A Quick Guide to USDA Loan Applications

Like any other mortgage, the borrower must demonstrate his or her ability to pay his loan and the willingness to pay the loan on time every month. The borrower's credit score will also have to be checked and analyzed to see if he or she has sufficient finances to pay the loan as soon as it becomes due. Aside from that, the borrower should prove that he or she has steady and enough income to meet the home loan payments, as well as ensuring that he or she has enough savings each month. But what does the loan underwriter do to determine your loan eligibility?

One of the first things that your loan underwriter will check is your gross generated income, the income of the co-buyer, as well as that of other working adults that will be living in the same household. Necessary adjustments need to be done if the generated household income goes over the maximum limit to help the borrower qualify for a loan.

Although the USDA is not strict with employment history, you still need to provide your loan underwriter with a clear picture of what your gross income looks like. In order for you to do that, you have to submit copies of your IRS tax filings for the past two years. For those who are self-employed, at least three years of tax returns are needed to help determine a good average income. For those who are working for an employer, previous copies of the most recent pay stubs need to be submitted.

If there are any gaps in the employment history which exceed 30 days, an explanation letter has to be made, unless the generated income during that period is considered seasonal. Those who have less than two years of steady employment history may still be considered eligible as long as there's a strong likelihood of continuing the employment in the same position. As soon as you're ready to file for a USDA guaranteed loan, you may try to find a USDA approved lender who's an expert on the USDA home loan procedure.

Another thing that your lender will check is your credit history. Your credit history report will reflect all your previous debts with other creditors and your payment history as well. It also reflects whether you were able to manage your credit limits or even extended your credit limitations. Any late payments which went over 30 days will also be reflected on your credit history. Other notes such as repossession, bankruptcy, or even foreclosure will also be reflected on your credit report.

Once you've already settled your past credits and debts and have a good credit standing, it will become much easier for your lender to process your USDA loan application.