How does a USDA loan work if you have bad credit?

I have pretty bad credit right now. My wife and I are looking at a home that has been forclosed on and we would love to get it, but getting a loan the regular way is probably not going to work right now. Does anyone know exactly how the USDA loans work. Does your credit score have to be high or does it not matter?

Thank You

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  • 1 decade ago
    Favorite Answer

    My husband and I met with a lender who is licensed to work with USDA (also known as Rural Development) loans. The property has to be in a Rural Development area and you have to make less than the median income of that area. Additionally, lenders will require that you have a minimum credit score of 620 to qualify. USDA does not have a minimum guideline, but lenders do. The house will also have to meet certain criteria.

    None of this is as complicated as it might sound! Believe me! We were nervous before we began the process, but our lender has been an incredible guide through the whole thing.

    (It's the underwriting process that goes on forever! LOL)

    My best advice would be to got to the USDA/Rural Development website and look up lenders in your area, and then set up an appointment to meet with one. They can help you and answer all of your questions!

    My husband and I are thrilled we went with a USDA/Rural Development loan because we didn't have to put any money down and now we're moving into a gorgeous home within a month!

    You can do it too!!!

    Don't let the minimum credit score of 620 intimidate you! There might be ways around that particular problem!

    If you don't try, you'll never know. It's at least worth a shot! The worst thing that can happen is the lender will say no. You can always try another lender. And even if everyone says no, you're no worse off than when you started! Go for it!!!

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  • 1 decade ago

    Credit score is not the most important thing when applying for a government insured loan (FHA, USDA). CREDIT however IS important. I would advise that you speak to a HUD credit counselor about your credit history and try to work on that first. Its no cost to you and the answers you seek should be found there. Just go to the hud site and search for counselors.

    Source(s): www.hud.gov
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  • Maria
    Lv 4
    4 years ago

    depends on the specifics of the loan and the mortgage firm who takes it. usda make direct grants, and loan guaranteed loans which is a mortgage from a lender which the usda guarantees, but makes no direct loan.

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  • 1 decade ago

    Good Credit is still the main factor for getting a mortgage loan, regardless of the loan program.

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  • Anonymous
    3 years ago

    Richard Dove and David Roberts asked the same question. You should see their answers side by side.

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  • 3 years ago

    This is puzzling to me too

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