USDA or FHA

Guest

Hello-
My fiance and I are in the process of trying to get a usda loan. we have already found a house and are under contract. He had a medical BK over 3 years ago with some lates on his credit history. I only have 2 lates on my credit history from 3 yrs ago from trying to help him with his payments. Everything has been explained in a letter to the underwriter. now they are asking for non-traditional credit references on him. He has his car payment and our rent. those are flawless. however things like utilities...not so much. there has never been a 30 day late with them but if the bill is due on tuesday the 18th and he doesn't get paid til friday, he will pay it friday. this is showing as lates on the non-traditional credit references. our low mid score is 626. can we still go through with USDA or FHA? He has been with his work since 2004 and I have been with mine since 2007 but in the same field since 2004.
Thank you so much for any help!

gmakerley · Posted: Sat Feb 06, 2010 9:19 am Post subject:

beej, with non-traditional tradelines such as utilities, that due date is, in essence, the 30th day by which it is to be paid. yes, anything paid after that date is late.

i think it's going to end up as a matter of interpretation by the underwriter in this case, to see if you'll be penalized for that slightly late payment pattern or not. a score of 626 is generally adequate, but since you're trying to overcome his bankruptcy by providing the utilities, etc. it's more than likely going to be a judgment call. if he has additional non-traditional references that won't report lates, that might be well worth providing to your lender.

Guest

I see. I guess the part that is the hardest to understand is that the bank who is processing the loan that is backed by the USDA is requiring stricter standards in comparison to the USDA. USDA states that a score of 620 or higher does not need the non-traditional credit references.

gmakerley · Posted: Mon Feb 08, 2010 3:24 pm Post subject:

it's true - individual lenders have their own standards, above and beyond what the product might require. if they spot something they don't care for, they've got the right and they'll exercise that right, to ask for more information, more credit references, more reserves, etc.

after all, it's their money that they're lending, and they want to ensure repayment. yes, the government guarantees such loans to the lenders, but if an individual lender ends up with too many losses, the government can and will ask the lender to tighten up.

you may be dealing with a lender who's been asked to tighten up, or you may be dealing with one who felt it necessary to do so prior to being asked. these are weird times, and there's a lot of conservatism taking place.

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