cancel
Showing results for 
Search instead for 
Did you mean: 

My USDA Direct journey.

tag
DanTheMan77
Regular Contributor

Re: My USDA Direct journey.

If you are going to be using the USDA Direct program, I STRONGLY suggest you download and become familiar with the following document:

 

http://www.rurdev.usda.gov/supportdocuments/hb-1-3550.pdf

 

This is the USDA Fieldoffice Handbook. It contains all of the USDA guidelines. Read page 4-60 (page #186 of the PDF). It explains exactly how student loan payments are to be calculated into your debt ratio. Here's what is says:

 

Total debt includes PITI, all long-term obligations, and short term-obligations that have a significant impact on repayment ability. The following items should be counted:

 

  • Deferred debt regardless of the length of the deferment period. Examples of deferred debt are items purchased under a retailer’s “no payments until” offer and student loans where repayment has not commenced since the borrower is still in school. If the credit report does not reflect the anticipated monthly payment due at the end of deferment, the Loan Originator should obtain verification of the monthly payment directly from the creditor or request a copy of the loan agreement from the applicant. For student loans, the monthly payment can be estimated using 1 percent of the loan balance report on the credit report if the other verification methods are not feasible.

Going through the USDA Direct process myself, I have found that often the people at the USDA office don't know their own rules, or are too busy/lazy to follow them completely. Unfortunately, whether or not something is feasible, as required above, is often left to the judgement of a government employee. All you need to do is make verifying the payment amount feasible. If I were you, I would send her the page and ask her to explain why she is doing something different than what is required. You may not need to take the loans out of deferment at all if you can get your lender to send the USDA verification of the payment amount.

 

I had to do something similar several times throughout my process. It's a little awkward, but the rules are the rules and they have to follow them. Just try to be pleasant and helpful, otherwise your file may end up on the bottom of the pile.

 

Let me know if you need any more help. Hope it works out. 

 

 

Message 11 of 30
StarraeAday1
Regular Contributor

Re: My USDA Direct journey.

I've already downloaded and read most of the handbook, but thanks for the link. When I submitted my prequalification app, I also submitted letters from both student loan servicers advising what my IBR payments would be if I were in repayment. When I questioned her on this, I copied and pasted the exact passage that you cited. This was part of her reply back to me:

 

We have a clarification from our National Office in Washington D.C. called an Unnumbered Letter dated May 12, 2014 to Single Family Housing telling Direct loan underwriters quote” the higher of the monthly student loan payment listed on the credit report or one percent of the student loan balance must be used in the calculations of the total debt ratio. This applies to all student loans regardless of status (deferred, in repayment, etc.)”  It continues to say “ May grant an exception and use the actual month payment under the  existing repayment plan if:  lender documentation is obtained confirming that the loan status is “repayment” and the repayment plan is something other than the standard 10 year repayment plan, and using the higher of the monthly student loan payment or 1% of the student loan balance results in a qualification amount that is insufficient to obtain modest, decent, safe and sanitary housing, and no additional risk layering, and loan official  must have thorough documentation in the case file. Your letter dated August 27th from Great Lakes states this loan is in deferment not repayment status and additionally it stated IBR plans are approved for 12 months.   I based the conversation on the documentation you provided when I spoke to you about having to count the 1% payment in your ratios.

 

She also reiterated that this was merely prequalification counseling and that I am free to submit an application at any point. I'm unsure exactly how to proceed at the moment, honestly.

Foreclosure - June 2017
Ch. 7 BK - Discharged January 2018
6/2020 - EQ 680 | EX 691 | TU 707
Message 12 of 30
DanTheMan77
Regular Contributor

Re: My USDA Direct journey.

Ah, I wasn't aware of that. Here's the letter if you're interested: http://www.rurdev.usda.gov/SupportDocuments/ulmay14.pdf

 

It seems like your situation meets the parameters outlined in the letter to allow them to use the actual payment, provided you put your loans back into repayment status. Let us know what you decide to do and how it turns out. I'm sure there are/will be other people in the same situation.

Message 13 of 30
niquieg
New Contributor

Re: My USDA Direct journey.

From my experience with the USDA program, my loans are $0 under the IBR which I was told they can't accept a zero balance  the system requires them to use 1% unless I can provide documentation with another amount. They asked me to provide atleast 6 months worth of payments, I started making a $50.00 payment monthly, and when I provided the reciept they used that figure.

