Dash Home Loans is here to help you find the most affordable home loans³ for your needs. As USDA loan lenders, we can help you with USDA loans in North Carolina and South Carolina.
Buying a home is an exciting milestone in life. However, the process can also be daunting, especially when it comes to financing. This is where USDA home loans come in. These government-backed loans offer 100% financing and low interest rates to help rural Americans achieve homeownership. In this article, we’ll explore everything you need to know about getting a USDA home loan in North Carolina.
What is a USDA Home Loan?
The US Department of Agriculture (USDA) offers home loans to low- and moderate-income homebuyers in rural areas through its Single Family Housing Direct Home Loans program also known as Section 502 loans. These loans require no down payment and offer fixed low-interest rates.
USDA home loans are available for the purchase construction renovation or relocation of a home in eligible rural areas. The loans can also be used to refinance an existing non-USDA loan.
Some key benefits of USDA home loans include:
- 100% financing – No down payment required
- Low fixed interest rates
- Flexible credit score requirements
- No monthly mortgage insurance premiums
- No prepayment penalties
USDA home loans help rural residents who cannot qualify for conventional mortgages become homeowners. The program bridges the gap by providing affordable financing options.
USDA Home Loan Requirements in North Carolina
To qualify for a USDA home loan in North Carolina, you must meet certain eligibility criteria set by the agency. Here are the key requirements:
Income Limits
Your household income must be below the income limit set by USDA for your county in North Carolina. Income limits range from $60,900 to $97,300 depending on the area.
Home Location
The home you wish to purchase must be located in a rural area designated as eligible by USDA. You can check your address here to verify eligibility.
Credit History
USDA has flexible credit score requirements. Minimum credit scores range from 580 to 640. You must demonstrate a willingness and ability to repay the loan.
Citizenship
At least one applicant must be a U.S. citizen, U.S. non-citizen national, or qualified alien.
Home Appraisal
The purchase price or appraisal value of the home must be within the limits for your county. Limits range from $153,900 to $372,400.
Primary Residence
You must make the home your primary residence and occupy it within 60 days of closing. Rental income up to 30% of repayment income is allowed.
Debt-to-Income Ratio
Your total debt-to-income ratio must be within USDA guidelines, typically 29% of gross monthly income for housing costs and 41% for total debt.
Repayment Ability
You must demonstrate sufficient and dependable income to repay the loan. USDA reviews household debt and obligations to determine this.
Credit Counseling
If you have limited or no credit history, USDA may require you to complete credit counseling.
How to Apply for a USDA Home Loan in North Carolina
Here is a step-by-step guide to navigating the USDA home loan process in North Carolina:
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Determine your eligibility. Use the USDA Income and Property Eligibility tool to check if you qualify before applying.
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Find a USDA lender. Work with an approved USDA lender familiar with the program requirements.
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Select a real estate agent. Find an agent experienced in USDA loans who can help you find eligible homes.
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Complete a loan application. Your lender will guide you through documenting income, assets, debts, credit history, etc.
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Get pre-approved. Your lender will issue a pre-approval letter stating your loan amount.
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Make an offer. Make an offer and negotiate price when you find the perfect home.
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Allow property appraisal. USDA will appraise the property to ensure it is within value limits.
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Close the loan. The lender will handle loan underwriting and documentation for closing.
The USDA requires a fully documented loan application including verification of all income, assets, debts, and credit history. Work closely with your lender and real estate agent throughout the process.
USDA Home Loan Interest Rates in North Carolina
USDA home loans feature fixed interest rates that are very competitive compared to conventional mortgage rates. Here are the current USDA interest rates in North Carolina as of July 2024:
- USDA 30-Year Fixed: 4.875%
- USDA 15-Year Fixed: 4.375%
These rates are discounted by 1% for borrowers receiving payment assistance. The interest rate is set at the lower of the rate at loan approval or closing.
USDA interest rates are near historic lows, so it’s an excellent time to apply for an affordable USDA home loan in North Carolina. The fixed rates provide stability in your monthly mortgage payments.
USDA Home Loan Limits in North Carolina
The USDA sets mortgage limits based on the median home prices in counties across North Carolina. Here are the 2024 loan limits for select North Carolina counties:
| County | Limit |
|---|---|
| Buncombe | $372,400 |
| Durham | $372,400 |
| Forsyth | $372,400 |
| Guilford | $372,400 |
| Mecklenburg | $372,400 |
| Orange | $372,400 |
| Union | $372,400 |
| Wake | $372,400 |
| Watauga | $372,400 |
| Wilson | $216,900 |
| Sampson | $216,900 |
| Warren | $216,900 |
| Scotland | $153,900 |
| Mitchell | $153,900 |
The purchase price and appraisal value of the home must fall within these limits for your county. Higher limits apply for properties with 2 to 4 units.
Pros and Cons of USDA Home Loans in North Carolina
USDA home loans offer many benefits but also have some limitations to consider:
Pros
- Requires no downpayment
- Offers fixed low interest rates
- No monthly mortgage insurance
- Low or no upfront costs
- Flexible credit score requirements
Cons
- For rural properties only
- Loan limits may be lower than conventional loans
- Strict income and eligibility limits
- Upfront guarantee fee of 1% of loan amount
- Potential for balloon payments if refinancing
While USDA loans are not for everyone, they can be an excellent option for eligible borrowers in North Carolina seeking cost-effective home financing.
