In North Carolina, we are lucky that are so many places to live where you can have a white picket fence, or an outbuilding… not everybody wants to live in a cookie cutter neighborhood! The good news is that for most of those “less urban / more rural” parts of NC, you can buy a house with no money down, using the USDA Home Loan Program! So, what are the USDA Home Loan Requirements in North Carolina?
The USDA Home Loan Program is a zero down payment required home loan program for those looking for a home in a small town or rural setting. This is the “go to” mortgage program for folks who want to live outside Raleigh in Clayton or Holly Springs Neighborhoods. We also get lots of calls from folks who want to take advantage of the program in areas around Charlotte, like Belmont. However, all 100 counties in North Carolina have a portion of the County that qualifies.
The USDA Loan program can sometimes be used to purchase a Horse Farm, but in general, the program is not designed for a working farm. Income Producing Farms in North Carolina, and properties with lots of outbuildings will have a difficult time getting a USDA loan – and should probably consider looking at a Commercial Loan.
The USDA Loan program really only has 3 requirements. The Household income has to be below the maximum limit set for the County and must be enough to meet the debt to income guidelines, credit must be current with no late payments in the last 12 months, and the house must be located within the USDA Loan Eligibility Map “footprint.” The USDA Loan Eligibility Map NC is supposed to change . At that time, almost 25% of the neighborhoods that currently qualify for USDA Loans in North Carolina, will not be eligible for the program. (We created maps so you can preview the actual North Carolina USDA Loan Eligibility Map Changes)
Basic Qualifying Information for USDA Loans:
- Credit Scores need to be at or above 620. There are some exceptions – so if you are slightly under this let us take a peak at your credit and we’ll let you know if you can buy a home with a USDA Loan now – or if you need to do some work and close in six or eight months! Remember that when you are reading about “needing a score,” what that really means is that you must have 2 of your 3 scores over that “minimum number.” So in some cases, we will need scores as high as 640, especially if your Debt Ratios are high – which is not as hard as you might think. Here are some Credit score tips we’ve seen really work in the last 12 months.
- You can not have Judgments or Liens outstanding against you. This is not a USDA Home Loan requirement, it’s for any mortgage program. This requirement is non-negotiable, because you can not get Title Insurance if you have a Judgement or Lien against you. Remember, you can not dispute a Judgement or Lien. A Judge had to see the documentation for that to be on your report, so you have the option of Settling it – or leaving it on the report until it ages off. Unpaid Taxes (a tax lien) will stay on your credit report for 15 years.
- USDA Loans require a minimum waiting period of 36 months since a bankruptcy, short sale or foreclosure. Take that time to re-establish your credit and get your scores up. Not using credit is not going to help you get the scores you need to purchase a home after you’ve had a credit disaster.
- Traditional Credit Scores are needed. We need at least three trade lines. We can no longer build credit, using your cell phone bill as proof that you make your payments on time. If you are a first time home buyer, and you don’t have much credit – or if most of the credit you do have is Student Loans, well then call us. You can sometimes get added to a family member’s credit card, or you can get started with a couple of secured credit cards.
- USDA Counts Student loans that are in Deferment. Other mortgage programs don’t. If you are not making payments on a half-dozen student loans, and you want to use this program, we suggest you start working on a payment plan that includes those deferred loans.
- You must not be over the Maximum Income Household Requirements for your area. In most parts of North Carolina, USDA Home Loan Requirements are broken down between how many people are in the household. So, in Wake County, 1 to 4 people in the Household means that the total Household Gross Income can be no more than $96,950. For a household with 5 member or more, the income limit is $127,950. This changes per county, so check and see what the limits are for your County. Also remember that we can make adjustments to the household gross income by following USDA guidelines. The Income adjustments for USDA can be made based specific allowable deductions on tax returns for the past two years, child care expenses, retirement income, disability and several other factors. If you are just a little over the maximum numbers, call us – we might be able to help you figure it out. 919 649 5058
- The House must be within the USDA Home Loan “Footprint.” USDA is changing its classification and definitions for Rural Housing – and more than 22 Communities in NC that CURRENTLY qualify for USDA Home Loan Financing could lose that USDA Home Loan designation due to Census Numbers. In the official USDA Loan Eligibility site – you’ll see these changes listed as “Future” Property Eligibility Maps in the sidebar.
