Don’t have money for a down payment on a house in NC? Here are your options.

As higher mortgage rates squeeze many would-be buyers across Wake County, there are still a handful of options to help them purchase their first homes in North Carolina, even if they don’t have much money for a down payment.

This spring, many are increasingly turning to one of North Carolina Housing Finance Agency’s (NCHFA)‘s four first-time programs. They’re designed to help low- to moderate-income families buy a home with looser financial requirements.

Nationwide, first-time buyers can take advantage of federal programs, such as an FHA loan, too. The Federal Housing Administration (FHA) allows eligible buyers to pay as little as 3.5% of the purchase price for a down payment.

“This really helped me become a homeowner,” said Teresa Johnson, 52, a medical communications director who works in the Research Triangle. She closed on a three-bedroom, three-bathroom townhome in Selma for $245,000 last month. “It’s just me. I don’t have two incomes to qualify (for a typical loan). The FHA loan allowed me to do the 3.5% down.”

NCHFA is a public agency created by the General Assembly in 1973 to increase the supply of affordable housing within North Carolina. The News & Observer spoke with the agency’s team leader for documentation and compliance, Kim Hargrove, to learn more about these programs and the relief they can give first-time buyers with little resources for purchase.

NC offers these first-time-homebuyer programs

There are four options for first-time buyers based on their eligibility, such as income and sales price limits. (More on that below.)

Before seriously considering any of these options, it’s crucial to speak with a participating lender to figure out what potential buyers can realistically afford, said Hargrove.

“None of the programs through the NC Housing Finance Agency are ‘free money.’ These products are intended to provide affordable mortgage options to North Carolinians statewide,” she said.

Down payment assistance, tax credits for first-time buyers in NC

There are four programs that first-time homebuyers (who meet income and sales limit eligibility requirements) can consider. Contact NCHFA with questions about any of the programs by visiting nchfa.com/contact-us or calling 919-877-5700.

Here’s what to know about each one:

• The NC Home Advantage Mortgage: This program is for eligible first-time and move-up homebuyers. It provides stable, fixed-rate mortgages and down payment assistance up to 3% of the loan amount.

Repayment of the down payment assistance is required only if the buyer sells, refinances or transfers the home before year 15 of the mortgage. The down payment assistance is forgiven at 20% per year at the end of years 11 through 15. Complete forgiveness is offered at the end of year 15.

In the past year, 2,546 buyers purchased a home using the NC Home Advantage Mortgage, and 86 were in Wake County, according to NCHFA’s public relations team. Additionally, seven were in Orange, 21 were in Durham, three were in Chatham and 64 were in Johnston.

Find all details and eligibility requirements (and contact NCHFA with questions) by visiting nchfa.com/home-buyers/buy-home/nc-home-advantage-mortgage.

• The NC 1st Home Advantage Down Payment: This program provides $15,000 in down payment assistance to eligible first-time homebuyers and military veterans.

It is provided as a 0% deferred second mortgage, which is forgiven after 15 years. Repayment is required based on the same terms as the NC Home Advantage Mortgage.

In the past year, 2,387 buyers purchased a home using the NC Home Advantage Down Payment Assistance program, and 69 were in Wake County, according to NCHFA’s public relations team. Additionally, six were in Orange, 17 were in Durham, three were in Chatham and 54 were in Johnston.

Find all details and eligibility requirements (and contact NCHFA with questions) by visiting nchfa.com/home-buyers/home-buyer-mortgage-products/nc-1st-home-advantage-down-payment.

• The NC Home Advantage Tax Credit: This program enables first-time homebuyers and qualified military veterans to save up to $2,000 per year on their federal taxes. This is done with a Mortgage Credit Certificate (MCC), which can allow homebuyers to have more money in their paycheck to pay their mortgage.

You must apply and be approved for the NC Home Advantage Tax Credit before purchasing your home. Then prior to closing, the NCHFA must review and approve your loan.

This option can be combined with the down payment assistance offered through the NC Home Advantage Mortgage, but it cannot be combined with the NC 1st Home Advantage Down Payment.

In the past year, 639 buyers purchased a home using the MCC, and 89 were in Wake County, according to NCHFA’s public relations team. Additionally, five were in Orange, 35 were in Durham, three were in Chatham and 79 were in Johnston.

Find all details and eligibility requirements (and contact NCHFA with questions) by visiting nchfa.com/home-buyers/buy-home/nc-home-advantage-tax-credit.

• The Community Partner Loan Pool (CPLP): This down payment assistance program can be combined with an NC Home Advantage mortgage. It is targeted to low- and moderate-income homebuyers earning below 80% of their county’s area median income.

Borrowers can receive up to 25% of the sales price or a maximum loan of $50,000, whichever is less.

In the past year, 105 buyers took advantage of the CPLP, and 12 were in Wake County, according to NCHFA’s public relations team. Additionally, two were in Orange, two were in Durham, none were in Chatham and nine were in Johnston.

