Credit Score Borrower Eligibility for an Arizona USDA Home Mortgage

Summary of USDA Mortgage Requirements USDA Mortgage Program Arizona Overview
April 24, 2014
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April 24, 2014

Credit Score Borrower Eligibility for an Arizona USDA Home Mortgage

USDA Home Mortgage Borrower Eligibility

No Down, 102% Financing, Low Credit Score – as low as 580, generous ratios of 29/41% makes the Arizona USDA Home Mortgage Program a winner.

Arizona Mortgage Broker

Arizona Mortgage Broker

General USDA Home Mortgage Credit Guidelines

A 24-month history of residence is required on all files.

The total debt ratio should include revolving debt regardless of when the debt will be retired. Installment Mortgages will only be considered if the debt will be retired in more than six months. However, if the monthly payment on the debt is substantial, the payment will also be included in long term debt.

If the borrower has co-signed a Mortgage for another party, an acceptable 12-month history validating that the borrower is not making the payment must be provided in order to exclude the payment from the total debt.

If any late payments are reported for the previous 12 months, the liability must be included.

In divorce settlements when one person retains ownership of a residence as a result of the proceedings, it does not imply that the person relinquishing ownership is automatically released of the financial liability associated with an existing mortgage debt. The divorce decree, along with a release of liability from the mortgage creditor, must be presented as evidence that an applicant is no longer legally responsible for the mortgage payment. If no release of liability is granted by the creditor, then the applicant remains legally obligated for the debt. Quit claim deeds do not remove liability for mortgage debts.

When a borrower has a delinquent student Mortgage obligation, a satisfactory six-month repayment history must be provided. Regardless of deferment status, all student Mortgages must have the monthly payment included in the debt ratio calculation.

Applicants with scores of 640 or greater are typically not required to explain recent credit inquiries or to document adverse credit history except for those involving delinquent Federal debt or a previous Agency Mortgage. Existing collection accounts should be paid off at closing, if possible or a stable payment verified and included in the DTI ratio.

Borrowers are subject to the following USDA Home Mortgage eligibility requirements:

  • Borrowers may have only one primary residence. Borrowers may be the current owner of a structurally sound, functionally adequate house, as long as it is sold prior to or concurrently with the purchase of the new home. Exceptions may apply on a case-by-case basis by the area RD office.
  • Borrowers must have a valid Social Security number.
  • Borrowers may be a permanent or non-permanent resident alien.

In the instance of an expired Green Card, extension documentation is NOT acceptable. The actual Green Card must reflect a valid/unexpired date.

  • Title to be placed in individual names only.
  • All borrowers must be screened using CAIVRS (Credit Alert Interactive Voice Response System) to determine if an applicant is delinquent on a federal Mortgage.
  • Borrowers with more than
    • 1×30 day late in the previous 12 months,
    • 2×30 day late in the previous 36 months,
    • collections filed in the previous 12 months,
    • charge offs within the last 36 months,
    • judgments filed in the previous 12 months and
    • open tax liens with no repayment plan

are indications of unacceptable credit and may adversely affect Mortgage eligibility.

  • Rent History Delinquencies: 0x30 in the previous 12 months. If the credit report does not provide the housing history rating, a Verification of Mortgage. (VOM) & Verification of Rent (VOR) or cancelled checks is required. If the borrower rents from a relative, the most recent 12 months consecutive cancelled checks is required. Mortgage/Rental

USDA Home Mortgage C0-Borrower Eligibility:

Co-borrowers are subject to the following eligibility requirements:

  • Co-borrower must occupy the property (Non Occupant Co-Borrowers are not allowed)
  • Co-borrower must take title to the property
  • Co-borrowers must sign note if using income to qualify
  • The co-borrower cannot be an interested party to the transaction (such as seller, builder, real estate agent, etc.)

Credit History and Credit Score for an Arizona USDA Home Mortgage

A minimum 580 credit score is required on all Mortgages.

Mortgage Broker Arizona

Arizona Mortgage Broker,

Additional Requirements for Credit Scores 580-639:

  • A 12-month verification of rent or mortgage with a payment rating is also required on all files when the primary wage earner has a credit score of less than 640. This may be done using a Request for Verification of Rent or Mortgage Account, information contained on the credit report or cancelled checks. All lates greater than 30 days must be documented with an explanation from the applicant.
  • Recent credit inquiries must be explained
  • Existing collection accounts must be paid off
  • Adverse credit histories must be documented
  • Manual underwriting is required

Credit history must indicate a reasonable ability and willingness to meet obligations as they become due. The following are indications of unacceptable credit history and must be carefully investigated:

  • More than one payment being more than 30 days late in last 12 months
  • Charge offs within 36 months which includes foreclosure or Chapter 7
  • Judgments that are currently outstanding or were paid off within the last 12 months
  • Outstanding tax liens, no matter what their age, that are currently delinquent
  • One or more rent payments paid 30 days or more past due in the last 36 months
  • Accounts converted to collections within the last 12 months that are still due and payable
  • Outstanding collection accounts, no matter what their age, that is currently delinquent.
  • Previous Rural Housing Service debt or non-Rural Housing Service debt that resulted in a loss.
  • Any outstanding judgment obtained by the United States in a federal court (other than a tax lien).
  • Bankruptcy: Three year wait period
  • Foreclosure: Three year wait period
  • Pre-foreclosure and Short Sale: Three year wait period.

The credit report must reflect a zero balance on mortgage liens included in the foreclosure /short sale OR documentation must be obtained to support no further obligation.

Note: at the USDA Home Mortgage Underwriter’s discretion, unacceptable credit history may be waived with sufficient documentation and explanation.  Explain by documenting the situation in a letter saying the adverse credit was temporary in nature (lost my job), beyond the applicant’s control (company shut down), and the likelihood of recurrence has been removed (got a new job at a better more stable company making more money).

USDA Home Mortgage Wait period waiver: Less than three years is acceptable with the following requirements:

  • GUS approval required
  • Borrower must have a 640 or greater credit score
  • Satisfactory 12-month documented housing payment history
  • No late payments leading up to the short sale
  • Circumstances leading up to short sale must have been beyond the borrower’s control and temporary in nature
  • The credit report must reflect a zero balance on mortgage liens included in the foreclosure /short sale OR documentation must be obtained to support no further obligation.
  • Clear Credit Alert Verification Reporting System (CAIVRS only – no outstanding claims)

The USDA HOME Mortgage is a program that has great benefits and can provide first time home buyers with the opportunity to purchase a home.  

The USDA Home Mortgage Program is a jewel!

USDA Home Mortgage Program Overview

Overview of the USDA Home Mortgage Program






Arizona Hard Money Arizona Mortgage Broker

Arizona Home Mortgage

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Dennis Dahlberg


Level 4 Funding LLC

Tel:  (623) 582-4444 | Fax: (888) 279-6917

NMLS 1057378 | AZMB 0923961 | MLO 1057378

23335 N 18th Drive Suite 120

Phoenix AZ 85027

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