonus, overtime, alimony, child support, etc..) received by the applicant and co-applicant(s). This income is used to calculate qualifying ratios.
- Adjusted Income – This is the applicant’s eligibility income less the total of any of the following deductions applicable to the loan. Income from all household members must be included in the total adjusted income. This adjusted income must not exceed 115% of the median household income for the area.
If you are considering a USDA Home Loan, and you have more questions about the Minimum Credit Score Requirements for USDA Loans 2015 –> please call Steve and Eleanor Thorne , 919-649-5058 Connect with us on Google Plus or Facebook!