Find all details and eligibility requirements, and contact NCHFA with questions, by visiting nchfa.com/home-ownership-partners/real-estate-agents/mortgage-product-options/community-partners-loan-pool.

(Source: nchfa.com)

Eligibility requirements to use NC homebuyer programs

Potential buyers need to meet income and sales price limits to use one of NCHFA’s programs. (Note: The NC Home Advantage Mortgage program does not have a sales price limit.)

Based on the program used, qualifying income limits are determined either by only the borrower’s income or by total family income. All of these figures are verified by the lender.

• Borrower(s) only: The NC Home Advantage Mortgage income limit is only determined by the income of the borrower(s) — also known as qualifying income.

• Total family income: The NC 1st Home Advantage Down Payment and NC Home Advantage Tax Credit (or Mortgage Credit Certificate) is determined by total family income. This includes the total gross annual income for all titleholders and, if applicable, a spouse.

Sales price and loan amount limits can vary per location, such as county, throughout the state. You can search for your county and filter by your program type and family size by visiting housingbuildsnc.com/home-buyers/income-limits.

(Buyers hoping to purchase in certain census tracts might also be eligible for mortgage products. Find eligible census tracts in Triangle counties by visiting nchfa.com/county-census-tract-targeted-areas.)

The income and sales price limits are as follows in Triangle counties (as of May 2, 2023):

• Wake and Johnston counties: The sales price limit and loan amount limit is $385,000 for the NC 1st Advantage Down Payment and NC Home Advantage Tax Credit.

Income limits vary between $110,000 and $126,000 for first-time programs, depending on family size and/or number of borrowers.

• Durham, Orange and Chatham counties: The sales price limit and loan amount limit is $385,000 for the NC 1st Advantage Down Payment and NC Home Advantage Tax Credit.

Income limits vary between $95,000 and $126,000 for first-time programs, depending on family size and/or number of borrowers.

How to find first-time lenders and agents

To use any of NCHFA’s programs, eligible buyers must use a participating lender. You can search for local participating lenders by visiting nchfa.com/home-buyers/find-lender.

“We recommend that [interested buyers] speak with a participating lender to determine how much they can afford and their eligibility for our mortgage products, down payment assistance and tax credit options,” NCHFA’s Hargrove said.

“Once they understand their financing options, it will be easier for homebuyers to find a home that they can afford for the long term.”

Select real estate agents across the state have undergone training in NCHFA’s programs and can provide guidance to first-time buyers, Hargrove said.

You can find these agents at nchfa.com/home-buyers/find-real-estate-agent. You can also call NCHFA’s office at 800-393-0988 and ask for assistance.

Questions? Try a (free) housing counselor

“The Agency recommends that first-time buyers consider working with a housing counselor to be sure they are ready to buy and to prepare themselves for the expenses of home ownership,” Hargrove said.

“A housing counselor can review a potential buyer’s credit score, monthly income and expenses and provide recommendations on whether now is a good time to buy. Homebuyers can access these free services at a HUD-approved housing counseling organization.”

For a list of nearby housing counselors approved by the U.S. Department of Housing and Urban Development, visit consumerfinance.gov/find-a-housing-counselor.

Housing counselors can provide advice on buying a home, renting, defaults, forbearances, foreclosures and credit issues. They can offer independent advice at little or no cost to you, according to the Consumer Financial Protection Bureau.

Note: Not every counselor offers all services, CFPB advises, so be sure to look at the list of services offered by each agency.

Homeownership help programs in NC

There are more programs, besides the NCHFA, that can help first-time buyers purchase a home.

The U.S. Department of Housing and Urban Development created this list of North Carolina-specific agencies and organizations that may be helpful for some first-time homebuyers:

• Habitat for Humanity: Habitat helps bring homeownership to very low-income families. Homeowners help “pay” for the down payment with physical labor to build the house, and volunteers help the effort. Learn more at habitat.org/housing-help/habitat-homeowners.

• USDA Rural Development : These programs can reduce the cost of homeownership for families with low and moderate-income. Learn more at rd.usda.gov/nc.

• Greensboro Housing Coalition: Programs offered are intended for low to moderate-income households and those with special needs. Learn more at greensborohousingcoalition.org.

• Downtown Housing Improvement Corporation (DHIC): This Raleigh group offers personal support for first-time homebuyers through private counseling sessions, homebuyer workshops, post-purchase counseling and more. Learn more at dhic.org/homeownership-center.

• The Center for HomeOwnership: Through the financial education group “Financial Pathways of the Piedmont,” this HUD-approved agency serves Forsyth, Stokes, Yadkin, and Surry counties. Learn more at financialpaths.org/homeownership.

Learn more about North Carolina’s homeownership assistance programs at hud.gov/states/north_carolina/homeownership/buyingprgms.

Real estate reporter Chantal Allam contributed to this story.