topic Re: USDA Direct Loan Woes! in Mortgage Loans

USDA Direct Loan Woes!

Anonymous — Thu, 14 Jun 2018 17:43:01 GMT

I've just called the office in Oklahoma for information regarding the USDA Loan program. I was told that, as my household income is so low, the most appropriate for me would be the Direct and not the Guaranteed. I don't know my FICO scores as I am unable to afford to get them but, according to Credit Karma and Credit Sesame, my score is 626. I am aware they use a different scoring method and these scores should only be considered as a guideline or estimate. I do have an auto loan but it is being reported to TransUnion and not the other two bureaus. As the mid-score is used and two of the three bureaus are low and only TransUnion is aware of my on time payments for over 2 years, then, from what I understand, this score would be eliminated and not used for my mid-score and the auto loan would be as if it never existed. Also, I have just found there is a 3 and a half year old collections on my report from a $146 natural gas bill. The person that I spoke with told me that because of this collection, I am not eligible for any USDA loan and it would have to be removed from my credit report for a minimum of 6 months. Also, he stated my credit score needs to be 640 or better to be eligible. This has destroyed my hopes of ever getting into an actual house by the end of this year.

Here is the details of my family's situation. We are a family of three with a total household income of $18,960 per year, well below the poverty level. I am 51 years old and permanently disabled. For the past two and a half years, the three of us have been living in a derelict 24 foot travel trailer. The roof leaks over the beds every time it rains and the door has a broken window covered by heavy cardboard and does not close correctly leaving a 2 inch gap at the top of the door. There is a small air conditioner in a window that barely puts out any cold air and temperatures in the trailer is reaching in excess of 95 degrees fahrenheit. Heating in the winter is done with a single oscillating reflector heater as the trailer does not have the original heater. The refrigerator is a small dorm room type with broken hinges so you have to take the door off completely to add or remove items from it. As there is no water heater, we only have cold water available so we have to use a 700W microwave water for bathing. The toilet has broken free of the flooring and the tank has partually ruptured so now there is raw sewage leaking onto the ground under the trailer. Every day that is above 80 degrees is a struggle to get through with all of us suffering dehydration nearly every day in the warm weather, freezing in the cold weather and getting water-logged in the rainy weather.

The land that the trailer is on runs us $300 per month and have never missed nor been late on the payments for nearly 3 years. Unfortunately, the land payments are not reported to any of the credit bureaus but we do have every payment receipt since the beginning. The land is rent to own with the option of leaving at any time, so that is an outgoing expense that can be rechanneled into USDA loan payments. The homes in the area that are available are in the $20k to $30k range so such mortgage payments would end up falling in at under $300 per month, what we are paying now. One home that we have found is $20k and would be perfect for our needs and has been on the market for about 3 years, so it's probably not going anywhere.

With the call to the Oklahoma office, our hopes and dreams have all collapsed. From what was stated, I may not be eligible for more than a year and not sure where to go from here. Any and all suggestions are more than welcome. We are more than capable of the mortgage payments on time and in full as we have been on other loans for roughly 3 years but it appears to all boil down to what the credit bureaus have in their records and the rigid guidelines in the USDA handbooks. It appears we'll have to continue living in unsanitary and inadequate housing for an indefinite time...

Re: USDA Direct Loan Woes!

Anonymous — Thu, 14 Jun 2018 19:39:56 GMT

Hello HillbillyBB, you do have a few things going against you for a USDA loan, but don't lose hope! You may be able to get this loan sooner than a year. I'm currently waiting for final approval for my USDA loan and this is what I've experienced. You CAN get a USDA loan with a judgment, but you have to do 1 of 2 things, pay it off and show it's satisfied (call the creditor that placed the judgement against you and see if they will take less than owed) or the exeption to this (directly from the USDA handbook) is if you have a payment plan in place and making timely consistent payments 3 months prior to the loan application. This payment can also be excluded from your DTI, if full payment satisfying the account, can be done in less than 10 months. Even though your rent isn't being reported, it can be counted as a tradeline or proof of payment history. They will send a letter to the property owner/manager to confirm you have paid your rent on time. This also applies (if applicable to you) a phone bill, cable bill, electric bill, even Netflix payments. If you can show on time payments for 12+ months, that will help establish payment history. The only issue would be to get your true Fico Mortgage scores. I know you said you couldn't afford it, but it will you see where you're truly at. For USDA, your middle score must be over 640. Try to see if you can save up and get those scores. Check for FICO introduction specials, you could get it for a discount or give them a call and see what they can do for you, doesn't hurt to try! You will need to have enough money to pay a year of insurance up front before closing and there ARE going to be closing costs (taxes. bank fees etc...this is not a 0 down payment, even though it's advertised that way). Your state may have low income down payment programs, so do research on that. Depending on what the property appraises at and how much you can afford to pay according to your DTI is what your loan will be approved for. They will base your mortgage payment on the principle/interest, PMI-which is less % than FHA or conventional PMI, insurance and taxes AKA escrow. Your total debt (including the mortgage) cannot exceed 41% of your monthy income, I did read in the handbook that there can be exceptions to this, I'm just unclear of what that is. I'm no expert, but this is what I've learned over the last 3 1/2 weeks. Don't lose hope, it may take a few months, but if you really want out the home you're in, you can get it done First step, call that creditor the judgment is through, get started on a payment plan or see if they will settle for less. 2nd, research down payment assistance for your state, this could help drastically in the amount of the loan you'll need to keep you under the 41% DTI.

Re: USDA Direct Loan Woes!

Anonymous — Thu, 14 Jun 2018 22:42:01 GMT

Thanks for the reply, Jperk0402. I went to https://www.myfico.com/fico-credit-score-estimator/estimator/ to see what it would estimate my FICO score to be and answered the 10 questions, including the single collections in the amount of $146.00. The estimated score came back as 665-715 and now wondering how accurate the estimator is. If it does turn out my score is 640+ I have read many threads here, where sometimes, a small collections more than 3 yrs old is disregarded. So, a new question is, how accurate is the estimator on myFICO?

The office I called this morning is mailing out the application anyway and hope to have it by next week. If nothing else, at least I'll be able to look it over and learn what I need to do. Also, in regards to the middle score, what can be done when actual credit reporting is done with only one of the three? Wouldn't it reflect incorrectly if the bureau that has all your actual credit history is thrown out? With this done, it would show a zero credit history when I have an auto loan that is nearing the end of its life and I've never missed a single payment. And of course, with my credit history thrown out, I wouldn't even be eligible for a one dollar loan!

Re: USDA Direct Loan Woes!

Anonymous — Fri, 15 Jun 2018 04:07:06 GMT

If it’s a collections account, they may still want it paid or show you’re making payments to get it taken care of along with a letter of explanation or LOE. Even if your car payment is only reporting to one bureau, it will still be regarded as part of your credit history. They don’t actually disregard all but the ‘middle score’ bureau report. That is just the deciding score to see if you qualify or not. Read through the handbook (link below) there is a section on credit reporting and what they do when someone has little to no credit history. I’m not sure how accurate the FICO estimator is, there are so many different variables that can cause a score to be high/low. I’ve seen people with way worse collections, bankruptcies and debt on their reports, but they had better scores than I did, so you never know. When I first started working on my credit, my fako (credit karma) scores were much lower than my FICO, but now that I’ve improved somewhat, my CK scores are much higher. It just depends on the bureau and what algorithm they are using (or so I’ve read on these forums). Good luck!

https://www.rd.usda.gov/files/hb-1-3555.pdf