Posts Tagged “usda underwriting”

There are some sweeping changes coming in the Fall of this year (2011) which will make Mortgage lenders more accountable for the loans they fund and approve; some speculate that this is the part of the reason the USDA has chosen to tack on Mortgage Insurance (just like FHA’s) to the monthly payment.
Thankfully, we the tax payers won’t be the ones needing to subsidize things. The homebuyer pays Mortgage insurance just like he/she would for an FHA loan.
Here’s how things will change , come Oct 1, 2011.
Presently the USDA Zero down loan carries with it a 3.5% Upfront Guarantee fee and no monthly mortgage insurance.
After Oct 1, the Upfront Guarantee fee drops to 2.00% and an annual Mortgage insurance of 0.3% will be added.
The annual mortgage insurance will never go away over the life of the loan. (This makes it unlike FHA, where after 5 yrs and 78% Loan-To-Value threshold, the mortgage insurance can go away).
Good news is that the annual mortgage insurance $dollar amount will decline each year because it’s recalculated at the new principal balance of the loan each year.
Overall this means an increase of about $16/mo for every $100,000 loan amount borrowed. Not a deal killer necessarily, but definitely something that affects debt ratio and qualifying ability/buying power.
Stay tuned for more updates :)
Be sure to use our super Mortgage Calculator (unlike any other) to compare payments at

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Deducted from what? From gross adjusted Income, for the purposes of keeping you (the Borrower) below the Income limit for the program.
Remember, USDA Zero down loans have income limits which are determined by the entire income of the household.
Common deductions we immediately look for are for childcare expenses, minors living at home, full time students living at home, elderly folks 62+ yrs or older, disabled etc etc.
But medical expenses in excess of 3% of annual income maybe deducted. For a detailed breakdown, read this lengthy article.
USDA Loans & Medical Expense Deductions

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It appears USDA has tightened up their requirements for “GUS”. (GUS stands for Govt Underwriting System and is the automated engine for USDA just like DU/LP is for FHA etc . . )

FICO scores below 640 will receive a “REFER” and will need to be manually underwritten by the Agency. Borrowers must have three major compensating factors and proof that the derogatory credit that is driving their fico below 640 was temporary and beyond the borrower’s control. Divorce is not a qualified reason. Medical, death of wage earner or immediate family member, loss of job or reduction in wages can be. All must have documentation to support.

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Just fired off an email to an Investor inquiring whether USDA had a problem with him having bought the property 3 1/2 weeks ago and reselling it for profit.
Of course, answer is **NO**** !! USDA Zero Down (Rural Housing) loans do not have a “Anti Flipping” rule like FHA had.
Even FHA has waived/modified it’s Anti-Flipping policy so it’s less burdensome for investors and homebuyers. But with USDA, there are no restrictions whatsoever.

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