Before you start reading, this is a very long, very detailed post:
Our USDA 502 Direct loan process isn't quite the same as what I'm reading on these forums so I thought I'd share our experience. The major distinction is that we're using a qualified approved USDA loan application packager instead of applying directly to a USDA office. They application packagers is handling all of the legwork of the application and then sending it to USDA local office to complete and we're wondering what is different about the process.
My annual income as verified by employer 12/31/2013 is $28,936.80
My current credit scores are: EX: 721; EQ: 721; TU: 644
Monthly Debt: Student Loan 1% estimate $194; Auto Loan $163- all credit cards are $0 balance/0% utilization
To begin with, we decided to go through our local housing develepment office because they build and sell brand new construction homes specifically to low income families through a "revitalization" project in up and coming neighborhoods and they are a loan application packager/loan originator for USDA.
We had our first meeting with the housing counselor/loan originator on 08/23/2013. We found out the following: my wife couldn't be on the loan because her Ch. 7 bankruptcy was only 30 months out and we would be over income until our baby was born putting us into a larger family size and higher income limit. I also needed to lower my DTI backend ratio and raise my credit scores:
We set up an action plan with the counselor for when we returned after the baby was born or the money I received from VA GI BIll for school ended, whichever came first:
-We needed to put a minimum of $2000 in savings for "seasoned" money for HOI, possible closing costs, and Earnest deposit. (moved from checking to savings and have not touched)
-We needed to payoff and/or refinance our auto loan because we just bought a 2013 Dodge Journey in April and its payment was putting us over the backend DTI ratio when taken into calculation with the 1% student loan estimate since my student loan is in 6 month grace period.
(GM Financial Auto Payment $465, refinanced to Capital One Auto $163 payment after my wife's dad paid off $13,000 with what would have been her portion of inheritance from her grandfather's estate)
-I needed to pay off my credit cards to 0% utilization to help give us some wiggle room with the DTI ratio.
($2500 Discover card limit, $1200 utilized, minimum payment $47; paid to $0 balance; all other accounts were already paid to $0 but had not yet showed up on the credit report).
-I had to be removed from being an authorized user on my wife's CC account so they didn't count her minimum payment against my DTI ratio. (completed as soon as we left the meeting)
- Complete homeowner's education course (completed 10/2013)
In the interim, the housing counselor put us in touch with the construction manager, which sent us specs for the next home they were building with an expected completion in 12/2013. We really liked the home floorplan, the neighborhood is right where we want to be and bonus it's beside a major community park, best school district in the county, etc, but couldn't go under contract until our next meeting with the housing counselor since the home required we be within the income guidelines to even contract.
Fast forward to the end of November: Our baby girl was born making us a family of 5 and now within the income guidelines. All verifications were turned in by my wife to show that our full action plan had been completed and the housing counselor pulled a new credit report. My scores were well within USDA streamline process guidelines now and my debt-to-income ratio was now where it needed to be. My school income ended 12/13/2013 and we verified income ended.
12/18/2013 went to look at the completed home and put in the contract since we were thrilled (no kidding it's the perfect starter home for us) with the home. The contract is for $165,500 purchase price with $5k closing assistance. HOA fees $200/year and put down $500 earnest deposit. We went in to complete the application and were told I had to pay off a medical bill. Paid bill off, then came back in to sign all the final loan paperwork. Turned in 2011 and 2012 tax returns with w2s, 4 months of paystubs (just because I had them available), landlord and employer contact information, and copy of driver's license. I also gave them a check to pay for the USDA credit report fee as well.
12/20/13 we got an email..."After recalculation I show that you are eligible for the full RD amount of $157,600
Principle and interest shows $467.42 at a 1% rate, now keep in mind as it reaches the underwriter these
Numbers could change if they see something differently than we did.
But the ratios are good now with a back end of 39.34% (this has to do with credit debt owed and house payment)
So I would not use that Discover card while you are going through the loan process.
The back end number can be no more than 40%"
The remaining difference and any closing costs in excess of $5k will be covered by a second "silent" forgivable loan made by the housing authority or one of their community partners like neighborworks as what they referred to as a leveraged loan.
On 12/31/2013 after the housing counselor received my VOE, the application was submitted to the USDA approved loan originator FAHE/Just Choice Lending. They sent a request back for verification of my wife's full 16 digit CC account number because the documentation we submitted that I was no longer an authorized user only showed the last 4 digits of each account number and the numbers on the credit report are the first 12 of the account numbers. Finally got proof that the account number was the same, just 16 digits split 12 and 4.
The Housing Counselor emailed to say that my file is now in the local USDA office as of 1/17/2014.
Starting scores: August 23, 2013: EX: 603; EQ: 684; TU: 644
2 month improvement scores: Nov. 4, 2013: EX: 695; EQ: 719; TU; 628
4 month improvement scores: January 2014: EX: 721; EQ: 721; TU: 644
Current scores~ March 13, 2014: EX: 721; EQ: 721; TU: 669
