MyLegacy

we want to apply usda but have bad credit

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Do we stand a chance or are we wasting our time?

Our income would allow us to apply for a home USDA direct or guaranteed.

House we want - also qualifies for USDA, on market 10/2011 for 154k, is now down to 113k. For sale to settle estate. Mom's bf knows owner, she just wants to unload it and is considering auction in the spring.

Bad credit - DH has 3 co's not paid from 4 years ago. (2 cc's, 1 4wheeler.) It started when he lost job, missed 2 payments then they all jumped across the board. The balances at first delinquency were 6k total, and is now up to 13k. Can't file BR because his name is on parents deed (was done 10 years ago so he inherits). He also had a redeemed repo 2 years ago but vehicle was then paid monthly until payoff. This all happened while on unemployment.

DH has 2 solid years of employment with solid global company.

His myfico is 621. My CU fico is 652.

We rent for $1000, so obviously the house would save us a lot.

My question is this: Should we apply now? Does it look better if we make pay-arrang with the CA's for the co's NOW, or should we apply and let them tell us what they require of us? My mom has offered to give us $ to get rid of the baddies.

What can we do to avoid a denied loan?

Thanks everyone. Appreciate your time!

Edited by MyLegacy

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Money talks.Banks will want twenty to thirty % down,with bad credit.Thats if they approve the loan at all.When buying a house its best to pre qualify with your bank.That also would be pending the inspection and title of the house.

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I understand that regarding conventional loans you need to put more down the worse your credit is, if you get a loan at all.

The USDA has different rules. They used to not have a required minimum fico, then it went to 620, and now I am hearing 640. I have been told that you can have bad accounts as long as it is paid in full, and you have on-times for the last 12 months.

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Their may be better chance for getting in to that loan.

I seem to remember that my navy recruiter asked my parents if I was a member of any of these groups: Hispanic, Native american, african -american, or of any group listed as minority.

I listed hispanic, had some portugese and spanish blood, now it seems to me they never did any tests or anything like that to find out. So it seems to me if you check a box on a form about race they aren't allowed even to ask you about it.

Just saying, check into it it might help you.

also since SOL may be up send validation request. then dispute it. showing a dispute may make it better. Also in your state are their seperate credit scores for each of you? I think validation and disputing will help. filling out the boxes on the form may really help. It's not as if it could be assertained in any way.

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SOL here in PA is 7 years.

Credit scores are separate, we plan to marry in Jan. If that would hurt the loan then it can be postponed until after we get a loan. (Easily changed, only going to the JP since we have both been married before.) We've been together for 7 years...

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There are a couple of things you'll want to iron out here:

1. Credit - pay down what you can... the goal is to be at no more than 30% of the limit (ex. $300 on a $1,000 card). That should help your score out some - as of this morning, my banker told me the minimum FICO score for USDA Rural Housing is 640. Also, there can't be any lates on any installment loans in the past 1 year, along with no unpaid collections or judgments. This alone may be an issue...

2. The real estate - why is he on title? You wrote it was for inheritence purposes. It's easier to draft a living trust and make him beneficiary. The trust becomes the owner of his parent's house and this allows him to still inherit. The underwriting has become more strict, and if they see he's part owner of another house, it may cause delays in getting an approval.

Also, if he's got bad credit, what's the likelihood of any of this turning into judgments? This also comes into play...

USDA loan rates are not really going anywhere, so I'd think you'd want to button these things up before applying...

Edited by 1stStep

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1stStep, you brought up things I never thought of. Thank you!

Credit = I have one sec cc (800 avail) keep at 5-10% utilization. We have no other current debt except rent/living expenses. Vehicles are finally paid off (almost 2 yrs ago). The unpaid collections are all 4 years old, and the redeemed repo was just over 2 years ago - prior to him securing employment.

When his name was added to the deed: Parents owned house and cabin in mtns. (No mortgage on either) He lived with parents in house most of adult life and used to 50/50 share expenses until dad retired at 55yrs. DH then started covering all exp because they couldn't. Sister was to get cabin, him the house. Cabin was due to sheriff for delinquent taxes. The sister paid back taxes, parents transferred to her. While at the lawyers for the transfer, they also added his name to deed for house. Brother/sister don't get along, was done so they didn't fight about it. 3 years later, DH loses job, goes from income of 45k to unemployment to 25k. He couldn't afford all expenses on his own, and mother got mad that he couldn't support them anymore. They fought constantly, he finally moved in with a friend. Hasn't lived in house for 4 years now. 2 years ago, his parents tried to sue him for unpaid property taxes, but it was dismissed by the judge. His attorney advised him to not sign off - if house goes for sheriff (taxes), then he would get half of whatever is left, or they could buy him out, or he would be sole owner when they die. This is the reason he cannot file BR...not that I want him to.

For some dumb reason their lawyer added DH as half owner, and his parents as half owner... instead of thirds for each... DH attorney verified that with courthouse.

