USDA Direct

[eener]

I have been reading and researching about USDA direct loans and have found out that they waive the 36 months from bankruptcy and foreclosure if you have a credit score over 640 - we do and are $1500 under the low income requirement. The area we want to move to with GREAT schools near my family is right at the line to qualify for rural housing.

The issue we are having is that our current home is still in our names - we tried for another loan mod and after being denied I'm not sure when they will actually sell our house (there is already a judgement - it is not listed for the April sale).

We don't qualify for a loan if we are currently homeowners. I have read that some people have done a quit claim deed to qualify for a USDA direct loan when the bank was taking their time foreclosing. I would wait it out but the process to get approved takes a while, then we will have to find a house and close and I don't want to move twice - or find out that funds aren't available. DH is also up for a promotion at work and it would cause us to go over the low income limit when he gets it by $248 a year.

Has anyone done a USDA direct mortgage? It seems like our best option and the only way we wouldn't get stuck in a crappy apartment or house in a bad area of town. Rent here is insane compared to buying! Would a quit claim deed work?

[Drazil65]

Hi, you can try but most banks will not accept QC deeds (or everyone would be doing it, right?) or DIL's, the banks really do not want all this inventory so they sit on it. Our BOA loan took 2.5 years to finally foreclose but it was not BOA that foreclosed. It was the HOA after we stopped paying (on purpose to force them to do it) and I called the HOA attorney and asked them to please go ahead with the process. It took them about a year before they actually started it (I kept calling them until they agreed).

Then I called a third party investor (investor had bought several other properties in area) once they had a sale date (you can keep checking the sheriff sale website for added auctions until you see your property, ours posts the date about 5 months out). The HOA's sat back at the auction and watched the bank and the investor go back and forth for the property, the investor won the bid. That was 1/31/14 and the deed was finally transferred out of our names last week on 3/26/14 (Judicial State so process long).

So 2.5 years later we are finally successful because of my due diligence and keeping on top of things NOT because BOA did anything after their original judgment was entered. Good Luck and you may have to take the bull by the horns and "push" things along.

[eener]

I was thinking about having him just quit claim it to me since I am a stay at home mom and will not be on the new note. Or does the deed have to be out of both of our names since we are married to qualify for USDA direct?

We are also in a judicial state but our county has an auction on the first Monday of every month and doesn't post to their website until the week before the auction. The bank has to post the notice of sale 2 weeks before the sale date. We have felt like we have been in limbo for a long time. Houses that we could buy using a RD loan rent for at least $1500 a month but would be under $900 a month PITI. RD loans also give you a subsidized interest rate as low as 1%. You have to pay the subsidy back when you sell or refinance the house but we need low payments now.

[eener]

Update!

We did the quit claim deed and the house is now only in my name. I was never on the original mortgage that was discharged in Chapter 7 bankruptcy in December 2012. That was fine for the underwriter with USDA.

They have already processed our application and are just waiting on DH's employment verification. They said we should receive our Certificate of Eligibility as soon as they receive the verification

We have to buy in a rural area, the house has to be under 1800 square feet and it has to be under $167,000.

This is a GREAT option for anyone that is still low income after filing bankruptcy and who has credit score over 640. There are NO waiting periods as long as your credit score is over 640 - ours was that high 3 months after our discharge. I highly encourage everyone to look into this program. Interest rates are currently 3.75% and they finance the loan for 33 years. This is a much better option than FHA with outrageous PMI that you pay for the life of the loan and it's 100% financing.

I will update as things progress!

[eener]

Some more info on the USDA Direct mortgage for anyone interested in getting one

Payment calculator

http://www.anytimeestimate.com/loan-programs/usda-loan_calculator.htm

http://www.rurdev.usda.gov/had-direct_housing_loans.html

Link to field office handbook

http://www.rurdev.usda.gov/supportdocuments/hb-1-3550.pdf

Go to page 170 to start reading about credit requirements. Page 171 lists "Indicators of Unacceptable Credit" and it lists bankruptcy, foreclosure etc within 36 months - however page 175 says

For applicants with no outstanding judgments obtained by the United States in a Federal
court and who have more than one credit score listed on their RMCR that result in a reliable
credit score of 640 or higher on their RMCR, Exhibit 4-4 need not be used to identify indicators
of unacceptable credit handling. In addition, Form RD 1944-61, Credit History Worksheet, need
not be completed. These applicants are automatically classified as having acceptable credit
histories regardless of what is listed on the RMCR. To avoid potential disparate treatment,
additional credit analysis is not appropriate. Credit scores are used to reduce the time necessary
to conduct a credit analyses, but under no circumstance can they be used to make adverse
decisions.
To ascertain if an applicant has a reliable credit score of 640 or higher to preclude the use
of Exhibit 4-4 to identify indicators of unacceptable credit handling, the following practice will
be established:
• If the three credit scores are listed on the RMCR, the middle numerical score should
be used.
• If the RMCR only contains two scores, the lower of the two should be used.
• If the RMCR only contains one score, a full credit analysis must be completed.
• If no score is available, the credit bureau will report a “zero.” Zero in these cases has
the literal meaning of null, or indicating there was not enough information or credit
references for the statistical model to compute a credit score value.