Here’s what to do if your USDA Loan is Denied

What happens if a USDA loan is denied after the contract is signed? Well, before your blood pressure starts to rise, remember that there are multiple ways a USDA loan can be approved.

In today’s short video, we’ll discuss the USDA approval process and how to keep your transaction heading in the right direction… even if your USDA loan gets initially denied.

Before clicking the play button, please download our free USDA Blueprint for Success. This resource is a great education tool designed for both homebuyers and realtors.

What happens if your USDA Loan is Denied?

If your USDA loan is denied, don’t panic. There are multiple ways a USDA loan can be approved. So, take a deep breath and I’ll walk you through the options.

There are two different ways a USDA loan can be approved: 

1. Automated Underwriting – acceptance through the USDA underwriting system known as GUS  (Guaranteed Underwriting System)
2. Manual Underwriting – For those files that receive a “Refer” or “Refer with Caution” response from GUS or any other factor that requires a downgrade.

Automated vs Manual Underwriting

Automated underwriting acceptance is like driving down a smoothly paved road with great weather and no traffic. Whereas, manual underwriting is like traveling down a bumpy road in bad weather. They both get you to the destination, but one may require additional care and steps to navigate.

Automated acceptance  will permit a more streamlined approval process and reduced underwriting documentation. Whereas, manual underwriting guidelines are more stringent, but also provide more flexibility for things such as credit exceptions.

Depending on your bank or lender they may only work with automated approvals.

Steps after Denial

If you have been denied a USDA loan your next steps are to…

1. Ask if the lender is able to process under manual underwriting guidelines.
2. Check to see if you are working with an actual approved USDA lender.

If you are not working directly with a USDA approved lender, then the bank, broker, credit union, or lender is the “middle man” working with the approved USDA lender. This often leads to delays or miscommunication.

As an approved USDA lender, we are experienced in working with USDA guidelines for both manual and automated approvals. Plus, we have specific systems in place for USDA processing that cover everything from pre-qualification to closing.

Remember, let our experience be a resource for you. Whether it be USDA, VA, FHA, or Conventional, simply call or email to discuss your scenario and let us show you the “Metroplex” difference!

(800) 806-9836 Ext. 280
SeanS@MPLX.org