USDA Loans. I wish for once someone would put things straight on the requirements.

Asked by Confused, 46131 Tue Feb 7, 2012

For once I would love to know where all this Fico score at 620 and Bankruptcy older then 36 month is coming from. There is nothing listed on USDA website about this or nothing in CFR 7 about this. If I missed something I apoligize. Is this something the lenders have imposed themselves? We have tried and tried to get financed and since I have a Bankruptcy (95% medical exepenses) my score is 590 and I keep getting denied even after the USDA told me there are no such guidelines that THEY impose and I should have no problem. This is soley on the lender. So who is lying? USDA or lenders?

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Kendratara, Both Buyer And Seller, Boise, ID
Fri Aug 12, 2016
USDA guaranteed loan is a great program if you qualify. No money down and relatively low mortgage insurance compared to other loan programs. Contact an USDA approved lender to learn about their specific qualification requirements.
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1 vote
Lew Corcoran, Agent, Easton, MA
Tue Feb 7, 2012
In general, USDA follows FHA guidelines/requirements in underwriting a mortgage application. Basically, that means if you qualify for an FHA mortgage, you'll also qualify for a USDA Rural Development loan subject to income and property location requirements.

USDA does state in their underwriting requirements that a bankruptcy or foreclosure of less than 36 months is considered unacceptable credit history. However, they do allow 'mitigating circumstances' that is / was temporary in nature and beyond your control such as increased expenses due to illness.

USDA also talks about credit scores and when a lender should accept or deny a mortgage application for USDA. You can find a quick read of this at…

All that being said, lenders do have what are known as "overlays." Simply put, lenders can (and often do!) impose stricter underwriting requirements than what USDA calls for. It's perfectly legitimate for lenders to do so. That means lenders can require such things as higher credit scores, longer wait periods after a foreclosure, short sale, or bankruptcy, and so on.

You should find a mortgage originator who fully understands USDA requirements and who also understands lender overlays to help you fully document your circumstances. In your case, you should be able to document the medical conditions that led up to your bankruptcy. However, your low credit scores could be enough for a lender to show concern and not approve your mortgage application.

Hope this helps.
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1 vote
Brian.young, Home Buyer, Rockford, IL
Mon Dec 28, 2015
Licensned in 43 states not just CA, I work for a direct lender in the mortgage industry who offers conventional, FHA VA, and USDA loans. The best part is unlike lendingnetwork we keep your info private not broker it out and we go below 580. Are lowest score we accept for government loans are 550 when most lenders require a 620 and brokers a 580. You have to have two years of income with a score over 550 with bankruptcies discharge date 2 years and over. We have basic guidelines and a pretty easy process. Feel free to text me or call me anytime up to 10:00pm Eastern with any questions.
Brian Young 214-797-3479
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Kathy Lewis, , Valdosta, GA
Wed Nov 11, 2015
Yes, to answer your question - all lenders and banks have their own in house "overlays" to all programs.

USDA Mortgage Hub
100% USDA Rural Housing Loans
Serving all 50 states
Ph: 800-691-8826 (7 days a week)
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Confused, , 46131
Tue Feb 7, 2012
You have all been so helpful. Thank you so very much for explaining this further.
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Confused, , 46131
Tue Feb 7, 2012
Thank you! That makes much more sense to me. First time doing this and its super confusing to me.
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Allison Fish…, Agent, Ann Arbor, MI
Tue Feb 7, 2012
Best if answered by a lender. I know it is hard to keep all the guidelines and rules together
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David Mennen, , Indiana
Tue Feb 7, 2012
Sorry things are confusing...... We work with several lenders and what you are finding out is the dirty little word called OVERLAYS.... which is simply -- rules on top of USDA's requirements....

In short I would like to help you. Long story short you will need to get your credit scores up and find a USDA lender that will consider your loan.... We can help guide you for both -- raising your credit scores and finding a USDA lender that will work with you...
Please call me or email me. David Mennen - Tippecanoe Mortgage - Owner. 765-448-3200 or email
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Ron Thomas, Agent, Fresno, CA
Tue Feb 7, 2012
USDA does not control everything on this loan;
some things are left up to the individual Lender.
If you are having problems with a particular Lender, find another.

Good luck and may God bless
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