Many of the New Home Communities popping up around North Carolina do not fall within the USDA RD Home Loan program footprint. This means that potential Home Buyers can not take advantage of the USDA Home Loan NC program that requires no down payment.
The NC Affordable Housing Agency (also referred to as NC Housing or NCHFA) in Raleigh just rolled out a program to help these home buyers, who might not have 3% for a down payment, but still want to buy a house!
The Conventional NCHFADown Payment Grant Program offers a mortgage loan that can provide all of the Down Payment for your home!
This is a great program, especially for buyers interested in brand New Homes in NC. Not all Banks and Mortgage Companies in NC offer the NCHFA Down Payment Grant Program – we offer ALL of the NC Affordable Housing mortgage products.
If you qualify for the loans, and you are working with a Lender who DOESN’T offer the program – it could cost you thousands of thousands of dollars over the life of the loan! So ASK your lender for these Grants and Mortgage Tax Credits, and are NOT just for First Time Home Buyers. Mortgage Loans that have less than a 20% down payment all have some form of Default Insurance, or PMI. Fortunately, with the new Conventional NCHFA Down Payment Grant Program, the PMI factors are very low – meaning that compared to a FHA loan, this loan should have a lower monthly payment.
There are multiple PMI Options for the NCHFA Down Payment Grant Program, so we will need to talk with you about how long you expect to stay in the home, what kind of cash you have available to use in buying the house – and what the Builder / Seller is willing to help contribute to come up with the best PMI option for you. Just remember that the program has lower monthly PMI Options available.
Down Payment Grants in North Carolina:
For Government Loans, like FHA Home Loans NC, the NCHFA Program offers a 3% down payment grant. This means that a borrower only needs .5% for the down payment. For Conventional Loans, the NCHFA Down Payment Grant Program offers a 3% down payment Grant. This means that a borrower only really needs to cover their closing costs, and many times a Seller is willing to help with that. Under both the FHA and Conventional loan, the monies needed for the Closing Costs, or the Down Payment can be a Gift from family.
The NCHFA Down Payment Grant is forgivable, you have no monthly payments, and no interest charged. If you qualify, the down payment amount not only helps you get into your new home, but enables you to build equity more quickly. You don’t need to repay the down payment unless you sell, refinance or transfer the home. Even better, the down payment amount is completely forgiven at year 15 and reduced by 20% a year in years 11 through 15.
That sounds like you’ve got to live there forever before it’s forgiven right? Not really. With normal appreciation in NC, you would make up that 3% grant of Equity in the first two years. So… essentially, you are “golden” after you build your equity up!
Borrower Income Versus Household Income:
Another reason that First Time Home Buyers might use the NCHFA Down Payment Grant Program to qualify is because the maximum borrower income of $87,500, only applies to the borrowers who are applying for the loan. For the USDA Home Loan Program with no down payment, there are maximum household income limits that we must consider, no matter who is on the actual mortgage application.
The USDA RD Home Loan Maximum Income limits consider all of the folks living in the house – even if we are not including that person on the loan application. This “kicks” many families out of the program. With the NCHFA Down Payment Grant Program – we are only looking at the income of the folks who are actually going to be on the loan application.
So if a husband and wife are buying a home, but one of them has some credit issues, and substantial income, we do not have to consider their credit, or their income in meeting the qualifications of the program.
We recently helped a couple moving to Clayton, NC from Florida. The Husband had a Gross income of $72,000 and the wife had a Gross Income of $69,000. Obviously, their combined income was over the maximum of $87,500. The Husband had a mortgage loan in Florida that resulted in a Short Sale in December of 2010, they’ve been renting since then. The wife was not on the Florida mortgage.
We were able to make a mortgage loan through the NCHFA Down Payment Grant Program to her, and she only needed $500 to cover her portion of the Closing costs that the Seller didn’t pay!
Qualifying for the Conventional NCHFA Down Payment Grant Program
You do not have to be a first time home buyer to qualify for the NCHFA Program – you just can not currently own another home. The minimum credit score requirements for a Conventional NCHFA Down Payment Grant of 3% loan is 640. The minimum credit score requirement for a FHA Home Loan Down Payment Grant of 3% is also 640.
This First Time Home Buyer Program is “exempt” from the Debt to Income Ratio restrictions of 43%. This means that we can go up to 45% for your debt to income ratios! This is great news for folks who might have higher Home Owner Association Dues, or other factors that are making their total payments higher for their Dream Home.
You CAN use the Mortgage Tax Credit / MCC program along with the Conventional NCHFA Down Payment Grant Program. The MCC program (Mortgage Credit Certificate) is normally used in conjunction with a Government Mortgage Loan, like FHA, USDA or VA.
The Conventional NCHFA Down Payment Grant Program also qualifies for the Mortgage Tax Credit. The Home Buyers must meet:
- Qualifying income requirements vary by the size of your household, and the county you want to buy a home in.
- Credit score requirements for the MCC mortgage program are 640
- Sales Price Restrictions mean the maximum sales price is $245,000
- First-time home buyer status (meaning if you have not owned a primary residence, “home” in the last 3 years you might qualify for the program)
If you qualify for the MCC / Mortgage Tax Credit, you will be able to claim 30% of the interest you pay on your mortgage as a credit on your federal income taxes. You can save up to $2,000 per year on your federal taxes, money that can be put toward your mortgage payment.
Additionally, if you purchase a home that is brand new, and has not been lived in within the past 12 months, you can qualify for a 50% deduction up to $2000!
Still have questions about Conventional NCHFA Down Payment Grant Program? Leave a comment below, or call Steve and Eleanor Thorne 919 649 5058 we’d love to help you make your dreams of home ownership come true with a mortgage loan that’s right for you! Connect with us on Google Plus and Facebook