Can you get a mortgage with a just 620 credit score and a job?
Almost! There is a common myth out there that you need to save up for a big down payment and have near perfect credit. This is not the case and many people will be pleasantly
surprised to know that you can qualify for a USDA Rural Development loan with only a 620 credit score, decent job history and the household must make less than 92k (1-4 persons) 122k (5-8 persons) in most of Maryland. There location restrictions however most of Maryland is eligible.
You must to have the ability to repay the loan and this is calculated using your gross income against your debt – “DTI” Debt To Income Ratio. This is broken into two categories “Front” and “Back” The front ratio is the total amount of your new mortgage including taxes and hazard insurance against your total monthly income. Your “Back” ratio is your total monthly reoccurring consumer debt including your mortgage. This is usually anything on your credit report i.e. credit cards, car payments, personal loans. Fortunately USDA allows higher ratios than many other consumer mortgage loans.
Another unique characteristic of USDA is the “funding fee” or “guarantee fee.” This is a 3.5% fee that is usually rolled into the loan that covers the lender should you stop your payments. Just to be clear, you do not have to pay the fee out pocket and it is NOT a down payment. As an example, lets say that you buy your home for a purchase price of 200k. The “funding fee” fee would be $7,000 and your total loan amount that you will repay is $207,000.
There are income limitations or restrictions depending on the location of the property being purchased. The income limitations are based the number of people living in the home and are broken into two categories 1-4 and 5-8 persons. In Charles County, Calvert County, and St. Marys County, the USDA Income Limit is 1-4 People $92,600 / 5-8 People $122,250. In other parts of Maryland the USDA Income Limit varies based on the per-capita income.
Why haven’t you heard more about this program? One of the reasons is the program hasn’t been funded for the later part of 2010 and most mortgage companies did not offer USDA Loans but there were a few that never stopped. There are many people today that are qualified and don’t even know it because they were told that they need 3.5% down (FHA) or a higher credit score etc. This is a fantastic program for first time home buyers because of the flexible guidelines and ease of approval. USDA Guidelines can be found at USDA Loan Home For more information or to see if you qualify, please call 443-624-9398 Mon-Sat 9am – 9PM