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Does your credit score have to be at least 640 to qualify for a USDA loan?

July 13th, 2018 by Sean Stephens

How can you qualify for a USDA loan with credit scores under 640?

Welcome back everyone, Sean Stephens here again with Metroplex Mortgage Services and How to qualify for a USDA Credit Exception in Florida?another USDA Loan Pro Video Quick Tip.

Does your credit score have to be at least 640 to qualify for a USDA loan?

In today’s video I will break down how it can be possible to qualify for a USDA loan with credit scores below 640 and walk you through the details step-by-step.

Also, if you have not yet done so, feel free to download our newest “USDA Blueprint for Success” with the link below.  This educational resource is designed to help walk you through the USDA qualifying process and designed for both homebuyers and Realtors alike.

As a starting point, USDA guidelines require that applicants “generally must have a verifiable credit history that indicates a reasonable ability and willingness to meet their debt obligations”, but additional guidance is provided when credit exceptions are needed, such as the following:

“Credit history problems do not always reflect an unwillingness to meet financial obligations” and it further states that,

If the lender believes that the applicant is creditworthy, the lender should document on the underwriter’s analysis the reasons that an exception is justified.”

Secondly, how can a USDA credit exception be approved by the lender?

USDA Credit Waiver eligibility for credit scores under 640

A USDA Credit Waiver will be required on those files that are in need of a credit exception and it is defined as a:

consideration of mitigating circumstances to establish the intent for good credit

In these situations, mitigating circumstances along with any supporting documentation may be provided by the applicant and reviewed by the USDA Approved Lender in order to determine if the negative credit in question was:

  1. Temporary in nature
  2. Beyond the applicant’s control, and
  3. Circumstances contributing to the adverse credit have been removed.

Remember that these situations will be taken case by case and USDA lenders must conclude that the applicant did not disregard their financial obligations.

Florida USDA Approved Lender

Examples of supporting documentation which could be provided by the borrower are:

  • Hardship letters signed and dated by the applicant
  • Attorney letters, if applicable
  • Medical documentation,
  • Evidence of payment arrangements or payment history with creditors

As you can see, processing a successful credit waiver takes both USDA guideline knowledge and experience.  Many lenders will only accept automated approvals and do not have the capacity to process successful credit waivers which may lead to a borrower being denied when their loan could have been approved.

I have built a team around me dedicated to help you through the USDA qualifying process and it is important to remember that not all lenders have experience with processing and closing USDA loans.

Metroplex Mortgage Services is an Approved USDA Lender in FL, TX, TN, & AL and we are known for our program expertise with specific systems in place to process USDA loans from pre-qualification to closing.

Just call or email to discuss your scenario and let us show you the “Metroplex” difference!

800-806-9836 Ext. 280
SeanS@MPLX.org

Just call or email if you have any USDA qualifying questions, want to discuss a new scenario, or would just like to take advantage of our free 2nd opinion service which is great for those existing transactions

I want everyone to make it a great day, and look forward to seeing you right here for the next tip of the week!

P.S. – You can download our “USDA Blueprint for Success” by CLICKING HERE

Tampa FL USDA Approved Lender List #1 Ranked

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