Saturday, February 27, 2010
Qualifying for a VA mortgage is not always easy. The credit guidelines are very strict and not all homes will qualify. If you fall a little short on qualification consider the USDA Rural development mortgages as a great option. They are 100% loans too.
USDA basically has two purchase mortgage programs: Direct and Guaranteed. Both programs require that the property be located in a rural eligible area. That generally means an area with a population less than 10,000. You can determine if a property is eligible from this website: http://www.rurdev.usda.gov/
Each program also has limitations on income and the income is derived from the median income in each county. The guaranteed program is focused on the median income buyer. The direct mortgage is for low and very low income families. Low is defined as 50 to 80% of the median income and very low is 50% or less. Yes, people on a fixed income can qualify.
The credit guidelines are different for each program. Guaranteed is similar to conventional guidelines but there are exceptions and they allow for scores as low as 620.
The Direct Mortgage really lowers the bar on credit requirements. It even allows for alternative credit if you don't have traditional credit. There is no minimum score. Sometimes they allow medical collections but cell phone, cable company, or credit card collections must be paid off if you don't have extenuating circumstances. This is not a comprehensive list.
The USDA Direct mortgage is called direct because the funds for this loan come directly from the government. (tax payer money, ... that is where the gov gets it's money) A good thing about this loan is that if your income is low to very low the government will subsidize your payment. That means they will make part of the monthly P&I for you.
The Guaranteed loan is actually originated through outside lenders or banks and then submitted to USDA for final approval and Guarantee. USDA only guarantees the loan, they do not fund it. You can research the guidelines from this site. USDA Mortgage Guidelines
If you have questions submit them in the comment section and we will respond.
For more information about VA guidelines go to this site: VA Mortgage Guidelines