North Carolina First-Time Home Buying Assistance Programs for 2024

North Carolina First-Time Home Buying Guide

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    By Kim Franke-Folstad

    (Last Updated – 03/2024)

    Whether you’re looking for coastal charm, a quirky mountain town, big-city amenities and sports teams, or something in between, you’re likely to find it in North Carolina. Which explains why the Tar Heel State has become a magnet for new college grads, growing families, retirees, and anyone in between.

    Unfortunately, that’s not so good for first-time homebuyers in North Carolina. Rising prices and lower inventory have made the housing market pretty daunting.

    According to Redfin, the median home sales price in North Carolina was $353,300 in January 2024 — a 4.8% increase in just 12 months. In some communities, the numbers have been much higher. Prices have risen especially rapidly in Hendersonville, Elizabeth City, and Carolina Beach.

    The good news is that North Carolina first-time homebuyers may be able to get financial help through state and local programs. There also are longstanding federal programs that could improve a buyer’s chances of success.

    Recommended: First-Time Homebuyer Guide

    Who Is Considered a First-Time Homebuyer in North Carolina?

    For most programs offered in North Carolina and elsewhere, applicants are considered first-time homebuyers if they haven’t ever owned a home (of course) or haven’t owned a home for at least the past three years. Most first-time homebuyers will need a mortgage loan in order to make their purchase.

    4 North Carolina Programs for First-Time Homebuyers

    Most first-time homebuyer programs in North Carolina are designed to help low- to moderate-income buyers who need help coming up with a down payment or closing costs.

    Program participants typically must meet eligibility requirements regarding their income, credit scores, and debt-to-income (DTI) ratio. There also may be home price limits, and the home usually must be owner occupied. Also, at least one of the buyers may have to complete a homebuyer education course.

    Veterans and buyers who are purchasing homes in certain census tracts may be eligible for the same perks as first-time buyers.

    The North Carolina Housing Finance Agency (NCHFA) offers several programs.

    1. NCHFA NC Home Advantage Mortgage

    The North Carolina Home Advantage Mortgage program pairs a 30-year fixed-rate mortgage (conventional, FHA, VA, or USDA) with down payment assistance in the form of a 0% interest, no-payment, forgivable second mortgage for as much as 5% of the first mortgage amount.

    The second mortgage doesn’t have to be repaid unless the home is sold, or the first mortgage is paid off or refinanced, within the first 15 years of the loan term. At the end of year 15, the second mortgage is completely forgiven.

    Benefits and requirements include:

    •  Competitive interest rates and up to 5% down payment assistance for FHA, USDA and VA loans; 3% down payment assistance on conventional loans

    •  Second loan amount may be reduced by 20% annually in years 11-15

    •  Loan can be used to purchase a single-family home, townhouse, condominium, townhouse, duplex (FHA loans only), or new manufactured home (FHA, VA, or USDA loans only; minimum 660 credit score)

    •  Borrowers’ annual income cannot exceed $134,000

    •  Minimum credit score of 640

    •  Maximum DTI ratio of 43%

    •  Available to first-time and repeat homebuyers

    A participating lender can help you get started; find a lender online or call 1-800-393-0988.

    2. NCHFA NC 1st Home Advantage Down Payment

    If you are a first-time homebuyer or military veteran purchasing a home with an NC Home Advantage Mortgage, you may be eligible for $15,000 in down payment assistance through the NC 1st Home Advantage Down Payment program.

    The down payment assistance comes as a 0% interest deferred second mortgage that doesn’t have to be repaid unless the home is sold, or the first mortgage is paid off or refinanced, within the first 15 years of the loan term.

    Benefits and requirements include:

    •  Loan amount may be reduced by 20% annually in years 11-15

    •  Must meet requirements for and obtain an NC Home Advantage Mortgage

    •  Limited to first-time homebuyers and veterans

    A participating lender can help you get started; or call 1-800-393-0988.

