North Carolina First-Time Homebuyer Programs
Amanda Gengler has been researching and writing about financial matters for media publications as well as investment firms for 15 years. She has discussed finances on CNN, MSNBC, FOX, NBC, CBS, ABC and other local and national outlets.
North Carolina first-time homebuyer programs can help you achieve your dream of owning a home. You may qualify for aid such as upfront cash to help fund the often overwhelming down payment. For a rundown of the programs available, including the type of assistance offered and who qualifies, read on.
On this page
- First-time homebuyer programs in North Carolina
- North Carolina first-time homebuyer qualifications
- Understanding North Carolina first-time homebuyer down payment assistance
- Other first-time homebuyer loan programs
- Home price trends in North Carolina major areas
- What are the current mortgage rate trends in North Carolina?
First-time homebuyer programs in North Carolina
The North Carolina Housing Finance Agency (NCHFA), a public agency, offers various types of aid to certain residents trying to buy their first homes.
NC Home Advantage Mortgage
Need help funding your down payment? The NC Home Advantage Mortgage offers down payment assistance to first-time homebuyers — as well as homeowners trying to move up to a larger house. Buyers can access up to 3% of their loan amount through a second mortgage.
Requirements
To qualify for this program, you need:
- An annual household income of $126,000 or less
- A credit score of 640 or higher
- To move into the home as your primary residence within 60 days
Pros and cons
| Pros | Cons |
|---|---|
Forgivable second mortgage Not required to repay if you live in the home for 15+ years Available to first-time and trade-up buyers Higher income limits than other programs Can be combined with other assistance programs (see below) | Must repay if you unexpectedly need to sell, move or refinance Available only through certain lenders Household income limit of $126,000 Typically excludes pricey homes needing jumbo mortgages |
NC 1st Home Advantage Down Payment
This program provides up to $15,000 in down payment assistance for North Carolinians who have not owned a home within the last three years. The assistance is forgiven at 20% per year at the end of years 11 through 15 of living in the house, with the full amount forgiven at the end of 15 years. If you sell or refinance your mortgage before the 15-year mark, you’ll need to repay the balance.
Requirements
- Must not have owned a home within the last three years, or be a military veteran
- An income below certain maximum thresholds, which vary by county and family size. Look up your county income limits here.
- A sales price below a stated maximum, commonly $385,000
- Credit score of 640 or higher
- Live in the home within 60 days of closing
Pros and cons
| Pros | Cons |
|---|---|
Assistance forgiven if you live in the home for at least 15 years Broad definition of a first-time buyer means anyone who hasn’t owned a primary residence in three years can qualify Available statewide | Needing to sell unexpectedly could cost you Lower income limits than other programs Excludes many homes pricier than $385,000 Available only through certain lenders |
NC Home Advantage Tax Credit
You may be eligible to save up to $2,000 a year on your federal taxes through this program. It allows you to claim a federal tax credit for 30% of the interest you pay on your mortgage for an existing home or up to 50% of the interest on a newly built home. You must apply for the mortgage credit certificate at the same time you apply for your mortgage.
Requirements
- First-time buyer (have not owned a primary residence in prior three years) or military veteran
- Move in within 60 days of closing
- Household income cannot exceed certain maximums, which vary by county and family size.
- Usually the home must cost less than $385,000
Pros and cons
| Pros | Cons |
|---|---|
Broad definition of first-time buyer Can still deduct remaining mortgage interest on your taxes Able to combine with NC Home Advantage Mortgage™ | Too late to apply if you already bought the home Lower income limits than other programs Cannot be combined with the NC 1st Home Advantage Down Payment program |
Community Partners Loan Pool
The NCHFA offers this form of down payment assistance to borrowers whose income is at or below 80% of the area median income (AMI). North Carolinians who qualify can nab up to 25% of the home sales price, or a maximum of $50,000, whichever is less. This is a no-interest, deferred 30-year second mortgage, which means that as long as you live in the home for that entire time frame, you won’t have to make monthly payments on this form of assistance. Only specific mortgage types qualify for this form of assistance.
Requirements
- Household income below 80% of AMI
- A sales price less than the maximum, which varies by county.
