South Carolina First-Time Home Buying Assistance Programs & Grants for 2023

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

For most programs offered in South Carolina, as elsewhere, applicants are considered first-time homebuyers if they haven’t owned a primary home for at least the past three years.

However, it’s a good idea to be clear on each program’s specific eligibility standards before you start the application process.

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.

The state and county assistance programs include most of these loans, so if you qualify for one of those programs, that might be the smarter move.

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 program. Loans have competitive interest rates and require a down payment of 3.5% of the purchase price for borrowers with FICO® credit scores of 580 or higher. Those with scores as low as 500 must put at least 10% down.

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. You can learn more about FHA loans in general and loan limits by state or county.

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 Home Possible mortgage is for buyers who have a credit score of at least 660. Once you pay 20% of your loan, 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 surviving spouses may apply for loans backed by the Department of Veterans Affairs. VA loans , 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.

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. The VA itself is the mortgage lender. The funding fee applies.

U.S. 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. The agency details income and property eligibility .

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 2022

Ever wonder how you compare with the flock of first-timers? Here are some recent stats from the National Association of Realtors® (NAR):

Percentage of buyers nationwide who are first-time buyers: 34%

Percentage of buyers in the NAR’s South region who are first-time buyers: 30%

Median household income of first-time buyers nationwide: $86,500

Type of home purchased by first-time buyers:

•  Detached single-family home: 80%

•  Townhouse/rowhouse: 9%

•  Condo/apartment (five or more units): 1%

•  Duplex/condo/apartment (two to four units): 2%

•  Other: 8%

Median home price for first-time homebuyers: $252,000

Median down payment for first-time homebuyers: 7%

Median age of first-time homebuyers: 33

Relationship status for first-time homebuyers:

•  Married: 50%

•  Single females: 20%

•  Unmarried couples: 17%

•  Single males: 11%

First-time buyers with kids:

•  No children: 70%

•  One child: 15%

•  Two children: 11%

•  Three or more children: 5%

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. Always 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

First-time homebuyers who qualify for one of the many assistance programs in South Carolina may be able to reduce the costs of getting a mortgage. For those who don’t meet income limits and other criteria, conventional and government-backed mortgages are alternatives.

While you’re noodling on your options, keep in mind that borrowers who go with a mortgage from a private lender don’t necessarily have to come up with a 20% down payment. (And most buyers don’t.)

Make your dream of being a homeowner come true with SoFi’s competitive mortgage rates and down payments as low as 3% for qualifying first-time homebuyers.

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