Can You Qualify For A USDA Home Loan With High Debt Ratios?

Is it possible to qualify for a USDA Home Loan with high debt ratios?

So, what if you found that perfect home, but your bank or lender says your debt ratios are too high to qualify for a USDA loan?

Because of the uniqueness of USDA Rural Home Loans, the guidelines are quite different from what is traditionally found with FHA or Conventional. With that being said, many times I see banks and lenders provide advice that may be well intentioned, but unfortunately is simply not accurate.

Here are important highlights that can help with a homebuyer’s qualifying:

• USDA Published guidelines for debt ratios are 29% for housing and 41% for total overall expenses. However, when utilizing the GUS underwriting system and the response is an “Accept”, those debt ratios are considered eligible. The one exception would be in the case of a manual underwriting downgrade which would eliminate the ability for automated processing and those associated benefits.
• Installment accounts with 6 months or less remaining may be removed from the debt ratio calculation completely.   This guideline does not apply to revolving accounts such as credit cards. Please be advised that the payment may continue to be included in the debt ratio at the discretion of the lender’s underwriter.
• What about paying off debt during the loan process? For example, what if funds are available to pay off either a credit card or installment account after a contract has been signed and the loan is in process? This can be permitted, but please note that many lenders have specific overlays on this topic and may not allow accounts to be paid off after application has been made. Metroplex Mortgage Services will permit accounts to be paid off as part of the application process and prior to closing. Please remember that all funds used to pay off accounts must be documented from an eligible source.