USDA Rural Home Loans for Arizona (520) 349-9090

What Credit Score Does The USDA Loan Require?

pauldunn — Mon, 24 Jan 2011 21:41:36 +0000

What Credit Score Does The USDA Loan Require? is a post from: USDA Rural Home Loans for Arizona
If you are not reading this post on USDARuralHomeLoans.com, within your feed reader or in our newsletter, then the content has been stolen and the site you are reading it on is not reputable and is plagiarizing our content. Quite frankly, I would suggest not doing business with them and if they have google ads, I would suggest reporting them to google. Please return to USDARuralHomeLoans.com to read our original articles.

The USDA Loan and Credit Scores..

People ask me all the time what credit score is needed to get a USDA loan to buy a house in Arizona with absolutely Zero Down Payment. There are actually a pretty good variety of answers to this question.

Before we open the curtain on the USDA Loan and show you the credit score options, let’s take a look at what a credit score is.

There are three credit bureaus and each has a detailed history of an individual’s credit. They are Trans Union, Equifax and Experian. They each have their own super secret, mathematical model that they use to create and formulate a person’s credit score. It’s basically like your credit history goes into the big credit machine, and out comes a three digit number.

That number is a score that lenders will use to determine your level of risk. So a lower score means a higher risk and a higher score means a lower risk.

So, you’ll have a score from Trans Union, from Experian and from Equifax. The score used to qualify for a loan is the middle of the three scores. So let’s say you have a 648 from Trans Union, a 602 from Experian and a 623 from Equifax then you middle score would be the 623.

Now, the USDA Loan does not have an actual minimum credit score, can you believe that? But the lenders who fund the USDA loans will generally require a minimum middle credit score of 620 and the USDA does advise that lenders should not approve loans with less than a 580 middle credit score. Some lenders will go with a lower score, say down to 580 or so, but be prepared to pay significantly more in closing costs with such a low score.

Apply for a USDA Loan Online Now: Loan Application

NOTE: Our company requires a middle credit score of at least 620 to fund a USDA Loan.

If your credit score is standing in your way from qualifying for a USDA rural home loan, then be sure and get a free copy from annualcreditreport dot com and verify that the information is all correct. I wrote a post last week on some tips you can use to improve your credit score also.

So in summary, as a general rule if you have a middle credit score of 620 then you will have a very good chance of getting approved for a USDA rural home loan.

I hope you found this Arizona Home Loan tip useful and would love to hear your comments.

To find out if you qualify for a USDA Loan call (520) 225-0380 or click on the Get Started on USDA tab above and ask for a quote. If you want to go ahead and get your application in, you can fill out my Arizona Home Loan Application Online here.

How To Get A Zero Down USDA Loan Even If Your Spouse Has Bad Credit

pauldunn — Tue, 18 Jan 2011 21:00:54 +0000

How To Get A Zero Down USDA Loan Even If Your Spouse Has Bad Credit is a post from: USDA Rural Home Loans for Arizona
If you are not reading this post on USDARuralHomeLoans.com, within your feed reader or in our newsletter, then the content has been stolen and the site you are reading it on is not reputable and is plagiarizing our content. Quite frankly, I would suggest not doing business with them and if they have google ads, I would suggest reporting them to google. Please return to USDARuralHomeLoans.com to read our original articles.

Does The USDA Loan Ignore Your Spouses Bad Credit?

More people would be looking at buying a home in Arizona with the Zero Down Payment USDA Loan if they were not held back by their spouses bad credit. There are lots of reasons why one spouse may have pretty decent credit and the other may have some bad credit dings; especially in our current economy.

These are called Spouse Only Loans and the USDA Loan does allow them. It looks ONLY at the credit report history of the borrowing spouse and does NOT even look at the credit history for the non-purchasing spouse. So if YOUR credit qualifies and your spouse has a questionable credit report, you have the option of not including your spouse on the loan.

USDA Administrative Notice 4543 specifically states that the Non-purchasing spouses credit is NOT considered a reason to deny a USDA Loan application.

However Arizona is a community property state, so you must disclose your spouse’s community property debt obligations on the application and you will need to qualify with those debt payments.

Here is how it works…

We will pull your credit and we will pull the credit of the non-borrowing spouse in order to determine the accurate debt for qualifying. At closing, the non-borrowing spouse will NOT sign the note, but will sign the security instrument.

Apply for a USDA Loan Online Now: Loan Application

However since the USDA Loan does look at total household income in order to qualify under the income limits, you would need to provide the full income documentation for the non-borrowing spouse.