Judgements? Don't know if they will happen. Total is 13k, right around 4k on each. Sold to CA's heard nothing from OC since sold.

Our landlord has also offered to right a letter of reference stating we have paid on exact due date for 3 years. Don't know if that means anything.

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I purchased a house last year through the USDA. At the time, I had two charge offs, one at 51K and the other 30+K. At the time I applied both charge offs were three years old. I also owned another home that I could not sell.

My credit scores at the time were from about 550 to 625. My wife had never had credit in her name, so, in essence she had none that would count. I bought the new home in my name alone.

I tried several of these so call mortgage brokers, fell flat on my face. Denied every time. Finally approached to banks. One being Wells Fargo and was excepted and approved by both. In the end, I went with the other major bank. Got the loan and everything has gone well. You just need to dig and find someone that will work with you. I got a good interest rate for the time and have been pretty happy with the deal.

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TomnTex,

Thank you for sharing. I think the reason this is so confusing for me is, I hear of situations like yours that are successful (which gives me hope) and then others tell me don't bother, it's impossible...

I am also curious to know how sellers feel/react when they have to deal with a buyer using USDA.

I would think they would be like "why in the heck would I want to wait so long for someone to get approval/funding? I want to sell my house, so find me someone that won't take so long!"

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I have read on another post to get a real estate agent.

I don't know any, have never used one.

Please provide tips to find one with USDA experience, and what should I know or ask?

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I closed on mine in about two months, your Realtor will know if the house qualifies for USDA when you start looking.

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It would be best to find a realtor with USDA experience. Why not call the USDA office ar you, they may know or have a relative who is in the biz. Just saying never hurts to call.

as for your fiancees parents house, might want look into setting up a living trust and rolling his 1/2 interest into that. Then later he can maintain some distance from the house.

Sounds like my family on the drama side of things. Just goes to prove none of our situations are wholly unique, some of the exact same things going on in the same family arguments nationwide.

Since it is thanksgiving, don't let any holiday meals devolve into the shouting matches they usually do. And maybe mention CIC to the parents it sounds as if they are in a situation that needs credit advice also.

As in my family the little sister may be a lost cause like mine. So as long as we are all digging out of the greater depression, might as well make friends along the way.

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I have read on another post to get a real estate agent.

I don't know any, have never used one.

Please provide tips to find one with USDA experience, and what should I know or ask?

All the major banks offer USDA lending... if you PM me, i will find one for you.

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Thanks everyone, I really appreciate your input.

As for the parents and sister, there has been no communication with them in 4 years. The mother has "disowned" him. It is really sad, but DH has been so much better since he is away from the negativity. The mother has caused many problems for several family members... very sad.

I plan to call USDA next week. Figured it would be futile to call during the holiday week.

I also plan to meet with our credit union this coming week for their "loan health checkup".

The USDA has 2 offices in PA, one in Harrisburg (all the way across the state) and my regional one is Lebanon, which is 2 counties away from me. I am located in Chester County, PA. If anyone knows of a realtor with USDA experience in my local area, please let me know. Can't P.M. yet, haven't hit 10 posts yet...

I have just added my DH as an AU on my cc... Hope that may help with this score, it sure has helped me.

Best wishes, hope everyone enjoyed a happy and safe holiday!

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Actually, you will want to contact a bank/credit union first to get the ball rolling on the USDA loan. Also, many realtors will not work with you unless youve got a preapproval from a lender.

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I will call our credit union tomorrow and set up an appointment to have the loan evaluation.

I just added DH as an AU on my cc. Hope it helps his fico.

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I don't know that your credit union is going to have USDA loans... most of the major banks offer them.

For example - I checked with a few credit unions in your county, and they do not offer USDA home loans. You might want to check with a larger bank in the area or call a mortgage broker...

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I purchased a house last year through the USDA. At the time, I had two charge offs, one at 51K and the other 30+K. At the time I applied both charge offs were three years old. I also owned another home that I could not sell.

My credit scores at the time were from about 550 to 625. My wife had never had credit in her name, so, in essence she had none that would count. I bought the new home in my name alone.

I tried several of these so call mortgage brokers, fell flat on my face. Denied every time. Finally approached to banks. One being Wells Fargo and was excepted and approved by both. In the end, I went with the other major bank. Got the loan and everything has gone well. You just need to dig and find someone that will work with you. I got a good interest rate for the time and have been pretty happy with the deal.

 

 

It is amazing that you got approved with your history TomnTex.  Even back in the days of wild and crazy mortgage lending, underwriters were loathe to approve with such big unpaid charge-offs.  You did get a gift from God - and the bank.  I would take a professional guess such a deal is not available anywhere today.

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Well, this just happened in 2011 and I already owned another house which I still have. Never missed a payment on either one. Again, I had two banks approve me, one being WF.

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On the West Coast it is Umpqua bank. They are growing in Calif. now.

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