Purchasing your first home is a big deal. The process is exciting, but can also frustrate you when you are facing financial hurdles.
From saving up on the down payment, getting mortgage approval, and covering the closing costs, you need to plan for several things, and a lot may hold you back. Fortunately, you also have many first time home buyer NC programs at your disposal and will help on your journey to home ownership.
Today, we cover the programs for first-time home buyers in North Carolina. You can also use many of these programs for purchasing your second or third home, while others are for first-timers only.
Low Down National Loans for the First Time Home Buyer NC
First-time homeowners can access several national lenders and government sources to smooth the way. First-time home buyers in North Carolina with a 20% down payment can get a conventional loan with an attractive interest rate. Plus, you never have to worry about paying for Private Mortgage Insurance (PMI).
However, few people looking for their first homes can afford the 20% down—and you do not have to either!
You can get home by saving as little as 3% or even 0% when you know where to look. Here are six low-down-payment national programs worth exploring.
Conventional Loans — 3%
Many home purchasers associate low down payment programs with government-backed tools. However, no federal agency insures a conventional loan, and it offers you a low down payment too.
Eligibility requirements for 3% down payment mortgages are:
- A minimum 620 credit score
- Reliable employment and income
- No bankruptcies or foreclosures in your recent credit report history
- A Debt-To-Income (DTI) ratio below 43%
- Mortgage not exceeding conforming loan limits
- DPAs or gift funds may cover closing costs and down payment
- The home is your primary residence
- Completion of a North Carolina first-time homebuyer education course
Here are Common conventional options with a 3% down payment
Conventional 97 Mortgage
Many lenders are now offering home buyers the option to pay 3% down on a conventional 97 mortgage instead of the standard 5% down payment.
The conventional 97 mortgage is right for you if:
- Have excellent or good credit but modest savings
- Want to cancel PMI as soon as possible
- You are not willing to spend your savings on the down payment and closing costs
- You are looking to purchase a more expensive home than the FHA loan allows
A conventional 97 has no income limits, but you get more restrictions compared to other loans. For example, the single-family unit you are purchasing must be your primary residence. Plus, you cannot purchase a vacation home or investment property.
Fannie Mae HomeReady Mortgage
The payment assistance program is an excellent low down payment option if you are in the lower-income bracket. The HomeReady mortgage allows counting renter income on your application if you are living with tenants for at least 12 months. Income from non-borrowing occupants is a compensation factor during loan application, but income limits apply.
You do not have to spend money in your pocket. The total down payment on the property and closing costs may come from Down Payment Assistance (DPA) or gifted funds.
This mortgage option is excellent for:
- Multigenerational households where the parents and kids are working
- Borrowers looking for roommates but want to purchase the property on their own
- Home buyers interested in renting out one of the rooms
Freddie Mac Home Possible Mortgage
The Home Possible tool is like the HomeReady mortgage. However, only rental income counts toward your application. Income from other people in your house will not help you qualify for the loan.
The Freddie Mac loan means you can purchase 2- to 4-unit properties with 3% down, but you need to live in one unit.
FHA Loan — 3.5% or 10%
An FHA loan is a mortgage that the Federal Housing Administration (FHA) insures. FHA insurance protects the mortgage lender so they can offer low-interest loans, easy credit requirements, and low down payments.
FHA loans are flexible and have low rates, making them a popular option for first-time home buyers, low- to moderate-income home shoppers, and low-credit buyers.
However, FHA loan requirements NC residents must meet are:
- Pay a 3.5% down payment if the credit score is over 580
- Pay 10% down when the credit score is between 500 and 579
- Have a clear history of employment and steady income
- You have not experienced foreclosure in three years
- A 50% or less DTI
- Live in the home full-time
VA Loan — 0%
VA loans are the best possible mortgage if you qualify. The U.S. Department of Veterans Affairs (VA) backs the loan to help active-duty military personnel, veterans, and other groups own homes affordably.
The VA loan is a true no-money-down opportunity of getting a home mortgage. Further, you do not pay for mortgage insurance, making the instrument attractive.
VA home loans are also available for surviving family members.
USDA Loan — 0%
As part of its Rural Development Guaranteed Housing Loan program, the U.S. Department of Agriculture (USDA) backs this loan. USDA loans are ideal for low- to moderate-income individuals looking to own a home.
The guarantee from the USDA is insurance that protects lenders, so they can provide below-market interest rates and zero-down mortgages. Mortgage Insurance (MI) for a USDA home loan is a 1% upfront fee for purchases.
To qualify for the loan:
- You must meet the average salary in your area
- Have a credit score of over 640
- Purchase a home in a suburban or rural area
- The qualifying areas have a population of less than 20,000
NC Loan Assistance Programs for First-Time Home Buyers
Are you eyeing a condo or home First Carolina Realty has on offer, but not sure whether you can scrape together the down payment or afford a mortgage?
You are in luck if you live in North Carolina!
The North Carolina Housing Finance Agency (NCHFA) and its affiliate organizations are offering programs that assist home buyers. These programs provide affordable mortgages and down payment assistance, and you can combine some products.
These programs and participating mortgage lenders make it possible to afford your dream home sooner than you think. Further, most programs are perfect for first-time homebuyers.
NC Home Advantage Mortgage
An NC Home Advantage Mortgage is a fixed-rate mortgage. Qualifying home loan products are conventional, VA, USDA, and VA mortgages.
The mortgage is an NCHFA program running through participating mortgage lenders. A Home Advantage mortgage is perfect for the first-time buyer, but it is also an excellent option if you want to upgrade.
