Approved by Bank, Denied by USDA

[TCKan]

I applied for an USDA loan (100% financing) last Friday and was approved by my bank with a mid score of 684. We were told we would be approved with no problem. USDA came back today and denied us. Although my scores are decent, we had a few late pays about 18 months ago on our mortgage. We were a month behind for 6 motnhs and then caught ourselves back up. What they were most annoyed with, was a late pay this January on my credit card. The payment is $15 each month. They feel that if we couldn't pay that, we can't pay a mortgage. The payment was missed because it was forgotten, not because we couldn't pay it. (I mean who doesn't have $15???) I am looking for a way to appeal the decision, but if that doesn't work, I am wondering if there are lenders doing 10% down loans that would look at credit score only, and not all the details of the report. Any suggestions?

[pizzadude]

Sorry to hear about the denial ~ Have you sent any Goodwill letters to the creditor to ask them to remove this late payment? I believe that pretty much all banks will require you to have 12 months of OnTime payments before you apply for a mortgage. I'm not aware that any banks will only look at your score and not all of the information on your credit reports.

[DrMac210]

Based on their underwriting guidelines, I could see them denying due to the lates on the mortgage as they consider two or more 30 day lates on a mortgage or rent in a 3 year period as "unacceptable".

As for the missed $15 cc payment, that doesn't make sense as you can have ONE 30 day late in the last 12 months.

[TCKan]

I tried that right after the lates occurred and they tried to tell me it was illegal for them to do that, and that company policy as well as the law would not allow it.

[StartingOver10]

If you are going to put down 10% you will see that the u/w criteria is different.

Is there a reason, if you have 10% for your down payment, that you are going USDA?

Try a conventional or FHA loan.

The more you put down, the less risk it is to the lender. You are highly risky at 100% and late mortgage payments and late consumer debt too (doesn't matter about the amount it is the combination of both late mortgage payments and very recent late cc payments). The more you put down the less risky your file is to the lender.

[Erinkkelly]

It doesn't matter if the payment is minimal or not...a late is a late. Most loans are run through an automated underwriting system...even USDA. If the computer doesn't approve you it's moved to manual sometimes which have a different set of rules, typically no late payments.. If you don't meet the guidelines then there isn't much to be done. It's looked at as if you can't manage your funds...I know it's just $15.
I've never heard of any mortgage program where the details of your credit aren't taken into consideration...would you lend money without looking at the details? I would think your loan officer should be working on other options for you to see if he can flip you into a different program. Some banks and credit unions have portfolio products where they basically make up the rules and hang onto the loan themselves, but these are all on a case by case basis bad honestly depends how important you are. Good luck!

[TCKan]

We were going USDA because we would be borrowing against 401K to put a down payment, or draining our savings completely, which I don't feel comfortable doing. We are looking at doing an FHA now after looking more closely at the guidelines. We have a better chance at that loan.

[TCKan]

We live in a small town, and my lender (large regional bank) actually told me that there are local banks in the area who do look at just the credit score and not the full history. She said that had USDA not flagged her on the report, she would have let us go through because his scores are good.

[TCKan]

Talked to a credit union and received an Approve/Eligible from AUS. Sent all my documents over for them to look at in the morning. LO was checking with UW to make sure that loan would be accepted. He said we would probably need a LOE on late pays, but that he and another LO both looked it over and thought it would be accepted. We will see what tomorrow brings.