USDA Direct Loan Question

[Anonymous]

Hello all!

Just looking for opinions/advice from fellow FICO members who rebuilt credit to apply for a USDA loan.

I have spent some time rebuilding and have brought my scores above the 640 threshold needed to apply for a USDA Direct residential loan.

There are 2 current issues on my report that I am still working to resolve. 1 is a paid collection from Midland that I am working on getting deleted. This is a work in progress and I am hoping it happens soon.

The others is a judgment that was filed January 2010. I started payments on this 3 months ago. I have a confirmation letter from the Collection Agency regarding this payment plan. I know the requirements say no active judgments. I am going to continue monthly payments and intend to pay this off in full no later than Feb/March 2011. I cannot do so before unless I apply for new credit-and I have been refraining from doing so.

Will this judgment be a major hindrance? I am going to submit my app regardless and see where it takes me. I cannot imagine waiting another year AFTER payment in full to attempt homeownership as we are cramped in our current place.

My DTI, income and everything else qualifies me. This debt is the only thing I am concerned about.

Any advice? Experience?

Thanks in advance.

[Anonymous]

I would still try.  They havent said a word about the unpaid collection on my report. 

I hope you have a whole lot of patience for this loan because we've been in this process since May and pretty sure we're going to be waiting a lot longer. 

[Anonymous]

Thanks for the advice.

yes, I have heard the process can take awhile so I am prepared. I think. lol

[Booner72]

I had a judgment placed on my credit 2/2010 or 4/2010.  I closed on my house 8/19/11.  A requirement was to pay it off.  I was super-worried that this would be a deal breaker by my LO says she sees judgments (paid) get through automated underwriting "every day" was her words.  It's 12 months clean credit from when it was reported, not from when it was paid.

I've heard others getting mortgage w/ the judgment as long as they can prove 12months of on time payments.  In my case, I had to pay it.

Good Luck.

[Anonymous]

Thanks Booner.

I am 3 payments in so far. It is a 12 month payment plan. If they require it fully paid prior to/at closing, I will do whatever it takes obviously. The balance will be lower at that time so it should be easier.  I don't want to wait to apply in case it can make it through one way or another.

It's been over a year. Nothing negative since that date of Jan 2010. Nothing I am worried about popping up.

[wednesdayaddamsd]

Booner the OP is asking about the USDA Direct program, which is vastly different from others. Unless you had a USDA Direct mortgage, your own experience won't help the OP.

[Macbookguy]

I applied for a USDA direct earlier this year and closed on my house on 8/26. Credit is really subjective in this program and it has been my experience of going through the program myself and now helping a friend get through it that each area specialist (loan officer) applies the credit standards differently. The general rule is absolutely no unpaid collections and no judgments for the previous two years. Paid collections are a six month wait from the date of payment.

It was my experience that I was about to be in a world of trouble over a $119 collection owed to Liberty Mutual. I had to dig through a stack of bank statements to prove I'd paid this off two years ago or I was going to be denied my loan until I paid it and waited six months. My friend I'm helping through the program now has a judgment from July 2010 and she prequalified and is now going through the program. Her loan officer said they would need an explanation letter stating why the judgment (small at $300) is outstanding, etc.

It's also been my experience that you should be as open and upfront with your area specialist as you can. Tell them EVERYTHING up front. The hardest thing about this program is the wait and it would be awful to wait out the months that'll go by only to find out you can't proceed in the program because of the judgment.

Best of luck! Wednesday, good to see you again!

[Anonymous]

Hi all!

My original handle was independentlady7 but I can no longer log in as that. Weird. Anyways, I am she!

I wanted to let you all know that I submitted my app in October with everything I could possibly think of.

Yesterday, in the mail, I got my certificate of eligibility contigent upon paying off the judgment. Woo hoo!!

Now need to scramble to come up with those funds, about $1,700. I can do it :-)

And I can start house hunting...anticipating more stress to follow....

Wish me luck!

Thanks everyone for the helpful advice and wonderful words of encouragement!