Do you think if you have a poor to no credit score you cannot get approved for a mortgage? While with certain conventional loans this is true, other options will allow you to have a minimal credit score.
One of those options is a USDA loan.
When applying for a mortgage, there are many things the lender takes into consideration. What you make every month, what your debt total is, and if your payments are less than what your income is. Your credit score is only a part of the many factors that contribute to whether or not you get approved for your mortgage.
Your credit score for a USDA loan matters, but there is another way of getting this mortgage. Let’s take a look at what a USDA loan is and how you could get one even if you have no credit.
The Basics of a USDA Loan
A USDA loan is a rural housing loan backed by the United States Department of Agriculture. The government created this program to help boost the housing market, especially in rural and suburban parts of the country. Not only that, the loan helps make housing more affordable for low-to-middle income families.
The USDA loan has some of the lowest interest rates when it comes to mortgages across the country. That is one of the major appeals to this program. On top of that, there is a low mortgage insurance rate, and 100 percent financing (you are not required to make a down payment, another significant factor).
One of the hardest parts about getting approval for a USDA loan is the location of the property. Although there is a common misconception that you must live on a farm to qualify, rather, you can live in a rural or suburban community that is only miles away from a major city. The way the country defines rural and suburban, open up many opportunities to use this program to purchase a property.
Qualifications for the Loan
There are qualifications you must meet to get approval for this loan besides the location. There is an income limit of about $82,000 for a household with up to four family members, and just under $110,000 limit for families with five to eight members. The application takes into consideration the overall income of the household and not the individual applying for the mortgage.
Other qualifications include having an acceptable debt-to-income ratio, with the maximum being 41 percent. The property must also be in decent condition.
Credit Score Requirement
As mentioned earlier, you can apply and get approval for this loan with little to no credit score. However, most lenders do have a minimum of a 640 score. Your credit score shows how reliable you are with paying back loans and credit cards.
If your credit score is under 640, there is still a chance, although much more difficult. The lender must underwrite your loan.
If this is the case, you’ll need more information for the lender. He or she will want to see how long you’ve been at your current job, if you are a good homeowner, your on-time payment history over the last year, and what your bank accounts look like (including savings and retirement accounts).
Don’t let your credit score deter you away from the possibility of getting a mortgage. See if you qualify for a USDA loan.