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USDA loan denied.. any options?

USDA denied my loan today due to my student loans being in default I am currently in a rehab program for them and they will be back in good standing in 6 months. I have already put up earnest money and made an offer. we are supposed to close in 45 days. HELP! anything I can do? by timpatridge781 from Amarillo, Texas. Feb 17th 2016 Reply


William J Acres (William_Acres)
#2 ranked lender in Arizona - 7,788 contributions

This is a perfect example of why I tell people to get pre approved before ever writing an offer on a property.. But if you actually did get pre approved, then I can almost guarantee you probably used a local bank but did not use a mortgage broker.. A qualified mortgage broker would have never written you a pre approval letter knowing you are currently delinquent of your student loans. When it comes to mortgage finance, you cannot be behind on student loans.. period!! In fact, if you are behind on any type of government debt, you will be automatically denied.. For government guaranteed loans, the buyers information must be run through a government database search called CAIVRS (Credit Alert Verification Reporting System). If you have any outstanding / delinquent government debt, you're automatically denied. The only way to get past this is to get the student loans current as soon as possible.. Even if you brought them current today, it could take months for the CAIVRS system to show and change it's status. As far as your earnest money deposit, you should receive that back. Most RE contracts are subject to you obtaining financing... so if your denied, they will refund you the monies you put up.. I'm a Broker here in Scottsdale AZ and I only lend in Arizona. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. William J. Acres, Lender411's number ONE lender in Arizona. 480-287-5714 WilliamAcres.com NMLS# 226347

Feb 17th 2016
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Thank you for your response. so there is no way to go thru a conventional loan or anything else?

Feb 17th 2016
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William J Acres (William_Acres)
#2 ranked lender in Arizona - 7,788 contributions

Conventional financing does not require a clear CAIVERS.. however, they will require your student loans be current.. And with conventional financing, you need to have better credit scores than USDA. Typically, if your not putting 20% down, then you need to be 660 or above, but ideally 700 or above. and there is a minimum of 3% down for first time home buyers, or 5%+ down otherwise. The reason you need to have higher scores is because with conventional, you will have to pay mortgage insurance if your putting less than 20% down.. With a low credit score, you will pay a higher interest rate, but the MI rate will also be higher.. higher credit scores get better rates all around. I'm a Broker here in Scottsdale AZ and I only lend in Arizona. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. William J. Acres, Lender411's number ONE lender in Arizona. 480-287-5714 WilliamAcres.com NMLS# 226347

Feb 17th 2016
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Justin Murray (JustinMurray)
#103 ranked lender in Illinois - 172 contributions

Tim,Is it possible to get on a new payment plan with student loans that brings them current automatically for you? Have you reached out to the current student loan servicer regarding this? I have seen it done recently - for this same reason. what is your current credit score?

Feb 17th 2016
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Joe Metzler (JoeMetzler)
#1 ranked lender in Minnesota - 3,439 contributions

Did you have a pre-approval before making the offer? Currently defaulted student loans, or ANY loan in default is going to be an issue, ESPECIALLY on a government loan like FHA, VA, or USDA loan. This is Loan Officer 101 type stuff. I assume you had a pre-approval, and they blew it... This is a common problem because about 80% of Loan officers in this country are NOT licensed, and are really more like low level, low information application clerks. ALWAYS due homework ON THE LOAN OFFICER. Make sure they are LICENSED and experienced, and not just some application clerk.

Feb 18th 2016
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Jesse Stroup (jessestroup)
#195 ranked lender in California - 589 contributions

You can look to a conventional loan or a hard money loan.

Mar 3rd 2016
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