USDA makes qualifying for a mortgage a little easier

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

USDA offers one of the few no-money-down loans, but its credit restrictions have disqualified some first-time homebuyers who don’t have established credit histories. USDA required a loan applicant to have at least 3 credit accounts with a 12 month or longer payment history.

That changed last week. USDA dropped the number of required accounts to 2, which makes it a little easier.

For homebuyers who don’t use traditional credit that appears on a credit report, USDA still allows the use of non-traditional credit accounts to achieve the required 2. Non-traditional credit includes rent, utility, and insurance payments.

However, good payment histories on non-traditional accounts cannot be used to replace accounts that appears on your credit report. In other words, if your credit score is low because of negative items on your credit report, USDA won’t ignore these items just because you have good payment history for rent and utilities.