    3. NCHFA Community Partners Loan Pool

    The Community Partners Loan Pool is another way for low- and moderate-income homebuyers to receive down payment assistance. The assistance is structured as a 0% interest, deferred second mortgage with a term that matches the borrower’s first mortgage term. The loan has no monthly payment and is usually repaid when the home is sold or at the end of the loan term.

    Only newly constructed homes or existing homes in “like new” condition (less than 10 years old or with an effective life of 10 years or less) are eligible.

    Benefits and requirements include:

    •  Up to 25% of the home’s purchase price, not to exceed $50,000, when combined with an NC Home Advantage Mortgage

    •  Up to 10% of the purchase price when combined with a USDA Section 502 loan

    •  Income and sales price limits apply

    •  Borrower must prove sufficient, stable income to afford and maintain the purchased home

    •  Minimum credit score of 640

    •  Maximum DTI ratio is 45%

    •  Must complete an approved homebuyer education course and at least two hours of housing counseling. (Borrowers must establish a plan for education and counseling before signing a sales contract on a property.)

    To apply, contact a community partner .

    4. NC Home Advantage Tax Credit

    Eligible first-time homebuyers, veterans, and those who are buying in targeted areas in North Carolina also may benefit from obtaining a mortgage credit certificate through an NCHFA-approved lender. Borrowers can use the certificate to claim a portion of their annual mortgage interest paid as a federal tax credit of up to $2,000 every year.

    The certificate can be combined with the NC Home Advantage Mortgage program but not with the NC 1st Home Advantage Down Payment program.

    Recommended: Understanding Mortgage Basics

    Other North Carolina Homebuyer Programs

    If you’ve already chosen the North Carolina city or county you hope to make your home, you also may want to research local buyer assistance programs.

    For example, the city of Greensboro’s Neighborhood Development Department offers eligible homebuyers up to $10,000 in down payment assistance (not to exceed 20% of their home’s overall purchase price) in the form of a 0% interest, no-payment second mortgage that is forgiven after five years of living in the home. For eligibility requirements, check out the Homebuyer Down Payment Assistance Program .

    If you can’t find assistance in your chosen location, check back occasionally for offers. Some first-time homebuyer programs base their opportunities (and deadlines) on the funds they expect to become available. When their money runs out, they may press pause.

    How to Apply to North Carolina Programs for First-Time Homebuyers

    For most mortgage and assistance programs, contacting a participating lender is the first step. Follow the links provided.

    Federal Programs for First-Time Homebuyers

    Several federal government programs are designed for people who have low credit scores or limited cash for a down payment. Although most of these programs are available to repeat homeowners, like state programs, they can be especially helpful to people who are buying a first home or who haven’t owned a home in several years.

    The mortgages are generally for single-family homes, two- to four-unit properties that will be owner occupied, approved condos, townhomes, planned unit developments, and some manufactured homes.

    Federal Housing Administration (FHA) Loans

    The FHA, which is part of the U.S. Department of Housing and Urban Development (HUD), insures mortgages for borrowers with lower credit scores. Homebuyers choose from a list of approved lenders that participate in the FHA loan program. Loans have competitive interest rates and require a down payment of 3.5% of the purchase price for borrowers, who typically need FICO® credit scores of 580 or higher. Those with scores as low as 500 must put at least 10% down.

    In addition to examining your credit score, lenders will look at your DTI ratio. FHA loans allow a DTI ratio of up to 50% in some cases, vs. a typical 45% maximum for a conventional loan.

    Gift money for the down payment is allowed from certain donors and will be documented in a gift letter for the mortgage.

    FHA loans always require mortgage insurance: a 1.75% upfront fee and annual premiums for the life of the loan, unless you make a down payment of at least 10%, which allows the removal of mortgage insurance after 11 years. For a $300,000 mortgage balance, upfront mortgage insurance premium (MIP) would be around $5,250 and monthly MIP, at a rate of 0.55%, would be around $137. You can learn more about these loans, including FHA loans for refinance and rehab of properties, by reading up on FHA requirements, loan limits, and rates.

