@StihlBilly wrote:
Our dream home literally just came on the market and I've been on the phone all day trying to move things forward with a USDA 100% loan. We currently own a 2 bed 1 bath ranch on a 1/4 acre. This new home is a 3 bed 2 bath on 5 acres. Plenty of room for our growing (2 kids, maybe one more) family. Here are the details:
- Combined income of 115K but with deductions for 2 children and childcare expense we just squeak in under the limit.
- CH7 BK was discharged 2 years ago yesterday.
- BK was due to my wife being out of work for a year and a half (extenuating circumstance to hopefully get around USDA's three year seasoning requirement).
- Have established good credit since the BK-FICO scores are 680 for each of us.
- Our only debt is mortgage (discharged but have never missed or made a late payment in the seven year history of the loan), one car loan ($230), and student loans ($625 for both of us), no credit cards.
We are going to try first to keep both homes and rent our current home because I don't know if we can get it sold in time. We do have a listing agent working on getting the home on the market ASAP though. What are our chances?
A couple problems. First, are you going for a Direct Loan from USDA, or a Guaranteed Loan? The rate is lower for a Direct Loan (currently 3%), but very slow, aka a morttgage at government speed. I applied for a pre-approval for a Direct Loan in late Feb and just yesterday received my notice "Your application has been selected for processing", requesting income documentation & a $32 fee to pull my credit. Second, you are permitted to own 1 other home in addition to the own you want to purchase if you can document that your current home is inadequate for your needs. You would seem to qualify for "overcrowding": Severe overcrowding which is defined as more than 1.5 household residents per room. The lender must obtain verification that overcrowding has existed for more than 90 days and will persist for at least nine (9) months into the future.
BUT, you will likely have a problem qualifying for adequate income to support the mortgage payment on both properties if you rent out your current home because: Applicants retaining their existing dwelling must qualify for all mortgage liability payments. Newly signed leases have no historical basis to conclude that the income is likely to continue and cannot be used for repayment ratio calculation. Rents received less than 24 months do not represent a stable continued source of income for repayment income due to lack of history and cannot be used when qualifying the loan request. The exclusion of rental income will ensure the applicant has sufficient monthly income to meet all mortgage and liability payments.
That's from Chapter 8 of the 3550 Handbook, which can be found here:
http://www.rd.usda.gov/publications/regulations-guidelines/handbooks
Do you have enough savings for a 3.5% down payment for an FHA loan? That would be an easier route to go.