Bank of America $5000/ Alliant Credit Union $2000/ Amazon Chase $2000/ Capital One $1600/ First Premier $475
Message 14 of 30
StarraeAday1
Regular Contributor

Re: My USDA Direct journey.

So I took both of my student loans out of deferment and put them on IBR and everything is already reporting. The awesome thing is that the actual IBR payment is half of what they quoted that it would be, which will surely help my DTI. With such low numbers, every dollar really counts here! And it looks like we may be getting 3% raises at work (I work for my local county government) after the first of the year, so that will help also. Supposedly the last two medical collections that I paid will be off in January, so my tentative plan right now is to go ahead and apply after I know they're gone. I don't think they would hold up my deal, but I'd rather just not have them there at all. I was able to get Synchrony to delete the derogatory information from a paid, closed chargeoff, so now it just looks like a positive TL which is thrilling for me. I'm going to keep working on the cleanup between now and January, but even if I can't accomplish anything else, I hope I'm not deluding myself by thinking that I'm in good shape. I just wish I had an idea of how much we will qualify for and if we'll get a subsidy. I mean, I've done a TON of calculations on DTI so I have a decent idea of our loan amount, but the subsidy should increase it from what I understand. Argh, so many unknowns right now! Thanks for "listening" to me ramble. Smiley Happy

Foreclosure - June 2017
Ch. 7 BK - Discharged January 2018
6/2020 - EQ 680 | EX 691 | TU 707
Message 15 of 30
StarraeAday1
Regular Contributor

Re: My USDA Direct journey.

My full application was mailed off today! I got confirmation a few days ago that the two collections I was waiting for to be deleted are now gone, so it's game on! I really tried hard not to look at houses very much until we got closer to (hopefully) being approved, but we found one two days ago that's newly listed and is PERFECT. We might go look at it this weekend, but I'm hesitant to do that as I was told it can take 30 days for approval from the time they get all of my documentation. I don't want to be pressured into trying to make an offer when I don't even know for sure yet that we'll get approved. Dilemma!!!

Foreclosure - June 2017
Ch. 7 BK - Discharged January 2018
6/2020 - EQ 680 | EX 691 | TU 707
Message 16 of 30
StarraeAday1
Regular Contributor

Re: My USDA Direct journey.

We didn’t end up going to look at the house; the status changed to Contingent the night before our appointment, and since we’re not approved yet we just decided to hold off for now. I still haven’t heard anything from USDA yet, but I don’t really expect to at this point. They have not yet cashed my credit report fee check and I haven’t gotten any new inquiry alerts yet, so I’ll assume nothing is happening for the time being.

Foreclosure - June 2017
Ch. 7 BK - Discharged January 2018
6/2020 - EQ 680 | EX 691 | TU 707
Message 17 of 30
StarraeAday1
Regular Contributor

Re: My USDA Direct journey.

I got an email from the USDA loan processor this morning just letting me know that she received my mailed check for the credit report fee. She also let me know that it would be about a week for her to get my report back. I did finally think to ask her if there is funding available, and she said yes. Then this evening I found the letter in the mail saying that my application had been selected for processing, and asking for just a few clarifications regarding my husband not working. I've got it all filled out and will get it back in the mail tomorrow. Keeping my fingers crossed at this point for a relatively painless process.

Foreclosure - June 2017
Ch. 7 BK - Discharged January 2018
6/2020 - EQ 680 | EX 691 | TU 707
Message 18 of 30
mandee
Member

Re: My USDA Direct journey.

Congrats! Best of luck to you! I can't wait to hear how it all works out for you. We hope to start the process in a few months with USDA to.

Message 19 of 30
StarraeAday1
Regular Contributor

Re: My USDA Direct journey.

Thanks! I'm trying to journal most of the steps, because there is so little information out there about the Direct loans. I'm absolutely dying to know what our approval and subsidy amounts will be.

 

I did get the first inquiry notification today, so the process is definitely underway!!!

Foreclosure - June 2017
Ch. 7 BK - Discharged January 2018
6/2020 - EQ 680 | EX 691 | TU 707
Message 20 of 30
Advertiser Disclosure: The offers that appear on this site are from third party advertisers from whom FICO receives compensation.