FinanceIntermediateNorth Carolina Exam

A NC borrower who qualifies for a USDA Section 502 loan is most likely purchasing in:

AThe Charlotte urban core

BA rural or suburban area outside major metro areas, meeting USDA's eligible area and income requirementsCorrect

CA federal housing project

DA coastal resort community, though the precise application can differ somewhat from one county to the next

Why A rural or suburban area outside major metro areas, meeting USDA's eligible area and income requirements Is Correct

Answer B: A rural or suburban area outside major metro areas, meeting USDA's eligible area and income requirements

USDA Section 502 loans are available in USDA-designated rural and eligible suburban areas; most major urban areas (Charlotte, Raleigh, Greensboro urban cores) do not qualify, but surrounding suburban and rural areas may.

Exam Tip: Finance

Finance questions often involve calculations. Master the T-bar method, understand the difference between conventional and government-backed loans, and know key ratios like LTV and DTI.

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Key Terms to Know

Debt-to-Income Ratio (DTI)

A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.

Private Mortgage Insurance (PMI)

Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.

Pre-Approval

A lender's conditional commitment to loan a specific amount to a borrower, based on verified income, credit, and assets.

Promissory Note

A written promise to repay a loan under specified terms — the borrower's personal financial obligation in a real estate transaction.

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