USDA Rural Development Mortgage Guidelines

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USDA Rural Development Mortgage Underwriting

USDA Rural Development uses an automated system called GUS (Guaranteed Underwriting System) for mortgage underwriting.  GUS is available for approved lenders and I understand they are getting it ready for Brokers in the near future.

On this page I'm just going to briefly highlight mortgage guidelines you need to be aware of in regard to the USDA Rural Development 100% mortgage program.  I won't be going into detail for the consumer but if you have further questions send an email.

Risk Layers

Risk layers are any combination of credit waiver, payment shock, ratio waiver, non-traditional credit, or buy down.

Only one layer of risk should be allowed but if two are being considered there must be very strong documentation of  compensating factors.

Compensating Factors

Compensating factors include PITI less than current rent, job history, 660+ credit score, future increase in income due to education or experience, cash on hand, considerable savings, and conservative use of credit.

Non-U.S. Citizens

Qualified Aliens are OK

Not Required

  • Thermal Standards, typical insulation for the area applies
  • Plans and specs only required if lender requires it
  • Surveys are not required as long as title insurance is obtained
  • Noise assessments
  • Appraisal cost approach is only required if the lender needs it or the appraiser suggest it is a good indicator of value
  • Inspections and permits should not be submitted to RD.  Also building permits, C.O., warranties, well/septic/and termite letters all should be retained in the lender file.

Seller Concessions

Rural Development does not limit the amount of seller concessions.  Remember though that RD guarantees the mortgage so if the lender has a limit they honor the underwriters decision.  Most lenders on this loan will allow 6%.  Be sure to check with the lender you are submitting the loan too.  With compensating factors, they may allow more.

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