We get questions regarding how to calculate income for the Mortgage Credit Certificate (MCC) / NCHFA / NC First Time Homebuyer Program. It’s pretty easy:
Household income is defined as the gross annual income of any person over the age of 18 who is NOT a full time student, and who is expected to live in the residence being financed.
So let’s say you live near a college or University, and your Nephew is going to live with you while he is in college. Can the fact that he now lives with you make your household OVER the 2 person household? Maybe We will need transcripts showing that he is enrolled full time.
What if he works part time – is THAT income included in the maximum income for your household?
How to Calculate Income For First Time Homebuyer Program in NC
Let’s remember that this is the income used to qualify you for the Mortgage Tax Credit Program. Through the Mortgage Tax Credit (MCC) Program, you can receive a tax credit equal to 30% of the mortgage interest paid on your loan annually. There’s an additional incentive for those who are purchasing a newly constructed home.
With the current Mortgage Tax Credit program, the W-4 is changed for the borrowers, allowing them to bring home more money in each paycheck. The paperwork for this is done prior to closing on your loan – so it you purchased a home last year (for instance) and your mortgage lender didn’t offer the NC Housing Finance Agency (NCHFA Program), unfortunately, you are out of luck 🙁
The guideline says that it’s ALL of the income for the household, including income received by any household member who is 18 years of age or older (except a full-time dependent student).
What if the “student” will not be on the loan? The income will be counted in the maximum income numbers, even if they will not be secondarily liable on the mortgage, and that TOTAL household income cannot exceed the limits by household size.
The same is true if you have a parent living in your home, or anyone else… I just used Student in the example because I just got a call about it.
Basic Qualifying Guidelines
- Must be under the maximum income limits for the county
- Must have at least 2 credit scores over 640
- Must meet all other FHA mortgage loans, VA Loans, USDA Home Loans or Conventional Loan guidelines
- Property Sales Price can not exceed $245,000 for most of NC
- Must be NC resident, and you must occupy the property as owner owned property within 60 days of closing.
- 3% down payment assistance available if you qualify (Obviously, you don’t need this for a USDA Home Loans or VA Home Loan – since both are no money down home loan programs)
- No additional Insurance requirements
- Tax Credit can be issued if you qualify
Remember this Mortgage Tax Credit is in ADDITION to the Mortgage Tax Deduction that you will also get on your Federal and State Taxes.
Many times we talk to home buyers (especially first time home buyers) who tell us that they “want to keep their payments around where they are now.” Meaning that if they are paying $1200 a month in rent – they feel confident that they can afford a house payment of $1200… And that’s very logical – except – they’re comparing Apples to Oranges.
When you buy a house – it helps the economy, and UNCLE SAM gives you a TAX Advantage – which essentially equals a RAISE!
So, the good news is – if you’re in a 30% tax bracket – you can probably “keep your payments around where they are now” with a new house payment of $1450!
First Time Home Buyer Programs For Down Payment Assistance
There are currently four different Down Payment Assistance Mortgage “Grants” available for First Time Home Buyers in NC. These programs are referred to as DAPs, or Down Payment Assistance programs. We refer to them as Grants, because Millennials are familiar with the concept, and Mortgage Grants is a term that folks are searching on Google for information on. In reality, the Mortgage Grants are Forgivable Loans, they are not just available to help with the down payment – and can be used for closing costs, down payment, or to reduce your PMI. The money can pretty much be used for anything, except Repairs.
The Interest rates for these programs are set by the State. NOT all Lenders in NC work with the First Time Home Buyer Programs in NC, it’s one of the things we specialize in.
The mortgage rates for the “Mortgage Grants” are slightly higher than the mortgage rates on programs where you come up with your own down payment… sometimes it’s about 1% of interest higher than the “going” mortgage rate for other programs. Calling around to Lenders who are offering the program will NOT get you a better rate, because the mortgage company doesn’t set the rate.
The income for these programs normally have different income limits (they are higher) and they work off of QUALIFYING Income, which is different than Household Income. With a program that allows us to use “Qualified Income” we are only looking at the income used to qualify the person applying for the loan. We don’t have to use Overtime, Bonus or the income of other folks in the household to determine if you are under the limits.
There are some disadvantages to using a NC First Time Homebuyer program, and you should understand those before buying a house. Steve and Eleanor Thorne 919 649 5058 Connect with us on Facebook!