Paying a down payment on your first house might be challenging due to the growing real estate prices. If you want to buy a home in South Carolina but have never done so before, you might want to apply for a first-time homebuyer program.
MoneyGeek explores South Carolina first-time homebuyer program options with zero and low down payments.
What Is a First-Time Homebuyer Program & How Can It Help?
A 20% down payment on a house has historically been the norm in the United States. You can purchase a home with as little as a 3.5% down payment. However, mortgages with 10% or 15% down are also available.
The Federal Housing Administration insures FHA loans. Given that the guidelines are less stringent than those for other loans, this mortgage might be a viable option if you're a first-time buyer.
Programs for first-time homebuyers are in place to assist those who have never purchased a house. These programs include state-specific loans in your state, VA mortgages for serving military personnel and USDA loans for rural areas.
For instance, the Homebuyer Assistance Program in Lexington County and the SC Housing Palmetto Home Advantage Program are two programs in South Carolina for first-time buyers. These programs offer loan and down payment assistance.
Zero-Down-Payment Loan Programs
Some loan programs, such as USDA home loans and VA loans, do not require you to make a down payment when purchasing a house. That is why they are called zero-down-payment loans.
The Single Family Housing Programs provided by USDA Rural Development offer families and individuals the chance to purchase, construct or renovate reasonably priced homes in rural America. The income required to qualify for these loans depends on the average median income for each location.
You can finance a home in a rural area with Single Family Housing Direct Loans. This program caters to families with low or extremely low incomes. Borrowers are given a 33-year repayment term with payment assistance.
Under the Single Family Housing Guaranteed Loan Program, you can apply for a loan through an approved lender to pay for a house in eligible rural areas. The program is aimed at those with a moderate household income and charges 30-year fixed rates, with refinancing options available.
For veterans, the VA home loan may be an affordable and accessible option. One advantage is that VA mortgages do not require any deposit if the sales price is equal to or less than the home's appraised value. You can also get fair terms and rates from private banks, mortgage lenders or credit unions.
Unlike other loans, VA home loans have fewer closing costs. You don't need to pay for private mortgage insurance. That is a requirement on traditional loans if you put down less than 20% of the entire mortgage amount. Plus, you won't incur a penalty fee if you decide to make early payments.
If you qualify for a VA loan, you can use a VA-guaranteed loan to buy a single-family home, townhouse, condo or multifamily housing with up to four units. You can also make improvements to a home, such as building or upgrading to make it more energy-efficient.
Low-Down-Payment Loan Programs
Homebuyers in South Carolina can also opt to use a low-down-payment loan, which helps you buy a house with less than a 20% deposit. A Fannie or Freddie loan or an FHA loan are the two options.
Fannie and Freddie (Conventional) Loans
Conventional loans are those that the federal government does not back. As a result, they tend to be easier to qualify for and may offer lower interest rates than FHA loans.
If you're seeking a conforming conventional loan, your loan must not exceed the established limits under Freddie Mac and Fannie Mae. In most counties, the loan amount must be $647,200 or less, but in high-cost counties, you can borrow up to $970,800.
To buy a house with a conventional loan, you'll typically need a credit score of at least 620. Your lender will evaluate whether or not you have good credit by looking at your credit history. If you don't, your loan application might not be approved.
Additionally, your debt-to-income ratio (DTI) must be 50% or below for most conventional loans. Expressed as a percentage, your DTI shows the sum of your monthly income that pays off debts.
For homeowners who might not be eligible for traditional loans because of their stricter guidelines, the Federal Housing Administration (FHA) offers mortgages with lenient borrowing rules.
Since FHA loans have government backing, many lenders can offer lower interest rates than conventional loans.
FHA loans function similarly to other home lending programs in most aspects. To qualify for a mortgage, lenders check your income, credit history, employment history and proof that you can afford the down payment and closing charges.
Borrowers with credit scores of between 500 to 579 can refinance or buy a property with a 10% down payment.
Since county-specific loan limits exist, you can look up FHA mortgage limits listed by the Department of Housing and Urban Development (HUD) online.
One of the main benefits of an FHA 203(k) loan is that you can purchase or refinance a property and fund its renovation under only one mortgage loan. Additionally, you can borrow money up to the assessed valuation of your home following improvements.
An FHA 203(k) mortgage, which the FHA backs, has less strict application criteria than a conventional mortgage. Its maximum loan cap depends on where you live.
To qualify for an FHA 203(k) loan, you must have a credit score of at least 500 to 580. However, certain lenders may have a higher requirement. The minimum required for a down payment of 3.5% is a credit score of 580 or higher.
If you need assistance with your down payment, you can apply through state homebuyer programs or use monetary contributions from friends and family.
USDA loans: These loans do not require a down payment and are for applicants with low income.
VA loans: This program offers low interest rates and no down payment for qualified veterans.
Conventional loans: Typically have a maximum loan amount of $647,200 or less, depending on where you live.
FHA loans: Borrowers with a credit score of 580 or higher require a 3.5% down payment.
FHA 203(k) loans: They require a minimum credit score of at least 500 to 580. You can use funds to renovate your home.
South Carolina Homebuyer Programs
South Carolina first-time homebuyer programs can assist you in financing your home purchase as an alternative to federal loans.
Homebuyer Assistance Program
In Lexington, South Carolina, buyers can borrow up to $5,000. If you don't relocate, sell or refinance within five years, the lender may consider debt forgiveness.
SC Housing Palmetto Home Advantage Program
This homebuyer program offers a $0.00 monthly payment and forgiving down payment assistance of 0%, 3% or 4% of the loan amount. All loan options under the SC Housing Palmetto Home Advantage Program require a credit score of at least 640.
County First Initiative
The County First Initiative offers fixed-rate mortgages and forgivable down payment assistance up to $8,500. The FHA, conventional, USDA and VA loans are all financing options for borrowers.
FAQs for First-Time Homebuyer Programs in South Carolina
MoneyGeek researched frequently asked questions about first-time homebuyer programs in South Carolina to help you understand how they work in the state.
- Consumer Finance Protection Bureau. "Conventional Loans." Accessed September 24, 2022.
- Federal Housing Finance Agency. "About Fannie Mae & Freddie Mac." Accessed September 24, 2022.
- U.S. Department of Housing and Urban Development. "203(k) Rehab Mortgage Insurance." Accessed September 25, 2022.
- U.S. Department of Housing and Urban Development. "Loans." Accessed September 25, 2022.
- SC.gov. "Homebuyer Assistance Program." Accessed September 25, 2022.
- SC Housing. "Palmetto Home Advantage." Accessed September 26, 2022.
- SC Housing. "County First Initiative." Accessed September 26, 2022.
- U.S. Department of Agriculture. "Single Family Housing Programs." Accessed September 23, 2022.
- U.S. Department of Veterans Affairs. "Buyers Guide." Accessed September 24, 2022.