How to Apply for a USDA Direct Housing Loan
How do you apply for a USDA direct mortgage? We will
explain the details but first you need to understand that every State operates
differently and every Area Office with in that state may also operate
differently. All offices are bound by the rules and regulations set forth
but there is some flexibility as to how they start the process.
Some offices prefer a pre-qualification preliminary application
(two page form with no documentation or fees) and other offices want a full
blown (10 page) application with all your documentation and a fee for the credit
report.
My personal recommendation is the pre-qualification rout.
It is a no hassle and no cost quick step to find out if you are
"likely" to qualify.. Your information is put in the computer,
they pull a no-cost credit report and then will counsel you.
If you are likely to qualify they will send you a full
application. If there are some issues, they will talk to you about your
information details and counsel you as to what you should do so you may qualify
in the future. If you feel you can dispute or clear up the issues
you can still file a complete application.
However, either way you could still be denied the loan because
during the pre-qualification process all discussions are based on un-verified
information. If you submit a full application and documentation, all the
information will be verified by the Government and if it is unfavorable you will
be formally denied the loan.
Personally, I would prefer the pre-qual method. Tell me
what the issues are and let me fix them. The choice is yours. Do
call your local office to see how they operate. Some offices will not do a
pre-qual. Below is a more detailed version of the USDA Application
Process.
The devil is in the details.
Pre-Qualification
Pre-qualification involves using unverified information to evaluate the likelihood that a
potential applicant would be program eligible. The results of pre-qualification are not binding.
A potential applicant with possible obstacles to program eligibility may submit an application
and a potential applicant who appears program eligible is not guaranteed that a loan will be
made.
Pre-qualification serves as an opportunity to:
-
Explain the program and the application process;
-
Determine the likelihood of eligibility based on income and other factors; and
-
Calculate the likely maximum loan amount.
-
Encourage the early completion of homeownership education for maximum benefit.
The Agency should provide consistent pre-qualification counseling
for all potential applicants. It can be done face-to-face when a potential applicant
comes into the Field Office or by telephone when someone calls to inquire about the
program.
Although pre-qualification is not required, it is strongly encouraged because it can
eliminate unnecessary work for both the potential applicant and the Agency.
The pre-qualification process does not apply when a Form RD
410-4 (10 page application),
Uniform Residential Loan Application, has been received. The Agency should
proceed directly to the application review and processing (if funding is available).
During the course of the pre-qualification review, the Agency should provide as
much information as possible about how Section 502 program works. Although this information
will be repeated during the course of the application and loan approval process, it is important
for the potential applicant to begin to understand how the program works and the steps that will
be required to obtain a loan.
Pre-qualification provides an opportunity to consider whether the potential applicant
appears to meet the basic eligibility requirements. The Agency should enter into
the mortgage software information provided by the potential applicant and counsel
the potential applicant about the following requirements and restrictions.
- Creditworthiness. The Loan Originator should advise potential applicants about the
Agency's credit history standards including the ramifications of delinquency on a
federal debt. To aid in this discussion, the Loan Originator may order an in-file credit
report if the potential applicant has signed Form RD 3550-1, Authorization to Release
Information and may also check the Department of Housing and Urban
Development's online Credit Alert Interactive Voice Response System (CAIVRS)
and MortgageServ's Borrower Cross Reference screen (Customer/XREF/Social
Security). Regardless of the results of the infile credit report, the Loan Originator
must not discourage a potential applicant from submitting an application. The Loan
Originator must ensure that the race, gender, ethnic group and marital status
information, when a visual observation can be made, is input into the UniFi system.
This information is critical for reporting purposes.
- Citizen or qualified alien. The Loan Originator can ask potential applicants about
their citizenship status and, for qualified aliens, inform them of the documentation
that will be required when an application is submitted.
- Identity Information. The Loan Originator should explain to potential applicants
the documentation required to verify identity when an application is submitted.
- Requirement to occupy the dwelling. The Loan Originator should explain that the
dwelling must serve as a borrower's primary residence, and confirm that the potential
applicant intends to use the loan for this purpose.
- Financial information. The Loan Originator should obtain information from the
potential applicant about household members, income, expenses, and debt in order to
make a pre-qualification determination of income eligibility and repayment ability.
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