- Six hours of homebuyer education and two hours of one-on-one counseling from a housing counseling agency.
- Total debt-to-income (DTI) ratio not exceeding 43% of your monthly income
- Monthly housing costs no greater than 32% of your monthly income
- A credit score of 640, although exceptions exist
- Mortgage required to be a USDA 502 Direct loan or NC Home Advantage Mortgage
Pros and cons
| Pros | Cons |
|---|---|
Large amount of down payment assistance available No interest is charged on the loan Free education about buying a home | Must repay the entire loan at the end of 30 years Loan due earlier if you move out of the home Only certain mortgage types are eligible |
In addition to these programs from the North Carolina Housing Finance Agency, residents may find additional assistance programs in their local county’s or metro areas, such as this program in Forsyth County.
North Carolina first-time homebuyer qualifications
Typically to qualify for one of these assistance programs, North Carolinians should meet the following requirements:
- Your credit score must be at least 640.
- You must use a lender participating in the program.
- Your income must not exceed the program maximums, and must be documented.
- The house must cost less than the program maximums.
- You must live in the home as your primary residence for as long as 15-30 years, depending on the form of assistance.
If you potentially meet these standards, follow these steps:
→ Step 1: Find an approved lender. Not every local bank or credit union offers these programs, but the NCHFA maintains a list of participating lenders. In particular, buyers interested in the Community Partners Loan Pool must use one of the local government or nonprofit organizations approved for the program. Be sure to contact a few different lenders to find the best type of loan and terms for your needs.
→ Step 2: Educate yourself. With so many programs, as well as some additional regional aid in your local area, you’ll need to identify the programs you’ll qualify for. Also more formally, remember that the Community Partners Loan Pool requires you to complete specific homebuying education courses.
→ Step 3: Get approved. You’ll need to be approved by your lender just as you would for any other mortgage. The approval process requires you to show documentation proving you meet all of the program requirements, including the income and debt levels, as well as your employment history.
→ Step 4: Understand the fine print. Some of these programs require you to pay back the assistance at the end of the loan term. Or if you move too soon, such as within 15 years, you could unexpectedly need to pay off the full loan amount. Be certain you understand the fine print first.
→ Step 5: Ask for help. If you have any questions along the way, or simply want education before home or loan shopping, contact a HUD-approved housing counselor. These experts have been trained by the government to help buyers navigate the purchase process.
Understanding North Carolina first-time homebuyer down payment assistance
Before you choose a program, make sure you understand the type of aid offered. The differences can be as large as needing to repay the assistance or not. Here are common types of assistance.
Deferred second mortgage
A second mortgage is a type of home loan that allows buyers to borrow money without needing to make mortgage payments over the course of the loan term. But borrowers beware — you do have to repay the money at the end of the loan term or when you sell or refinance the house, whichever happens first.
Forgivable second mortgage
Similar to a deferred second mortgage, this type of second loan allows buyers to borrow some of the down payment. The big difference, however, is this loan does not have to be repaid if you continue to live in the house through the end of the loan term. But if you move out, sell or refinance before then, you may be expected to repay some or all of the assistance.
Grant
A grant is free money — assistance that doesn’t need to be repaid. The North Carolina Housing Finance Agency does not offer grants.
Mortgage credit certificate
A mortgage credit certificate (MCC) is a type of aid that can lower your federal and state tax bills by giving you a tax credit on a percentage of the mortgage interest you pay each year. This is different — and more generous — than the standard tax deduction, which simply reduces your taxable income.
THINGS YOU SHOULD KNOW
Each of these assistance programs requires your household income not to exceed certain thresholds. The maximums may vary by county and the number of earners in your family. You can look up income requirements for your county with the NCHFA.
How much of a down payment do I need to buy a house in North Carolina?
North Carolinians can often get into a house without saving up the traditional 20% of the house price you may have heard is necessary. Depending on your credit score, FHA loans require as little as 3.5% of the house price as a down payment. Some conventional loans may only require you to put 3% down. Even more generous is the VA or USDA loan, where you may only need enough cash to cover the closing costs and thus finance the entire cost of the house.
