USDA Direct Rural Loan (502 Direct) for very low or low income

[jolinn]

Hi! I hope someone can help me, because I've been patient (after reading this thread almost a year ago, I decided to just go for it. Thank you to everyone who has posted over the years) and I'm finally getting close to the top of the waiting list in my area (there's a year and one month wait). I don't make a lot (about 31k last year and projected at 35k this year), my credit is in the high 600's and I'm carrying about 235$ a month in debt. I'm never late, have nothing bad on my record, have maybe 3k in savings. 

Somebody told me that what really matters in a loan is that you are only carrying 30% of your capacity on your credit cards and I never knew that or I would have been trying to knock that down. I'm currently at about 65% on four cards and 0% on another. Would trying to get them down be the best use of my money?

I'm just worried that after all this time they'll say "Sorry, you're carrying too much of a debt load/we want you at 30% or you don't make enough to qualify for a sandwich."

Can anyone suggest my next move? I don't want to keep my kids in this apartment anymore. The area is going downhill and they need space.

Thanks in advance!

[StartingOver10]

I am not sure I understand your post completely.  Do you mean that you have total debt of $235 across 4 different credit cards?  Or do you mean that you are paying $235 per month toward credit card balances that are on 4 different cards? If it is the second one, then please post balances and payments for more customized guidance.

[Anonymous]

I recently applied for the usda guarantee loan, which I just found out Friday that I was denied for the reasons of not paying rent or a mortgage. They said they thought I would have payment shock but I had rented for 6 months two summers ago but they must not of consider that. So my question is could I apply for the direct loan and possibly still qualify or what should I do as to this was my only option to buying my own home?

[StartingOver10]

All lenders test for payment shock.

You will need to rent for a year or more to show you have the ability to pay rent regularly, consistantly and on time.  Payment shock is a formula that is based on your current payment and what your new payment will be with the home purchase.

Have you ever rented other than the short term rental you had for the summer two years ago?

[DanTheMan77]

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@StartingOver10 wrote:

All lenders test for payment shock.

You will need to rent for a year or more to show you have the ability to pay rent regularly, consistantly and on time.  Payment shock is a formula that is based on your current payment and what your new payment will be with the home purchase.

Have you ever rented other than the short term rental you had for the summer two years ago?

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Not 100% correct. Renting is not a requirement, it just shows proof that you can afford a montly housing payment. Many people live with family rent free before buying a home and still qualify. If you are not renting, some lenders will ask you to show proof of your repayment ability in another way. Regular (monthly) deposits to a savings account that equal 75% or more of your anticipated mortgage payment (PITI) should suffice for most lenders. It will be a red flag to lenders if you've been living rent-free and don't have any savings

I am going through the USDA Direct process right now. We are living with family and not paying rent. The USDA sent me an email containing "How do you intend to make sure you can afford the new mortgage payment." A simple two line repsonse explaining our budget was all that was needed.

[Anonymous]

Is anyone else dealing with the USDA completely changing who handles what in their departments? We are told that they don't know who will be handling our loan next. It was forwarded to a Loan Specialist 2 weeks ago after going through the verification process. It's been 37 days since we applied, but no answers. As far as I know, it's sitting in a pile being ignored while the few houses that meet our criteria are being sold.

We were told that they are revamping who handles the loans after 13 years. That doesn't sound good. I don't want to bother them, but this is so frustrating. How often do you guys contact someone about your loan? Who do you contact? I just get told, "I don't know what is going on. I'll find out and get back to you." with no phone call or email letting me know!

[Anonymous]

I am looking into the Direct loans. I live in Tallahassee. Currently I am at the lower end of the financial spectrum, single mom, two children. I want to get a home in the nicer district with better schools and wanting to get one built because I want at least an acre or two for a garden and farm animals. Does anyone know the rules for having a home built? No one I have talked to seems to know much about the Direct loan qualifications and expectations, having only worked with the Guaranteed loans. What is the minimum expected salary, etc. I make just at $18,500. I have one credit card, never had a late payment, but I have it maxed out. Will it help cover applianes and furniture? I want to apply after taxes so I can pay down my credit card and the two bad marks on my credit score. Working hard at getting all this done, just hard to get there. And going to go back to school in Spring which I am hoping will look better on the application since I am currently paying out of pocket for school.

Thank you for this post. And that it has spanned so many years is very, very good. I have so many questions, but no one to really answer them and this was very helpful and informative! THANK YOU!!!

[Anonymous]

If you do not have a USDA-RH loan, DO NOT GET ONE!!  I got one in 1980, 33 years were up in 2013.  I would not recommend these loans.  The details are to great to list here.  Just read the fine print, and know that a Federal Loan is much different than a state loan.  The Centralized Servicing Center, which services these loans is horrible.  Anyone who wants to know more can contact me for details.

[Anonymous]

I was just approved for a USDA Direct loan a few months ago. We live in a newer, beautiful home in a great neighborhood. We are paying about $500 less for our house than we would for a smaller apartment. You have to get these types of loans directly from the USDA. That's why regular lenders don't know much about the Direct loans. There is usually a limit on yard size. Where I live it is one acre. There is no minimum income....but there are maximum incomes. And it's strange, but if you tell them you are going back to college, they will use your projected future income as your annual income, which might put you over the income limit. However, they do not use projected future salary towards repayment ability. Hope this helps!

[Anonymous]

Just remember the subsidy you are receiving will have to be paid back in part.  Never, and I mean never talk to an Agent at the Centralized Servicing Center without recording it; best to always have a paper trail.  Keep a running, written events calander of all contacts. Keep all correspondences and cancelled checks or receipts of payment, and check every year to make sure that the payments have been applied.   Read the fine print, and know the USDA-RH regulations that apply to your loan.  If it sounds to good to be true, then it usually isn't.   How they get you is through the excitment of owning your home; then one by one they slip papers in front of you to sign with no time to read them all.  Anything you think you are saving, will be owed in part in the end.