First Time Home Buyer Grants and Down Payment Assistance in North Carolina

Mortgage Education from
First Time Home Buyer Grants and Down Payment Assistancein North Carolina
September 17, 2019 at 4:00 AM
by Jill Burgess
first time home buyer mortgage

First-Time Home Buyer Grants In NC

Looking to own a home in North Carolina? Then, it’s important you remember that you don’t have to spread yourself thin and erode your finances while trying to do it all by yourself.

First time home buyers in NC are entitled to something commonly known as First-Time Home Buyer Grants, and this affords first time home buyers a wonderful opportunity to acquire houses without overly straining their pockets.

But it doesn’t just stop at that. One of the good things about the first home buyer loan is that, even as it sounds like something for only the first-time buyers, people who have owned homes before are not excluded.

That is, even though you have owned a home before, you can still get first home buyer grants provided you meet certain easy-to-meet requirements. If you meet the maximum income limits and are looking to acquire a property that is not too expensive -- and one that you have been renting for the last three years -- you could be eligible for the grant, which is really the government’s way of assisting people who want to own homes in NC.

Of course, you have your questions -- How does it work exactly? How much do you get? And will you rue the decision to take the grant for the rest of your life being that you will be looped into insanely high monthly payments on a house because you took government money?

Well, for starters, the answer is definitely “no” for the last part. And here are other important things you should know about the first time home buyer grants.

How Does One Apply For First Time Home Buyer Grants

The first thing you must know is that there are several different First-Time Home Buyer Grants available in NC, and we shall explore them.

The North Carolina Housing Finance Agency (NCHFA) offers a number of loan programs with unique benefits for both first-time home buyers and repeat buyers. And one of these programs could help you buy a home sooner.

But even as there are a number of programs to choose from, you’d have to go through basically the same process when applying for any of those grants.

Ideally, you’d have to talk to an approved Lender (we at MortgagesByJill are on top of that list, and you want to get in touch with Jill Burgess, who throughout a storied career spanning three (3) decades, has personally funded no less than 2 billion dollars in mortgage loans).

After the loan applicant makes contact, lenders would generally look for the following information from the loan application:

· If the applicant exceeds the $87,500 maximum income limit for the whole state. Typically, USDA Home Loans NC goes higher than that depending on the household income. But with the First Time Home Buyer Grant program, people who are on the application are the ones being looked at. This usually makes it easier to qualify for.

· If the applicant has a minimum credit score of at least 640, because this is based upon the middle credit score, you will be home and dry if you had 3 scores that looked like 622, 641, and 649. And that's because at least two of those exceed the 640-mark.

· If the applicant has been renting, or living with parents, or schooling for the last three years.

After all these are determined, and provided you meet the basic requirements for the First Time Home Buyer Grants, we as your lender will determine which mortgage program is best suited to your needs, and how much grant you qualify for.

Note This:

The government-sponsored grants are generally called “mortgage grants” due to the fact that there is no interest charge, there are no payments to be made, and there is ‘monkey on your back’ in the form of an expected repayment of any of the money you receive for the down payment.

These are some of the perks that come with the grant, and it holds true, except for cases where the beneficiary moves out of the property or refinance before the dates assigned by a specific down payment assistance program.

“Forgivable loan” is a common way of referring to this down payment assistance program. As part of the provisions of the program that best suits the loan hopeful, a portion of this down payment assistance will be forgiven on a schedule that will be shared by the lender (that’s us) when the applicant (that’s you) applies for the loan.

Such funds are made available to lenders like us through the NCHFA, but interest rates vary from lender to lender depending on the rates set by the NCHFA.

Mortgage Programs That Support First Time Home Buyer Grants

Only down payment and closing costs are covered by the First-Time Home Buyer Grants. Any type of mortgage loan can be accessed using the grants, though each of the mortgage programs comes with a fair share of perks and quirks.

Having said that, it is completely true that you get any of the FHA Mortgage, VA Mortgage Loan, USDA Home Loan, or even a Conventional Loan, using the First-Time Home Buyer Grants.

Note The Following:

· The grants can be used for a down payment.

· The First-Time Home Buyer Grants can also be used to cover Mortgage Insurance, PMI or a VA Funding Fee, or to pay for closing costs.

· The grants can be used together with a seller paying closing costs and/or a gift you might receive.

What Grants And Programs Are Available In NC?

There are three different First-Time Home Buyer Grants that one can access;

· First, there is a grant that provides first-time homebuyers with 3 percent, which can be used for closing costs or a down payment on a Conventional Loan or an FHA Loan. Another program allows 5% in down payment grants for all Government Loans.

· Additionally, there is an $8,000 down payment available in every county in NC, though a limited offering. This is the newest of the bunch and does come with guidelines that slightly differ from both the 3% and 5% grants on the subject of income caps.

This new grant can also be put to use as payments for closing costs on programs that do not require any down payment such as the USDA Home Loan or the VA Loan.

· NCHFA also offers a Conventional Loan Grant Program which comes with the requirement of a down payment of 3%, while supporting closing costs from a gift, savings, or the seller. It's arguably the most flexible of all the programs, and it comes with low PMI rates.

And what’s more, the grants are available for homes that you qualify for, which implies that there is no maximum sales price for the program.

In any case, when using the grant as a down payment on an FHA Loan application, there are some restrictions -- you will have to make do with the maximum FHA Loan for the county in which the house you are buying is located.

Moreso, a USDA Home Loan application in NC, does come with additional income limits that are determined by the USDA Loan limits within the county where the house in question sits.

Mortgage Tax Credits Available for First Time Home Buyers

Besides the Grants, you could also get something called “Mortgage Tax Credit” in NC. This is especially available to people who have not bought a home in the last three years.

Tax credits are often associated with the tax deductions that come with owning a house. But a tax credit is preferable in that it comes straight off what you owe in federal taxes, whereas a deduction merely decreases your basis for taxation.

The rationale behind the program follows from the thinking that persons who are paying less in federal taxes can use the additional income to take care of any extra costs incurred in the process of buying a home.

Across NC, the maximum sales price for the Mortgage Tax Credit is $250,000, but there are also varying income cap requirements from county to county.

How Can One Benefit From The Mortgage Tax Credit Program?

Just like the First-Time Home Buyer Grants, Mortgage Tax Credits are provided to those who qualify for it at the time of closing.

Of course, there is some paperwork involved, and perhaps some waiting too due to the additional underwriting time (it has to go to the agency to get approved).

But provided you meet the basic requirements for the first time home buyer grants -- that is, you gross a yearly income of less than $87,500, you have a debt-to-income ratio of less than 45 percent, and the house you are buying is somewhere in NC, then you have strong claims to the money.

But remember, not all lenders offer this program and the money is not yours to have if you go ahead to buy a house before applying for the mortgage tax credit or the First-Time Home Buyer Grants in NC. You are only eligible if you apply for the tax credit at the time of buying the house in question, not after.

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