I am presently under contract on a usda guaranteed loan. The lender from the beginning new my full situation (income,assets,debts,score). I was pre approved for 250,000 and found a home within that range. Once I sent her verification of my 401k withdrawal it was sent to underwriting. I was downgraded to refer per Gus and declined for being over 29% ratio. We then added my grandmother on to the loan and was able to still stay under the income guidelines. A brief description of my file Mysore is 638, been on my job 6 years and only credit issues is 2 paid charge offs over 2 years old and one 30 date late payment over 3 years ago. Over 7k in 401k plan and 2k in savings. 1 credit card that's been open over two years, I paid card loan with 26 months paid history, two paid consumer loans and 1 current car payment with 15 months payment history. Grandmother score 628, retired 10 years and receives monthly ssa. Bad credit items is 2 medical bills and 1 collection account all over 5 years old. No lates ever reported and 13 paid accounts on report. LO called and said loan may be denied because of GUS system refering the loan to manual underwrite. I was confused because I was told that loan was going to be manually underwritten from the beginning because the scores were under 660? Something feels wrong about this and USDA advised that a loan can not be denied on this basis alone and the file has to be fully reviewed prior to denial and a reason given? Can anyone help with this?!