USDA Home Loan To Only One Spouse

We get questions quite often on this site, and we try to answer them as quickly as possible.  Some of them really need a “whole page” for us to answer, and this is one we’ve seen quite often.  Married Couples who want to buy a house, but… they want to buy but one has bad credit.  They want to buy a house in Raleigh, but – they might be over the USDA Home Loan income limit if one of they takes a new job.  So we thought we would answer the question we recently had about “USDA Home Loan to Only One Spouse” the question was, “Is that possible in Clayton?” The answer is… maybe?

“We are ready to buy a home in the Clayton, NC – McGee’s Crossroads area. We are married and both have decent jobs.  We have a few questions being that we are both first time home buyers:

• This USDA Loan will only be in my wife’s name due to me having crappy credit.
• The loan officer we just talked to (they were calling from Texas) said it wouldn’t matter if I got a new job offer, which I may be getting soon. Its my Dream job but want to make sure it won’t have any ill effects. He said it don’t matter on me since it’s only her name on the loan. But they still need to verify my employment?  Why do they need my job information is the USDA Loan is only in her name?
• She has a few credit cards, I think we kind of have high balances on them, we have money in the bank to pay them down but LO said not to touch money because they don’t want to see a lot of activity, it was better to have more money in the bank. Does that Sound about right?
• She has nothing what so ever negative on her credit, just credit inquires, credit card balances. FICO score is 719, and can’t remember her other credit scores right now, I’d have to look again.
• Sound like we would have any issues buying this house in Clayton, NC during the USDA Loan underwriting process?”

Okay, so you are reading this, and you are not a loan officer – I’m going to answer it just like I would if I was talking to this guy on the phone.  This guy is likely looking for a USDA Loan in Clayton, NC because they don’t have any down payment requirements, and they have really low payments.

In North Carolina, remember that as we make a loan with only one spouse on the mortgage, both will be on Title to the house.  We recognize marital rights in NC. This means both parties need to go to the Mortgage Loan Closing, because they both have documents to sign.

Dear Borrower of USDA Home Loan to Only One Spouse Question:

First Off, I’d like to pull your credit and take a peak at it.  Having higher credit scores will save you thousands of dollars over the next few years in insurance (because the lower your scores the higher your insurance rates).  Letting me pull it now, and run the Credit Simulators, is a good idea while we are all thinking about it.

Regarding your new job.  Congratulations!  Dream Jobs don’t just happen, people work hard for those!  It can definitely be a problem if your new job means a bigger income. USDA Loan Underwriters look at your income 2 different ways.  First we want to see if you qualify for the house in Clayton, based just on her income.  THEN we have to prove that your whole household income (including anyone living in the house who is over 18) is not over the HOUSEHOLD income limit for Johnston County.

In Johnston County, the 2017 maximum income limits for USDA Loans have recently changed!  The newest numbers are:

1 to 4 persons in the home $92,200
5 or more persons in the home $121,700

Regarding should you use the money to pay down the credit cards, versus leaving it in reserves.  Well, without having a full loan application, and seeing your full financial picture, that’s hard to answer.  In general, I will tell you that having reserves is a great idea, because there are going to be some costs that are associated with buying the house.

On the flip side (thinking about higher credit scores), you generally want to keep your credit cards paid down to about 1/3 of the high credit.  So if the most you can charge is $300, you want to keep the balance below $100 to get the best credit scores.

We will pull her credit again, right before closing.  So, as we are making a USDA Home Loan to Only One Spouse – if the balances are substantially higher (let’s say you want to buy a new refrigerator right before closing) that can hurt things.  If there’s an inquiry for a new credit card (say from Home Depot) that’s going to have to be explained.  If you opened an account, and have charged something (depending on how much it cost) you could have to delay closing and back into the USDA Loan Underwriting process.  That’s why it’s always a good idea to quit charging things on your credit cards by the time you make loan application.

USDA Loans have an automatic approval for folks with Credit Scores over 660 and low debt ratios.  I know you have her credit score, but remember that a “Mortgage” credit score can be quite different from a score you get from the Credit Bureaus.  Because of that, it’s really best for us to go ahead and pull her credit now too, just to be sure.  We work off of the middle credit score.

Everyone should have 3 credit scores (one from each credit bureau) – when we quote minimum credit score requirements for a USDA Loan in Clayton, NC we want to see 2 of those 3 credit scores over 600.

USDA Loans have some unusual property guidelines:

• Barns and Out-buildings could reduce the value USDA Home Loan Underwriters give you on the house.
• Underground Oil Tanks can require a ton of extra certifications and regulations.
• USDA Loans are difficult to make on homes that have in-ground pools.
• The road leading to the property need to be State Maintained.  Dirt Roads and shared driveways can be difficult.
• Private Well and Private Sewers (and there are many of these in Johnston County) can also require additional paperwork and inspections.  The USDA Loan requirements mirror the FHA guidelines

Again, not having the benefit of seeing your loan application, it’s difficult for me to tell you if you are going to have a problem buying a home in Clayton, NC.  Based upon the little bit of information you’ve given me – I’m sending positive vibes your way.

Having said that, it’s important to remember that the USDA Home Loan Process is a little different from others.  When you are applying for a USDA Home Loan your mortgage paperwork is actually going TO the USDA Home Loan NC office for them to physically underwrite.  (7 Tips for Faster Underwriting of your USDA Loan in NC)

If you are applying for a NC Housing Loan as part of the process (so USDA Home Loan with MCC Credit for instance) then you have four underwriters looking at your file!

At this writing the USDA home Loan Turn Times in NC are about 7 days.  We understand the underwriting times for USDA Home Loan in VA and SC are at least 10 days.  So again, this is in addition to the Bank Underwriting times (which are currently 48 hours).  You’ll need to add some additional time into your contract for this.

We also offer the NCHFA / NC First Time Home Buyer Programs to help you with USDA Loans in NC.  These programs include Mortgage Tax Credits, and a 3% grant to go towards closing costs!  There are Sales Price caps for the MCC (mortgage tax credit program) and income caps as well as established by NCHFA.

Connect with us on Google Plus or Facebook! If you have more questions about qualifying for a USDA Home Loan in Clayton NC, or USDA Home Loan to Only One Spouse, please call Steve and Eleanor 919 649 5058