We have a pretty big past customer base that consists of Single Female Home Buyers. That surprises some folks we talk to, because the commercials and ads for real estate companies and mortgage companies show TWO people buying a home! What if you are ready to go it alone? Is that even possible? “Home ownership is not just for happy couples – even if the banks seem to prefer having two names on the mortgage.” Single Income First Home Buyer Programs are available specifically for this growing group of home buyers.
Again, with our particular North Carolina business, we are especially seeing an increase in single females buying homes. According to a report released annually by the National Association of Realtors, the largest share of home buyers (30 percent) were between the ages of 25 and 34.
Two out of every three (66 percent) home buyers were married, but single home buyers made up a quarter (25 percent) of the market.
Single females made up the majority of the single home buyer market, accounting for 16 percent of all home buyers, while single males made up nine percent of the overall market.
“All over the world, the percentage of single buyers is rising as more young people delay getting married until their 30’s, and more single parents decide to buy homes rather than rent in order to give their children more stability,” says Jan Davel, MD of the RealNet estate agency group.
Locally, single buyers currently account for about 19% of all home sales, up from 13% four years ago. According to David O’Doherty Real Estate Clayton NC, a respected Agent in Johnston County
And even if solo house hunting feels a bit daunting, he says, “buying your own home now is one of the smartest decisions you can make, especially if you are secure in your job and committed to your location for the next few years, because both prices and interest rates are on a rising trend that will make it increasingly difficult for buyers of all sorts to qualify for home loans.”
What’s more, it need not be a frightening experience if you just follow a few guidelines, starting with careful financial planning. “It is important to get pre-qualified for a home loan so that you will have a good idea of what you can afford and not waste time looking at homes that are beyond your budget.”
How to Qualify: Single Income First Home Buyer
In the state of North Carolina it’s against the LAW for us to put you into a home that we can prove you qualify for.
This is especially important to know for the Single Income First Time Home Buyer who is working part time, or isn’t reporting all of their income on a Tax Return. We have to pull a tax transcript in the qualification process – this means that if you are a Sheriff’s Deputy (for instance) and you write off all of your uniform’s, mileage, etc. it could be difficult for us to qualify you.
We are looking at the income that shows on line 37 of your tax return, very bottom of the first page of your return. It’s called Adjusted Gross Income.
I could be over simplifying this – but if your W-2 income is $38,000 and you have non-reimbursed business expenses of $4,500 – then we are only allowed to use $33,500 to qualify you to buy a house.
The Underwriter is also going to be looking at “Payment Shock explained for mortgage approval” Meaning the difference between what you are currently paying for housing, versus what you will be paying.
Let’s say you’ve been living at home, saving money to purchase your first home, and you are one of those lucky folks who have never paid rent before. One of the requirements for a Home Loan in NC is a great Rental “Housing” payment record. If you’ve never paid for rent, then the Underwriter is forced to consider Payment Shock.
Here’s another example… What if you’ve been sharing an apartment with friends, and your portion of the rent was only $300 a month? A mortgage payment is likely to be at least $600.
Even if you can easily afford the $600, and you have good credit scores, one of the requirements an underwriter looking at a Single Income First Time Home Buyer is to explain why they “believe” you can handle the higher monthly housing expense.
One of the things they will count on, in this situation, is that you’ve shown that you are saving money.
So you’ve been paying $300 a month for rent – but you’ve consistently set $300 a month into Savings. This is something an Underwriter can see, and use as a reason to approve you.
Just like “couples” buying a home – the Single Income First Time Home Buyer can get a gift for the down payment or (assuming you qualify) you can get a down payment grant from the State of NC.
Mortgage Programs for the Single Income First Time Home Buyer
Conventional Mortgage Loans were once the LAST program we discussed with a Single Income First Time Home Buyer… NOW all of that is changing!
Credit score requirements are as low as most Government Programs, your are no longer stuck with PMI for the life of the loan – and in many cases, it’s pretty cheap (especially when compared to FHA Loans).
There are no restrictions about where the home is located, and there are no income limits for the program.
- A 3% down payment is required. WOW! That’s a big change from the 5% we use to require. Additionally, the Down Payment money can come from a gift, a grant, or savings.
- The borrower is NOT required to have “reserves” left over, which we needed in the past. So if you read that you need to have 3 months worth of payments left in the bank after closing… that’s old information.