Qualifying is based upon your gross taxable income. This means that if you earn $48,000 a year, before taxes are taken out, we are qualifying you on $4000 a month. We look at two things to see if you qualify. We want to see what percent of our total gross income is going to your house payment. So again, if we are using $4000 a month – we want to see no more than $1160 going towards the principal, interest, taxes and insurance on the loan (or 29%). The other thing we consider is what percent of your paycheck is getting spent on ALL of your bills (including the house payment). This should be no more than 41%. We do NOT count insurance and cell phone payments in this calculation. Recently, we’ve seen “total debt ratios” as high as 46% get approved.- We can ask for Debt Waivers if you are over the 29/41%. However, you will need some “offsetting” or Compensating Factors for us to work with… for instance, low payment shock or higher credit scores, or savings left over after closing.
- Childcare is considered in qualifying for a USDA loan. But it is kinda’ complicated… it affects the income used for qualifying and it might mean that if you are over the income limits in your area, but you are paying child care expense – you could still qualify!
- These loans are fully documented… bring every document you think we might need to loan application! Because some folks have tried to get these loans without disclosing the spouses income (for instance – trying to “cheat the system”) we normally ask for 2 years of tax returns. And even if WE don’t ask for 2 years tax returns, the USDA underwriters require that we get a 4506T, which is a transcript of what you reported to the IRS. Any write-offs, additional income sources, etc. will show up.
- It’s a 100% Loan, and you can get a gift, or the seller can contribute to the closing costs. There are no reserve monies needed after closing – so it can truly be a no money out-of-pocket loan!
- We can combine the NC Affordable Housing Program with a USDA loans in NC. If you have been renting a home for three years, you might qualify for this additional program that offers up to a 3% grant to help cover closing cost. It can also offer you an ADDITIONAL Tax credit that helps you qualify for a little bigger home.
- Give us everything we ask for as soon as possible on a USDA Loan in NC. The requests we might make for documentation can seem silly, however responding quickly is one of the things you can do to get your USDA loan underwritten faster! If you are applying for a USDA Loan with an MCC credit… your loan is actually underwritten 4 times. Every underwriter could ask for additional documents. It does NOT mean that your loan is getting turned down, it just means we have to give them what they ask for. Speaking of the Mortgage Tax Credit (MCC) program – it’s offered through NCHFA, and they require us to get a written Verification of Employment for every job you’ve had in the past 2 years – so please bring the contact information with you to your loan application.
In the past 7 years, we have not had a loan go to the USDA Underwriter that then got turned down. Having said that, remember that we are going to pull another credit report right before you close! So don’t quit your job, don’t buy a new car, don’t transfer large sums of money to payoff a credit card (unless we tell you to), and don’t (DO NOT!!) get a new credit card to buy appliances for your house until we tell you the coast is clear!
Every county in NC has a portion that currently qualifies for USDA Home Loans, but those “boundary maps” are scheduled to change pretty significantly in June of 2018. It’s going to change again in the fall of 2020.
We have several maps that show the Eligibility Changes for USDA Maps across the state showing the changes and what areas will continue to qualify for USDA Home loan financing.
For more information about USDA Home Loan Requirements in North Carolina, please contact Steve and Eleanor Thorne, 919-649-5058, Connect with us on Google Plus or via Facebook to keep up to date on any changes to the USDA Home Loan program in NC!
Hi, thanks for the great information you provide on the blog.
You wrote that “Qualifying is based upon your gross taxable income.” Is this also true for self-employed borrowers (S Corp)? Or are self-employed borrowers qualified based off their NET income?
For FHA loans, what is the maximum back-end ratio that’s allowed? I’m asking because I have a good deal of student loan debt (that I am trying to pay-off to reduce my DTI). Some websites say 43% max back-end ratio via FHA, while other websites say you can go higher – as long as the automated underwriting engines approve it. What’s the highest DTI back-end ratio you’ve seen approved? Any suggestions for what to shoot for?
