Warning! USDA Zero Down Program Is Tightening Their Guidelines
I have been warning first time home buyers for the last couple of years that it is getting much tougher to close mortgage loans. First FHA started tightening their underwriting guidelines and increased their mortgage insurance premiums which raised your monthly mortgage payment. Now, USDA is following suit and I have noticed that their underwriting is getting stricter and they are raising their annual premium again which means higher payments to you.
The USDA Zero Down Loan Program is still one of the best programs out there for a first time home buyer but you need to take advantage of this program before underwriting guidelines get so tight to the point which prevents you from qualifying for the program. For example, the required credit score for the program is 620 but we had a turn-down on a loan with a 680 score because the underwriting system did not like the overall credit profile unless there were cash reserves sitting in the bank. Recently, I have seen a trend which requires borrowers to have a few months payment reserves in the bank after closing which means if you can stockpile some money in your bank account then you may have a greater chance of getting approved for the program.
You need to contact us early in the process so we can submit your loan for pre-approval to determine if your overall credit profile meets underwriting standards and to determine if reserves are required. I can’t stress how important it is to get your ducks in a row several months prior to purchasing your first home to give yourself the greatest chance of getting approved for the program and becoming a happy homeowner. If you decide to wait until the last second, then be prepared to fly by the seat of your pants and you may be using a lifeline and calling parents or sibling to grab some cash for plan B loan program which requires you to have a down payment. You can avoid nightmares and headaches by contacting one of our loan representatives at 847-516-5743 to assist you in the purchase of your first home.