topic USDA Application? in Mortgage Loans

USDA Application?

Anonymous — Tue, 04 Dec 2012 19:17:44 GMT

First of all, thanks very much for providing a resource like this. As my wife and I have been shopping houses for two years, I've become accustomed to late-night google searches for all the little questions that have cropped up through this process. I've found myself here several times, and I sincerely appreciate that so many are willing to weigh in with their experience and expertise to provide others with encouragement and realistic answers.

I'd sincerely appreciate any thoughts on our situation. Although I feel like things are probably going to be just fine, there are a few concerns:

My wife and I both have a credit rating over 720. Hers has no negative marks, but mine has a few. I had a credit card (~$1500 worth) go to collections when I was in college which was long enough ago that the incident has dropped off my report for all but one bureau. I paid a settlement on it and was not smart enough to make them agree to remove it before doing so. I also have two accounts from around 2006 or early 2007 which were marked down as missed payments. I disputed both with the service providers themselves and then with collections, but they're still there. I believe they fall off soon, and neither is for more than $100.
Our lender has seen our credit reports and seems to think they will be fine. I had him pull them when we first began talking.
I am self employed. I have been for several years. However, I botched my 2010 tax returns, and as the lender was verifying my income for the last two years they pointed this out. I had to file an amended tax return and pay roughly $4,000 in back taxes. That has all been completed, and the IRS transcripts are reflecting those payments. An accountant handles my tax matters now and has me up to date on K-1 quarterly payments.
My wife graduated college in December of 2010 and has been a full time employee with the same hospital since graduation. Our lender has seen her diploma and verified this.
Together, our gross annual income is roughly $60,000. This falls beneath the median income for our area, so we are indeed elligible for a USDA guaranteed loan.
We have around $4700 in savings. It was double that, but then we had to pay it back out to Uncle Sam thanks to my inability to prepare taxes.
We are pursuing a USDA guaranteed loan for 100% of the purchase price.
The estimated mortgage for the property we're under contract on us $1250.

Based on the above, what are your thoughts? We are pursuing a USDA guaranteed loan with no money down, and my main concern is simply that they'll want us to cough out a five-figure down payment that we simply do not have. The ratified contract includes that the seller is going to cover $6500 in closing costs which is more than the lender estimated would be due. We are paying for the inspection out of pocket, and that is happening tomorrow.

We had considered another regional type of loan with 3.5% down, but even that figure was out of reach given the timeframe. We got a very good deal on the property that we found, and we wanted to move on it as quickly as possible. From what I've read here, simply having a few monthly payments in cash reserves should be enough, but I haven't found a great deal of information about 0-down loans. Any input would be sincerely appreciated. Thank you!

Re: USDA Application?

Anonymous — Fri, 07 Dec 2012 00:02:05 GMT

Your situation sounds good to me. You shouldn't have to explain any negative information because your credit scores are above 620 and you should receive an approval from the GUS system. USDA requires no down payment, so you are fine there as well. You are going to receive a good portion if not all of your closing costs. As long as the house that you are purchasing appraises for more than the purchase price, guarantee fee etc. You will be able to roll any additional closing costs into the loan. You will also be able to get some pre paids back at closing. The appraisal fee, homeowners insurance, and earnest deposit. You should be in good shape. Ask the loan officer if they have any overlays that you need to know about. Overlays are rules that the bank may have above and beyond USDA 's guidelines. Good Luck with the process, I hope you have a smooth one.

Re: USDA Application?

Anonymous — Fri, 07 Dec 2012 00:40:42 GMT

Thank you, dricedad, for taking the time to read all of that and weigh in. We are confident about the situation, but our loan officer is extremely conservative when it comes to offering any information. The inspection went well, and we are in the process of dealing with contingencies while waiting for the loan paperwork to go through. I'll breathe a huge sigh of relief when we get word that everything is on its way to the USDA end for approval.

Re: USDA Application?

Anonymous — Sat, 08 Dec 2012 02:10:54 GMT

Does your lender process USDA applications regularly? Our does and he told us that it would take at least 60 days to close. USDA is running close to 4 weeks behind in Ohio.

Re: USDA Application?

Anonymous — Sat, 08 Dec 2012 02:57:22 GMT

Yeah, ours does as well. We are in Virginia. In mid October they were saying around 30 days, but it slowed down a lot. Week before last he was saying 45 days, but he said they had caught up 3 or 4 days since then when we spoke on Wednesday. We built plenty of time into our contract (est. close 2/5) so that it could take up to 45 days, but I am just anxious to see us get to that phase. Good luck!