On the other side of this equation, even though you are providing income documentation for your spouse, you would need to qualify for the loan on your own. A non-purchasing spouse’s income is only looked at to determine eligibility under the income limits, not for qualifying for the new loan.

This is yet another handy advantage that the USDA loan has over FHA loans.

I hope you found this Arizona Home Loan tip useful and would love to hear your comments.

How To Get A USDA Loan If You Don’t Have Any Credit

pauldunn — Fri, 14 Jan 2011 17:13:10 +0000

How To Get A USDA Loan If You Don’t Have Any Credit is a post from: USDA Rural Home Loans for Arizona
If you are not reading this post on USDARuralHomeLoans.com, within your feed reader or in our newsletter, then the content has been stolen and the site you are reading it on is not reputable and is plagiarizing our content. Quite frankly, I would suggest not doing business with them and if they have google ads, I would suggest reporting them to google. Please return to USDARuralHomeLoans.com to read our original articles.

Can you get a Zero Down USDA Loan if you don’t have credit?

Now that is another really good question.

People looking to buy a home with a USDA Loan who do not have traditional credit histories can still qualify.

Since credit history is such a large part of getting any type of loan approved, what we need to do in a case where someone does not have a credit history is to… build a credit history.

The USDA Loan does specifically state that a non traditional credit report cannot be used to enhance bad credit or a poor payment history.

But before we build a credit history it is important that you know this works only for a person who has absolutely no credit. It will not work for someone who has old bad credit. The credit history slate needs to be completely blank.

A good place to go to see what your credit looks like is annual credit report dot com.

Okay, so here is how we build a credit history…

We’ll need to find alternative types of credit history that are at least 12 months old. Here is a list of references that we’ve had some really great results with..

- Rent payments as long as they can be verified and documented. Cancelled rent checks do the trick well.

- Utility bill payments such as: gas, electric, water, sewer, telephone, cable tv, etc.

- Insurance payments such as: medical, health, life, auto or renters insurance

- School tuition is a great resource

- Department stores

- Anything that is a regular payment that can be documented for 12 continuous months

Apply for a USDA Loan Online Now: Loan Application

If you do can verify your current rent payments, you will only need to have 3 of these ALTERNATIVE credit histories. If your rent history cannot be verified.. say you pay rent in cash or live with family rent free or pay rent with a cashier’s check, you would need to have 4 of these alternative credit histories. Then you can use them to qualify for a USDA rural home loan.

Since a borrower without a credit history is a higher risk, you’ll also need to be able to verify that you have a payment cushion in the bank. So you’ll need to show at least 2 months of payments in a bank account.

I hope you found this Arizona Home Loan tip useful and would love to hear your comments.

The USDA Loan and Bankruptcy Seasoning

pauldunn — Tue, 11 Jan 2011 16:33:56 +0000

The USDA Loan and Bankruptcy Seasoning is a post from: USDA Rural Home Loans for Arizona
If you are not reading this post on USDARuralHomeLoans.com, within your feed reader or in our newsletter, then the content has been stolen and the site you are reading it on is not reputable and is plagiarizing our content. Quite frankly, I would suggest not doing business with them and if they have google ads, I would suggest reporting them to google. Please return to USDARuralHomeLoans.com to read our original articles.

Understanding how the USDA Loan looks at Bankruptcy

A bankruptcy does have a substantial impact on your credit and your ability to get a new USDA Loan to buy a house.

A bankruptcy is defined as a federally authorized procedure by which a debtor is relieved of total liability for its debts by making court-approved arrangements for their partial repayment. Now there are two types of bankruptcies that apply to individuals and the USDA Loan treats them both differently.

First is the Chapter 7 which is the liquidation bankruptcy. In the Chapter 7, a trustee of the court will collect non-exempt assets and liquidate them to pay a portion of the debts that are owed. Once completed, or discharged, the individual is free from debt.

The other is the Chapter 13 bankruptcy. In the Chapter 13 the trustee of the court will create a Repayment Plan where the individual will make payments to the court over a series of years until the debts are paid in full. Then a discharge is issued.

There is a lot more to a bankruptcy, and for more information you could use our friend google or head on over to the free dictionary dot com.

There are two more things you need to know… 1 – how the USDA Loan will handle bankruptcies and 2 – How lenders who fund the USDA Loan will underwrite bankruptcies. Just remember, that the USDA does not actually fund the loan. The funding comes from various lenders.

So let’s first see how the USDA Program handles bankruptcies.

The USDA guidelines are known as the 1980. If we look at 1980.345 section d.1.viii it reads like this.. “Any debts written off within the last 36 months are considered unacceptable credit.” And a bankruptcy would fall under this category..

