NC First Time Home Buyers, especially those who are recent college grads, need to know how to get credit built up so that they can buy a home – they also want to know what options they have for purchasing a home, especially while rates are so very low. I wrote Recent College Graduates – Tips For Buying A Home, to let everybody know that there are now even more Grants, Tax Credits and below market interest rates available for folks in NC who have not owned a home in the last 3 years. In fact, if you are buying a home in the Raleigh area, we also offer City of Raleigh second mortgages that can provide you with up to $20,000 in down payment assistance!
Recent College Graduates – Tips For Buying A Home
Here’s a Question from a Borrower:
“I am a recent graduate of NC State, and I worked my way through college re-storing old Cars. This is something I am going to continue to do, using my Mechanical Engineering Degree. I recently married, and my wife has a job at the Hospital, and makes $54,000 a year. I have enough saved for a modest down-payment on a home, a little over $6000. I however, have absolutely no credit history. Can you please give me advice on how to quickly obtain good credit. Also, are there any types of grants for first time home buyers? I really do not have any knowledge on purchasing homes but we would certainly like to have everything prepared to buy a home later this year.”
So here are my First Time Home Buyer/ Recent College Graduates – Tips For Buying A Home:
- Income: It sounds like you are an entrepreneur! Congrats! If you’ve claimed the income from working on Cars for the last 2 years, we can use that income to qualify you. If you’ve written all of your income off, then we will have to qualify you on your wife’s income.
- Student Loans: You didn’t mention them – but here’s what you need to know. If someone else is making the payments, and they’ve done that for more than 2 years, and we can show where THEY have made the payments on time – we probably will not have to count the debt against you. If they deposited the money in your checking account each month, and then you made the payment for the loan – that might be another story. Some underwriters look at that as if you are the one paying the student loan.
- Student Loans in Deferment: If Student loans are in deferment, we are required to count a payment even if the loan is in deferment. Meaning, even if you have a ZERO PAYMENT obligation today – we will have to establish a payment amount for this student loan debt, even if it’s in deferment. IF NO PAYMENT AMOUNT IS KNOWN, then we will count 1% of the balance. More Recent College Graduates – Tips For Buying A Home and Student Loan Debt can be found here: Student Loan Deferment FHA Mortgage Guidelines.
- How Student Loans affect your credit: Because so many people have Student Loans, Installment Payments for Cars and Student Loans are not dong much to pull scores higher. For that to happen, you need a revolving credit card (actually 3 is the optimal number of revolving accounts you need). There are several ways to do this – go to Jareds, get a secured credit card – or get a family member (maybe your wife) to add you to one of their cards as an Authorized User.
- Debt To Income Ratios: When we qualify you for a mortgage we will normally think of a housing ratio of 28% and a total debt ratio of 37%. The Automated Underwriting (computer) models are written so that a maximum TOTAL debt ratio will not be allowed above 50%. If you are getting a government loan (USDA Home Loan, VA Loan or FHA) we generally think the maximum the system will take is 42% – but if you have a really high credit score (over 680), we’ve seen USDA Home Loans accepted with a total debt ratio as high as 47% this year!
- MCC Tax Credit: New sales price limit of $245,000 (up from the old $225,000). Note: NC Home Advantage (The Grant program) does not have a sales price limit (governed by FHA, USDA statutory limits).
– The MCC income limits are subject to change every July 1st. See “Income Limits” tab on the NC Housing (also known as NCHFA) Site.
– The tax credit threshold for “new” homes (never occupied) has been raised to 50%. Existing properties remain at a 30% tax credit threshold.
- First Time Home Buyer Grant Program NCHFA Also offers a 3% and a 5% Grant that can be used for down payment or closing costs. The minimum credit score required for the Tax Credit or the Grant program is 640. This means that 2 or your three credit scores need to be at or above 640 to qualify for the program. For a very short time, in a handful of counties, NC is offering a $15,000 Mortgage Grant that has no payments, no interest and is fully forgivable in 5 years.
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.
- USDA Home Loans: You didn’t mention that you are a Veteran, so I’m assuming that you will not be applying for a VA Loan – if you are, here’s some information you should consider. USDA Home Loans in NC are no money down mortgages. They have the lowest PMI rates, and the biggest requirement is that the property has to be in a more rural setting. The maps of where USDA will lend money are subject to change every October 1st.
- FHA Loans: The loans work well for first time home buyers and require a down-payment of only 3.5%. The Down payment can be a gift, if you qualify it can also come from the NCHFA Grant Funds. FHA allows a non-occupying co-borrower to be on your loan. So it’s a great program when family members want to help kids buy a house.
- Closing Costs: We can help you structure your contract so that the Seller is paying most of your Closing Costs, the trick is with wording the Seller Concessions correctly for the Underwriters. There are some of these fees that the Seller “can’t” pay, or won’t pay. You should be prepared to pay for the Inspection of the home, you will have to pay for your Home Owners Insurance, and your part of the taxes. Depending on what time of year you are closing, you could need as few as 4 months of taxes, or as many as 9. So there’s no way for me to give you an exact figure. We, as the Lender can also absorb some of your closing costs with the mortgage loan.
So Relax! NC First Time Home Buyer Programs can help you do this! Buying your First Home in NC is FUN! If you have more questions about Recent College Graduates – Tips For Buying A Home… Call Steve and Eleanor Thorne, Or leave us a comment below – we try to answer all of them 🙂 We offer the Best Mortgage Rates in Cary NC, 919-649-5058. Connect with us on Google Plus and Facebook