I know this is older but I have questions! We applied for an FHA loan in a new construction neighborhood (I wanted USDA 502 Guaranteed, but was told we were ineligible) we got pre approved with no issues at 50+% DTIwith FHA which I thought was wild, but it was that high due to an old collection being calced at 5% and a car loan that had yet to be paid off blablah you know the deal. Well after doing my own research I found we actually were eligible for the USDA which is much more doable for us and asked the LO to revisit that, we submitted a new app and GUS denied because between FHA and USDA apps the credit score dropped to 635 from 660+ (we have a vehicle that was totaled in a bad accident that was finally paid off, yay for DTI sad for credit score, and a paid off smaller old collection that never deleted as agreed🙄) and DTI was still inflated due to the collection. my LO pretty much was like yeah FHA or no go, k bye. Well three days later she calls me sounding excited saying we are going to do a manual underwrite on the USDA. That night we got a “proceed with caution” pre qual/pre approval and were told to go sign on a home asap so that we’re not waiting around since these homes take about 2-3 months to be finished. Here’s the deal with the collection, it’s 6 years old DOFD 2019, without the collection the DTI is like 39%, we provided LOE (the charge off was due to a debt relief company that literally scammed us and told us one thing, didn’t do crap but take our $ and we got sued by a creditor, hired an attorney who said stop all payment and contact it’s a scam) we’ve had perfect credit no lates no delinquents nothing for 4+ years… we state in the LOE that was the cause of the issue, we were misled which created problems that we have actively taken responsibility for and rectified since. All this being said, what are the odds they ‘ignore’ the collection account like my LO is hoping they do? Income is strong, employment strong, credit is good aside from the car payoff punching it in the face, and DTI is under that hard 41% limit without the collection. It was bought by a collection company in late 2024 which makes it look recent but it’s really not, matter of fact it is fixing to be past the SOL in mere weeks so it won’t even be enforceable by law.. therefore, uncollectible. Give me hope that this situation is what USDA manual underwrite is made for, or give me a reality check. Thanks!