We’ve used the term First Time Home Buyer Grants on this site multiple times. In most cases we are speaking of the down payment dollars that are available to us from the NC Housing Finance Agency. In some cases we are talking about funds that are available to us from a Municipality, like the City of Raleigh, or the City of Gastonia Affordable house dollars. Now, when I say these monies are available to us, as Lenders, that we can pass along – what does that mean? It means we can offer the home buyer access to money that can be used for a down payment, or closing costs.
We call this money “Grant” money. According to Google’s Dictionary, a “Grant” means:
“…a sum of money given by an organization, especially a government, for a particular purpose”
Based upon that definition, we think that the term “First Time Home Buyer Grants” is the appropriate use of words to describe the programs we are referring to. The LITERAL TERM for this money is “Forgivable Loan.” Very few people are familiar with that term, so, again we call them “Mortgage Grants.”
Here are some questions you should ask about these dollars, that do come with strings attached.
Is there any interest, or other fees charged on this money?
For the funds available for down payment on a home from NC Housing Finance Agency (NCHFA), the answer is “No.” There’s a fee associated with setting up the Mortgage Credit Certificate (MCC), and there are small fees associated with some of the other municipality affordable housing funds that are available. The fees vary by Agency, so you’ll find out the exact fee cost once we determine which program is best suited to help you buy a house.
Do I have to make payments back on the First Time Home Buyer Grants?
No. For some of these programs, the money is forgiven automatically after the first year, at a rate of 20%. For other programs, like the City of Raleigh, you must live in the home as your primary residence for a period of 5 years before the debt begins to be forgiven. For the NC Housing Home Affordable program, “repayment of the down payment is required only if you sell, refinance or transfer your home before year 15—the down payment assistance is forgiven at 20% per year after 10 years in the home.”
I’ve been Approved For A Mortgage, How Do I Apply for First Time Home Buyer Grants
The Down Payment Assistance Program, or Grant (whatever name you want to call it) IS the mortgage loan. Meaning you apply for the down payment assistance with the same lender you apply for the mortgage with. They go hand in hand.
You need to complete a mortgage loan application. You can do that on this site (see the green button on the right?), or you can call us (919 649 5058), or you can come in. That part doesn’t matter.
Is there a Recapture feature associated with any of these programs?
The Down Payment Assistance programs do not have a recapture feature associated with them. However, the Mortgage Tax Credit does have a recapture feature associated with it on a very limited basis.
If you use the Mortgage Tax Credit, and sell the home within 9 years, realize a profit on the sale of the home AND have a significant gain in household income can trigger a Mortgage Tax Credit Recapture. In a situation where all three of those things occur, then a portion of the money that you received in credit from the Federal Government might be owed back.
What qualifying requirements can I expect?
For most of the Down Payment Assistance Programs there are Income Limits. Those limits translate into 2 different “buckets.”
Household Income requirements are for programs that literally look at the total income of everyone over the age of 18 that lives in the home and is NOT a full time student. So if the Grandmother lives in the home, even if she is not on the loan, her income is verified and used to see if the family is over the limit… similar to the way we calculate the maximum household income for USDA Home Loans. The income limits vary by program, and vary by county. So it really is difficult to research this online. You really need to call a loan officer who is familiar with the programs (in NC you can call us at 919 649 5058).
Qualified Income is used for several of the NCHFA Mortgage Grants that are available. If the program that best suits your situation has a QUALIFYING Income limit it means that we are only looking for the income that is stable income from the borrower. READ: If the borrower is a wife who makes $80,000 a year salary, but she also receives overtime that we don’t need… and $80,000 is less than the cap for that county – she can qualify as being under the limit, even if her husband makes $90,000 a year.
There are maximum Sales Price requirements for MCC loans (currently it’s $245,000) and there are geographic restrictions for most municipalities, meaning you probably aren’t getting money from the City of Raleigh to buy a house in Apex.
Is North Carolina the only State offering these programs?
No. There are Down Payment Assistance programs available all over the Country. There are also Fannie Mae HomeReady products available, and Freddie Mac Home Possible loans available for those who need additional flexibility in qualifying. Finding the lenders who offer all of these programs can be challenging. I would recommend looking at the State Housing Finance Agency for a list of Lenders who are specializing in First Time Home Buyer Programs for your state.
Are there minimum credit score requirements for these programs?
Yes, most of the First Time Home Buyer Programs are designed for those folks who have 2 out of 3 Bureaus above a 640 credit score, although there might be a program available from a municipality that has a lower (or HIGHER) threshold. If you have a credit score from Credit Karma that is 620, does that mean you should wait to contact a Lender? NO! Please let us go through the steps of pre-qualifying you to see if we can help raise your scores quickly. Often times we can tell which collection accounts (for instance) need to be paid off, which ones will not need to be paid off, and which ones need to be left alone until closing.
How are Student Loans Looked At With First Time Home Buyer Grants?
The First Time Home Buyer Grants in North Carolina use the VA, FHA or Conventional loan guidelines from those agencies… meaning there are no “different” guidelines for the treatment of Student Loan Debt, unfortunately. Most of the Down Payment Assistance programs work with Fannie Mae Servicers, meaning you can not use the Freddie Mac Allowance for loans that are in IBR status.
VA Home Loans can work under the following guidelines:
If student loan repayments are scheduled to begin within 12 months of the date of VA loan closing, lenders should consider the anticipated monthly obligation in the loan analysis.
If the borrower is able to provide evidence that the debt may be deferred for a period outside that time frame, the debt need not be considered in the analysis.
So, theoretically – if you can prove, for instance, that your Deferred Student Loan Debt has a payment of $00.00 for more than 12 months, we don’t count it. Our Bank underwrites to these VA Guidelines, but not all banks do. There may be Bank overlays to this guideline, so ASK you lender specific questions about how they treat Student Loan Debt for Veteran Home Loans.
Again not all lenders offer this program… YOU CAN NOT GO AFTER THESE PROGRAMS “after the fact.” Meaning you can’t buy a house, and THEN apply for the mortgage tax credit, or the first time home buyer grants. You apply at the time you are buying a house!
We are EXPERTS at helping you buy a house with VERY LITTLE money out of pocket! We love working with first time home buyers, and offer all of the First Time Home Buyer Grants. Call Steve and Eleanor Thorne 919 649 5058 – or connect with us on Facebook or Google + or Twitter!