Automated and Manual Underwriting

In addition to automated computer underwriting, USDA offers manual underwriting that allows participating lenders to consider the personal circumstances of each home buyer and make good common-sense decisions regarding those who have demonstrated the ability to manage their financial affairs in a responsible manner. This is particularly helpful when a borrower has lagging credit scores despite a sustained recovery from past difficulties.

 
Non-Traditional Credit
A lack of credit history reflected on a credit report is not a problem with the Rural Development Loan. We simply document the applicant's willingness to pay debts through third-party verification, copies of canceled checks, or other acceptable documentation for recurring payments or monthly obligations such as rent, utility, phone, and bills.

 
Credit Scores

Under the manual underwriting system, credit scores are considered according to the guidelines published by USDA. >Click here to learn more about credit guidelines.

Chapter 7 Bankruptcy

Three years must have elapsed since the date of the discharge of a Chapter 7 bankruptcy. A period of less than three years may be acceptable if the home buyer can show that the bankruptcy was caused by extenuating circumstances that were of a temporary nature, were beyond the applicant's control, and have been removed.

Chapter 13 Bankruptcy

The home buyer must have successfully completed a debt restructuring plan and demonstrated a willingness to meet obligations when due for the 12 months prior to the date of application.

Foreclosure

Three years must have elapsed from a foreclosure with the loss of security or one year in a foreclosure with no loss of security.

Collections, Charge-Offs, and Judgments

Collections must be paid in most cases, but lenders may make exceptions depending on the account type, the amount owed, and the cause of the collection. All judgments must be paid, and charge-off accounts showing balances must be paid.