We often get calls from first time homebuyers in NC who want to know about special programs available to them. While we do offer NCHFA Programs, VA loans and FHA Loans – often times we find that the best program for the First Time Home Buyer is the USDA Home Loan. Common first time home buyer questions about NC USDA Home Loan program include:
1. Why choose a Rural Development Guarantee loan? Simple! If you are not a Veteran – the USDA Rural Development Guarantee (RDG) loans are the only true 100 percent financing loan you will find. Period. They require zero downpayment and they have very low PMI rates. The USDA home loan program is set for 30 years at a fixed rate, and there is no limit on the price you pay for the home.
The only qualifying factor for the home itself is that it be situated within an approved USDA eligible area. NC has an abundant number of areas that qualify for this program. However, if you live in Johnston County (any other County on the list that is going to see USDA map changes on October 1 2013) you should pay attention! Because about 20% of Johnston County could lose the ability to use the USDA Home Loan program in NC!
2. Can I Save Money by Using the USDA Home Loan Grant Program? Yes. Take, for example, a loan for $100,000.00. By taking out a USDA Home Loan loan, the borrower saves $4,290.00 in the first 10 years over what they’d pay out on an FHA loan. Why? For one reason – USDA RD loans have super low monthly PMI Rates!
When we first suggest the program, there’s generally a stunned silence at the other end of the line… “ugh, we weren’t really looking for a FARM?” No worries. The program is NOT specifically designed for farms, every county in NC has some portion of it that qualifies for the program, and the USDA Rural Development Home Loan Program has some of the cheapest costs associated with it! Compared to the better known FHA Loan, it can be $200 a month cheaper!
3. Is USDA Providing the Funds for These Loans? No. Much like the FHA, the USDA Rural Development Single Family Housing Program functions as an Insurance Company or safety net for mortgage lenders – in effect guaranteeing that they are protected in the event you go into foreclosure – up to 90 percent of the original loan amount. This guarantee grants lenders a great protection against losses. The quality of this USDA guarantee is what allows lenders to easily sell the loans on the secondary market.
Bottom Line – as long as the Government continues to purchase mortgages through QEIII, the interest rates for a mortgage-backed by the Government will always be the lowest mortgage rates available.
4. What Type of Credit Do I Need in Order to Qualify for the USDA Home Loan Program in NC? Typically, the good folks over at the USDA financing office like to see minimum credit scores at or very close to 620. If your middle credit scores are below 640 you may not have any of the following:
- Foreclosure in past 36 months.
- Bankruptcy discharged within 36 months.
- More than one 30 day late on consumer debts in past 12 months.
- Accounts converted to collections within past 12 months.
- Tax liens or delinquent government debts (including student loans).
- Judgments outstanding in past 12 months.
- Outstanding collection accounts.
- Two or more late rent payments in past 12 months.
5. Are there Minimum and Maximum Loan Amounts Associated with USDA Home Loans in NC? There’s NO minimum loan amount for the USDA home loan program in NC. However, maximums do apply. Typically, borrowers are limited to the appraised value of the home plus the 2 percent Guarantee Fee. The great news here is that you may finance 100 percent of the purchase price of your home (102 percent if you are financing in the 2 percent Guarantee Fee).
6. What Will Be Included in My Monthly Payment? The monthly payment will include principal, interest and the monthly cost of real estate taxes and Mortgage Insurance, Homeowners insurance. If you live in a community that has Home Owner Association (HOA) dues – it’s difficult for us to broadly say weather or not those will be included in your monthly payment. Each Investor we sell to has different rules.
7. How Are Closing Costs, Fees, etc. paid on the USDA Rural Development Loan? These fees and other eligible costs – including some repair/rehab costs – may be rolled into the loan. Again, 100 percent means NO out-of-pocket expenses at closing!
There is an upfront PMI charge (called a Guarantee Fee) when you close on the loan, but this is added to your base loan amount, so you have no out-of-pocket expense for it.
8. What areas are considered eligible for the USDA Rural Development Loan Program? Every county in North Carolina has some portion that is eligible for a USDA Home Loan. The NC USDA Eligibility Maps are changing at the end of September 2013, and with those changes, many areas will lose the USDA Loan Eligibility.
9. What are Rural Development’s income limits? Borrowers must have household adjusted gross income (AGI) that fits under thresholds set by Rural Development. These income limits vary from County to County, and are subject to change every October 1st. Learn more about Adjustments given for calculating maximum income for USDA Home Loans and the USDA Income Limits for each County in NC.
More Information on USDA Loans, and USDA Frequently Asked Questions please call Steve and Eleanor Thorne, 919 694 5058 we do TONS Of USDA home loans in NC.
We also offer the NC First Time Home Buyer Program that gives you additional benefits. This is really great news – especially since it looks like the USDA Home Loan Program is NOT going to be available for nearly 1/3 of our State starting at the end of September! You can currently use this program with the Mortgage Credit Certificate to purchase a home if you have at least 2 credit scores over 620!