Some borrower’s we talk to have ALWAYS been good savers, and they are drawn to the USDA RD Home Loan program because it allows them to keep their savings (it’s a 100%, NO down payment required loan!)! If you are a good saver – or maybe you are in a family that helps folks buy their home, then the USDA Loan NC mortgage is probably perfect for you!
If you are getting a gift to cover closing costs, for instance, we will ask for information on documenting large deposits for USDA Loans NC.
Right from the front let’s be clear that the folks giving you a gift are going to be required to help us prove that they had the money in the bank to give you the gift. (READ this is a hassle and we’ve had Grandparents who did not like us very much for asking these questions). In order to avoid that documentation, the money needs to be “gifted” 90 days prior to loan application.
There use to be a rule that said you could not have more than $5000 left in liquid assets after closing to qualify for a USDA Home Loan, thankfully that is no longer the case!
We have seen borrowers who just happen to “have” $3000 in a box in their backyard (seriously). This is a problem. We have to document the cash, it needs to be in your account for at least 90 days – or it needs to come to you as a gift, a payroll from an employer, a payment of an old debt, the sale of an asset… we need some evidence that the cash you have isn’t just from “drug money.”
So, you CAN have liquid assets and get a USDA Loan in NC! You can even make a down payment with a USDA Home Loan (and we encourage people who qualify to use the USDA Home Loan program as opposed to FHA because it’s CHEAPER!)!
There’s just one little catch – you can not have more than 20% of the home’s purchase price left over after closing in liquid assets. This means that if you purchased a $100,000 house, you can not have more than $20,000 left over after closing in a verified account.
Documenting Large Deposits for USDA Loans NC
We must verify that your Earnest Money is NOT tied to new/more debt, such as a loan or credit card advance. They’ll also want to know if the money is considered a gift. Point being – it had to come from somewhere. Maybe you:
- Sold your Bass Boat (had a client that did this)
- Sold your Airplane (had this too)
- Sold the Silverware your Grandmother left you (client did this)
- Had a Yard Sale – $2000 at a yard sale is a BIG yard sale!
Point being, any of those items will show a paper trail. We can show you owned the boat, silverware, etc. and a receipt where you sold it. We will need to establish the VALUE of that item, and that you didn’t sell a $20 Comic Book to your Friend for $2000 – and you will really owe him money back. (I’m hoping I’m making sense, we have to OVER document that it’s not a debt…)
Let’s just speculate for a minute that maybe you worked on the side as a Painter, and people just happen to pay you cash for those services. Well, if you don’t report it on your tax returns, we can not use the money as income to qualify you. If you don’t put it in the bank, so there’s no “history” of you having it – it’s going to be very difficult for us to use that money as a down payment.
Unlike FHA and VA – USDA Home Loan Underwriters actually look at every single USDA home loan file. So the loan is being underwritten more than one time. First, by the Automated Underwriting system (GUS), then by the Underwriters at our Bank, and THEN by the Underwriters at USDA… if you are receiving a Mortgage Tax Credit from NCHFA, then you have yet another underwriter looking for at the loan!
If you are one of the USDA Loan borrowers who needs compensating factors to buy your dream home – please keep that process in mind. We could be asking you for more documentation at every step – because each person, or model that looks at your file, might have a different set of “compensating” factors they want!
If you have questions about purchasing a home in NC using the USDA Home Loan, call us for pre-qualification! Steve and Eleanor Thorne, 919-649-5058 – we are USDA Mortgage Loan Experts, and we have the lowest rates!!
super post!