    Freddie Mac Home Possible Mortgages

    Very low- and low-income borrowers may make a 3% down payment on a Home Possible® mortgage. These loans allow various sources for down payments, including co-borrowers, family gifts, employer assistance, secondary financing, and sweat equity.

    The HHome Possible mortgage is for buyers who have a credit score of at least 660.

    Once you pay 20% of your loan, the Home Possible mortgage insurance will be canceled, which will lower your mortgage payments.

    Fannie Mae HomeReady Mortgages

    Fannie Mae HomeReady® Mortgages allow down payments as low as 3% for low-income borrowers. Applicants generally need a credit score of at least 620; pricing may be better for credit scores of 680 and above. Like the Freddie Mac program, HomeReady loans allow flexibility for down payment financing, such as gifts and grants.

    For income limits, a comparison to an FHA loan, and other information, go to this Fannie Mae site .

    Fannie Mae Standard 97 LTV Loan

    The conventional 97 LTV loan is for first-time homebuyers of any income level who have a credit score of at least 620 and meet debt-to-income criteria. The 97% loan-to-value mortgage requires 3% down. Borrowers can get down payment and closing cost assistance from third-party sources.

    Department of Veterans Affairs (VA) Loans

    Active-duty members of the military, veterans, and eligible family members may apply for loans backed by the Department of Veterans Affairs. VA loans, which can be used to buy, build, or improve homes, have lower interest rates than most other mortgages and don’t require a down payment. Most borrowers pay a one-time funding fee that can be rolled into the mortgage.

    Another benefit of VA loans is that they do not require private mortgage insurance (PMI) for borrowers who make a down payment of less than 20%. And they have more flexible credit score requirements. In some cases, even those who have previously been in foreclosure or bankruptcy can qualify.

    Borrowers applying for a VA loan will need a Certificate of Eligibility from the VA so make sure to review a guide to qualifying for a VA loan as a first step in the process.

    Native American Veteran Direct Loans (NADLs)

    Eligible Native American veterans and their spouses may use these no-down-payment loans to buy, improve, or build a home on federal trust land. Unlike VA loans listed above, the Department of Veterans Affairs is the mortgage lender on NADLs. The VA requires no mortgage insurance, but it does charge a funding fee.

    US Department of Agriculture (USDA) Loans

    No down payment is required on these loans to moderate-income borrowers that are guaranteed by the USDA in specified rural areas. Borrowers pay an upfront guarantee fee and an annual fee that serves as mortgage insurance.

    The USDA also directly issues loans to low- and very low-income people. For loan basics and income and property eligibility, head to this USDA site .

    HUD Good Neighbor Next Door Program

    This program helps police officers, firefighters, emergency medical technicians, and teachers qualify for mortgages in the areas they serve. Borrowers can receive 50% off a home in what HUD calls a “revitalization area.” They must live in the home for at least three years.

    First-Time Homebuyer Stats for 2024

    You’re probably wondering where you fit amid the mix of buyers who are out there shopping for their first home — or first in a while. Here are some stats from a recent National Association of Realtors® Profile of Home Buyers and Sellers and the homebuying site Redfin:

    •  Percentage of buyers nationwide who are first-time buyers: 32%

    •  Median household income of first-time buyers nationwide: $71,000

    •  Median home price of first-time homebuyers (according to Redfin): $242,000

    •  Median down payment of first-time homebuyers: 8%

    •  Median age of first-time homebuyers: 35

    Relationship status of first-time homebuyers:

    •  Married: 59%

    •  Single females: 19%

    •  Unmarried couples: 9%

    •  Single males: 10%

    70% of first-time homebuyers did not have children under 18

    79% of first-time homebuyers purchased a detached, single-family house

    Additional Financing Tips for First-Time Homebuyers

    In addition to federal and state government-sponsored lending programs, there are other financial strategies that may help you become a homeowner. Some examples:

    •  Traditional IRA withdrawals. The IRS allows qualifying first-time homebuyers a one-time, penalty-free withdrawal of up to $10,000 from their IRA if the money is used to buy, build, or rebuild a home. The IRS considers anyone who has not owned a primary residence in the past three years a first-time homebuyer. You will still owe income tax on the IRA withdrawal. If you’re married and your spouse has an IRA, they may also make a penalty-free withdrawal of $10,000 to purchase a home. The downside, of course, is that large withdrawals may jeopardize your retirement savings.