If you are an S Corp, your income will be based upon the Net income plus depreciation and one time expenses – The DTI will be determined by the AUS. I’ve seen them approve a 44% – but there were “off setting” factors (large amount of cash in the bank with very good credit scores). You might also want to see if you can get your loans consolidated, or refinance them to get better terms? If you are in NC, call us, and we will be glad to run your scenario thru GUS.
How does USDA loans deal with past short sells? Is there a waiting period required?
They require a 640 middle score, and depending on how the Short Sale is reported on your credit report – they will treat it like a foreclosure and require a three year waiting period.
This is a GREAT website. Just sent it to some USDA buyers. It is not only very pleasing to the eye but packed with all the right info!
Hi. Thanks for this information. We are looking at a rural property that qualifies for USDA and we would like to purchase it along with my daughter and her husband and family. Could we qualify for USDA as non-occupying co-borrowers?
Unfortunately, USDA does not offer non-occupying co-borrower loans. You can do this with a FHA loan, with 3.5% down. If you have specific questions, please call us and we’ll be glad to help! 919 649 5058
Hello: can retirees use Social Security and pension as the only income and still qualify for a USDA loan?
Thank you for this wonderfully informative site.
Amy – yes, we can qualify someone on Social Security and Pension income for a USDA Home loan in NC 🙂 Please call us at 919 649 5058
Hi Eleanor, all of my criteria seems to meet the guidelines for being approved for a USDA loan, however, I was a student approx. 6 months ago (starting working the week after graduation) and I have a STRONG, SOLID, work history prior to that in the same field. Can you give me some insight please?
My question is regarding bank statements. How months does uw require on a guarantee usda loan? What about nsf fee’s?
John- Great Question. We need to see 2 months of Bank Statements. So let’s say the April Statement shows an Ending Balance of $1200 and the OPENING Balance was $500. We are going to look at where the deposits came from. If the May Statement has an opening balance of $1200 and the ending balance of $1800, again – it will be the deposits that are focused on. If those 2 statements show 1 or 2 NSFs, it will not likely be a problem… unless you are also close on the Credit Score minimums. If you have specific questions, I encourage you to call us at 919 649 5058
Shannon, so I want to make sure I’m hearing you correctly. You were working, went back to school in the same field, and now you are working again? That probably works. The question will be about the Student Loans. USDA treats Student loans completely different from FHA or VA. We need 1 full months paycheck before someone with a new job can close on a mortgage. You can call us at 919 649 5058 and we’ll be glad to pre-qualify you. It takes about 15 minutes.
Hi,
I want to know what are the specifications for tax returns? If I only have one year of tax records instead of two years can I still be approved? Or do I have to have two years of tax records?
THAT is a GREAT question! You must be at least 18 years old – but if you are working in a field that is (for instance) related to some higher education – the one year of tax returns should be great! “If you were not Required To File Tax Returns, you are fine” is the exact answer I just got from my Underwriter!
You can call us at 919 649 5058 and we’ll be glad to go over your particular situation (at no cost or obligation) just to let you know what we are experiencing with both USDA Home Loans in NC and the newest First Time Home Buyer Programs you might qualify for!
How long doors it usually take to be approved?
Mandy – USDA Home Loans go directly to USDA to be approved. I’ve seen USDA Underwriters in NC take up to 3 weeks to approve loans – other times, they are approving them in 4 days. The process for getting a loan approval, however is not that long. With a USDA Home Loan, you call, we take a loan application, you send us the documents we ask for – so maybe 24 hours? Then we have an appraisal done, another week? Then we send all of that paperwork to the Bank Underwriter, and they tell us if they have any questions, or need any other documents. Then, they approve your loan, at the Bank. THEN the Bank sends the paperwork to the USDA Offices, for them to Underwrite.
If the USDA pulls your credit for prequalification, do they pull it again for the approval certificate. The approval needed to start shopping for your home?
What are some of the qualifying factors for a home you have chosen to qualify?
We are not USDA. The homes must be in the USDA Home Loan Footprint, and meet the minimum structural standards
Your pre-qual credit pull should be good for 120 days. Right before you close, you will have your credit report pulled again.
