High demand and low supply have caused housing affordability in South Carolina to drop by 10.9%, while the average home price has increased by over 18% since 2020. These changes make it pretty hard to qualify for a first-time home in rural areas.
Luckily, there are some government-backed options for loans that can help. If you’re looking at buying a home and have a low-to-moderate income, the United States Department of Agriculture (USDA) house loans can help future home buyers in South Carolina who have income limits make homeownership more affordable and easier to reach.
This article explains what you need to ensure USDA eligibility when you are looking to get a house loan.
How Do USDA House Loans in South Carolina Work?
USDA home loans aim to help families with low- to moderate-income and an income limit buy a home in eligible rural areas by applying lower interest rates. Without the program, these families may find securing a mortgage nearly impossible.
Backing from the USDA lets lenders offer low, 30-year fixed rates with no down payment. This makes it more affordable and easier to get into a home — even with income limits.
There are two specific loan options through the USDA mortgage loans plan. With a Single-Family Housing Direct Home Loan, loans are offered by the USDA itself. You can apply directly to your local USDA mortgage state office.
The Single Family Housing Guaranteed Loan Program, which is more common, is offered by private creditors, 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 program.
To get a future home buyer a residence loan eligibility, they’ll need to meet some general rules. These serve to prove that you can both afford the loan amount of mortgage payments and mortgage insurance and that you are in the target demographic of buyers who may not be able to secure a traditional mortgage.
One of the key property eligibility requirements is that your household income can’t 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 creditor to see if you meet this requirement for the purchase price.
In addition, you must have decent credit, though there is no minimum credit score required. Some creditors like to see a 620 credit score, but this is not required across the board.
Your creditor will also check your debt ratios comparing your debts to income. In general, creditors look for ratios no higher than 29% for housing costs and 41% for total debt.
The credit score and debt ratios of the program are more guidelines than requirements, meaning there is some wiggle room in meeting the house purchase qualifications. You will be evaluated on the overall strength after you apply, not just whether you check all of the boxes. For instance, if you have a strong credit score or a lot of savings, your creditor may be willing to compromise on the debt ratio program.
Home Requirements for North Carolina USDA Loan
The home you plan to purchase will also need to meet certain program prerequisites in order to be approved for a house loan in South Carolina. A key requirement is that the home is located in a rural area, which is usually determined by census tract density.
Since the definition of rural is vague and open for interpretation, rural housing in many areas you may not consider is actually legitimate. Start by looking outside of cities and metropolitan areas. Sometimes suburbs may be eligible too.
As towns grow and population density changes, eligible USDA rural areas can change too. Check an updated USDA home loan map in South Carolina to ensure the area you are considering will be acceptable for a house loan.
The home you plan on purchasing must be a primary residence. It can’t be an investment property, farm, vacation home, second home, or rental property. You can even use your residence 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 can’t 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 general prerequisites 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 house loans 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 prerequisites in order to continue to the next steps.
The first step you should take is to find an equal housing lender, who needs to be approved by the USDA. Getting either preapproval or house loan prequalification online can help, as it will tell you whether you may get a mortgage or not, and what the moneylender 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 or a government agency, as they will know what properties are qualified 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 prerequisites for government-backed loans.
Your creditor will help walk you through building your final loan application. They will also work with rural development to meet all prerequisites.
The next step is to wait for approval. Both your creditor and the USDA need to approve the whole process, so it may take longer than a traditional application. Make sure you plan extra time into your home-buying timeline.
After loans are approved, you’ll need to schedule and attend the closing. Make sure to bring any documentation your loan officer tells you to and ask any questions before the procedure. While there is no down payment on USDA loans, 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
A USDA house loan in South Carolina can help low- to moderate-income families buy homes with lower mortgage rates when it might otherwise be difficult. While there are a few extra prerequisites, 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!