As they said in the old Ginsu knife commercials… “but wait, there’s more..”

Because in the prior section it reads “unless the cause of the problem was beyond the applicant’s control”…

So, if the cause of the bankruptcy was due to a circumstance beyond the control of the borrower, then it can be possible to get approval for a USDA loan.

Apply for a USDA Loan Online Now: Loan Application

If we continue reading, section d.3 tells us exactly how to prove that situation.

We need to prove that the cause of the problem was: temporary in nature, beyond the applicant’s control, and have been removed. Examples given in this section include: loss of job, reduction of government benefits, loss of income, increased expenses due to illness, or death.

So if you had a bankruptcy within the last 36 months and you can prove that it was caused by a circumstance beyond your control, then you have a fighting chance to get a USDA loan approval.

Now, let’s talk about the other side of this… how the lender’s underwriter will evaluate a prior bankruptcy.

All lenders have overlays, which mean that they have their own internal rules that trump the USDA guidelines. So it is more important to know your lenders overlays than it is to know the USDA rules.

Most lenders will just flat out require that a bankruptcy be discharged 36 months, period. Some will consider a chapter 13 after being discharged 1 year.

But there are lenders who will have a much leaner bankruptcy overlay and follow the USDA guidelines very closely. This type of lender will typically want to see any type of bankruptcy have at least 3-4 established credit trade lines reporting on the credit report in order to show that you are rebuilding credit. In most cases this would take at least 12 months to accomplish.

As you can imagine, this type of lender is much more difficult to find. We do have a small handful of lenders that fit into this category that we do work with.

I hope you found this Arizona Home Loan tip useful and would love to hear your comments.

Simple Tips To Optimize Your Credit Score For The USDA Loan

pauldunn — Mon, 10 Jan 2011 14:11:22 +0000

Simple Tips To Optimize Your Credit Score For The USDA Loan is a post from: USDA Rural Home Loans for Arizona
If you are not reading this post on USDARuralHomeLoans.com, within your feed reader or in our newsletter, then the content has been stolen and the site you are reading it on is not reputable and is plagiarizing our content. Quite frankly, I would suggest not doing business with them and if they have google ads, I would suggest reporting them to google. Please return to USDARuralHomeLoans.com to read our original articles.

Credit Score Optimization Tips for the USDA Loan Program

With lender’s continuing to tighten their guidelines, it is more important than ever to know how to optimize your credit score for getting a USDA Loan here in Arizona. There are five components that make up your credit score, let’s take a look at them really quickly.

They are, in order of importance:

Your Payment History, which includes things like late payments, collections, on time payments, bankruptcies and such. Keeping a good payment history is not only important for your credit score but also important for simply qualifying for the USDA Loan.
Next would be the Amounts you owe on your credit. So balances on credit cards, installment loans and mortgages have an impact here.
Next would be the Length of your credit history. Did it just start, or does it go back 2 years or even longer.
Next is the amount of inquiries, how recent they are and did they result in any new credit.
And finally, the types of credit you have. Is it all credit cards or is there a mixture of credit cards, car loans and maybe a mortgage. Obviously, the mixture is the best.

While all those items impact a credit score, all we are concerned about for this quick post is how to quickly improve a credit score for getting a USDA Loan, right?

One of the biggest factors that impact your credit score is the Amounts Owed. It has about a 30% overall impact. And one of the quickest ways to improve a score is to take a good look at your Debt to High Credit Ratios. This simply means to make a note of how much you owe on any revolving account and compare it to your credit limit for that account.

So if you owe $750 on an account that has a credit limit of $1,000 then your Debt to High Credit Ratio is 75%, and that aint good.

Apply for a USDA Loan Online Now: Loan Application

Now, we know that the credit bureaus keep their credit score models a super secret, but we do know a few very important things about them. And number one is to keep your Debt to High Credit ratio for each account as CLOSE to zero as possible.

So the quickest way that I know of to quickly raise a credit score is to get your Debt to High Credit ratio down between 3 to 25% per account. And remember that for credit score purposes, debt should not be consolidated, it should be spread out among your revolving accounts to fit within the 3 to 25% ratio.

I hope you found this Arizona Home Loan tip useful and would love to hear your comments.

An Arizona Home Loan Tip On Student Loans

pauldunn — Tue, 28 Dec 2010 16:35:41 +0000

An Arizona Home Loan Tip On Student Loans is a post from: USDA Rural Home Loans for Arizona
If you are not reading this post on USDARuralHomeLoans.com, within your feed reader or in our newsletter, then the content has been stolen and the site you are reading it on is not reputable and is plagiarizing our content. Quite frankly, I would suggest not doing business with them and if they have google ads, I would suggest reporting them to google. Please return to USDARuralHomeLoans.com to read our original articles.