Do you provide USDA loans for all of NC or just your region? I live in Statesville, NC.
Susan! Yes, we do loans in ALL of North Carolina! Please call us at 919 649 5058
Hello, I told a friend today that I was heavily considering the USDA loan. They told me that an USDA loan requires you to sort of re-apply every year and if your income increases, then so can your mortgage payment. Is this true? Can your payment or rate increase after you close on the loan? Thank you
Not true with a USDA Guaranteed loan. We can help you 919 649 5058
With USDA loan can I apply alone or do I have to file with my husband? We have been separated and not filed taxes together in years, although we are currently working things out and his income helps pay certain bills.
As long as you have been separated for at least 3 months, and we have documentation recorded at the courthouse regarding the separation we should be able to qualify you to buy the house. Again, your husband will not be on the loan, and we are going to be documenting that he does not live with you.
Hi I have a question about student loans. I just went backed to school and currently work full time and have been for the last couple of years. I just received my refund check and have friends who told me not to put $ into my bank account because than I can’t use any of the money in that account for any down payment. I’m interested in a USDA is this true?
Emily – USDA Home Loans don’t have a down payment requirement – so that makes it easier. You can deposit the money, just make certain you keep a copy of the check
I have been told I should be able to get a guaranteed loan for North Carolina. Who should I apply with for the USDA loan?
We can help with that – please call us at 919 649 5058
Hi, I had a foreclosure in Oct 2013 and a Ch 13 in Jan 2012. I don’t really have any bills (paid off or discharged) and ONLY ONE Credit card still open. I’m in Charlotte, NC and trying to execute an Option to Purchase FHA won’t go nearly high enough 430 and I’m struggling to get Conventional due to the foreclosure.
I know you need two lines so my questions are:
1) Is there a ceiling to the amount for the home?
2) My wife has two credit cards on her credit but no income, does that help if we apply as joint? I also just paid off my truck but I’m to understand if it is closed so it doesn’t count. True?
3) Does any of the information above disqualify me?
Hey Steve! It will depend on when the home transferred title. You are close! Call us at 919 649 5058
Are USDA mortgages rates typically lower than others? Does they follow the bank rates?
Also, do you assist with coordinating the applications for the NC Affordable Housing Program and the MCC (what order do you apply, I assume I would need to receive a decision on all of the programs before applying for the loan)? Is it possible to receive downpayment assistance from USDA as well as the NC Affordable Housing Program? What are the terms of repayment of the USDA assistance?
Thanks
Jeremy – CALL US 919 649 5058 we can help you with this.
1. Yes, USDA is the cheapest option. Both because the basic PMI rates are gong down next week, and because the rates are lower than a Conventional (bank) loan.
2. We coordinate the MCC application and paperwork through NC Housing.
3. There is the option of using a NC Affordable Housing Program with USDA – but the rates are higher. USDA does not require a down payment. We generally see folks have the Seller pay for closing costs as opposed to using the funds from the NC Housing Grant to cover them… simply because the rate / payment is lower.
Ive work a full-time job for 7 years. I also work a part-time job. Combined income of about 27,000. Credit score hovering around 640. I’m interested in a home I have found. Looked it up to see if it was in the USDA zone and it is. Was wondering where to begin the process. Or if I even made enough money for a 65,000 home.
It sounds like you would qualify, you can apply online at the site where it has the green button, or you can call us at 919 649 5058
Hey Im looking to buy a home next year in Winterville I make $35,000 a year and Im a single mother of 3 i was trying to understand how the subsidy works and what price range should i be looking at . I will be debt free in 2 months and have at least (5000 in savings) and my credit score is 720. Im trying to get approved for a home costing $219,000. But Im thinking I want get approved for that amt. I saw that with NC community partners loan pool they help with 10% down payment assistance (0% 2nd mortgage) and USDA subsidy i should be within or less than my 1200 max mortgage payment. can u help me figure out if im out my ball park or what price range i need to be looking at? THANKS ALOT.
