High demand and low supply have caused housing affordability in South Carolina to drop 10.9%, while the average home price has increased by over 18% since 2020. These changes make it even more difficult to buy a home.
Luckily, there are a few government-backed loan programs that can help. If you’re looking at buying a home and have low- to moderate-income, USDA home loans in South Carolina can help make homeownership more affordable and easier to reach.
Let’s take a look at what you need to do to get a USDA home loan.
How Do USDA Home Loans in South Carolina Work?
USDA home loans aim to help families with low- to moderate-income buy homes in eligible rural areas. Without the program, these families may have difficulty securing a mortgage.
Backing from the USDA lets lenders offer low, 30-year fixed rates with no down payment, making it more affordable and easier to get into a home.
There are two main types of loans through the USDA loan program. With Single Family Housing Direct Home Loans, the loan is offered by the USDA. You can submit a loan application directly to your local USDA state office.
The Single Family Housing Guaranteed Loan Program, which is more common, is offered by private lenders while the USDA insures the loans against loss. Although it has a few additional requirements, the process is very similar to a traditional home-buying experience.
To get a USDA home loan, you’ll need to meet some guidelines as the buyer. These serve to prove that you can both afford the mortgage payments and that you are in the target demographic of buyers who may not be able to secure a traditional mortgage.
One of the key requirements is that your household income cannot exceed 115% of the area’s median income. Because these numbers vary drastically based on location and family size, you should check with your mortgage lender to see if you meet this requirement.
In addition, you must have decent credit, though there is no minimum credit score required. Some lenders like to see a 620 credit score, but this is not required across the board.
Your lender will also check your debt ratios comparing your debts to income. In general, lenders look for ratios no higher than 29% for housing costs and 41% for total debt.
The credit score and debt ratios are more guidelines than requirements, meaning there is some wiggle room in meeting the USDA home loan qualifications in South Carolina. For instance, if you have a strong credit score or a lot of savings, your lender might be willing to compromise on the debt ratio.
You will be evaluated on the overall strength of your application, not just that you checked all of the boxes.
The home you plan to purchase will also need to meet certain requirements in order to be approved for a USDA home loan in South Carolina. A key requirement is that the home is located in an eligible “rural” area, which is usually determined by census tract density.
Since the definition of rural is vague and open for interpretation, homes in many areas you may not consider are actually eligible. Start by looking outside of cities and metropolitan areas. Sometimes suburbs may be eligible too.
As towns grow and population density changes, eligible areas can change. Check an updated USDA home loan map in South Carolina to ensure the area you are considering will be eligible for a USDA home loan.
The home you plan on purchasing must be a primary residence. It cannot be an investment property, farm, vacation home, second home, or rental property. You can even use your home loan to build a home.
The home can be any type of home. This includes preexisting or new construction, manufactured, townhouse, condo, foreclosure, or short sale properties.
There cannot be any “income-producing” type buildings on the property, such as silos or barns used for commercial use.
You will need to have an appraisal to ensure certain other guidelines are met. The appraiser will look for a structurally sound foundation, stable roof, and easy access from the road. They will also check for functional heating and cooling, electrical, and plumbing systems, and well and septic systems, if present.
Process for Applying for a USDA Loan in South Carolina
The process for applying for a USDA home loan in South Carolina is similar to the process for getting any other mortgage. You just need to make sure you meet these other previously mentioned requirements in order for your application to be approved.
The first step you should take is to find a lender, who needs to be approved by the USDA. Getting either preapproval or South Carolina USDA home loan prequalification online can help you know you will be able to get a mortgage and what the lender is willing to lend to you.
Choosing a real estate agent can make the process of searching for your new home easier. Find one who has experience working with USDA properties, as they will know what properties are eligible for USDA loans in South Carolina.
Once you choose the home you wish to buy, make an offer, and it’s accepted, an appraisal is required. This will not only determine the fair market value of your home but will also make sure it meets the requirements for government-backed loans.
Your lender will help walk you through building your final loan application. They will also work with rural development to meet all requirements.
The next step is to wait for approval. Both your lender and the USDA need to approve your application, so it might take longer than a traditional application. Make sure you plan extra time into your home buying timeline.
After the loan is approved, you’ll need to schedule and attend the closing. Make sure to bring any documentation your loan officer tells you to. While there is no down payment on a USDA loan, you may still need to bring cash or checks for closing costs.
After closing, you’ll have the keys to your new home!
Apply for Your South Carolina USDA Home Loan
USDA home loans in South Carolina can help low- to moderate-income families buy homes when it might otherwise be difficult. While there are a few extra requirements, the process is overall straightforward, especially when working with a USDA-approved lender.
Call Society Mortgage to get started on your home buying journey today.