USDA Direct and/or guaranteed program

[Anonymous]

I'm hoping some of you who are familiar with this program can help me with a few questions. Thanks:

1) I keep reading that 640 is the magic number for automatic qualification for this program but does that hold true even if the debt ratio's are higher? For instance, if the ratio's are higher than 29/41 AND the middle score is over 660, is it eligible for automatic underwriting? Or will a waiver be required?

2) In terms of fico scores, are they using your middle regular fico score or your middle mortgage fico for eligibility?

3) How do they treat student loans? Will they accept the amortized loan payment or are they solely going with the 1%?

4) What's the difference (if any) between a co-borrower (lives in home) and a cosigner (does not live in home) on this program in terms of qualifications?

5) How does one guesstimate the amount of home they will qualify for based upon income?

Thanks so much.

[Anonymous]

USDA direct and guaranteed are very different loans. Please visit Rd.usda.gov to get a lot of information and make sure both you and your property are eligible. There has been a lot of USDA to FHA conversions on here where the requirements for USDA were not met.

33/41 is the most with compensating factors for guaranteed. Not sure about direct. Lender handbooks for both programs are online.

No to amortized. 1% or a fixed payment that will pay off the loan over the term period.

Middle mortgage score with guaranteed.

Direct- application goes to USDA directly and is underwritten inhouse.

Guaranteed- regular lender who is authorized to process USDA loans. They will qualify you first with their underwriter then once cleared it will go to the local USDA office for approval then back to the lender for closing.

29% is the max for your monthly payment of you GROSS income, that may be less if you have other debt as your TOTAL debt cannot exceed 41%.

You can guesstimate using that monthly payment with some online mortgage calculators.

660 meant less documentation for us.

Good luck! We closed our USDA guaranteed loan 7/28 but it was a tough road.

[Anonymous]

Guaranteed is extremely strict on DTI requirements. We got booted for being 1% over on the front end even though we were 1% under on the back end. Had to switch to FHA.

[Anonymous]

Just clarifying that 29/41 is the allowed DTI 33/41 was a max with compensating found in the USDA lender handbook, whether they will actually use that amount, I don't know.

[Anonymous]

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@Anonymous wrote:
Just clarifying that 29/41 is the allowed DTI 33/41 was a max with compensating found in the USDA lender handbook, whether they will actually use that amount, I don't know.

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Yea I think our underwriter must have had a stick up her butt that day. We have documented compensating factors, my LO tried to even lower the rate a little, she didn't care. Oh well, my LO has been trying to sell us on FHA from the beginning so he better deliver now lol.

[Anonymous]

I read all the horror stories I could while in "the process" and it really does seem luck of the draw with who you get for a underwriter and how they interpret the guidelines....

[Anonymous]

Thank you all for the feedback