Can I qualify for down payment assistance in North Carolina?
You may qualify for down payment assistance from the North Carolina Housing Finance Agency if you meet the program requirements:
→ Your income is below the program thresholds and you can document it.
→ You buy a house that costs less than the allowed maximum.
→ You complete homebuyer education if required.
→ You plan to live in the home as your primary residence.
→ You qualify for a first mortgage from a lender participating in the program.
Requirements vary between the programs, so consult the NCHFA to compare what’s the best fit for you.
How do I apply for North Carolina first-time homebuyer down payment assistance?
To qualify for first-time homebuyer assistance, start by finding a participating lender in the assistance programs. The lender should be able to walk you through the programs available and what paperwork is needed.
Other first-time homebuyer loan programs
Conventional loans
A conventional loan is likely what you think of if you walk into a brick-and-mortar bank. These loans are not through a government agency, such as the VA or FHA, and typically come with tougher standards, such as a higher credit score.
FHA loans
Backed by the Federal Housing Administration (FHA), FHA loans may be attractive to buyers with bruised credit or without a lot of cash for a down payment. FHA loans allow borrowers with at least a 580 credit score to put down as little as 3.5% (or 10% if your credit score falls between 579 and 500). The program has no maximum income limits, but does limit the price of the house you plan to buy.
VA loans
Military service members and veterans are eligible for VA loans, a type of mortgage backed by the U.S. Department of Veterans Affairs (VA). Eligible borrowers are able to finance 100% of the home purchase price, which means no down payment is required, although you’ll still need to pay a funding fee. What’s more, unlike other loans with low down payment requirements, you do not need to pay mortgage insurance.
USDA loans
If you’re house-hunting in a region specifically designated as a rural area, low to moderate income residents should look into USDA loans backed by the U.S. Department of Agriculture (USDA). No downpayment is required, but your income cannot exceed certain maximums.
What are the best first-time homebuyer loans?
The best product for you will depend on your personal and financial life. For help understanding the various programs and identifying the best match for you, reach out to a HUD-approved housing counselor. These folks are trained to help buyers navigate the homebuying and mortgage process.
Home price trends in North Carolina major areas
Home prices have moved significantly from a year ago, depending on where you live in the state. The Raleigh metro area, home to the state capital, saw a 2.9% year-over-year increase from the fourth quarter of 2021, with a median price of $431,000, according to the latest stats from the National Association of Realtors (NAR). The Durham Chapel Hill area, which has several renowned universities, saw similar growth, with the median price in the fourth quarter in 2022 at $425,600. Seeing an even larger jump is artsy Asheville, where the median price hit $420,000 at the end of 2022, 7.5% higher than a year earlier. The port city of Wilmington hit a median $414,800, up 12% from a year earlier. Finally, the Myrtle Beach and Conway area saw a 16.2% jump in price from a year earlier, hitting a median $373,500 in the fourth quarter of 2022.
These price jumps, combined with rising mortgage rates, have spelled bad news for buyers. Together they have caused monthly mortgage payments to spike compared to a year ago. For example, buyers in Wake County saw the median mortgage payment increase from $1,410 a year ago to $2,446 today, up a whopping $1,000 a month.
Is there a first-time homebuyer tax credit in North Carolina?
Yes. The NC Home Advantage Tax Credit allows residents who have not owned a home in the prior three years (as well as military veterans) to save up to $2,000 on their federal taxes. How? You can claim a tax credit for up to 30% of the interest you pay on your home and 50% of a new construction home. You can still claim a mortgage interest deduction for the remaining 70% of the mortgage interest you pay.
To qualify, your income must not exceed certain maximums. You must apply for the credit at the same time you apply for the mortgage.
What are the current mortgage rate trends in North Carolina?
Like buyers around the country, North Carolinians face higher mortgage rates than a year ago. According to Freddie Mac’s Primary Mortgage Market Survey, as of December 28, 2023, current rates for a 30-year mortgage nationwide are averaging about 6.61%, while 15-year mortgage rates are averaging around 5.93%. View specific rates in your state and area on the Lending Tree mortgage rates page.
