First Time Home Buyer Loan Requirements, NC Mortgage (2024)

First Time Home Buyer Loan Programs were initially provided to help those of us who don’t have 20% to put down on a home! There are some Conventional Loans that allow for less down payment, now – but they require very high credit scores, so most of those programs are for folks who are buying their 3rd or 4th house – not their very first “starter homes.” First Time Home Buyer Loan Requirements make it MUCH easier to purchase a home!

That’s where Government Home Loan Programs (typically referred to as First Time Home Buyer Loan Programs) have a niche – helping folks who might not have experience to build a high credit score or the huge cash requirements for a 20% down payment! The First Time Home Buyer Loan Requirements vary, based upon they program that you are most interested in.

In addition to the various programs discussed below, it’s important to remember that we also offer First Time Home Buyer GRANTS. These are offered WITH the mortgages below, and provide anywhere from 3% to $15,000 for down payment or closing costs. There is a decent sized basket of down payment programs to choose from, all with their own sets of income limits and qualification requirements, of course. Many First Time Home Buyers don’t realize that you get your mortgage (like a FHA loan) and you get your grant at the same time.

READ: You can’t go to another lender for your mortgage, and get the grant through us. We do it all at the same time. The reason it’s confusing is that VERY FEW mortgage lenders in North Carolina offer this program.

The First Time Home Buyer Loan Requirements for the Grants are fairly straight forward.

Are you under the maximum income limit? ($87, 500 for the 3% and 5% down payment help while the $15,000 has different income limits depending on the county you are buying in). With the First Time Home Buyer Grant program, we are only looking at the folks who are on the application. This usually makes it easier to qualify for!
Do you have a minimum credit score of at least 640? This is based upon the MIDDLE credit score – so if you had 3 scores that looked like 622, 641, 649 you would be golden, because at least 2 of them are over the 640 benchmark.
Have you been renting, living with parents, in school for at least the past 36 months?

If you meet these requirements, then you meet the First Time Home Buyer Loan Requirements for the Grants. You have no monthly payments, no interest, and they are forgivable.

**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.

First Time Home Buyer Loan Requirements

FHA LOANS

In today’s market, many home buyers have heard that 100% loan programs are gone, but that’s simply not true. It’s just one of the reasons we might suggest that you consider the FHA loan. An FHA loan is insured by the Federal Housing Administration, a federal agency within the U.S. Department of Housing and Urban Development (HUD).

The FHA does not loan money to borrowers, rather, it provides lenders protection through mortgage insurance (PMI) in case the borrower defaults on his or her loan obligations. The rates on FHA loans are generally market rate , and down payment requirements are lower than for conventional loans.

Low Down Payment: FHA considers the total investment into the transaction. They require a 3.5% investment into the property – and this can come from money you have on hand, a gift for a down payment assistant grant program we offer through the State of North Carolina. (Not all banks offer this program, so if you are shopping around, be sure to ask!)
Easier to Qualify: FHA is insured by the Federal Government. Because of this, more lenders are willing to give loans with lower qualifying requirements.
Less than Perfect Credit: FHA is more forgiving regarding Credit Score Issues than other programs, including bankruptcy.
Lower Interest Rate! YIPPEE! Unlike SubPrime loans which carried higher interest rates (because if you’ve had some slow credit – you’re a higher risk), FHA loans have very competitive interest rates. Always compare FHA loans with other loan types.
You can add a non-occupying co-borrower, work around situations where one person has credit and the other person has the income, and you can get family involved in helping you qualify to buy a house!

VA Home Loans

VA guaranteed mortgage loans are made by lenders and guaranteed by the U.S. Department of Veteran Affairs (VA) to eligible veterans for the purchase of a home. The guaranty means the lender is protected against loss if you fail to repay the loan. In most cases, no down payment is required on a VA guaranteed loan and the borrower usually receives a lower interest rate than is ordinarily available with other loans.

Other benefits of a VA loan include:

Negotiable interest rates at attractive rates.
Closing costs are comparable and sometimes lower than other options.
No monthly mortgage insurance (like FHA and Conventional loans)
Right to prepay loan without penalties
The Mortgage can be assumed by the buyer when a home is sold.

Although monthly PMIis not required, the VA charges a funding fee to issue a guarantee to a lender against borrower default on a mortgage. The fee may be paid in cash by the buyer or seller, or it may be financed in the loan amount.

A VA loan can be used to buy a home or build a home that meets your needs! These loans are made to Veterans and their married spouses (with few exceptions).

USDA Home Loans

USDA Home Loans are much like the other First Time Home Buyer Loans discussed here, in that USDA doesn’t MAKE the loans we offer, they simply guarantee them. Meaning, if you should go into foreclosure, they will pay some portion to the bank. This is the system that kept the banks operating during the Great Recession, and they charge an upfront and a monthly PMI fee for this privilege.

USDA Home Loans have only a few requirements – but the BIG BENEFIT for the program is that there’s a ZERO down payment requirement. Meaning, you can buy a house, with a USDA Home Loan and bring virtually no money to closing.

The Household income has to be below the maximum limit set for the County. This can be a very different income than the income we use to qualify you for the mortgage. Let’s say there’s an aging parent living in the home – their income would be used to see if you meet the maximum income limit, but they might not be on the loan for “qualifying” purposes.
The Household income on the Application (so everybody who will be on the loan) must be enough to meet the debt to income guidelines. The Income must be able to support the 29/41 ratios set by USDA Home Loan Requirements – meaning your TOTAL house payment (including taxes and insurance and paying the mortgage back) can be no more than 29.000% of the GROSS monthly income.
The Credit Scores of everyone on the loan needs to be above 640 – this is a change. If you read that you can get a USDA Home Loan with a 620 credit score – that’s changing. The “target” score in the new USDA Home Loan requirements 2015 Updates is 680, but they will allow us to go down to 640, under very specific circ*mstances.
The house must be located within the USDA Loan Eligibility Map “footprint.” The USDA Loan Eligibility Map NC also changed. For instance, in the Raleigh area, there are more than 2 dozen neighborhoods that no longer qualify for the USDA Loan Raleigh program.
You do NOT have to be a First Time Home Buyer to qualify for USDA Loans, and the Seller is allowed to cover your closing costs.

First Time Home Buyer Mortgage Tax Credits

Another great perk for First Time Home Buyers is the Mortgage Tax Credit program that’s still available in NC. It helps qualified buyers get into a slightly larger home that they could otherwise afford!

Through the Mortgage Tax Credit 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 NCHFA Program, unfortunately, you are out of luck

Up to $2000 annually ( or roughly $167 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).

First Time Home Buyer Tips

If you’re a First Time Home Buyer looking for tips to make this an easier experience, here are some of our suggestions!

Go ahead and meet with us (your Lender) EARLY in the process! Let us peek at your credit, look at your pay stubs and give you an honest assessment about your decision to purchase! Often times folks think they need to pay something off, and they don’t.

Getting Pre-Approved means you are acting as a Cash Buyer for a Seller, and usually means you will get the best deal!

You might think you have to wait 6 months – and we might be able to tell you NOW is the time! Even if it IS six months – let us talk to you about the taxes, and insurance and the tax benefits!

While you are saving money for your first home, let us HELP YOU get your credit in order – this is what we do all day, and we don’t charge for that help! (Here are some questions to ask your lender!)

So Relax! NC First Time Home Buyer Programs can help you do this!TheFirst Time Home Buyer Loan Requirements were “created with YOU in mind! Call Steve and Eleanor Thorne, we offer today’s Best Mortgage Rates, 919-649-5058. Connect with us on Google Plus and Facebook