Alternatives to USDA Home Loans in North Carolina
If you don’t qualify for a USDA loan, here are some alternatives to consider:
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FHA loans – Require 3.5% downpayment but offer low rates and limited credit requirements.
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VA loans – Offer 100% financing for veterans and active military.
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NCHFA loans – North Carolina Housing Finance Agency loans have income limits up to $97,300.
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Down payment assistance programs – State and local programs provide grants for downpayments and closing costs.
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Loan programs from North Carolina Rural Center – They offer tips and resources for rural residents.
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Conventional 97 loans – Require 3% downpayment and have slightly higher rates than USDA loans.
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Renovation loans – Like FHA 203(k) and HomeStyle Renovation loans help finance fixer-uppers.
Be sure to discuss these options with your lender to find the right loan for your budget and financial goals.
Get Started on Your USDA Home Loan in North Carolina Today!
Buying a home is easier than ever with the USDA home loan program. Now that you know the requirements and process, you can start assembling your paperwork and getting pre-approved. Work with a lender familiar with USDA loans to ensure smooth sailing.
Owning a home in North Carolina is a worthwhile investment. USDA home loans make it affordable with no down payment required and fixed low rates. Achieve your American dream of homeownership with help from the experts at USDA Rural Development.
USDA Loan Eligibility in North Carolina & South Carolina
To get a USDA rural home loan, you will need to meet specific requirements, most notably purchasing a home in a rural area. To help you determine if your home is in a rural area, you can use the USDA eligibility map.
The USDA eligibility map will help you find areas in North Carolina and South Carolina that have a population under 20,000 people, meaning they fit the rural designation put in place by the U.S. Department of Agriculture. You can check out eligibility maps through the USDA.
North Carolina has a large number of rural areas that may be eligible for USDA loans. Areas that are not eligible typically surround major cities, including Charlotte, Raleigh, Fayetteville, Jacksonville, Wilson, Wilmington, and Greensboro. You’re likely to be eligible for a USDA loan in North Carolina if you are planning to buy a property that’s a significant distance from these cities.
Similar to North Carolina, the areas in and around major cities are not eligible for USDA loans in South Carolina. Some of those major cities include Columbia, Florence, Spartanburg, Myrtle Beach, Charleston, Greenville, Anderson, Aiken, and Rock Hill.
Benefits & Disadvantages of USDA Loans
A USDA guaranteed loan is a great option for some people. The biggest benefit of this loan is that it will offer competitive rates. Often, USDA loan rates are more affordable than conventional loan rates. In addition, your USDA mortgage may be easier to qualify for if you have a limited credit score.
The major disadvantage of a USDA mortgage is its location restriction. You have to be willing to buy a home in an area that is rural. You also need to fall within income limits, which may not work for all individuals and families.
USDA home loans are often compared to FHA home loans because they are both are good opportunities for many people. USDA loans and FHA loans are both backed by the U.S. government⁶, meaning they are less risky for lenders. However, they also have some key differences.
USDA loans do not require a down payment². That means you can finance 100% of the purchase price for your home. That’s a nice benefit to anyone hoping to buy a home. FHA loans require 3.5% of the sale price as a down payment. Who qualifies for a USDA loan can also be a factor for some with a higher income. FHA loans have no income limits.
On the other hand, USDA loan requirements NC and SC buyers have to meet can be limiting. The biggest factor is buying in an area that is considered rural.
Pros and Cons of a USDA Loan | All You Need to Know About USDA Home Loans EXPLAINED
FAQ
What is the income limit for a USDA loan in NC?
What credit score do you need for a USDA loan in NC?
Is USDA easier to get than FHA?
What is the debt-to-income ratio for an USDA loan?
How do you qualify for a USDA Home Loans NC loan?
At a minimum, applicants interested in obtaining a direct loan must have an adjusted income that is at or below the applicable low-income limit for the area where they wish to buy a house and they must demonstrate a willingness and ability to repay debt.
What are the benefits of the USDA Home Loans NC program?
Also known as the Section 502 Direct Loan Program, this program assists low- and very-low-income applicants obtain decent, safe and sanitary housing in eligible rural areas by providing payment assistance to increase an applicant’s repayment ability. Payment assistance is a type of subsidy that reduces the mortgage payment for a short time.
What is the USDA Loan?
The USDA Home Loan Program is a zero down payment required home loan program for those looking for a home in a small town or rural setting. This is the “go to” mortgage program for folks who want to live outside Raleigh in Clayton or Holly Springs Neighborhoods .
What is the USDA Loan Eligibility Map?
In the official USDA Loan Eligibility site – you’ll see these changes listed as “Future” Property Eligibility Maps in the sidebar. Qualifying is based upon your gross taxable income. This means that if you earn $48,000 a year, before taxes are taken out, we are qualifying you on $4000 a month.