Can You Qualify for a USDA Loan with NO Credit History?

How can you qualify for a USDA loan with no credit history?

How can somebody with limited credit history or even no credit scores at all qualify for a USDA Rural Home loan? As you can imagine, this makes the USDA qualifying process a little more difficult, but it is still possible!

Helpful reminder when you try to qualify for a USDA loan with no credit history.

Underwriting will require proper verification of rental history. In cases where there is no credit history, underwriting guidelines will require that you show 12 months of cancelled rent checks or a verification of rent form completed by either an apartment complex or management company.

However, a private landlord verification of your rental history would not be sufficient on its own. If you are renting from a private landlord, you would also need to provide cancelled rent checks to document the payment history. Paying rent by cash or money order is not advisable or an acceptable form of rent verification with underwriting.

Alternative forms of credit history will also need to be documented. Customarily, these are accounts that are not reporting to the credit bureaus. Common examples of these are water, electricity, cable, and phone bills. We will need to verify anywhere from 2 to 3 of these type of accounts with an on-time payment history over the last 12 months.

Although not underwriting requirements, strong compensating factors can help strengthen your USDA qualifying ability such as:

• Stable time on the same job for at least 2 years,
• Low qualifying debt ratios, and
• Verified assets in a checking, savings, or 401K
  (This can document reserves in case of an emergency.)

Please remember that all scenarios are on a case by case basis, and minimum credit qualifying conditions may apply.

These situations take both experience and credit understanding, so let our unique USDA expertise help clear these all too common qualifying hurdles.