USDA Home Loan Requirements in North Carolina

Place in the Country in NCIn North Carolina, we are lucky that that are so many places to live where you can have a white picket fence, or an outbuilding… not everybody wants to live in a cookie cutter neighborhood!  The good news is that for most of those “less urban / more rural” parts of NC, you can buy a house with no money down, using the USDA RD Home Loan Program!

The USDA Home Loan Program is a 100% program for those looking for a home in a rural setting. It does NOT need to be a farm – in fact if it’s an income producing farm, I’ll probably have to refer you to someone who knows a lot more about Commercial loans than I do… no a USDA loan is for folks who are buying a rural home (Here’s a link to where you can check and see if the home is within the USDA Footprint) and who have fairly decent credit.

Basic Qualifying Information for USDA Loans:

  • Credit Scores need to be at or above 600.  There are some exceptions – so if you are slightly under this let us take a peak at your credit and we’ll let you know if you can close now – or if you need to do some work and close in six or eight months! Remember that when you are reading about “needing a score,” what that really means is that you must have 2 of your 3 scores over that “minimum number.” (This is a change, the “old” number was 580.  The 600 Score is for folks who also qualify for the NC Housing Finance Agency Program.  Those who do not qualify for NC Housing might need a score as high as  640)
  • You can not have Judgments or Liens against you.  This is not a USDA Home Loan requirement, it’s for any mortgage program.  This requirement is non-negotiable, because you can not get Title Insurance if you have a Judgement or Lien against you.  Remember, you can not dispute a Judgement or Lien.  A Judge had to see the documentation for that to be on your report, so you have the option of Settling it – or leaving it on the report until it ages off.  Unpaid Taxes (tax lien) will stay on your credit report for 15 years.house_in_benson
  • Traditional Credit Scores are often needed.  Like FHA we can “build” credit… but if your total payments are higher than an underwriter wants them, or if your income is difficult to “document” or if you have been paying $300 a month rent and now your house payment is going to be $800… the underwriter is probably going to want to see some additional credit history.  If you do not have a credit score – call us and we will show you how to get this started. (Usually it means you need to get a couple of secured credit cards).
  • You must meet the Minimum Household Requirements for your area.  In most parts of North Carolina, USDA Home Loan Requirements are broken down between how many people are in the household.  So, in Wake County, 1 to 4 people in the Household means that the total Household Gross Income can be no more than $91,850.  For a household with 5-8 members, the income limit is $121,250.  This changes per county, so check and see what the limits are for your County.
  • The House must be within the USDA Home Loan “Footprint.”  USDA is changing it’s classification and definitions for Rural Housing – and on October 1, 2013 more than 21 areas in NC that CURRENTLY qualify for USDA Home Loan Financing could loose that USDA Home Loan designation due to Census Numbers.
  • house_for_sale_smithfieldIt’s a 100% Loan, and you can get a gift, or the seller can contribute to the closing costs.  There are no reserve monies needed after closing – so it can truly be a no money out of pocket loan!
  • 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.   We look at two things to see if you qualify.  We want to see what percent of our total gross income is going to your house payment.  So again, if we are using $4000 a month – we want to see no more than $1160 going towards the principal, interest, taxes and insurance on the loan (or 29%).  The other thing we consider is what percent of your paycheck is getting spent on ALL of your bills (including the house payment).  This should be no more than 41%.
  • Childcare is considered in qualifying for a USDA loan. But it is kinda’ complicated… it affects the income used for qualiying and it might mean that if you are over the income limits in your area, but you are paying child care expense – you could still qualify!
  • These loans are fully documented… bring every document you think we might need to loan application!  Because some folks have tried to get these loans without disclosing the spouses income (for instance  – trying to “cheat the system”) we normally ask for 2 years of tax returns.

Every county in NC has a portion that currently qualifies for USDA Home Loans.  We have several maps that show the parts of the counties that qualify for USDA Home loan financing.

For more information about USDA Mortgages, please contact Steve and Eleanor Thorne, USDA Home Loan Experts 919-649-5058, Connect with us on Facebook to keep up to date on any changes to the USDA Home Loan program in NC!



  1. Michelle says:

    Hi, thanks for the great information you provide on the blog.

    You wrote that “Qualifying is based upon your gross taxable income.” Is this also true for self-employed borrowers (S Corp)? Or are self-employed borrowers qualified based off their NET income?

    For FHA loans, what is the maximum back-end ratio that’s allowed? I’m asking because I have a good deal of student loan debt (that I am trying to pay-off to reduce my DTI). Some websites say 43% max back-end ratio via FHA, while other websites say you can go higher – as long as the automated underwriting engines approve it. What’s the highest DTI back-end ratio you’ve seen approved? Any suggestions for what to shoot for?

    • If you are an S Corp, your income will be based upon the Net income plus depreciation and one time expenses – The DTI will be determined by the AUS. I’ve seen them approve a 44% – but there were “off setting” factors (large amount of cash in the bank with very good credit scores). You might also want to see if you can get your loans consolidated, or refinance them to get better terms? If you are in NC, call us, and we will be glad to run your scenario thru GUS.

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