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CLOSED -- Clueless but I would like to buy a home - USDA Direct

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Established Contributor

Re: Clueless but I would like to buy a home

From my research and speaking to the USDA rep, USDA Direct does accept IBR but USDA Guaranteed does not. Also someone else posted that in this forum as well, which is why I double checked and asked the USDA rep.

BK7 Discharge 1/16
10/15 ~ EQ: 406; TU: 520
10/18 ~ EX: 666; TU: 646; EQ: 652
Message 21 of 122
Established Contributor

Re: Clueless but I would like to buy a home

Prayers answered ! My EX is now 650 ! The reason being is this - last year I learned on this forum I needed a loan reporting to complete my profile. So I opted for a Navy Secured Loan. I only did  it for $250 and for 6 months. So every 6 months months I had to renew it. Sometimes Navy would pay it off early and I would take a 30 point hit before I could renew it. But it would bounce back after they reported the loan again.

 

So I had been rehabilitating my student loans and I didn't know how long it would take for them to start reporting. I went ahead in June and renewed my Navy loan, paid most of it and then went through shock that my student loans reported fairly quickly and of course owing the whole 83k. This caused a hit of 30 points.

 

Today my Navy loan reported and I gained 12 points. Lovely ! I wasn't expecting that. In fact, I was thinking of paying it off this month since someone in another thread told me the Navy loan would not help my score at all. Bah to him !

 

I am going to go work on my USDA pre-application right now !

BK7 Discharge 1/16
10/15 ~ EQ: 406; TU: 520
10/18 ~ EX: 666; TU: 646; EQ: 652
Message 22 of 122
Valued Member

Re: Clueless but I would like to buy a home

Just spoke with a USDA rep and was told IBR payments are not accepted and the 1% rule applies. I honestly have no idea who is right or wrong. Different offices say different things.

Message 23 of 122
Valued Member

Re: Clueless but I would like to buy a home

I just took it upon myself to copy and paste this from the handbook for USDA Direct:

 

Student loan payments. The Loan Originator must use the actual monthly payment under the existing repayment plan (as verified by the lender) if (1) the loan is in repayment status, (2) the applicant has a reliable credit score of 640 or higher, (3) the applicant has no significant delinquency as outlined in Paragraph 4.14 B., and (4) the applicant’s payment shock is not more than 100% or is not measurable. If all four conditions are met and the applicant who is responsible for the student loan has, for example, a $0 monthly payment because they are on an income-driven repayment plan, there will be no student loan payment considered in the TD ratio. If all but the 4th condition is met, a waiver from the next level supervisor may be sought if the overall risk assessment on the application warrants it. When the above does not apply (e.g. because the loan is in deferment or forbearance), the higher of the monthly student loan payment listed on the credit report or one percent (1%) of the student loan balance must be used in the TD ratio.

Message 24 of 122
Established Contributor

Re: Clueless but I would like to buy a home


@RaiderFan1987 wrote:

I just took it upon myself to copy and paste this from the handbook for USDA Direct:

 

Student loan payments. The Loan Originator must use the actual monthly payment under the existing repayment plan (as verified by the lender) if (1) the loan is in repayment status, (2) the applicant has a reliable credit score of 640 or higher, (3) the applicant has no significant delinquency as outlined in Paragraph 4.14 B., and (4) the applicant’s payment shock is not more than 100% or is not measurable. If all four conditions are met and the applicant who is responsible for the student loan has, for example, a $0 monthly payment because they are on an income-driven repayment plan, there will be no student loan payment considered in the TD ratio. If all but the 4th condition is met, a waiver from the next level supervisor may be sought if the overall risk assessment on the application warrants it. When the above does not apply (e.g. because the loan is in deferment or forbearance), the higher of the monthly student loan payment listed on the credit report or one percent (1%) of the student loan balance must be used in the TD ratio.


That's an excellent find. If a rep ever tells you different, you can always quote that back to them. I had to read a section to a rep when he said I had to wait 3 years for my bankruptcy to be over but if you have scores over 640 and extenuating circumstances, you can be considered. I have a clean file for the past 2 1/2 years as well. Only baddie is my bk.

BK7 Discharge 1/16
10/15 ~ EQ: 406; TU: 520
10/18 ~ EX: 666; TU: 646; EQ: 652
Message 25 of 122
Established Contributor

Re: Clueless but I would like to buy a home

Just a quick vent - I see that a letter is coming today from USDA (via USPS Informed Delivery). I got a phone message from the local rep this morning with whom I have spoken to before. He reiterated that I would not be eligible to apply for the loan until my bk was 3 years old in January 2019.

 

When I last spoke to him over a month ago, I read him the guidelines that stated I could apply and that he was to fill out a special form and indicate what my extenuating circumstances were. 

 

I tell you, I could just scream ! But no, he is going to be evaluating my application further so I left a sugary sweet message for him and told him if there was nothing else that precluded me from applying, like DTI, I would like to move forward and have my extenuating circumstances considered. So, prayers sent, fingers crossed that he is not an immovable force in the face of guidelines and facts.

 

 

 

 

BK7 Discharge 1/16
10/15 ~ EQ: 406; TU: 520
10/18 ~ EX: 666; TU: 646; EQ: 652
Message 26 of 122
Established Contributor

Re: Clueless but I would like to buy a home

Wow, so my prayers have been answered quickly ! My rep just called me and he said I need to document my extenuating circumstances (which I can) and then he looked at my old dti (which I have worked on and brought down) so then he updated that. Then he gave me the good news - he can pre-approve me for a $140k house with a subsidy !! In the area I am looking at, I can find a very nice 3-4 bedroom house with a big backyard and newer construction (2000s). I'm really excited !!!

 

Next I need to submit the full application for approval. He is emailing me that shortly.

BK7 Discharge 1/16
10/15 ~ EQ: 406; TU: 520
10/18 ~ EX: 666; TU: 646; EQ: 652
Message 27 of 122
Valued Member

Re: Clueless but I would like to buy a home

My husband and I are interested in the USDA Direct Loan but were still working on his FICO scores. These are his scores:

 

Mortgage Scores

EQ: 585 

EX: 615

TU: 650

 

FICO 8

EQ: 644

EX: 657

TU: 654

 

I assume their going to check the mortgage scores and that I need to get the 615 to at least a 640. Do you know if the USDA Direct uses FICO 8 or the mortgage scores FICO 5,4 and 2???

Message 28 of 122
Established Contributor

Re: Clueless but I would like to buy a home

My understanding is that they use Trimerge mortgage scores. Have you talked to your office ? Do you know already how you are going to boost his scores ?
BK7 Discharge 1/16
10/15 ~ EQ: 406; TU: 520
10/18 ~ EX: 666; TU: 646; EQ: 652
Message 29 of 122
Valued Member

Re: Clueless but I would like to buy a home

We paid off his LOC $1500 balance to knock his utilization all the way down but kept a small balance on his other cc $300 limit of like 7% utilization. We were hoping that would help. Were planning to have a repull again in 2 weeks.

Message 30 of 122
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