If you’re a first home buyer you probably know that you could be eligible for government assistance in buying a home, commonly known as first home buyer grants. The home buyer grants are also available to those who have owned a home before, as long as you meet the maximum income limits, don’t buy a house that’s too expensive and you’ve been renting for at least the last 3 years.
How exactly do they work? And how much do you get? And do you end up with really high Monthly Payments on a house because of the First Time Home Buyer Grants??? (nope.)
How To Apply For First Time Home Buyer Grants
The first thing to understand is that there are several different First Time Home Buyer Grants available in NC.
However, the process for applying for any of these grants is the same.
You have to contact a qualified Lender (we are definitely on that list with NCHFA, so dial 919 649 5058) and complete a mortgage loan application. You can do that on this site (see the green button on the right?), or you can call us, or you can come in. That part doesn’t matter.
Once we have the information from the loan application we are going to look for the following:
- Do you go over the maximum income limit for the WHOLE STATE of $87,500 for the Applicant. USDA Home Loans NC have a ceiling, which in some cases is higher, based upon the HOUSEHOLD income. With the First Time Home Buyer Grant program, we are only looking at the folks who are on the application. This usually makes it easier to qualify for!
- Do you have a minimum credit score of at least 640. This is based upon the MIDDLE credit score – so if you had 3 scores that looked like 622, 641, 649 you would be golden, because at least 2 of them are over the 640 benchmark.
- Have you been renting, living with parents, in school for at least the past 36 months. We’ve made loans to folks who owned a property in Ohio that they moved out of, and have been renting in NC for 3.5 years. They qualified for the First Time Home Buyer Grants.
After we determine that you meet these basic qualifications for the First Time Home Buyer Grants, we will determine which mortgage program works best for you, and how much grant you qualify for.
A Quick Note
We refer to these programs as “mortgage grants” because there are no payments to be made, there is no interest charge, and there’s no expectation that you will have to repay ANY of the money you receive for down payment, unless you move out of the property or refinance prior to the dates assigned by your specific down payment assistance program.
The literal term for this down payment assistance program is a “forgivable loan.” Under the terms of the program that best suits you, a portion of this down payment assistance will be forgiven on a schedule that we will share with you when you make loan application. These funds are available to us through NC Housing (NCHFA) and are available through other lenders in the state as well. The interest rates for these programs, however, will not vary from lender to lender as that is set by NC Housing.
Mortgage Programs Accepted With First Time Home Buyer Grants
The First Time Home Buyer Grants only cover down payment, and closing costs. You can use the grants for any type of mortgage loan, and each mortgage program has it’s own “quirks” or requirements. So again, you can use First Time Home Buyer Grants to get a FHA Mortgage, USDA Home Loan, VA Mortgage Loan or a Conventional Loan
- The Grants can be used in “conjunction” with a Seller paying Closing Costs (for instance) and / or a Gift you might receive
- The Grants CAN be used for Down Payment
- The First Time Home Buyer Grants can also be used to pay for closing costs, or to cover Mortgage Insurance, PMI or a VA Funding Fee
What Grants and Programs Does North Carolina Offer?
In North Carolina, there are three different first time home buyer grants available.
One First Time Home Buyer Grant provides you with 3% that can be used for closing costs or a down payment on a Conventional Loan or a FHA Loan. The other program allows 5% in down payment grants for all Government Loans.
There’s a NEW Limited offering of a $15,000 down payment grant for those buying a home in Mecklenburg, Cabarrus , Cumberand, Guilford and Johnston Counties. This newest grant program does have some different guidelines from the 3% Grant and 5% Grant.
The Grant can also be used for Closing Costs on a USDA Home Loan or a VA Loan (these programs don’t have any down payment requirements).
The grants are available for homes that you qualify for, meaning, there’s no MAXIMUM sales price for the program.
However, if you are applying for a FHA Loan, with the Grant to cover your down payment, you will be limited to the maximum FHA Loan for the county you are buying a house in. If you are applying for a USDA Home Loan NC there are some ADDITIONAL income limits based upon the USDA Loan limits in the county you are buying a house in.
Here are the maximum Single Family Home / FHA Loan Limits in 2017 for the more “urban” areas in North Carolina. In general, if it says “Raleigh,” for instance, it includes the neighboring Towns like Wake Forest, Holly Springs, Apex, Knightdale, Wendell, Johnston County, Cary, and so on.
- Asheville, NC$275,665
- Winston Salem, NC$275,665
Mortgage Tax Credits Available for First Time Home Buyers
In addition to the Grants, North Carolina offers a Mortgage Tax Credit for folks who have not owned a home in the past three years. This Tax Credit is in ADDITION to the Tax Deduction you receive for owning a house. A Tax Credit is better than a deduction, because a deduction decreases your basis for taxation – but a Tax Credit comes straight off what you owe in Federal Taxes!
The spirit of the program is that if you’re paying less in Federal Taxes, you will take the income to help offset any extra costs in home ownership.
There’s a maximum sales price for the Mortgage Tax Credit across the State of $245,000 – there are also maximum income requirements, and those vary by county you are buying a house in.
So how do you get your hands on the money?
MANY People send us messages saying:
“I qualify for the Mortgage Tax Credit Program, what line do I put that on for my Tax Return – Bought my house last year.”
Same thing about the First Time Home Buyer Grants, “I have been approved for a FHA Loan, how do I get my Grant??”
The First Time Home Buyer Grants and the Mortgage Tax Credits are provided at the time of closing, there’s some paper work involved, the loan has additional Underwriting time since it has to go to the Agency to get approved. As long as you meet the requirements…for the First Time Home Buyer Grants that means you have less than $87,500 a year gross income (before taxes), your debt to income ratios are less than 45%, and you are buying a house in NC… we’re good.
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!