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Home Purchase

USDA Underwriting Guidelines and Qualifications | Minimum Credit Score

byNicholas Auriemma, NMLS# 1455001
4 years ago
inPurchase, USDA Loan
USDA Underwriting Guidelines and Qualifications Minimum Credit Score

USDA Underwriting Guidelines and Qualifications | Minimum Credit Score

Minimum USDA qualifications are set by the United States Department of Agriculture. The USDA minimum credit score will vary by lender due to some lenders setting higher standards than USDA underwriting guidelines. This article will explain:

  • Eligibility tool for USDA income requirements.
  • Options for USDA grants.
  • And cover some key USDA loan guidelines.

USDA Minimum Credit Score Overlays

Often, minimum credit score will vary by lender due to an internal guideline called an overlay.

For example, some lenders set higher minimum credit scores like 640 or 620 FICO credit score.

Why do lenders set these higher standards? They may not have the resources to underwrite the loan or they concentrate on originating loans for borrowers that meet a specific credit profile.

Minimum Credit Score for USDA Loan

On page 25 of Chapter 10: Credit Analysis of the USDA Handbook, there is a illustration approach to manually underwritten loans based on credit ranges. An underwriter may approach the four situations as follows:

680 Credit Score or Higher

A basic level of underwriting will be done to confirm there is an acceptable credit reputation.

679 to 640 Credit Score

A comprehensive level of underwriting will be done to establish an acceptable credit reputation. Credit history should demonstrate a past willingness and ability to meet credit obligations.

Less than 640 Credit Score

A cautious level of underwriting will be performed with a detailed review of past willingness to repay and ability to manage obligations as agreed. When approving a loan, there should be documented extenuating circumstances.

Little or No Credit History

A sufficient non-traditional credit report must be able to prove the willingness to pay recurring debts.

Minimum Credit Score of 550

At Nationwide Mortgage & Realty, LLC, the USDA minimum credit score is 550, but other factors are determined during the pre-approval process. Credit scores of 580 or under are not typically approved without strong documentation of extenuating circumstances.

Getting Pre-approved for a USDA Loan

In order to get pre-approved for a USDA loan, a borrower should go through the steps to get pre-approved. The first step is to reach out to a Loan Originator for a list of documentation required for underwriting and processing.

Once enough information has been gathered, a full credit application will be taken to run the Guaranteed Underwriting System (GUS) to determine eligibility results.

When approved, a pre-approval letter will be issued to start shopping for a home.

USDA Loan Income Requirements

Two year history for employment is required. Maximum housing ratios are 29/41 and ratio waivers do not apply with a credit score under 640 FICO.

With higher credit scores, the debt-to-income ratios are determined by GUS. USDA income limits must be met that are established by the United State Department of Agriculture.

USDA Income Limits

Steps on how to use the USDA income eligibility tool:

  • Ask a Loan Originator to help or click on the USDA income eligibility link.
  • Pick a state.
  • Pick a county.
  • Fill in the following fields:
  • Number of People in Household.
  • Number of Residences Under 18 Years Old, Disabled or Full Time Students.
    1. Is Loan Applicant or Co-Applicant Age 62 or older?
    2. Are there any disabled Persons Living in the Household?
  • Fill out income.
  • Click finish to determine USDA loan income requirements and eligibility.

USDA Underwriting Guidelines – Property Eligibility

The United States Department of Agriculture’s website has a property eligibility section that determines if properties are located in an eligible rural area.

The tool is as easy as putting in an address and finding out either:

  • The address is not located in an eligible rural area.
  • The address is located in an eligible area.

USDA Grants for Home Loans

USDA loans do not require a minimum borrower cash investment, but USDA grants can help pay for the down payment and/or closing costs with no repayment. The USDA grants are 3% of the first total mortgage loan amount.

  • Limited to 1 unit only.
  • The minimum credit scores for the USDA grants is 640 FICO.
  • Debt-to-income ratios are determined by GUS.
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Nicholas Auriemma, NMLS# 1455001

Nicholas Auriemma, NMLS# 1455001

Nicholas Auriemma is a Loan Originator at Nationwide Mortgage & Realty, LLC, providing information on mortgages that can often be confusing even to real estate and mortgage professionals. Borrowers can be discouraged because mortgage professionals can be mistaken due to guidelines always changing, the extent of guidelines, their company having an overlay (stricter guideline), or other lenders not offering a loan program. Call or text Nick anytime at 630-779-8430 or email at nick@nationwidemtg.net.

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Restrictions may apply. All loans are subject to credit, underwriting and property approval guidelines.  Nationwide Mortgage & Realty, LLC is not acting on behalf of or at the direction of HUD/FHA or any government agency. CO: Check license status of your mortgage loan originator at www.dora.state.co.us/real-estate/index.htm. Also licensed in: CA, FL, IN, NC, TN, VA, WI and TX: NMLS ID 276777. Illinois Residential Mortgage License | MB. 6760210. WA: Consumer Loan License MB-276777. GA: Georgia Residential Mortgage Licensee 60857. MN: This is not an offer to enter into an interest rate lock agreement under Minnesota Law.

  • Home
  • Request Information
    • Apply Now
  • About Us
    • Career Opportunities
    • Contact Us
    • Meet the Team
  • Purchase
    • Conventional Loan
    • Condotel & Non-Warrantable
    • FHA Loan
    • FHA 203k
    • Fix & Flip
    • Investment
    • Jumbo & High Balance
    • New Construction
    • Non-QM Loans
    • USDA Loan
    • VA Purchase Loan
  • Refinance
    • Cash Out & Debt Consolidation
    • Conventional Refinance
    • Condotel & Non-Warrantable
    • FHA 203k
    • FHA Streamline Refinance
    • Investment
    • Non-QM Loans
    • Reverse Mortgage
    • VA IRRRL
  • Loan Process
    • Application Checklist
    • Credit Report
    • Home Buying Do’s and Don’ts
    • Interest Rates
    • Mortgage Calculator
    • Pull Credit
  • Mortgage Blogs
No Result
View All Result

Request Information | Apply Now
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: (844) 953-0100
Email:
info@nationwidemtg.net
Nationwide Mortgage & Realty, LLC
​1 TransAm Plaza Drive Suite 300
​Oakbrook Terrace, IL 60181
NMLS # 276777
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