27,100 people search for the answer of that question in NC every month… First Time Home Buyers have talked to a friend, or a family member who told them they should consider a USDA Home Loan – but WHY? What is a USDA Home Loan?
USDA Home Loans are no money down home loans with specific underwriting requirements that include:
- Property Restrictions:
- The property must be located within the “USDA Footprint.” USDA literally has “maps” that show where they will finance a house, and where they won’t. 1/3 of North Carolina could become ineligible at the end of September 2013 – at least 22 Communities are on the list of places that will no longer be eligible for USDA Home Loans – including many areas near Raleigh, NC.
- Home Value Ratio compared to Land Values require that the land value must be no more than a third of the total value of the property. So if the purchase price of the home is $100,000 then the value assigned to the land must be no more than $30,000.
- The Value of any “out buildings” that could be used as part of a “working farm” (like a Barn) may be deducted from the amount you can borrow.
- Properties that have a Swimming Pool that is “in ground” are generally not going to work for USDA Home Loans. (see this about USDA Home Loans and Swimming Pools)
- Homes that have in ground oil barrels, or oil barrels that have been removed from the property will likely require additional inspections.
- Home Inspections that show on a HUD 1 will likely mean that the Underwriters want to review them… this means that if the Home Inspector notes ANYTHING – it will need to be fixed. (See This)
- Income Restrictions:
- Every County in North Carolina have different income limits for USDA Home Loans. If you have an additional family member staying in the home (like a grandparent, or a nephew going to college) then the Household Income calculations are figured based by including them in the numbers.
- Bonuses and Overtime must be able received for the past 2 years for us to be able to count it in qualifying you to buy a house… reversely – even if you’ve only received the income for 12 months, and we can’t count it to qualify you – we still have to count it in the MAXIMUM Income limit for the area. (hoping this makes sense)
- Child Support and Alimony / you must have received it “on time” for 12 months and it must be “continuing” for at least 36 more payments. Support agreements that say “support will continue if child goes to college” will not be allowed in qualifying you for house payments. Single Parents should read this.
- Underwriting Student Loans – we see tons of people with deferred Student Loans. With FHA First Home Loans it’s not too much of a problem… but for USDA they can be.