USDA One Credit Score Mortgage: What You Need to Know to Qualify in 2024
If you’ve been told you can’t qualify for a USDA loan because you only have one credit score, you’re not alone. Many potential homebuyers are turned away by lenders requiring three credit scores, but that’s not the full story. At Gustan Cho Associates, we’re proud to offer USDA loans with flexible requirements, including options for borrowers with only one credit score.
This guide breaks down everything you need to know about USDA One Credit Score Mortgages to get on track to homeownership—even if you have limited credit history.
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What is a USDA One Credit Score Mortgage?
The USDA One Credit Score Mortgage is a loan option created to assist individuals in purchasing homes in qualifying rural regions without requiring an excellent credit history. While USDA loans generally require a 640 credit score or higher, at Gustan Cho Associates, we work with lenders who can consider borrowers with just one credit score—so long as it’s at least 680. This approach helps more people qualify, especially those who don’t have a lot of traditional credit history.
Why Choose a USDA Loan?
USDA loans offer unique benefits:
- 100% Financing: That means no down payment is required!
- Low Mortgage Rates: USDA loans are backed by the government, leading to competitive interest rates.
- Flexible Credit Options: Unlike many traditional loans, USDA loans can accommodate borrowers with lower or fewer credit scores.
With these advantages, USDA loans are a great option for anyone seeking affordable homeownership in rural or suburban areas.
Understanding USDA One Credit Score Mortgage Requirements
One of the biggest questions borrowers ask is: “Can I qualify with only one credit score?” The short answer is yes but with conditions. Here’s what you need to know:
- Credit Score of 680 or Above: Typically, if you possess a single credit score, lenders usually seek a minimum score of 680.
- Alternative Credit Verification: If you don’t have three credit scores, lenders might use non-traditional credit sources like rent, utility payments, or even cell phone bills to verify your payment history.
- Income Eligibility: USDA loans come with income limits based on the area and household size. You’ll need to meet these to qualify.
- Property Location: The home you want to buy must be in a USDA-approved rural area. Many suburban areas also qualify.
Qualify for mortgage loan with low credit scores, click here
How to Qualify for a USDA One Credit Score Mortgage
If you’re considering a USDA loan but only have one credit score, follow these steps to improve your chances of approval.
Step 1: Check Your Credit Score
Start by confirming your current credit score. If you only have one score, lenders prefer it to be at least 680. This is higher than the usual USDA minimum of 640, but with just one score, a higher number gives lenders more confidence.
Step 2: Consider Non-Traditional Credit Sources
You can still show financial responsibility through non-traditional credit if you don’t have multiple credit scores. Here’s how it works:
- Verify Rental History: If you’ve paid rent consistently for at least 12 months, get copies of your payment records. Lenders can use this as a substitute for a traditional credit score.
- Provide Utility and Insurance Bills: Bills like your electricity, water, cell phone, and auto insurance can serve as proof of on-time payments.
- Submit Bank Statements: Showing steady bank deposits and a low debt-to-income ratio can support your USDA loan application.
Step 3: Boost Your Credit Profile Quickly
Add more credit lines to your profile to increase your eligibility. Here are some fast ways to do it:
- Open Secured Credit Cards: Secured credit cards are easy to qualify for and will quickly add to your credit history. Using them responsibly can help increase your score.
- Authorized User Accounts: Ask a family member to add you as an authorized user on one or more of their credit cards. This can boost your credit score if the card has a positive payment history.
Step 4: Work with a Lender Who Understands USDA Guidelines
Not all lenders offer USDA One Credit Score Mortgages. At Gustan Cho Associates, we work with lenders specializing in USDA loans and understand that not all borrowers have a traditional credit history.
USDA One Credit Score Mortgage Guidelines: The Details
Let’s look at what USDA loan guidelines mean for borrowers with one credit score.
Credit Score Requirements
For most USDA loans, a 640 credit score is generally required. However, with a 680 credit score and only one score available, borrowers may still qualify through our flexible guidelines. Each lender’s approach can vary, so it’s key to work with a USDA-approved lender that accepts one credit score.
Non-Traditional Credit Verification
If you don’t have three credit scores, you’ll need to provide other forms of credit verification, like:
- Rental Verification: Proof of consistent rent payments for 12 months can show lenders you are creditworthy.
- Utility Bills and Insurance Payments: Consistent, on-time payments on these accounts prove financial responsibility.
Income and Property Eligibility
USDA loans have income caps based on area and family size. The property must also be in a USDA-eligible rural or suburban area—not all homes qualify. To find out if a home is USDA-eligible, consult with a USDA-approved lender or check the USDA’s online property eligibility map.