How Student Loans Impact USDA Loan Qualifying

When people are looking at getting an Arizona Home Loan whether it is a USDA Loan or FHA Loan who have existing student loans, they need to be aware of how those student loans will impact their qualifying. The USDA Loan Program is very popular among recent graduates, and a couple reasons are because not only is there not a down payment requirement but it is the simplest home loan to get.

Because you don’t need to fork out a ton of cash to get into the USDA Loan Program it has gotten VERY popular over the last few years.

Student loans come in two classes: deferred and not deferred. And one thing to keep in mind when looking at the USDA Loan Program is that it does treat student loans differently than the other loan programs available. At first glance you would intuitively think that a deferred student loan would not be considered in qualifying for your new home loan.

And for most Arizona Home Loan programs that would be the correct way to look at the deferred student loan.

Apply for a USDA Loan Online Now: Loan Application

However the USDA Loan Program is a little different in that it requires all long term debt to be included in the qualifying calculations. Until recently, the USDA considered any loan that has at least 6 remaining monthly payments as long term debt. So in the case of a deferred student loan, even if it has only 6 monthly payments remaining, then it would be included in the qualifying process.

This September that rule changed slightly with the publication of Administrative Notice 4543. Now, any student loan whether it is in repayment or deferred must be included in the qualifying calculations.

If you do have student loans that are in deferred status and plan on getting a USDA Loan, be sure you know exactly how much the monthly payment will be once the loan is back in repayment status. If you do not have that information, the USDA Underwriters will use 1% of the loan balance as the monthly payment.

I hope you found this Arizona Home Loan tip useful and would love to hear your comments.

How The USDA Loan Program Handles Collections

pauldunn — Wed, 15 Dec 2010 18:00:50 +0000

How The USDA Loan Program Handles Collections is a post from: USDA Rural Home Loans for Arizona
If you are not reading this post on USDARuralHomeLoans.com, within your feed reader or in our newsletter, then the content has been stolen and the site you are reading it on is not reputable and is plagiarizing our content. Quite frankly, I would suggest not doing business with them and if they have google ads, I would suggest reporting them to google. Please return to USDARuralHomeLoans.com to read our original articles.

Can Collections Prohibit You From Getting Into The USDA Loan Program?

Another question I hear quite a bit about the USDA Loan Program is about collections. It’s pretty common to hear… I have some old collections, are they going to stop me from getting approved for the USDA Loan?

It’s always a good idea to know what is on your credit report and so you might want to head on over to annual credit report dot com and pick up a free copy… just be sure that all the info on it is correct, if not you can dispute it online.

If you see collection accounts you’ll want to let your USDA Loan Representative know about those right away because certain types of collections can have a negative impact on the ability for your lender to get clear title; which basically means that specific collection could show up as a lien on the title. Usually, simply paying off an old collection prior to closing will be fine. BUT be sure to speak with your loan representative before paying off any old derogatory credit, as it could work against you.

And any lien on title would need to be paid off before the USDA Loan can fund.

Apply for a USDA Loan Online Now: Loan Application

Now the USDA Loan Program relies on the lender to provide good quality loans and the USDA rules say that the LENDER must determine if an open collection account would need to be paid before or at closing. As you can imagine, these rules will vary from lender to lender and will also change over time as tighter regulations hold lenders and individual underwriters personally responsible for their loan approvals.

Whenever there is a collection involved, it would always be a best practice to provide a written letter explaining the what caused the collection and that those problems have been eliminated.

If you have a specific question about how the USDA Loan Program works with collections, or about the USDA Loan in general please leave a comment below. I answer all non-spam comments.

3 Things The Lender Looks At When You Apply For A USDA Rural Development Home Loan

pauldunn — Tue, 01 Dec 2009 15:33:49 +0000

3 Things The Lender Looks At When You Apply For A USDA Rural Development Home Loan is a post from: USDA Rural Home Loans for Arizona
If you are not reading this post on USDARuralHomeLoans.com, within your feed reader or in our newsletter, then the content has been stolen and the site you are reading it on is not reputable and is plagiarizing our content. Quite frankly, I would suggest not doing business with them and if they have google ads, I would suggest reporting them to google. Please return to USDARuralHomeLoans.com to read our original articles.

What The USDA Rural Development Underwriter Looks For When You Apply… Part 1

This is a three part series where we will look at the 3 factors that a USDA Rural Development underwriter will look at when reviewing your file for loan approval. If you have questions that are not addressed here specific to USDA Rural Development Credit Qualifying, please ask them in the comment box below.

