Credit Score Requirements for USDA Mortgages in Pennsylvania
Credit guidelines for USDA Mortgages in Pennsylvania and the rest of the nation are more flexible compared to other types of mortgage financing. USDA Mortgages, also known as USDA Rural Development Loans, are easier to credit qualify for than Conventional financing and even easier to credit qualify for than other government programs like VA and FHA.
The USDA as an agency does not have a minimum credit score but individual USDA lenders do set their own minimum credit scores.
620 seems to be the universal minimum USDA credit score at this time.
With a 620 credit score a borrower can qualify for a USDA home loan provided they can document current housing history. If they currently own a home this means having a clean 12 month mortgage payment history on the credit report. If they are currently renting, this means documenting 12 months of timely rent payments with evidence of cancelled checks. Borrowers with credit scores between 620 - 639 will also have to make sure they fit within debt ratios of 29/41, meaning that their new housing payment can not exceed 29% of the verified gross income and their total debts can not exceed 41% of the verified gross income.
Credit guidelines for USDA Mortgages with scores at or above 640 loosen up a bit more. For credit scores of at least 640, verifying housing history not listed on the credit report (like rent) can be waived. Credit scores at 640 or above can also allow a borrower to have minor collections overlooked and there is no need to verify any assets, if the borrower is not bringing money to the closing table. Debt ratios may be allowable up to 50% with a 640 score as long as the rest of the file is solid.
At this time, USDA Rural Development Loans are more flexible than most mortgage programs but there are some credit deficiencies that the USDA will not overlook no matter what the credit score. These include...
Late mortgage payments with the last year
Delinquencies on federal debt (IRS liens, student loans, Government mortgages such as VA, FHA, USDA)
Short sale within 3 years
Foreclosure within 3 years
Chapter 7 Bankruptcy within 3 years
Chapter 13 Bankruptcy completed and finished within the last year
The combination of more flexible credit guidelines and 100% financing has made USDA Mortgages in Pennsylvania worth a look for anyone looking to purchase a property in a USDA eligible area.