USDA Rural Development Mortgage Guidelines

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Mortgage Credit Guidelines

The credit guidelines for this home mortgage are simple, straight forward and very flexible.  Don't get the idea that this is a bad credit mortgage because it is not.  It is flexible and you will see how everything about this mortgage plays together.

Credit Score:

If the credit score is 640 or above the credit is considered acceptable.  This is so cool.  If the score is 640 or above the documentation is streamlined as follows:

  • No rental history is required
  • No credit waiver is required if there are derogatory trade lines like bankruptcy, foreclosures, or late payments for whatever. The only exception is Federal debts.

If the score is below 640 a full manual credit assessment must be done  by the underwriter.  Indicators of unacceptable credit history for this mortgage loan are:

  • More than one 30 day slow pay in the last 12 months
  • Foreclosure less than 3 years old
  • Tax lien or delinquent Government debt with no arrangement for re-payment.
  • Judgment outstanding with in the last 12 months
  • More than two slow rental payments in the last 12 months
  • Account converted to a collection within the last 12 months
  • Chapter 7 discharged for less than 3 years
  • Foreclosure less than 3 years
  • Chapter 13 discharged for less than 1 year

It is important to note that the underwriter can issue a credit waiver for any of these issues with proper documentation that proves that the bad credit was beyond the control of the applicant, were temporary, and causal factors have been removed.  Underwriters must also consider layered risks in addition to low credit scores.  These are covered on the underwriting page.

Credit scores below 580 should not be considered if there is any derogatory credit and there must be extraordinary compensating factors.

In addition to all this the lender must obtain a clear CAIVRS number for each applicant.  They must get 12 months documented rental history, however this is only required if the credit score is less than 620.

An RMCR or Tri-merged credit report is preferred but a  dual-merged report will be accepted.

Non-traditional credit is acceptable if traditional credit is not available.  There is a 3 reference minimum and no other risk layers are allowed.

 

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