One of the best programs we offer are USDA Home Loans For First Time Home Buyers. While you don’t HAVE to be a First Time Home Buyer to use the USDA Home Loan program, it works really well for these folks because there are NO down payment requirements.
“Inability to save for a down payment is listed as the No. 1 issue preventing home buyers from entering the market. This is particularly true among millennials, who are often faced with dual problems of paying down student loans and paying historically high monthly rental rates, making it hard for them to save. Low-down payment programs provide an opportunity for this demographic — and other first-time home buyers — to enter the market.”
USDA Home Loans For First Time Home Buyers
We get many questions on this site from First Time Home Buyers – I figured I would try to answer some of the commonUSDA Home Loans For First Time Home Buyers questions, if you have others, please leave me a comment below the post, and I will try to answer your specific question as quickly as possible.
Q: Is there a deadline to apply for these no down payment USDA Home Loans in NC?
A: No. The USDA Home Loans are made year round. The funding for the program comes from Congress every October. Guideline changes are normally (not always) announced in August or September, and then go into place during December of January.
The changes that could be announced each year include general guideline changes, USDA Home Loan Map changes, and maximum household income limits that vary per county. The USDA Loan Office in NC processes home loan applications in the order they are received for the guaranteed program that we offer.
Q: What do I do if my lender doesn’t offer USDA Loans?
A: We are licensed to handle USDA Loans across North Carolina. It is possible, if not probable, that you will speak to a lender in NC who only does 1 or 2 of these loans a year. Those guys could be good mortgage lenders, they simply don’t “Specialize” in USDA Home Loans For First Time Home Buyers… and so you might not get all of the benefits you deserve when you buy your house.
For instance, you lender might not offer the Mortgage Tax Credits with your USDA Home Loan. If you qualify for it, it saves you up to $2000 a year for as long as you live in the house!
Additionally, because we specialize in USDA Home Loans here in NC, your loan is handled quickly and more efficiently than with lenders who are not familiar with the USDA Home Loan process.
Q: Are USDA Home Loans only for First Time Home Buyers?
A: No. In fact, in some cases you can have another house that you are renting out, and get a USDA Home Loan. It doesn’t happen often, but we’ve done this for a few families who could not sell their home in Florida (for instance) and needed a home in NC. There’s still no need for a down payment!
Q: What is the maximum amount that I can borrow?
A: The USDA loan program does not limit the amount that a home buyer can borrow; however, there are maximum income limits set per county. Because of that, we normally seeUSDA Home Loans For First Time Home Buyers capping out around $350,000.
It’s just difficult for most folks, with a car payment and a couple of credit cards to qualify for much more than that with the USDA Home Loan income cap in Wake County at $121,250 for a family of five. The USDA Home Loan Income Limits vary by county and by the number of people in your household, so each situation is unique.
But the answer is -unlike FHA Loans, where there’s a maximum loan amount per county – USDA Home Loans do NOT have a maximum loan amount. It’s based upon what you can qualify for.
Q: How much are the closing costs for a USDA Loans NC?
A: Closing costs vary by location, and they are expected to go higher in NC starting in August of 2015 – when new CFPB regulations go into effect. In general, these are the current closing costs we are seeing in Raleigh.
Remember, Attorney fees, property taxes even home owner insurance policies are different depending on where you buy a house, so for me to give you an exact amount on a $250,000 house is just not possible until I know more information.
USDA Home Loans For First Time Home Buyers allow for a Seller to pay for most of your closing costs or, it is possible to use gift funds from family and non-family members. If you are using something other than Savings you have IN A BANK, for your USDA Home Loan NC talk to us about how we need to document the money you will be using.
We’ve run into problems, for instance, when a live-in who was not going to be on the loan, was writing checks for the Earnest Money Deposit. When the money for closing costs, or Earnest money is NOT coming from YOUR own bank account, talk to us about that situation VERY EARLY in the process.
Q: Are there PMI charges on USDA home loans?
A: Yes. USDA Loans have their own form of USDA Home Loan PMI Rates, although people in the Mortgage Business call it a “Guarantee Fee.” It covers the Bank in the event you can’t make your house payments and default on the mortgage.
