We get “Rural” really fast in NC… one minute you’re in a neighborhood – the next you can wake up to the sound of Roosters!
If you’re interested in living in a home with a larger lot – and a little less “Urban” this might be the program for you!
The program’s full name is the USDA Rural Development Guaranteed Housing Loan program. Most people call them “USDA loans” or “USDA RD Loans”. USDA loans are insured by the U.S. Department of Agriculture.
The USDA’s loan’s biggest feature is that it is a No Money Down Home Loan! That’s right, if you qualify – this is a 100% mortgage loan.
USDA loans are the same as most other mortgages in that they don’t have “crazy payback schedules” or come with prepayment penalties. Because these loans are backed by the government of The United States, there are some “quirks” to it.
Is the USDA loan program limited to first-time buyers?
No, the USDA Rural Housing Program can be used by first-time buyers and repeat buyers. We’ve done several loans for folks who currently have a house (in Tennessee for instance) and get transferred to NC – meaning that when they buy in NC… they’ll have 2 houses. There are some ways for this to work.
What types of mortgage loans are available with a USDA mortgage?
The USDA / Rural Housing Program offers 30-year fixed rate mortgages only. These are NOT for Construction Loans – There is no 15-year fixed rate mortgage. There are no adjustable-rate mortgages. 30-year fixed only.
What is the USDA program’s minimum downpayment?
USDA Home Loans have no downpayment requirement. You can finance over 100% of the property value with a USDA loan.
How are Student Loans Treated when Qualifying for a USDA Loan?
Student loans come in two classes: deferred and not deferred. And one thing to keep in mind when looking at the USDA Loan Program is that it does treat student loans differently than the other loan programs available. USDA Loan Underwriters count a payment – even if it’s deferred. If it’s deferred as an income base (changes annually) they count $100.
Can I finance the USDA PMI into my mortgage?
Yep. The PMI that USDA charges on loans (called Upfront Mortgage Insurance or Guarantee Fee) can be included in the loan. This means that if you are purchasing a $100,000 home in Raleigh, the loan will be $102,000; OR, you can pay the 2% out of your pocket… or see if you can get the Seller to pay it. We are NOT seeing many situations where the Seller is doing this, but if you have extra funds, you can go ahead and pay this off. Unlike FHA, the Guarantee Fee (or Mortgage Insurance Fee) is not refundable.
How much are the closing costs for a USDA mortgage?
Closing costs vary by lender and location. In general, we are seeing more NC Home Buyers who are getting the Seller to pay the Closing Costs (we can help you structure that).
Can the seller pay my closing costs on a USDA Loan?
Yes, the USDA Rural Housing Program allows sellers to pay closing costs for buyers. These costs can include state and local government fees, lender costs, title charges, and any number of home and pest inspections.
Can I get a gift for my closing costs?
Yes, USDA loans allow gifts from family members and non-family members. You will need a gift letter to accompany your loan application. We can help you coordinate this (it’s not too hard). You also may be able to get a grant from NC Housing.
Can I use the USDA loan program for my working farm?
No, the USDA Rural Housing Program is for residential property. There are some situations, however when we can help you use the program to purchase a horse farm.
Can I use the USDA loan program for a vacation home or Investment Property?
No, the USDA Rural Housing Program is for primary residences only.
Is there a minimum credit score for the USDA loan program?
Most Banks currently look for a 640 credit score. This is the number that GUS (the automated system) requires. NC Housing Finance Agency allows folks to go down to 600.. the trick is that NCHFA only accepts USDA loans that have a GUS approval… well, if GUS requires 640 – that’s the number you need.
I recently got out of college and don’t have 2 years of work history. How long until I am USDA-eligible?
If you are a W-2 employee, you are eligible for USDA financing immediately; you don’t need a job history. If you have less than 2 years in a job, however, you may not be able to use your bonus. overtime or commission income to qualify. HEADS UP – we are going to need a first pay stub. So, if this is a new job, we can’t close until you receive your FIRST pay stub.
I am self-employed. Can I use the USDA loan program?
Yes, self-employed persons can use the USDA Rural Housing Program. If you are self-employed and want to use USDA financing, as with FHA and conventional financing, you will be asked to provide 2 years of federal tax returns to verify your self-employment income. Your Income Taxes must be Filed, and we must be able to get a transcript before you can close.
Can I do a “cash out” refinance with the USDA program?
No, the USDA Rural Housing Program is for purchases and rate-and-term refinances only.
Are USDA mortgage rates good?
Yes, USDA Rural Housing Program mortgage rates are often lower than the comparable conventional 30-year fixed mortgage rates. And because mortgage insurance rates are lower, with small downpayment, USDA loans are usually much cheaper than the FHA programs!
If you are considering a USDA no money down home loan, call Steve and Eleanor Thorne. We can help you find out if your income qualifies for the program in your county – and if the property you have your heart set on is within the USDA Footprint!