Home buyers in both North Carolina and South Carolina can buy a house with with No Down Payment required by qualifying for a USDA Loan.

What? …Is this the same USDA that oversees farming and agriculture?

Yeah, it is. While the USDA is mostly thought of in relation to food safety, they also have a program for funding housing in census-designated Rural Areas. The USDA refers to their housing program as the USDA Rural Development Loan Program. More commonly these loans are called USDA Loans or USDA Mortgages.

Many areas that are designated as Rural are less rural than they might seem. It is actually quite common to see USDA eligible areas close to the larger cities of North Carolina and South Carolina.

What areas of North Carolina and South Carolina are eligible for the USDA Loan Program?

Most of North Carolina and South Carolina are eligible for the USDA Loan program. Once you are outside of the major metro areas you are probably in USDA eligible territory.

Are USDA Approvals easier for properties that do not need repair?

Obtaining a USDA Approval is easier if the property is “move-in ready”. USDA will condition a house for repair if the home has any conditions that would affect the soundness or safety of the home. These repairs would need to be made prior to closing on the house. Below are some examples of repairs that a USDA appraiser might flag a property for…

  • Plumbing Leaks

  • Broken/cracked windows

  • Doors or windows that are unable to be opened

  • Exposed/damaged electrical wires 

  • Rooms without heating

  • Cracks in the foundation

  • Homes older than 1978 can not have any chipped or peeling paint due to the presence of lead in paint prior to the 1978 Lead paint Rules

  • Bare exterior wood that is not stained or painted

  • Electrical outlets that are within 6 feet of a water source and not Ground Fault Interrupted (GFI outlets are a cheap and easy installation)

  • Hot or Cold Water that is not operational

Income guidelines for USDA mortgage are not the same as other mortgage programs?

Similar to every other mortgage program, the USDA does require that you have enough verifiable income to qualify for the mortgage payment. However, the USDA also has maximum allowable income. If you make too much money the USDA will deny your USDA application! Maximum household incomes are determined by census data and are set at a County level. Check your County in the Menu to see the maximum allowable household income for your area.

 
 

How high of a credit score do I need for a USDA Loan?

Approvals for USDA Loans are much easier if your credit score is at least 640. Scores under 640, will often require extra documentation to obtain an approval. If your credit score is below 640, the underwriter will ask you to document 12 months of recent housing payment history.


I hear the USDA Loan Program is only for first time home buyers?

You heard wrong, my friend.

The USDA does allow current homeowners and previous homeowners to apply for the program.

The main rule to keep in mind… the USDA does not allow any applicant to own more than one home at any one time.

If you currently own a home, then this home will need to be sold as part of qualifying to buy a new home with the USDA program. Closing on the sale of a current home on the very same day as the purchase of a new home is common and can be coordinated.

Can the USDA Program also be used for refinancing my house?

Yes, the USDA allows refinancing as long as the mortgage being refinanced is also a USDA loan.

Can the USDA Mortgage Program be used to purchase Rental Properties?

The USDA won’t go for that. The USDA does not lend on income producing properties.

Does buying a house with no down payment mean that I don’t need any money at closing?

There are always closing costs when buying a home. The USDA program allows the seller to pay up to 6% of the sales price to cover these closing costs. In addition, the USDA allows the buyer to roll the closing costs into the loan amount as long as the appraised value supports the needed loan amount. These two factors allow us to structure most USDA Loans so there is no money needed at closing.

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Carolina USDA Loan Program

Key Items to Remember

  • USDA Loans do not require Down Payments

  • USDA Loans can have the closing costs paid by the Seller (up to 6% of the sales price)

  • USDA Loans allow the closing costs to be rolled into the loan amount (as long as the appraisal supports the needed loan amount)

  • USDA Loans do not have any adjustable rates, only 30 year fixed mortgages

  • USDA Loans have no prepayment penalties

  • USDA Loans are also offered in many suburbs of major metro areas

  • USDA Loans are often available in towns with sizable populations