The USDA doesn’t really make mortgage loans, they simply insure the bank against you possibly going into foreclosure. The USDA Home Loan requirements are really a function of what loans USDA will insure. All mortgages where there’s not at least a 20% down payment have some sort of Default Insurance. The type of insurance that keeps Banks solvent if you find yourself unable to make your mortgage payments. This Mortgage Insurance is normally referred to as PMI – so we call the USDA Home Loan version of Mortgage Insurance USDA PMI.
USDA Home Loan NC Basic Requirements
USDA Home Loan NC eligibility requirements really come down to a handful of items:
- The home you buy must be within the USDA Home Loan Eligibility area. The USDA Eligibility Maps for North Carolina are expected to stay in place until the Summer of 2015. After that time, there are communities that may no longer qualify for the USDA program in NC.
- You must be under the USDA Home Loan Income Limit for the County you wish to purchase a home in. The Income limits vary by household size, and there are exceptions that can be made to help you qualify – so if you’ve been told you’re just over the limit – call us. So many loan officers don’t really know how the exemptions work.
- You need two credit scores over 640. We might be able to get you approved if you have 2 scores over 620 – it will just depend on all of the other factors that play into your qualification picture. If you have assets left over after closing, or if you are not going to have payment shock. If you have MULTIPLE layers of risk, the NEW USDA Loan approval model is looking for a credit score of 680!
- Any Foreclosure, Deed In Lieu, or Short Sales need to be at least 36 months behind you.
- Student Loans, even those in deferment will be counted against you.
- The Maximum total debt ratio “guideline” is 42%. We’ve seen files REJECTED that had 660 credit scores and a 44% debt to income ratio. Ratios and Credit scores need to be IN-LINE for USDA Home Loan approvals right now.
- USDA Home Loans are for Owner Occupied Properties, not Commercial Farms, 30 year fixed rate mortgages.
USDA Home Loans NC are one of the most desired mortgages available because they are cheap to get into – they require no down payment. They have very low closing costs, and USDA Loans allow the Seller to pay closing costs. Many times, folks in North Carolina can get into a home with a USDA Home Loan and less than $750. If you have enough cash reserves to make a down payment and qualify for a conventional loan – A USDA Home Loan might not be the right program for you.
USDA PMI Rates 2015
The USDA PMI Rates 2015 are also pretty cheap, when compared to FHA loans. There’s an upfront, initial premium charged of 2%. This USDA PMI premium is generally added to the Loan amount. So, if the home that you want to purchase is $250,000, we would multiply that by 2% (which equals $5000) and your loan amount would then be $255,000. This will not change your monthly payments very much – and if you don’t want to go into your home with “negative” equity – you can get a gift to cover the charge. You could also use the NCHFA 3% Grant funds to cover the cost, assuming you qualify for the program.
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 $250,000 – with a loan amount of $255,000 – we would multiply that by .5% to get an annual rate of $1275. This amount is divided by 12 and would be added to your homeowners insurance, taxes, principal and interest and paid back $106.25 a month.
USDA PMI does not “age” off the loan. Meaning – you will not get a portion of the upfront fee refunded if you move 14 months later. If you live in the property for 17 years, and you’ve built up tons of equity in the home, USDA PMI will still be charged each year.
Here’s the good part about that – the annual USDA PMI Rate will be charged on the Balance at the beginning of that new year. So each year, as you pay your mortgage balance down, the amount of USDA PMI charged will be charged on that lower balance, and will be less from year to year (I’m hoping this makes sense – if not call me and I’ll run an amortization for you to see).
USDA Home Loans are part of the Federal Budget process, and as such the maximum income limits and USDA PMI Rates are subject to change every October. It’s normally announced in September if there will be a USDA PMI Rate change. This year it went from an annual rate of .4 to .5 – so it’s not a huge difference!
USDA Home Loans – NC First Time Home Buyers
If you have not owned a home in the last 36 months – you might qualify for the North Carolina Housing Finance Agency (NCHFA) First Time Home Buyer Program. The program is designed for folks with good credit, they require at least a 640, and they also have income limits which vary per county.
There are three parts to the NC First Time Home Buyer Program – first, you might qualify for a mortgage tax credit. The Tax Credit (called MCC) can add up to an additional $2000 a year to your income, allowing you to qualify for a slightly bigger home. The NCHFA Program also offers 3% in a Down Payment / Closing Cost Assistance Grant that is forgivable, and carries no interest. These benefits can be used in combination with the USDA Home Loan Program in North Carolina.
Additionally, the program offers below market Mortgage PMI rates for Conventional Loans, for those who qualify!
If you want to learn more about No Money Down Home Loans in NC, please call Steve and Eleanor Thorne 919 649 5058, we know what works in North Carolina, and we help people here buy their dream homes every single month! We offer Today’s Lowest Mortgage Rates!