You also get down payment assistance of up to 5%. The assistance comes as a no-interest second mortgage you do not pay off unless you refinance, move or pay off within 15 years. Otherwise, the NCHFA will forgive 20% annually as you get to years 11 through 15.
Qualifying for NC Home Advantage Mortgage
North Carolina residents qualify for the mortgage as long as:
- They are buying a home in North Carolina and occupying it throughout
- The minimum credit score is over 640
- They have an income not exceeding $99k
- They are legal U.S. residents
Properties you can purchase with the loan include:
- Duplexes (for FHA loans only)
- Single-family properties
- Newly manufactured houses for buyers with 660 credit score and using USDA, VA, or FHA mortgage
NC 1st Home Advantage Down Payment Program
The NC Home Advantage mortgage offers down payment assistance, but the NC 1st Home Advantage Down Payment program can offer additional help.
Qualifying for the program gives you access to up to $8,000 in down payment assistance. The program features a 0% deferred second mortgage with complete forgiveness after year 15.
Qualifying for NC 1st Home Advantage Down Payment Assistance
Applying for this mortgage product can help you secure a home. Before you approach a lender, make sure you meet these requirements.
An eligible applicant should:
- Meet all NC Home Advantage Mortgage requirements
- Purchases a North Carolina home and occupies it as the primary residence within 60 days of the closing
- Have an income lower than $99,000
- Have a 640 or higher credit score
- Be a legal U.S. resident
- Be a first-time homebuyer, veteran, or is buying a home in a target census tract
Properties eligible for NC 1st Home Advantage Down Payment include:
- New houses when you have a 660 or higher credit score
- Single-family units
NC Home Advantage Tax Credit
Military veterans and first-time home buyers can qualify for the NC Home Advantage Tax Credit. On qualification, you receive an up to 30% tax credit on your mortgage interest rate up to $2,000. The credit applies for each year you are living in the home.
The product is a Mortgage Credit Certificate (MCC) offering that comes through the NCHFA. You can combine tax credit with your NC Home Advantage Mortgage but not with NC 1st Home Advantage Down Payment.
Qualifying for NC Home Advantage Tax Credit
The tax credit can help you save thousands of dollars when you account for the lifetime of the home loan. However, you must meet these requirements to qualify.
Applicants eligible for the NC Home Advantage Tax Credit should:
- Have an NCHFA-approved loan before closing
- Purchase a North Carolina home
- Be a military veteran, first-time buyer, or buying in a census target area
- A legal U.S. resident
- Get MCC approval before buying the home
- Meet the sales price and income limits of the county
Eligible properties are:
- New and used manufactured homes
Community Partners Loan Pool
The Community Partners Loan Pool (CPLP) allows combination with your NC Home Advantage Mortgage so you get assistance up to 20% of the sale price but not exceeding $30,000. You can also get the home loan while using the USDA Section 502 for up to 10% help of the purchase price.
The CPLP has the characteristics of a zero-interest, second home loan. However, the loan pool matches your first mortgage terms, and repayment is a must when the term ends or sell the home.
Further, you can combine CPLP with an NC Home Advantage Tax Credit or NC 1st Home Advantage Down Payment.
Qualifying for Community Partners Loan Pool
CPLP is an excellent additional assistance option for your down payment while getting into the housing market. However, the requirements are strict.
Eligible applicants should:
- Not have a total household income exceeding 80% of the county Area Median Income
- Provide proof of stable and sufficient income
- Have a 640 and more credit score
- Have between 25% and 32% of the monthly income going to housing
- Finish a home buyer education course and undergo a two-hour housing counseling session
- Work with a CPLP member to establish a home ownership readiness plan
Properties eligible for this product include:
- Homes that do not exceed the county limit
- New homes with a Certificate of Occupancy
- New homes or those less than 10 years old
- Repairs are necessary before loan approval
Self-Help Loan Pool
Get a Self Help Loan Pool (SHLP) loan by partnering with another SHLP member (usually Habitat for Humanity). You stand to gain up to $35k in mortgage financing for a home rehabbed or built by an SHLP member.
SHLP mortgage combines with other agency funds for 0% and amortizing loans with terms between 20 and 33 years. You make your regular mortgage payments to the SHLP member.
Qualifying for Self-Help Loan Pool
The SHLP program is the strictest home buyer down payment assistance program in North Carolina. This is because the program targets homes rehabbed or built by agencies such as Habitat for Humanity. Consider these requirements if you want to know whether you qualify.
Eligible applicants must:
- Take part in a self-help housing activity such as rehabilitating or building the home
- Have a household income below 80% of the area median income
- Complete a homebuyer education course and counseling
Properties eligible for the program are:
- Houses rehabbed or built by an SHLP member
- Homes not exceeding the max sales price in the county
Here are various resources available to you as the latest first time home buyer NC has. Reflect on your requirements as the borrower while considering the options. Some programs and loans are an excellent fit if you have a low credit score, while others are specific for certain areas. Qualifying for any of these programs means you can get a home without draining your savings!
Are you struggling to find the perfect low down home loan product or getting one of the assistance programs? Let the experienced real estate agents at Homes by Ardor help. We will walk you through the home buying process and help you find something that works for you.
Kris Reid is the CEO of Ardor SEO, a company that helps real estate professionals get more leads and customers to predictably grow their business.
Over the years, Kris acquired extensive knowledge of SEO and its practical applications in various industries, with the main focus on real estate.
In 2021 Ardor launched the Icons of Real Estate Podcast to share proven strategies from the top producing icon agents with the real estate community.
After obtaining the real estate license in 2022, Kris joined eXp Realty and launched Homes by Ardor, the platform that was built to be the fastest way to buy or sell a house. Homes by Ardor also provides leads for its partner companies and realtors.