Telisha – You are making impressive strides to get to the place you want to be! Congratulations! I think you are looking at the right price range – but the BEST thing to do is call us, and let us run the exact numbers for you. We won’t pull your credit until you are ready for us to – but to get the best feel for where you need to be home shopping wise, call us at 919 649 5058. We’d love to help you!
I was approved from my bank in October to buy a home through USDA. At the time I had a credit score of 746. In November I did something really unwise, I made my first ever two 30 date late payments and it’s reflected on my credit score. My score is now around 640. My approval certificate expires January 9th, 2017. I’ve written a goodwill letter to the bank asking for these to be taken off my credit report. I’m hoping it will work since I’ve never had late payments before. Have I really blown my chance for home ownership for the next year?
Certainly not for 3 years – but potentially for 12 months. If there’s a really really good reason, the UW might excuse it.
Can you qualify for USDA if you already own your own land?
Johnny, this is really a trick question. I’ve talked to a couple of different Underwriters about the correct way to respond. USDA Offers a Construction loan. I’m not sure who does these, besides Wells Fargo. If you have a builder do this with you, and they are getting the funds to build a home, then we can help you.
A family friend of ours recently became approved for a usda loan and told us about it. I wanted to find out if that is better than the FHA. We are a family of 6, on a single income of 48K, with 4 children in the home. Also, we are in the Harrisburg area, do you all work in this area as well?
Yes, we have Realtors and borrowers we work with in that area. USDA Loans are the best loans available, IMHO. There’s no down payment required, the mortgage rates are very low, and in most cases we can help negotiate a situation where we have the Seller pay closing costs. Here’s some more information on USDA Home Loans in the Charlotte Area.
I moved to NC in August 2017. I was wondering how long I need to be employed in NC before I could qualify?
You qualify now! Congratulations on your decision to buy a house! Call us at 919 649 5058, we do loans all over the State
I am currently renting a home in FL. I’d like to move my family to NC within the next 12 months. Can I qualify for all the NC programs while still living and working in another state? Technically, once we purchase a home I’d have to relocate and find another job, so I’d be unemployed immediately after. I’m not concerned about difficulty finding a new job with good pay in my field once we move.
Hello If I want a 200.000 dollar home in Georgia . What would my income have to be , the credit score is a 640.
Tracey that would depend on what your debt is, where the house is because we have to count Insurance and Taxes. I would suggest asking a loan officer in GA.
hi my income is 58000 and my credit score is a 741.Can I qualify for all the NC programs usda
thanks
If I’m only looking at that criteria you do – but we would need more information for a pre-qualification. Could you please call us at 919 649 5058 so that we can get more specific information?
Hi, I’m looking to buy a house that it’s within the USDA footprint, I’m veteran as well, and I’m trying to figure out what’s the best way to go, either VA loan or USDA loan, what’s the best overall? Rates comparison? Pros and Cons? Thank you in advance!
John, thanks for the question. USDA and VA Loans have very similar great rates. There are a couple of other differences… USDA has an income limit, VA Home Loans do not. USDA counts Student Loan Debt – VA Home Loans do not. So from a qualifying standpoint – they are very different. If qualifying is not an issue, then you would want to look at the Guarantee fee. That means we need to know more about you VA Status – have you used your Eligibility before? This is one of those things where we need to chat. You can always call us at 919 649 5058.
Hi. If I already own land and I want to purchase a mobile home to put on the land, would I be required to use my land as collateral for the USDA loan? I am concerned that if I pass away, or end up in a nursing home, that I will not be able to keep my land and the mobile home in the family.
Nicole – there’s not a way for US to do a loan just on the Mobile Home. It has to be permanently attached to the land, which makes it a home. In NC we issue a CAR Title to Mobile Homes that are not attached. So, to answer your question, yes, the land would be part of the collateral. You would have the opportunity to rent it, if you should need to move for some reason, and you can get mortgage insurance that is separate from what WE require, that will pay off the mortgage in the event of death. Hope that helps – you can always call us at 919 649 5058
HI! I NC, if I want to purchase a manufactured home, do I have to own the land it’s on? Can I put it on family land and pay my nephew lit rent?
For a mortgage, you will need to own the land. Otherwise it’s treated like a car loan in NC>