1. Strengthen Your Credit Score

Your credit score is one of the most important factors the AUS considers. Here’s how to make it work in your favor:

1. Target a Score Above 680: A score above 680 dramatically improves your odds, especially for USDA or FHA loans.
2. Reduce Credit Card Balances: Aim to keep your credit utilization below 30% of your total credit limit.
3. Avoid Recent Derogatory Marks: Late payments, collections, or charge-offs within the last 12 months can negatively impact your application.

2. Stay Within Debt-to-Income (DTI) Guidelines

Your DTI ratio measures how much of your income goes toward monthly debts and housing expenses.

1. Meet AUS DTI Limits:
2. USDA: Typically capped at 29/41, though compensating factors can allow 32/44.
3. FHA: Can go up to 46/56 with strong compensating factors.
4. Lower Monthly Obligations: Pay off small debts, like credit cards or car loans, to free up room in your DTI.
5. Increase Your Income: Adding a part-time job or including an eligible co-borrower’s income can help.

3. Build Reserves and Consider Down Payment Options

1. Show Savings: Having 2-3 months of housing expenses in reserves shows financial stability.
2. Consider a Larger Down Payment: While USDA loans don’t require one, other programs like FHA allow higher down payments, which can strengthen your application.
3. Use Gift Funds: Ensure any gift funds are properly documented to meet lender guidelines.

4. Maintain Stable Employment

1. Stay Consistent: Two years of steady employment in the same field is ideal.
2. Document Income Clearly: Pay stubs, W-2s, and tax returns should show consistent or increasing income.
3. Avoid Gaps: Employment gaps longer than a month can complicate your application unless well-documented.

5. Leverage Compensating Factors

Compensating factors are additional strengths in your financial profile that can offset higher DTI ratios or other risks.

1. Excellent Credit History: No late payments or delinquencies in the past 12-24 months.
2. Low Loan-to-Value (LTV) Ratio: A lower LTV ratio shows you’re borrowing less compared to the property’s value.
3. Minimal Payment Shock: The new mortgage payment shouldn’t be significantly higher than your current housing expense.

6. Choose the Right Property

1. Ensure Eligibility: Make sure the property meets USDA or FHA guidelines.
2. Appraisal Value: Ensure the home’s appraised value matches or exceeds the purchase price.

7. Avoid Common Mistakes

1. Don’t Open New Accounts: New credit inquiries or accounts can lower your score and raise red flags.
2. Double-Check Information: Ensure your application is accurate and consistent.
3. Avoid Negative Bank Activity: Overdrafts or non-sufficient funds (NSF) fees can hurt your approval odds.

8. Work with a Knowledgeable Loan Officer

As your loan officer, I’ll help you structure your application to highlight strengths and address weaknesses. With my experience, we’ll focus on:

1. Adding compensating factors to improve your AUS results.
2. Strategizing ways to lower your DTI or improve your credit profile.
3. Ensuring all documents are accurate and complete.

Final Thoughts

Getting an "Approve/Eligible" decision from the AUS isn’t just about meeting minimum requirements—it’s about presenting a strong overall financial picture. By improving your credit score, managing your DTI, building reserves, and working with an experienced loan officer, you can significantly increase your chances of approval.

If you’re ready to get started, let’s connect! I’ll guide you every step of the way to help you achieve your dream of homeownership.