To be eligible for a USDA Rural Development Direct 502 loan, applicants must show that they are
able and willing to repay the loan.
This loan is not credit score driven, ... but how the agency
evaluates your credit history is determined by your score. If your credit
score is above 640 it is possible to get a waiver for minor credit issues.
If it is less than 640 a waiver is typically not considered.
The following video covers the basic credit requirements for this loan:
The underwriter must evaluate the credit history of each proposed party to the note.
An applicant's credit record does not have to be perfect; a few instances of credit problems can
be acceptable if an applicant's overall credit record demonstrates an ability and willingness to
The Agency must investigate indicators of unacceptable credit to determine whether they are accurate, and whether there is an acceptable explanation for the problem that
might justify an exception. Failure to understand credit history or the nature of a credit problem could put the Agency at risk of providing financing to an applicant who is unable or unwilling to repay the debt.
Little or no credit history. The lack of credit history on the credit report may be mitigated if the applicant can document a willingness to pay recurring debts through other acceptable means such as third party verifications or canceled checks. Due to impartiality issues, third party verifications from relatives of household members are not permissible.
Payments on any installment account where the amount of the delinquency exceeded one installment for more than 30 days within the last 12 months.
Payments on any revolving account which was delinquent for more than 30 days on two or more occasions within the last 12 months.
A foreclosure that has been completed within the last 36 months.
An outstanding Internal Revenue Service (IRS) tax lien or any other outstanding tax liens with no satisfactory arrangement for payment.
Two or more rent or mortgage payments paid 30 or more days late within the last 2 years. If the applicant has experienced no other credit problems in the past 2 years, only 1 year of rent history
will be evaluated. This requirement may be waived if the program loan will reduce shelter costs significantly and contribute to improved repayment ability.
Outstanding collection accounts with a record of irregular payments with no satisfactory arrangements for
repayment, or collection accounts that were paid in full within the last 6 months, unless the applicant had been
making regular payments previously.
Non-Agency debts written off within the last 36 months, unless the debt was paid in full at least 12 months ago.
Agency debts that were debt settled within the past 36 months, or are being considered for debt settlement.
Delinquency on a federal debt.
A court-created or court-affirmed obligation or judgment caused by nonpayment that is currently outstanding or
has been outstanding within the last 12 months, except:
◊ A bankruptcy in which:
♦ Debts were discharged more than 36 months prior to the date of application; or
♦ Where an applicant successfully completed a bankruptcy debt restructuring plan and has demonstrated a
willingness to meet obligations when due for the 12 months prior to the date of application.
◊ A judgment satisfied more than 12 months before the date of application.
An applicant with an outstanding judgment obtained by the United States in a Federal court, other than
the United States Tax Court, is not eligible for a Section 502 loan. This requirement is statutory and cannot
Credit Alert Interactive Voice Response System - CAIVRS
Except in VERY unusual circumstances, an applicant who is delinquent on a Federal debt is
not eligible for a Section 502 loan. The underwriter can verify whether the applicant has
delinquent Federal debt through CAIVRS.
Residential Mortgage Credit Report
The Residential Mortgage Credit Report (RMCR) will include a Beacon, Classic 2004
FICO, and Fair Issac credit score. The report will include data from the three main repositories,
updated verifications on all tradelines with a balance (updated to within 90 days), a court records
check that includes adverse items for the prior 7-year period, and a 2-year employment and
The RMCR will also provide the results of a check against the U.S. Department
of the Treasury's Office of Foreign Assets Control (OFAC) database. OFAC administers and
enforces economic and trade sanctions against targeted foreign countries, terrorists, international
narcotics traffickers, and those engaged in activities related to the proliferation of weapons of
If an OFAC match message appears on the RMCR, refer to the U.S. Treasury website at
http://www.treas.gov/offices/enforcement/ofac/faq/answer.shtml for guidance on how
to determine if the match is valid. If a due diligence review concludes that the match is valid,
the applicant should be denied assistance and referred to the OFAC contact number for further
information as per the aforementioned website.
Copyright 2010 | Kale Enterprise Corp. |
Cartersville, Georgia, 30120
Underwriting Guidelines here