This fee is much less than the PMI required on FHA Loans, or frankly just about any other program. Fortunately, USDA allows you to finance your Upfront Mortgage Insurance payment into your loan amount. For example, if you borrowed a $100,000 for your house, your Upfront PMI would be $2,000, which you can finance into your mortgage. After financing, your loan size would be $102,000.
In addition to the upfront USDA PMI fees, there’s an annual charge as well. The Annual USDA PMI Rates 2015 are charged at a rate of .5%. This means that on our example sales price of $200,000 – with a loan amount of $202,000 – we would multiply that by .5% to get an annual rate of $1010.This amount is divided by 12 and would be added to your homeowners insurance, taxes, principal and interest and paid back $84.17 a month.
Q: What types of terms do USDA Loans have?
A: Currently, USDA Loans offer 30-year fixed rate mortgages… there’s also a 15-year fixed rate mortgage, although we don’t get many folks in NC asking for one. The USDA Home Loan program does not offer adjustable-rate mortgages.
Q: What can I expect for Mortgage Rates with USDA Home Loans For First Time Home Buyers?
A: USDA Home Loan rates are often .25% of interest rate lower than comparable, Conventional 30-year fixed-rate mortgages.
Seems weird? Well, USDA Loans NC have pretty strict credit guidelines, these loans are for solid borrowers who don’t have cash for a down payment. They are making loans in parts of NC that never saw high appreciation rates on homes – and never really saw home prices dive.
They are also guaranteed by the USDA Federal Government program. And since the US Government is backing them, there’s much higher confidence by the Banks that if you can’t make your payments, the US Government will provide some relief.
Approval Requirements: USDA Home Loans For First Time Home Buyers
There are really only 3 things that you need to be concerned about when it comes to getting approved forUSDA Home Loans For First Time Home Buyers.
- Do you meet the USDA Loan Minimum Credit Score and Debt to Income Requirements?These recently changed. If you see on the Internet that the minimum credit scores for USDA Home Loans go down to 600 – it’s wrong... in fact if you read on THIS SITE that the minimum credit score is 600 – it’s wrong and I would ask you to PLEASE leave me a comment so that I can fix it!!! Credit scores and debt to income ratios changed in December of 2014. We’ve still seen higher ratio USDA Loans approved, and folks with middle credit scores of 640 get approved all day long – but it’s just “tighter” credit criteria than it was last summer.
- The House you buy must be located within the defined USDA Loan Eligibility “Footprint” of what they consider “rural.” The good news is that in NC, we get rural FAST – there’s a portion of EVERY County that qualifies for USDA Home Loan financing!
- You must be under the USDA Loan Income limits for the County you want to buy a house in. There are different ways to calculate Household Income, and there are deductions we are allowed to consider. Many loan officers are not familiar with these USDA Loan Income Requirements (shameless plug – another reason you should call us for your mortgage!)
What does the USDA require for employment eligibility?
You must establish employment to be eligible for the USDA Home Loan for First Time Home Buyers. If you are a recent college graduate, we are allowed to consider College as a previous Employer if you find a job within your field. This allows you to “skip” the minimum of two years of steady employment you see mentioned on most sites.
Can I get a USDA Home Loan after a bankruptcy?
Yes, the USDA Home Loan Program requires the bankruptcy to be discharged for at least 36 months. A recent guideline now states that if you were in Bankruptcy, and there was a property included in the Bankruptcy – you must wait 36 months from the BANKRUPTCY – NOT the date of the transfer of property. This is very helpful for folks who have been through this tough period.
I recently went back to work. How long until I am USDA Loan Eligible?
USDA Loan NC Underwriters state that you are eligible immediately as a W-2 employee… BUT… if you’ve had more than a 30 day gap in employment, expect to write a letter of explanation about why you had a gap in employment and why you won’t be having one in the near future.
Can I use a Non-Owner Occupying Co-Borrower to Qualify for a USDA Loan NC?
USDA Home Loans For First Time Home Buyers are not available to non-occupying co-borrowers. FHA Loans and Conventional Loans both have provisions for buying a house with a parent (for instance) but that doesn’t work with a USDA Home Loan.
If you or your family or friends are considering purchasing your first home, or if you have questions about what works best forUSDA Home Loans For First Time Home Buyers– please call Steve and Eleanor Thorne 919-649-5058. We pre-qualify, and counsel borrowers everyday, and we can help you purchase a home!