Any lender doing USDA RD Guarantee 2 + years after BK & Foreclosure

[ji9]

Wondering if anyone knows of a USDA RD Guaratnee Lender who is writing mortgages less than 3 years after Foreclosure?  We are at about 29 months out.  I know USDA allows with a high enough credit score which we have, it's just a matter of finder a lender who allows as well.   Any information would be appreciated.  

[ShanetheMortgageMan]

USDA is extremely cautious with Ch 7 bankruptcies & foreclosures less than 3 years old.  From all experiences I've encoutered it'd need to be due to an extenuating/mitigating circumstance.  What was the reason for your foreclosure?

[ji9]

Reason for foreclosure was mostly medical bills and the inability to refinance our mortgage because of being so upside down.  Did try to work with the lender to accomplish a deed in lieau but our lender didn't allow deed in lieau's.  I know if you read USDA RD Guaranteee's rules it says with a high enough score they will allow a credit waiver, just trying to find a lender that would do that.   Or a lender that would write a regular mortgage if we had 20% down might work.  Thanks.   

[DanTheMan77]

Is there a reason you are asking about USDA and not FHA?

[ShanetheMortgageMan]

Medical bills usually are an extenuating circumstance (i.e. needed to pay the medical bills otherwise healthcare would not be provided).  However usually it's a bankruptcy that is filed to wipe out medical debt, not a foreclosure (unless that was the only way you could afford to pay the medical bills).  You'd need to be able to tie the medical bills to not being able to pay the mortgage in order for that to be considered an extenuating circumstance.

It's not just having a high credit score and re-established.  In addition to having at least a 581 credit score, the credit waiver also states the situation must have been: 1) temporary in nature, 2) beyond the applicant’s control and 3) the circumstances contributing to the adverse credit have been removed.  Even though USDA just specifies a 581 score, you will likely need at least a 680 score.

Further, USDA doesn't like people to use their program if they could otherwise qualify for conventional financing.  Typically in the past they've linked a 20% down payment to being able to qualify for conventional financing, however with a prior foreclosure you'd still be a ways off from being able to get conventional financing, so I'm sure they'd be fine allowing someone in your situation who had a 20% down payment use USDA financing.

[ji9]

I'll make some calls locally to see if I can find any lender.  The 20% down is not liquid.  It would be in the form of a 401K loan and only would be taking it if that was the only way we could get approved for a mortgage.  Appreciate the information on what we would need for USDA.   Both our credit scores are over 680.   

As to FHA, I don't think we could go FHA until we hit 3 years and then would need to pay PMI on top of that??  

We are also trying to get approved with NACA but I'm getting nervous that may not happen.  

Thanks.   

[ShanetheMortgageMan]

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@ji9 wrote:

As to FHA, I don't think we could go FHA until we hit 3 years and then would need to pay PMI on top of that??  

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Correct, FHA has an upfront amount & annual amount.  USDA also has an upfront amount (which is more than FHA's) but their annual amount is much cheaper, resulting in a lower overall payment than FHA.

FHA also would be able to do it less than 3 years from the foreclosure sale, essentially the same same as USDA's guidelines (without the score requirement though).

[ji9]

So FHA does not have the 3 year waiting period after a foreclosure?  

[ShanetheMortgageMan]

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@ji9 wrote:

So FHA does not have the 3 year waiting period after a foreclosure?  

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It has the same guidelines as USDA.  3 years for the foreclosure unless there was extenuating circumstances, then just 1 year can be acceptable.

[ji9]

OK, that's makes sense.   Thank you.