USDA pre-qualification extremely low??

[Anonymous]

So, my husband's did the pre-qualification form for the USDA Direct loan. We recieved an email 8/29 saying 5-7 business days. Today, he finally called bc we've heard nothing.
The woman on the phone told him that his Equifax score was 692, and that his monthly debt was $520, which is true.
She then told him he was only pre-qualified for $68k and that he should pay down some of his monthly debt before applying. We downloaded the worksheet from the USDA site and put the numbers in and came up with $144k.
The only thing I can think of is that the estimated the taxes really high but she didn't tell him what the taxes were.
Does anyone know how they figure that, and if it can be changed if you want a house with lower taxes?

We'd love to pay down some debt, but with a $1200 rent payment, it's happening at a snail's pace. The killer is really a car loan that was subprime but we didn't want to try to refinance while mortgage shopping.
I'm in NJ, if it matters, and looking in Burlington County, which has lower taxes than most parts of the state. We've been purposefully looking in town with low taxes, so this estimate seems to hurt us disproportionately.

[NC_Mtg_Loaner]

Is there any chance you might be eligible for a USDA RD Guaranteed Loan?   

IIRC, the Guaranteed Loan may have higher DTI Allowances.    I think you can check your income eligibility here:

https://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do?pageAction=sfp

I have lots of experience originating the RD loans but the Direct loans may have more strict guidelines.

[Anonymous]

I can theoretically, but I was under the impression that I would have more buying power with the direct loan bc of the subsidy that can drop your interest to 1%.
Our plan was to take the subsidy for the first year only, and use the money saved to pay down some debt and take care of some things we've been putting off.

[Anonymous]

Plus the direct loan rate is capped at 3.25% and the guaranteed is variable.

[Anonymous]

I'm also in Burl County. We refinanced our car loans after the prequal with ABCO. Went from 20 & 25% to 5%. Helped our DTI alot.
Yes, if you find a lower tax you get more loan amount. Or higher tax makes the loan amount less.

[Anonymous]

That helps a lot, thanks! I'm going to call tomorrow and find out what they used for the tax amount to see if that's the reason it came back so low.

Without giving away too much personal info, Hindsight, did you end up in northern Burlington or southern? I've read your thread and what you went through so I'm curious. We're looking primarily northern, but will go south if we have to. Hubby works in Mercer county so don't want a crazy commute.

[Anonymous]

We're northern. When we first applied they used $4000 but I asked them to use $6000 because we knew the town we originally wanted was closer to that. Off the top of my head the house we picked is $5500. But the next town over can be $4500.
They also used $1100 for home owners but we found one for $800.

[Anonymous]

Ah then I bet that's my problem, because running the worksheet from their site, a difference of a few hundred dollars can equal a buying power change of thousands.

[Anonymous]

This happened to me also!  They came back with an extremely low number because they used an estimate for taxes that was more than $1,000 over the average for my county.  I make about $2300 per month and the calculator said I should have had around 155k or so.  I gave her a new number to use for the taxes and she came back then with somewhere around $168k.

This was all based on a monthly payment of $710 a month for me, which I honestly thought was a bit high.  My take home pay every other week is about $820.  (I'm a teacher at a Catholic school.)

I have a $223 a month student loan payment which the $710 left me with what I thought was a "scary" low amount of money left per month.  I have extra money to pay some of it off and I might do that.

In the mean time, since I was pre-qualled in August, they told me they would keep my app in but I said I wanted to try to put the money away each month and see what I had left.  They said there would probably be a lapse in funding for a bit and then call me back around November to see what my status is.

Truthfully, I have zero ambition to look for a home during the school year, but maybe the timing will work out okay.