- The 3% grants for a Single Income First Time Home Buyer to cover down payment assistance for a house from the State of North Carolina means you need NO DOWN PAYMENT to buy a house! Standard disclaimer, I just said there are no income limits for the Conventional Program which is true… unless you are applying for the 3% grant, then there are some income restrictions.
- In situations where we can NOT establish a payment for a deferred Student Loan and mortgage qualification, then we are required to count 1% of the balance.
You do NOT have to be a Single Income First Time Home Buyer to qualify for the USDA Home Loan NC .
The USDA Loans in NC do not require ANY ANY down payment, and the Seller is allowed to pay for closing costs.
- USDA Home Loans in NC are pretty easy to qualify for – you need decent credit, the home needs to be located in the USDA “eligible” area, you need to be below the income requirements for the county you want to buy in, and you can’t currently have a USDA Home Loan in the general area where you are buying a home (although there are some exceptions to this). These are 30 year, fixed rate mortgages for owner occupied properties.
- Minimum Credit scores recently changed for USDA Home Loan Credit Score Requirements NC, and now you really need a 640 or higher to qualify for the program.
- Every county in NC has a portion that qualifies for the program.
- The maximum income for a Single Income First Time Home Buyer varies by County. In the Raleigh area the limit for one is 91850. In Durham it’s 82000. In Asheville the USDA Loan Limit for one person is 75650. In the Charlotte Metro area the limit for USDA Income for one person is 78800, and in Greensboro it’s 75650. Complete list, each county USDA Home Loan Income Limits NC for NC.
Qualifying Single Income First Time Home Buyer Veteran’s can apply for a VA Home Loan guidelines, which also require no down payments.
VA Home Loans are frankly the easiest loan to qualify for, they have no monthly PMI charges and VA Mortgage Loans have no restrictions regarding where the home is located.
- Veteran’s do not need perfect credit, although you will need a credit history. In general, we are looking for a 620 middle credit score for this Single Income First Time Home Buyer mortgage.
- The VA Mortgage Loan Underwriting Guidelines are fairly straight forward. Active duty Service Members need to remember that there are some important things to know about the way underwriters are counting BAH and BAS pay.
- Although it might seem like a complicated formula, the VA will guarantee a maximum of 25 percent of a home loan amount up to $104,250, which limits the maximum loan amount to $424,100 (except in some very high cost areas in Eastern NC where they go over $700K). Generally, the reasonable value of the property or the purchase price, whichever is less, plus the funding fee may be borrowed.
FHA Loans are another popular program for the Single Income First Time Home Buyer.
Credit score requirements are much looser for this program, and folks who have been out of serious credit issues for at least 24 months are generally considered for approval. There are no restrictions about where the home is located, and there are no income limits for the program.
- A 3.5% down payment is required. This Down Payment money can come from a gift, a grant, or savings. We’ve had folks sell their grandmother’s Silver to buy a house. We had someone else sell an airplane – someone sold a Harley. The 3% grants for a Single Income First Time Home Buyer to cover down payment assistance for a house from the State of North Carolina mean that you only need .5% to buy a house!
- Maximum Loan Amounts: Maximum FHA Loan Limits Vary per County, and are subject to change each October. View Current FHA Loan Limits for all Counties in North Carolina. The FHA Maximum Loan limit for Wake County in 2017 is $300,150.
- FHA Qualifying Income Requirements: FHA is flexible with income used to qualify buyers. They will work with people who are in the IT field, and are on contracts, they will count part time income, and Child support and Alimony Payments. For the most part it’s also important to remember that when starting a new job, you will probably need to receive your first full paycheck before you can close on your new home.
- I know this is all about doing it yourself – however, FHA does have a Non-Occupying Co-Borrower to buy a house in NC provision that allows the income of a family member to count towards the income to qualify.
- Maximum Loan limits for FHA Loans in NC vary based upon the county you are buying a house in.
Single Income First Time Home Buyers should also be aware of the opportunity to use the Mortgage Tax Credits available to them!
Up to $2000 annually ( or roughly $166 a month) is added to your paycheck as a dollar for dollar reduction of your federal tax liability.
The remaining 70% of the interest you pay on your mortgage during the year is still a tax deduction on April 15th!(remember that there’s a little different schedule for those buying a new home in NC).
If you want to buy a house anywhere in North Carolina, and you need a mortgage loan, or if you have more questions about:
How to buy a house in North Carolina as a Single Income First Time Home Buyer
Please call Steve and Eleanor Thorne 919-649-5058.