A lot of our clients are looking for a home with a front porch swing, away from all the hustle and bustle they encounter during their daily travels. That’s why the USDA Home Loan Program has been so perfect, because in NC, it doesn’t take much time at all to be smack dab in the middle of some Country Road! will continue to change slightly every six months or so until 2020, when we expect a massive update.
USDA Home Loans NC is a program that is literally an extension of the US Department of Agriculture, and it is designed as a mortgage program that will spur development in our State’s more rural areas. As we all know, every county in NC has some area that is rural, and so most of our state qualifies for this mortgage program that requires NO DOWN PAYMENT.
The trade off for not making a down payment, is that you have to be willing to buy a home in the more “outskirt” areas, you can’t for instance buy a condo in downtown Raleigh or Charlotte with the program. You have to buy in Clayton, or Holly Springs, or other “up and growing” areas.
There will be changes to the areas that are eligible for the USDA Home Loan NC program for the next couple of years as new Census data is released. In general, we understand the USDA Loan Maps for NC are being updated with data released in December and June.
The largest changes (areas that are shrinking) are around the Urban areas of Jacksonville, NC; Greenville, NC; Rocky Mount, NC; Goldsboro, NC; Raleigh, NC; Greensboro, NC; and Charlotte, NC.
This is an important part of the program to understand, because if you are qualified to buy the home you are renting (for instance) in February, when you are ready to buy it in August, we need to re-check to see if the home is STILL in a USDA Eligible area, because USDA Loan Maps for NC are going to be constantly changing.
USDA Loans are NO DOWN PAYMENT, and they have very low PMI payments. This helps keep the mortgage payments with a USDA Loan very affordable. They are not restricted to First Time Home Buyers, they have very attractive (read low) mortgage rates, and you can own another home, in many circumstances, and still qualify for a USDA Home Loan.
USDA Loan NC Underwriting
Not only are the USDA Loan Maps for NC in a constant flux of change, in the last year, we’ve seen more than 60 guideline changes! That’s a lot to keep up with! In general, the USDA Loan NC requirements and underwriting guidelines are becoming more conservative. Because of this, I’m going to tell you what WE SEE working, not necessarily what the “guidelines” say. I’m doing this, because USDA is shifting it’s Underwriting Process so that MANY LOANS are requiring a Manual Underwrite.
What does a Manual Underwrite of your USDA Loan mean, and why do you care?
I’m not smiling while I write this.
USDA Home Loans are Underwritten (approved) under an archaic system (IMHO). You have to get the loan approved through an Automated System (called GUS, it’s a unique system to USDA, not the same computer system other loans use). Then it goes to the Bank Underwriter (just like other loans). AND THEN it goes to the USDA Home Loan Underwriters located all over the State. THOSE Underwriters are verifying that the Computer, and the Banks Underwriter knew what they were doing when they approved the loan. This is the only program that requires this extra manual step.
This is a terrible system, because at points last year it was taking more than 25 days for a loan to be seen by the USDA Loan Underwriters here in NC. In some states it was worse. The USDA system simply was not built to have the amount of business it was getting. In North Carolina, EVERY COUNTY has some portion (albeit shrinking) that qualifies for USDA Home Loans.
Because of this strain, and the lack of USDA Loan Underwriters, they adjusted the Automated System last fall… and fewer loans are getting approved without a Manual Underwrite. Because that system is so new – few Underwriters are committing to approving these “marginal” USDA Home Loans, kicked out by GUS.
In NC, the Loan Officer, and the Underwriter have their ID recorded with the Deed Of Trust. This means that if a loan goes bad, there’s a trail to see if the LO or the Underwriter were actually to blame.
This added layer of risk also means that the mortgage interest rates for a Manual Underwritten USDA Home Loan will have a higher rate. This is not just at our Bank, this is for all lenders, a “sail right through” USDA Home Loan in NC has a great mortgage rate. Lower than Conventional Loans, lower than NC Housing Loans with Down Payment assistance – it’s just a great rate… but a MANUALLY Underwritten USDA Home Loan carries a higher rate.
Bottom Line??? It’s TOUGH to get a Manual Underwrite, USDA Home Loan NC approved. There’s no other way to word that.
Fortunately, there are alternatives. We’ve migrated many of our clients over to the NCHFA Grant program, and I’ll explain why in just a minute.
USDA Loan Maps for NC
USDA HOME LOAN NC Eligibility – USDA Loans are NO DOWN PAYMENT, very low PMI Fee mortgages. This makes them VERY desirable. To qualify for a USDA Loan in NC, you NOW need to meet the following Guidelines
- Be under the HOUSEHOLD Income Limits for the County in which you are buying a house. This is not just the folks who are on the Application, this is every man, woman and child over the age of 18 who lives in the house. NCHFA Grants income limits are based solely on the folks who are applying for the loan.
- Buy a property that is within the New USDA Loan Maps for NC footprint. When you look at the Raleigh USDA Loan Map below (for instance) you will note that there are many new places that no longer qualify for the program. Areas marked in “pink” do not qualify.
- All applicants must have 2 credit scores over 640 AND you can NOT exceed the income to debt ratios of 29.0000% and 41.0000000000% AT ALL. Otherwise… you will be a manual Underwrite. For those folks with scores over 660, we might be able to go to 32.000% and 44.0000% as long as you have some offsetting factors… like additional cash left over after closing. READ: USDA Loans really need 660 scores, or VERY low debt ratios. We can get much lower credit scores, or higher debt ratios approved with other programs.
- We CAN get loans manually approved with a 600 Credit Score I don’t want you to read this and go, darn not the program for me. All I’m saying is that if you are going to have a manually underwritten loan, you should have the expectation that your rate will be a little bit higher, and it’s going to take an extra 10 days or so, because it’s all being Underwritten multiple times… and we are going to be required to document the heck out of your loan.
- Student Loans will be counted in ratios. There’s tons of stuff out there, we’ve written about it, and the Underwriters still count Deferred Student Loan debt. It doesn’t really matter, based upon what we can tell if the loan is genuinely in a long term deferment. USDA Home Loan Underwriters, from everything we can see count the worse case with Student Loan debt, meaning 1% of the balance, unless you have definitive paperwork showing that it is in fully amortized repayment. Having said that… if you qualify with that fully amortized payment, we’ve seen situations where someone took their Deferred loans out of deferment, and then after closing put them right back into deferred status.
We’ve heard all of the doubts from folks who think, “I am just able to save a LITTLE bit of money renting – HOW am I going to afford Home Ownership?” The good news is that there are First Time Home Buyer Loans available in NC – that make it possible to buy a home with less than $1000… often times you can buy a house with as little as $500.
Even with the New USDA Loan Maps for NC, and the tougher USDA Loan guidelines, there ARE many other options that allow you to buy a house, with affordable payments, and virtually NO CASH out of your pockets!
We are NC lenders, we do a TON of NO DOWN PAYMENT loans in North Carolina. For MOST PROGRAMS, you do NOT have to be a First Time Home Buyer to Qualify. We are familiar with where you want to buy, the New USDA Loan Maps for NC, and we want to help you! If you have more questions, call us! Steve and Eleanor Thorne 919 649 5058. You can also connect with us on Facebook, Twitter, Pinterest, Instagram… we’re here for you, whenever you are ready to get started!