USDA and open collections

[JenThompson777]

Hi!

I am speaking to a few lenders, including the USDA office directly, regarding applying for the USDA gauranteed loan soon.  I am getting conflicting information, and would like to throw this out there for you.  Possibly someone has had this experience:

I understand that a mid-score of 620 is the "magic" number for this loan.  I have been told by a USDA rep that you can even have open collections, and other derogatory information on your credit report (as long as its not a federal debt, bankruptcy, or foreclosure), and still get approved - because with a 620 score, they use the streamlined method, which includes not looking at negative items or needing explanation of them.

However, I hear from other lenders and some threads that they have been denied the loan because of open collections, even with the 620 score.

Does anyone know of, or had experience, where the USDA guaranteed loan is approved even with derogatory, or open collection accounts on the CR?

Thanks for your insight.  I'm almost at 620, and have 2 open collections that I may not be able to pay off before the time frame I want to apply.

Jen

[Anonymous]

there is no one rule.  Different lenders are stricter, and different files will get different answers.  Someone running just at 620 who has open collections and is running high DTI probably will not get approved or will do so with conditions that stuff be paid.  Someone with 700 FICO 20% total DTI and putting 5% down will probably not have a problem.  Also, the type, size, and age of the collections matter.  Some lenders, no matter what the loan you are looking at, will require collections to be paid.