The USDA Rural Development Loan is not as familiar to people as other mortgage types. Additionally it’s natural to be concerned about what an underwriter will be looking for when they delve into the depths of your personal Loan application. After all, you’re supplying them with personal information in your quest to buy a home. So I’d like to provide some quick insight as to the 3 things that a USDA Rural Development Underwriter is looking for when they review your loan application for that Loan approval.

Apply for a USDA Loan Online Now: Loan Application

1. Your Credit

Yes, your credit is an obvious number 1 and it is the most important aspect of your loan decision. It is one factor that you can actually have control over. In an earlier post I wrote about USDA Credit Qualifying, but will go into more detail here.

Credit tends to come in three categories:

Good (Currently defined as a 620 middle credit score or better)
Bad (Less than a 620 middle credit score)
Thin (A lack of credit history often with no credit score)

While most USDA Rural Development lenders require a 620 middle score, some have been elevating that requirement to 640 or even 660 over recent months. Credit Score Optimizing is beyond the scope of this post, but good advice may be all you need to boost your score enough to qualify. If you have concerns about your score you should review your credit report with an experienced mortgage professional as some good quality advice may be all you need to get a few extra points.

Collections and bankruptcies are the predominate issues that the can cause concern. The age and size of a collection will determine if it would need to be paid off or not. AND different USDA Rural Development lenders will have their own specific requirements determining if a collection must be paid or not before closing.

The same can be said about prior bankruptcies. Most USDA Rural Development lenders will require that a bankruptcy be discharged for 3 years before you can be considered for a USDA loan. However with a high enough credit score, some lenders will allow you to qualify for a USDA Loan after only 2 years. Consult your mortgage professional.

Length of Credit History

While the talk of the town on the credit front is mostly about credit scores and optimizing your credit to get that magical 620 middle credit score, there is one other credit factor that is often overlooked; Length of Credit History.

A credit score is supposed to be an indicator of the quality of your credit, but many times a “Thin” credit profile may artificially skew a score. For this reason most USDA Rural Development lenders do have a minimum requirement for the Length of Credit History.

Most lenders will require a credit history to have:

3 credit trade lines (auto, credit cards, etc.); and
12 month active history for each of those three trade lines

Here it is important to note that the 3 trade lines do not currently need to be open or even active. This requirement helps to assure that the credit scores reported are indeed accurate.

But I Don’t Have A Credit History…

If you are one of the many Americans with a Thin credit profile, meaning that you just don’t have a credit history, you can still get a USDA Rural Development Loan. You can actually “build” a credit profile by providing a history of four sources of alternative credit that have been active for at least 12 months.

What qualifies as Alternative Credit?

Increasing consistent deposits to a savings account
Rent and Housing payments
Utilities (electricity, water, gas, cable, phone, etc.)
Insurance (medical, auto, life, renters, etc.)
Local stores (department stores, furniture, etc.)

In the next post we will discuss the other 2 important factors that the USDA Rural Development Underwriter will be looking at in your loan application file.

To apply for a USDA Rural Development Loan click on the Get Started on USDA tab above.

Apply online for a USDA Loan and get pre-qualified today.

USDA Rural Home Loans – Credit Score Requirements

pauldunn — Wed, 12 Nov 2008 02:42:36 +0000

USDA Rural Home Loans – Credit Score Requirements is a post from: USDA Rural Home Loans for Arizona
If you are not reading this post on USDARuralHomeLoans.com, within your feed reader or in our newsletter, then the content has been stolen and the site you are reading it on is not reputable and is plagiarizing our content. Quite frankly, I would suggest not doing business with them and if they have google ads, I would suggest reporting them to google. Please return to USDARuralHomeLoans.com to read our original articles.

There is no written minimum credit score requirement to qualify for a USDA Rural Home Loan. However, many investors who fund the USDA Rural Home Loans have a minimum requirement of 620 middle credit score. This simply means that the USDA Rural Home Loan allows for a little variance in the credit score to qualify.

Apply for a USDA Loan Online Now: Loan Application

The USDA Rural Home Loan will require that any borrower with less than a 620 middle credit score undergo a stringent credit screening. USDA Rural Home Loans will look at the most recent 12 months of rental history and with a lower credit score the USDA Rural Home Loan will definitely require you to write some detail credit letters of explanation.

The good news is that a credit score of 620 or higher may allow you to get away with some pretty significant credit dings.

Apply for a USDA Rural Home Loan in Arizona.