You CAN Buy a house with no down payment in NC! A recent study showed that homeownership is the best way to create Generational Wealth. We believe that’s true. The vast majority of homes are purchased through a mortgage, but most traditional mortgages require 20% down — and that can be a challenge for many potential homeowners right now. If just don’t have the cash for that big down payment, but you are sick and tired of paying rent – keep reading? There are more than 8 different mortgage loan programs outlined here to show you how to buy a house with no down payment in North Carolina.
How To Buy A House With No Down Payment in NC
USDA Home Loans
Although these are often known as ‘rural’ loans, that doesn’t mean you have to buy a home in the middle of nowhere — some eligible locations are in surprisingly populated settings, like Holly Springs, Wake Forest and Leland. Loans through the Department of Agriculture (USDA) are available to folks who have decent credit and a steady income that doesn’t exceed certain median income requirements. It is restricted to more rural areas, and there are maps available to determine where those areas are located.
The USDA Home Loan NC program is looking at HOUSEHOLD income, unlike other First TIme Home Buyer Programs that look at Qualified Borrower income. If there are people in the home, over the age of 18 – their income will be lumped into see if the FAMILY is over the income limit.
USDA Home Loan Income limits change based upon County. These are 100%, no down payment required loans.
Homes in certain urban areas are not eligible. The potential homeowner must not already own a home. This is a change to the USDA Home Loan NC program. In the past, if you were moving from one state to another, and you wanted to rent out your home in Indiana, you could. Now, that home must be sold to qualify for a no down payment USDA Loan in NC.
There is no “PMI/mortgage insurance” on these loans; however, there is a 2% upfront fee, which can be rolled into the loan, as well as an annual fee of 0.5% of the loan balance. Every County in NC has an area that qualifies for these no down payment loans.
VA Home Loans
VA Home Loans allow you to buy a house with no down payment!
These loans, backed by the Department of Veterans Affairs, allow Veterans and their surviving spouses to purchase a home with no money down and limited closing costs. The average interest rates tend to be lower than those found on Conventional mortgages, and credit and income requirements are more flexible. As an added bonus, these loans do not require mortgage insurance, which can greatly reduce monthly payments.
FHA Mortgage Program
The Federal Housing Administration has offered advantageous terms since 1934; today they are one of the best mortgage loan options out there for those with less-than-perfect credit. The required down payment of 3.5% is much more attainable for most potential buyers.
Many first time home buyers in NC might qualify for a 3% Down Payment Assistance in the form of a deferred, forgivable loan from NCHFA. There are some income restrictions for this program that vary by County. The Down payment can also come as a gift from family. When you are want to buy a house with no down payment in North Carolina, often times folks are still tapping into the Bank of Mom and Dad, to help cover the closing costs.
How does this compare to a Conventional Loan, backed by Government Sponsored Agencies like Fannie Mae and Freddie Mac?
The FHFA and Fannie and Freddie have given lenders the clarity and reassurance they sought, but credit availability is still very limited because of the guidance from FHA. Laurie Goodman, Codirector, Housing Finance Policy Center of the Urban Institute wrote, “The FHA, not Fannie and Freddie (the GSE’s), has historically insured borrowers with less than pristine credit, because the FHA does not do risk-based pricing. The FHA charges the same fee for those with perfect credit and those with less than perfect credit.
The GSEs, on the other hand, impose risk-based pricing through their loan-level pricing adjustments,” Goodman said.
That’s right… the Mortgage Interest Rates are cheaper in most cases for a FHA Mortgage Loan, even with low 700 credit scores, than it is with a Conventional loan. FHA Mortgages are “backed” or insured by the US Government. That “insurance” against any loss is very attractive to folks who want to buy mortgage securities.
Even thought that “insurance” has a cost, the FHA PMI costs or lower credit scoring borrowers is still substantially less than the PMI for a similarly scored Conventional Loan.
Another benefit of FHA Mortgages? We can use a non-owner occupied co-borrower to help with qualifying. This will not help over come credit score issues… however, in the event the borrower does not have the income to qualify for the home they want to buy it’s a huge benefit. We often see this in a situation of a single parent, or a situation where one spouse has great income, but not so great credit history.
First Time Home Buyer Programs
In addition to the programs listed above, there are numerous other programs available to first time home buyers in NC. Sometimes these programs are offered through a particular municipality, like the Raleigh City 2nd program, the City of Greensboro or Gastonia.
For instance, the HomePath Ready Buyer program gives new homeowners 3% of the purchase price toward closing cost assistance upon completion of a home buyer education course. These homes have been foreclosed upon.
Another option is the HomeReady program, which applies to homes in lower-income neighborhoods. These are FNMA Programs are available across the state. They CAN HELP when you want to buy a house with no down payment in NC.
NC Housing Finance Agency Programs
In general, these programs are designed to help with the biggest draw back to home ownership for folks in NC today – having money for the down payment. Can you buy a house with no down payment in North Carolina, of course!
NCHFA provides 3 different programs that can be used. When you use the 3% assistance, you can buy a house with a FHA or Conventional Mortgage Loan and cover your down payment (for the most part). However you will need to have your own funds for the closing costs, or you will need to have the seller help with covering those costs. In today’s competitive market that can be difficult, but now that it’s near the end of 2022 – we are seeing Sellers willing to help.
The Agency also offers a 5% down payment assistance in the form of a deferred payment, forgivable loan in every county. Just like with the 3% program, there are income limits, however there are no restrictions about the location of the home, and there are no income limits.
The State Agency sets the interest rates, and you have to work with a participating lender. Both the DPA and the Primary Mortgage are done at the same time. You can’t get the Down Payment Assistance from one place and the Mortgage from Rocket (for instance).
The NCHFA loans are only available through approved lenders, and we are thankful to be on that list.
There’s also a $15,000 Program available through the Agency, and we offer this program as well. It has income and Sales Price limits
These limitations vary greatly by County, so call us to get the details on how they work! 919 649 5058
**A Quick Note**
Consumers refer to these programs as “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.
These DPAs are not like Pell Grants or Student Loan Programs.
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.
Buy a House with No Down Payment – PMI
Finally, remember that some little or no-money-down mortgages come with one big caveat: Private mortgage insurance. This typically kicks in when the down payment is less than 20% of the purchase price. All of the loans mentioned in this post fall within this situation.
Though PMI can be removed from the mortgage once a certain repayment threshold has been reached, it might drive monthly payments up significantly in the meantime. Because of the “over lay” of PMI company guidelines, this is really a situation where First Time Home Buyers in NC need expert guidance.
Many loan officers might do a couple of loans for first time home buyers a year – few of them FOCUS on the programs available through NC, like our office does.
Have more questions about how to buy a house with no down payment in NC? Call us, or go ahead and apply This is what we do. We help first time home buyers with that first purchase, and we work to be sure you are in the best program for your situation, and that you have the lowest payments available. Call Steve and Eleanor Thorne 919 649 5058.
I retried and move to Philippines and moving back to Hickory NC where I am from Have sss,annuity,pension the amount 5k monthly wife has a job as she get back all ready so need something to get in a home own one before I left 17years there sold it move here can you help me not sure if you will do double wide with land set up all ready little over 100k let me know what you can do for me Thanks!
Rickey we can do doublewides, just needs to be on a permanent foundation and we have to have that inspected to be certain it meets all of the requirements. Congratulations on your move!