    •  Roth IRA withdrawals. Because Roth IRA contributions are made with after-tax money, the IRS allows tax- and penalty-free withdrawals of contributions for any reason as long as you’ve held the account for five years. You may also withdraw up to $10,000 in earnings from your Roth IRA without paying taxes or penalties if you are a qualifying first-time homebuyer and you have had the account for five years. With accounts held for less than five years, homebuyers will pay income tax on earnings withdrawn.

    •  401(k) loans. If your employer allows borrowing from the 401(k) plan that it sponsors, you may consider taking a loan against the 401(k) account to help finance your home purchase. With most plans, you can borrow up to 50% of your 401(k) balance, up to $50,000, without incurring taxes or penalties. You pay interest on the loan, which is paid into your 401(k) account. You usually have to pay back the loan within five years, but if you’re using the money to buy a house, you may have up to 15 years to repay.

    •  State and local down payment assistance programs. Usually offered at the regional or county level, these programs provide flexible second mortgages for first-time buyers looking into how to afford a down payment.

    •  The mortgage credit certificate program. First-time homeowners and those who buy in targeted areas can claim a portion of their mortgage interest as a tax credit, up to $2,000. Any additional interest paid can still be used as an itemized deduction. To qualify for the credit, you must be a first-time homebuyer, live in the home, and meet income and purchase price requirements, which vary by state. If you refinance, the credit disappears, and if you sell the house before nine years, you may have to pay some of the tax credit back. There are fees associated with applying for and receiving the mortgage credit certificate that vary by state. Often the savings from the lifetime of the credit can outweigh these fees.

    •  Your employer. Your employer may offer access to lower-cost lenders and real estate agents in your area, as well as home buying education courses.

    •  Your lender. AAlways ask your lender about any first-time homebuyer grant or down payment assistance programs available from government, nonprofit, and community organizations in your area.

    The Takeaway

    Low- and moderate-income North Carolina first-time homebuyers have an array of mortgage and down payment assistance programs to aim for. Other first-time buyers who are shopping for a home in the state will have many possible mortgage options and with smart searching can find a good fit.

    Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

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    Should I take first-time homebuyer classes?

    It’s a good idea. Being informed is key to a successful home-buying experience for anyone, but especially for newcomers, who can easily be overwhelmed. First-time homebuyer classes can help; in fact, they are required for some government-sponsored loan programs.

    Do first-time homebuyers with bad credit qualify for homeownership assistance?

    Often they do. Many government and nonprofit homeowner assistance programs are available to people with low credit scores. That said, almost any lending program has credit qualifications.

    What credit score do I need for first-time homebuyer assistance in North Carolina?

    Most homebuyer programs in North Carolina require a minimum credit score of 640. But requirements may vary from one program or organization to the next, and some programs may use criteria other than credit scores to determine a borrower’s eligibility.

    Is there a first-time homebuyer tax credit in North Carolina?

    Yes. The North Carolina Housing Finance Agency administers a mortgage credit certificate program that allows qualifying borrowers to claim a portion of their annual mortgage interest paid as a federal credit every year for the life of their loan.

    Is there a first-time homebuyer assistance program for veterans in North Carolina?

    North Carolina Housing offers down payment assistance to veterans through the NC 1st Home Advantage Down Payment program, and qualifying veterans may be eligible for the NC Home Advantage Tax Credit. Nationwide, VA loans are available to eligible service members, veterans, and eligible surviving spouses.

    What is the average age of first-time homebuyers?

    The median is 35, according to the National Association of Realtors®.

    Photo credit: iStock/zimmytws

    *SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

    ¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.

    †Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.

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