Good news for first-time home buyers and repeat buyers in North Carolina: The state offers a loan program that comes with down payment assistance.
The North Carolina Housing Finance Agency has a program called NC Home Advantage Mortgage, which combines affordable, fixed-rate loans with down payment assistance of up to 5% of the loan amount. Even better: Borrowers don’t have to pay back the down payment help if they own the home long enough.
NCHFA highlights and eligibility requirements
- Available for credit scores as low as 640
- Get up to 5% down payment assistance on an FHA, VA or USDA loan, and up to 3% down payment assistance on a conventional loan
- Choose among conventional, FHA, VA or USDA mortgages from private lenders recommended by the NCHFA
- Depending on loan type, buy a house, town house, condominium, duplex or new manufactured home
- There is no sales price limit on the home for the loan program
- Must meet limits on income
- Overall debt-to-income ratio has to be 43% or less
- Home buyer education may be required
- Mortgage insurance will be required when a down payment is less than 20%
North Carolina home buyer assistance programs
NC HOME ADVANTAGE MORTGAGE
All loans under the program are 30-year, fixed-rate mortgages. The minimum credit score to buy a manufactured home is 660; it’s 640 for other types of homes.
Low- to moderate-income home buyers can get down payment assistance with the NC Home Advantage Mortgage. It’s available to qualified buyers who meet income guidelines, whether they are first-timers or repeat buyers.
The amount of down payment assistance depends on the loan type. Borrowers can get up to 5% assistance on FHA, VA and USDA loans. They can get up to 3% assistance on conventional mortgages. Down payment assistance, which is a 0% interest loan with no monthly payments, can be used to pay for closing costs, prepaid items (like property tax and homeowners insurance) and, of course, the down payment.
Depending on how long the borrower lives in the house, she may not have to pay some or all of the down payment assistance loan. After 11 years — and each year after — 20% of the down payment assistance is forgiven. That means after 15 years, the down payment assistance won’t have to be repaid, even if the borrower sells the house or refinances the mortgage.
SELF-HELP LOAN POOL
Through the Self-Help Loan Pool, low-income borrowers can get 0% interest rate mortgages to buy homes from Habitat for Humanity or other self-help homeownership organizations.
The assistance comes in the form of a grant of up to $35,000 that the organization combines with its own financing to offer a mortgage that has to be paid off in 20 to 33 years. Some of the money comes from federal funds, and the number of loans is limited.
Borrowers have to meet income and home price limits, which vary by county. They must take a homeownership education course and commit to keeping the house as their principal residence for at least five to 15 years, depending on the amount of assistance the homeownership organization got for that loan. Otherwise, the borrower will have to pay back the assistance. And the borrower must already participate in a self-help housing program — for example, helping in the construction or rehab of the house.
Mortgages using the Self-Help Loan Pool are available to first-time and repeat home buyers.
MORTGAGE CREDIT CERTIFICATES
The NCHFA issues mortgage credit certificates to eligible first-time home buyers, veterans and buyers in targeted areas. Qualified mortgage borrowers can get a credit to offset their federal income tax bills, up to $2,000 each year they own the home. Lenders can inform borrowers about the income and sales price limits; the mortgage credit webpage lists Census tracts that qualify.
Your next step
Visit the NCHFA’s information page for the NC Home Advantage Mortgage. This page has a link to a lender lookup tool and a way to find a real estate agent who has worked with program participants in the past.
The program requires you to take a homeownership education course. The lender will help you enroll.
If you’re interested in the Self-Help Loan Pool, visit NCHFA’s community partners page and select your county and the “Self-Help Loan Pool” program to see what’s available.
National first-time home buyer programs to consider
North Carolina’s mortgage program includes conventional loans and mortgages guaranteed by the Department of Veterans Affairs, Department of Agriculture and Federal Housing Administration. Borrowers also can get those loans without going through the state’s program if they don’t want down payment assistance or don’t meet the eligibility requirements.
Conventional loans are regular mortgages guaranteed by government-sponsored enterprises Fannie Mae or Freddie Mac, if the loans conform to their standards. Some of these loan programs allow down payments of as little as 3%. They require mortgage insurance for down payments less than 20%.
VA loans allow zero down payment and are available to qualified active-duty service members, military veterans and certain spouses.
USDA loans, guaranteed by the Department of Agriculture, are for buying homes in qualified rural areas. A down payment is not required. The home is not required to be on a farm or ranch — it just has to be in what the USDA deems a rural area.
FHA-insured loans are available to borrowers with low credit scores. Down payments on FHA loans are as little as 3.5%. Borrowers have to pay monthly mortgage insurance as long as they have the loan.
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