Where three scores are reported, the median score will be used as the minimum decision credit score (MDCS).  When there are multiple borrowers on a mortgage, and one or more of the borrowers do not have a credit score, the lowest MDCS of the borrower with credit scores will be used.  Minimum FICO score is 620, and 640 for Manufactured housing.

 

If a delinquent Federal debt is reflected in a public record, credit report, or Credit Alert Verification Reporting System (CAIVRS), the lender needs to verify the validity and status of the debt.  If the debt is confirmed valid and in delinquent status, the borrower must resolve it with the creditor agency; otherwise, the borrower is ineligible for an USDA loan.

 

Borrower is not required to provide an explanation of collection accounts, charge-off accounts, late payments, judgments or other derogatory information if it was more than 24 months.

 

Disputed derogatory accounts that must be considered are non-medical collections and accounts with late payments in the last 24 months.  Disputed derogatory accounts that are the result of identity theft, credit card theft, or unauthorized use when evidence (policy report, attorney correspondence, creditor statement) is provided to support the applicant's explanation, or accounts of a non-borrowing spouse in a community property state.

 

Bankruptcy must have been over three years since the discharge date.

 

Foreclosure must be over 3 years from the date of the transfer title.  

 

Non-borrowing spouse debt, if the borrower resides in a community property state or the property being insured is located in a community property state, must be included in the qualifying ratio, except if it is excluded by state law.  

 

For deferred obligations, the monthly payment must be documented, if available, otherwise it must be calculated with 5 percent of the outstanding balance.  

 

For student loans regardless of the payment type or status of payments, these accounts must be included in the borrower's liabilities unless there is proof from the student loan program, creditor, or student loan servicer that the loan balance has been forgiven, cancelled, discharged, or paid in full.  For outstanding student loans, the monthly payment can be from the amount reported on the credit report, the actual documented payment, or 0.5 percent of the outstanding balance if the monthly payment on the credit report is zero.

 

For the revolving charge accounts, if there is no payment reported on the credit report, either the payment shown on the current account statement or 5 percent of the outstanding balance will be used.

 

30-day accounts that are paid monthly are not included in the debt-to-income (DTI) ratio; however, if the credit report reflects any late payments in the last 12 months, a monthly payment must be calculated with 5 percent of the outstanding balance, and included in the DTI.

 

When a self-employed borrower states debt appearing on their credit report is being paid by their business, proof of debt is paid out of company funds is needed such as copies of business tax returns reflect a business expense related to the obligation, and cash flow analysis statement.