First-Time Homebuyer Programs in North Carolina

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Edited byAshley Jacobs

Updated: October 24, 2023

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When purchasing a home, you’ll need to make a down payment. Usually, this is 20% of the purchase price. For many homebuyers, this is a huge amount of money that is difficult to pay. This is where first-time homebuyer programs in North Carolina can help. MoneyGeek guides you through the different financial assistance programs that make homebuying more attainable.

What Is a First-Time Homebuyer Program & How Can It Help?

First-time homebuyers in North Carolina have access to several financial assistance programs that can help them afford to buy a home without having to pay a substantial amount of money upfront. Buying a home is one of the biggest financial purchases you can make, which is why it is important to know all your options and find the best deal possible.

A mortgage repayment assistance program determines how much you will need to pay as a down payment and how much you should expect to be paying monthly. Putting down a huge down payment means lower monthly payments and lower interest rates.

If your income is below a certain level, you could be eligible for government-backed loans like USDA and VA, which require no down payment. Conventional, FHA and FHA 203(k) loans require as little as 3.5%. In North Carolina, you can also access some of its state-wide loan programs to make buying a home more realistic.

Zero-Down-Payment Loan Programs

Zero-down payment loan programs, including USDA and VA loans, do not have a down-payment requirement as long as you meet certain income limit requirements.

USDA Loans

A USDA loan enables low-income families to purchase a home through a loan guarantee program that doesn’t require a down payment. This means that you can secure a loan with 100% financing.

As a way to encourage rural development, the United States Department of Agriculture (USDA) provides these loan programs with lower fixed-interest rates, low origination fees and reduced mortgage insurance prices to make payments more manageable.

Loan offerings include:

  • Single-Family Housing Direct Home Loans
  • Section 502 Guaranteed Rural Housing Loan
  • Section 504 Home Repair Program

However, there are requirements in order to be able to access these loans. Applicants need to meet a certain income requirement to become eligible. Your chosen property should also be occupied as your primary residence and in an eligible low-population rural area with a market value less than the applicable loan limit. Additionally, you cannot use the property for income-producing activities.

VA Loans

VA home loans are issued by private lenders, such as banks and mortgage companies, but are supported by the U.S. Department of Veteran Affairs. Only active-duty service members and veterans as well as their eligible spouses are able to qualify for this type of loan.

There are several types of VA home loans to choose from:

  • Home purchase loan
  • Cash-out refinance loan
  • Interest Rate Reduction Refinance Loan (IRRRL)
  • Native American Direct Loan (NADL)

VA home loans come with less stringent requirements. Unlike standard home loans, there is no maximum debt ratio, no maximum loan amount or credit score requirement.

In addition to not having a down payment requirement, applicants don’t need to buy private mortgage insurance (PMI), which is often asked for in a standard home loan.

VA home loans are a lifetime benefit and can be used multiple times. However, they do require a one-time funding fee.


Low-Down-Payment Loan Programs

Conventional home loans and FHA loans are examples of low-down-payment loan programs available to first-time home buyers in North Carolina. These loans require less than a 20% down payment.

Fannie and Freddie (Conventional) Loans

Conventional loans can be obtained through private insurance lenders, including banks, credit unions and other types of private lending companies. These types of loans aren’t insured by the government and, as a result, often have higher interest rates and stricter requirements.

Homebuyers can choose between two types:

  • Conforming loans adhere to the guidelines set by Freddie Mac and Fannie Mae. These often require a minimum credit score of 620 to qualify.
  • Non-conforming loans are the ones that go over the loan limits. You need at least a 700 minimum credit score to qualify.

Conventional loans with at least a 3% down payment require private mortgage insurance (PMI) to protect the lender should you default on your loan. This is an added monthly cost on top of your mortgage.

To qualify for both conforming and non-conforming loans, borrowers must have a debt-to-income ratio of 45% or lower.

FHA Loans

An FHA loan is another low-down-payment option for borrowers, especially when it's hard to meet conventional loan requirements. These are issued by FHA-approved private lenders. They are not directly underwritten by a government entity.

To qualify, you need a minimum credit score of 580, which allows you to put down at least a 3.5% down payment. Having a lower credit score of 500 to 579 requires at least a 10% down payment.

It is the FHA's responsibility to guarantee your loan. In turn, this reduces the risk on the part of your private lender. Therefore, your lender is more likely to approve your loan application even though your credit might be low and your down payment is less than the traditional 20% amount.

Ultimately, FHA loans make it easier for you to get a loan and achieve your goals of homeownership.


FHA 203(k)

If you want to purchase a specific residential property that needs renovation, your best option could be another type of Federal Housing Administration-approved loan called an FHA 203(k). This rolls your purchase price and renovation costs into one single mortgage payment.

This kind of repayment scheme is more manageable than having different loans.

An FHA 203(k) loan has a 15 to a 30-year term, which either comes in a fixed-rate or adjustable-rate mortgage. Interest rates for an FHA 203(k) are typically higher than a regular FHA.

Two types of FHA 203(k) loans are available, including the Standard 203(k) Loan and the Streamlined 203(k) Loan. Both differ in loan amounts, eligibility requirements and repayment terms. They also help with the cost of differing levels of home renovations, from larger-scale remodels to smaller improvement projects.


North Carolina Homebuyer Programs

The following loan programs are offered exclusively to North Carolina first-time homebuyers.

NC 1st Home Advantage Down Payment

First-time home buyers and military veterans who qualify for an NC 1st Home Advantage Mortgage can borrow a maximum of $8,000 as a down payment assistance.With this program, you must have a 640 or higher credit score, be a first-time homebuyer and meet other qualifying requirements.

NC Home Advantage Tax Credit

With the NC Home Advantage Tax Credit, eligible first-time homebuyers can save up to $2,000 on federal taxes with a mortgage credit certificate (MCC). Eligible applicants may be able to claim a federal tax credit for 30% of the interest paid on an existing home (higher for newly built homes).

NC Home Advantage Mortgage

The NC Home Advantage Mortgage comes with stable fixed-rate mortgages and a down payment of up to 3% of the purchase price. You must meet certain eligibility requirements to qualify.


FAQs for First Time Homebuyer Programs in North Carolina

Learn more about financial assistance programs in North Carolina for first-time homebuyers with these frequently asked questions.

In North Carolina, there are programs like NC 1st Home Advantage Mortgage, NC Home Advantage Tax Credits and more for those who receive government financial assistance when purchasing a home for the first time.

If you have not owned a home for the last three years, you might be able to qualify for state or federal assistance to be able to purchase your first home.

Yes. Government-backed assistance programs like USDA and VA loans help you purchase a home without a down payment required.

The North Carolina Housing and Finance Agency connects prospective homebuyers to different financial assistance programs.