How USDA Loans Compare to FHA, VA, and Conventional Loans
USDA loans have unique benefits, making them a strong choice for many borrowers. Here’s how they stack up against other popular loan types:
- No Down Payment: USDA loans allow 100% financing, unlike FHA and conventional loans, which require at least 3.5% and 3% down payments, respectively.
- Competitive Rates: USDA loans typically offer lower rates than conventional loans, thanks to government backing.
- Rural and Suburban Focus: USDA loans are designed for homebuyers in eligible rural and suburban areas, which can sometimes mean more affordable properties.
Benefits of Choosing Gustan Cho Associates for Your USDA Loan
At Gustan Cho Associates, we help borrowers qualify for USDA loans with only one credit score thanks to our flexible approach:
- No Overlays: Unlike many lenders, we don’t impose extra requirements (or “overlays”) beyond USDA guidelines.
- Personalized Support: Our team specializes in USDA loan programs and understands borrowers’ unique challenges with limited credit.
- Quick Credit-Boosting Tips: We provide guidance on how to boost your credit quickly, even if you have only one score.
Our mission is to make USDA loans accessible to more homebuyers, regardless of credit history.
Steps to Apply for a USDA One Credit Score Mortgage in 2024
Ready to take the next step? Here’s a step-by-step guide to applying for your USDA One Credit Score Mortgage:
- Confirm Your Eligibility: Check if your income, location, and credit meet USDA guidelines.
- Prepare Your Documentation: Gather records of non-traditional credit, such as rental history or utility bills.
- Reach Out to Gustan Cho Associates: Our team can review your credit and help you understand your options.
- Apply Online: Start your application today to see if you qualify for a USDA One Credit Score Mortgage.
At Gustan Cho Associates, we’re here to help you move into your new home with the least stress.
Final Thoughts on USDA One Credit Score Mortgages
With a USDA One Credit Score Mortgage, it is possible to fulfill your dream of owning a home, even if your credit history is limited. By meeting income and location requirements and working with a lender that understands USDA guidelines, you can secure a mortgage with 100% financing and affordable rates. Don’t let a lack of traditional credit hold you back—reach out to Gustan Cho Associates to learn more about how we can help you qualify.
Ready to Get Started? Submit your application now to start your USDA loan experience with a lender dedicated to ensuring your success.
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Frequently Asked Questions About USDA One Credit Mortgage:
Q: What is a USDA One Credit Score Mortgage?
A: A USDA One Credit Score Mortgage is a type of USDA loan that allows borrowers with only one credit score to qualify for financing, provided the score meets a minimum of 680.
Q: Can I Qualify for a USDA One Credit Score Mortgage if I Don’t Have a Lot of Credit History?
A: Yes, you can! With a USDA One Credit Score Mortgage, you may still qualify using alternative credit sources like rent, utilities, or insurance payments to show you’re financially responsible.
Q: Why do USDA Loans Sometimes Require Three Credit Scores?
Many lenders prefer three credit scores to assess creditworthiness. Still, with USDA One Credit Score Mortgage options, certain lenders can help you qualify with only one score if it’s high enough (usually 680 or above).
Q: What Credit Score do I Need for a USDA One Credit Score Mortgage?
A: If you only have one credit score, lenders generally require at least 680 to qualify for a USDA One Credit Score Mortgage.
Q: Are There Income Limits for a USDA One Credit Score Mortgage?
A: Yes, USDA loans have income caps based on your area and household size. The goal is to help low-to-moderate-income buyers access affordable housing in rural or suburban areas.
Q: Do I Have to Live in a Rural Area for a USDA One Credit Score Mortgage?
A: The home must be in a USDA-eligible area, including many rural and suburban areas. Check with a USDA-approved lender or the USDA website to see if your area qualifies.
Q: What are Non-Traditional Credit Sources for a USDA One Credit Score Mortgage?
A: Non-traditional credit sources include rental history, utility bills, and insurance payments. These can help prove your creditworthiness if you don’t have multiple credit scores.
Q: How Does a USDA One Credit Score Mortgage Compare to FHA and VA loans?
A: USDA loans provide financing with no down payment needed and typically have low interest rates. FHA loans need a minimum down payment of 3.5%. In contrast, VA loans are specifically designed for veterans and come with distinct criteria.
Q: Can I Use a USDA One Credit Score Mortgage if I Have Collections on my Credit Report?
A: USDA guidelines require any outstanding collections, including medical collections, to be paid off to qualify for a USDA One Credit Score Mortgage.
Q: How Can Gustan Cho Associates Help me Get a USDA One Credit Score Mortgage?
A: At Gustan Cho Associates, we offer USDA One Credit Score Mortgage options with no overlays, helping you qualify even with a limited credit history. We can guide you through the process and help boost your credit if needed.
This blog about “Get 100% Financing with a USDA One Credit Score Mortgage” was updated on November 7th, 2024.
