Qualifying for a USDA Mortgage If You Have Other Debts
USDA Loan Eligibility Requirements – Guidelines
There are several eligibility criteria set by USDA that need to be fulfilled by the applicant of a USDA home loan before he is deemed eligible for a loan guaranteed under this subpart. In order to make sure that the information provided on the below given criteria is true, the lender is required to meet the applicant and verify the information on the application. The eligibility criteria pointers include the following factors:
- Income Eligibility
- Dependable and adequate income
- Determining Repayment ability
- Credit History
- Previous RHCDS loan
- Other Federal Debts
Determining Repayment Ability
In order to qualify for USDA mortgages it is important that a person has adequate repayment ability. For this purpose the lender calculates a total debt ratio. To calculate this ratio the applicant’s monthly obligations are divided by his gross monthly income.
The monthly obligations of a person consist of insurance PITI, principal, interest and taxes. Monthly obligations also include:
- Cosigned Obligations
- Liability on a previous mortgage
In order to qualify for these loans, income to determine the total debt ratio also includes the combine and total income of not just the applicant but also the coapplicant as well as any other member of the household who is party to the note.
Compensating factors if you have debts in collection
When the prospective USDA home loan borrower has a total debt ratio that exceeds the maximum authorized ratio, then the lender can request RHCDS concurrence so that it may allow a higher ratio based on compensating factors. These compensation factors include:
- Applicant history of previous 12 months of devoting income to housing expense – the percentage of this income is similar to that of proposed loan
- The applicant has accumulated savings which when added to the housing expense of the applicant show capability of making the payments as required on the proposed loan
