USDA Direct Loans

[Familywantsahouse]

Does anyone with a less than 640 credit score have any personal experience with this? We technically meet the income guidelines this year (and probably will for the next few years) My husband's middle score is a 600. He will be the only on on the loan. (I have some bad business debt on my credit that I am fighting to have removed that would not allow me to qualify)

This is what the USDA says for the DIRECT loan with less than 640

If the score is below 640 a full manual credit assessment must be done  by the underwriter.  Indicators of unacceptable credit history for this mortgage loan are:

• More than one 30 day slow pay in the last 12 months
• Foreclosure less than 3 years old
• Tax Lien or delinquent Government debt with no arrangement for re-payment.
• Judgment outstanding with in the last 12 months
• More than two slow rents in the last 12 months
• Account converted to a collection within the last 12 months
• Chapter 7 discharged for less than 3 years
• Foreclosure less than 3 years
• Chapter 13 discharged for less than 1 year

We absolutely more than meet those guidelines. I just got deleted the only collection within the last 12 months that was actually a new collection from  a nearly 7 year old charge off. We might even be close to 640 when all is said and done with everything I've been able to remove. I've also emailed our USDA contact for this area, but I am looking for person experience with a sub 40 and this program.

[Anonymous]

I was told by my local office that a score of 640 was needed or they wouldn't even go further.

But, I also had an outstanding judgment. I was approved with the condition that it was paid prior to close. The local office was very very surprised the underwriter approved with that.

The rules are in place but, ultimately, it depends on the underwriter.

If I were you I would try to get his scores up before applying. With a score like that he has some issues they may require him to take care of.

[sophmore]

I thought that this thread might be helpful.  Macbookguy did an awesome job of describing the direct loan process and he listed his mid-score as 565.  I hope this link works but if it doesn't try searching for macbookguy.  http://ficoforums.myfico.com/t5/Mortgage-Loans/USDA-Direct-Rural-Loan-502-Direct-for-very-low-or-low...

[Familywantsahouse]

Thank you. The local guy got back to us and said the two medical collections still outstanding would have to be paid, but based on what we sent him...we would be eligible. One of the medical collection agrees to a PFD, so I will revisit that with them and try like heck to get the other one PFD's as well (I just sent them a second and third PFD to two different addresses!)