New $8000 Home Buyer Assistance – First Time Buyers and Buyers Who Have Not Owned In 3 Years
There’s a new $8000 First Time Home Buyer Program in NC that will become available on March 1, 2018. It is a unique program that will be available in every NC county. There are pros and cons to all of the First Time Home Buyer programs offered, and we will try and highlight those.
First Time Home Buyer Program in NC
There are multiple First Time Home Buyer Programs available in NC. Some of them are offered by the Municipality that you live in, others by the State and still others are from funds provided by the Federal Government. In general, these programs are designed to help with the biggest draw back to home ownership for folks in NC today – having money for the down payment.
The down payment assistance programs are sometimes referred to as DAPs, DPAs, First Time Home Buyer Grants or First Time Home Buyer Assistance Loans. All of these terms refer to the same type of mortgage loan. Although where the money comes from for the assistance might vary – the “spirit” of these programs are the same, and in most cases, the way you qualify will also be basically the same.
First Time Home Buyer Program Highlights NC
The amount of money available for the current NC Housing Finance Agency Programs are 3% of the sales price or 5% of the sales price. The new First Time Home Buyer Program in NC is for a total of $8000.
If you use the 3% assistance, you can buy a house with a FHA or Conventional Mortgage Loan and cover your down payment (for the most part). However you will need to have your own funds for the closing costs, or you will need to have the seller help with covering those costs. In today’s competitive market that can be difficult. The income limit for this program across the State of NC is $87,500. * There’s no sales price limit for this program, and there’s no geographic “footprint” like you would have with a USDA Home Loan. You can use this program in conjunction with the First Time Home Buyer Tax Credit (MCC).
Those who use the 5% down payment assistance program can use the money to cover their down payment AND their closing costs (at least as far as it will go). You could (and probably will) need some of your own funds to close, or you can try to negotiate closing costs with the Seller. The income limit for this program across the State of NC is $87,500. * There’s no sales price limit for this program, and there’s no geographic “footprint” like you would have with a USDA Home Loan. You can use this program in conjunction with the First Time Home Buyer Tax Credit (MCC).
Those who decide to use the New First Time Home Buyer Program will have access to $8000 to use for down payment and closing costs (similar to the 5% down payment assistance). This program is a FIRM $8000 that must be used, in other words if you only need $6000 for your down payment and closing costs, this is not the program for you. The income limit for this program varies based upon the number of household members and the county in which you buy a house. The sales price limit for the state is $250,000. You can NOT use this program in conjunction with the First Time Home Buyer Tax Credit (MCC).
*Subtle Variances in Calculating Income
First Time Home Buyer programs use 2 different methods to determine the income limits that qualify you for the program . The program might use “Qualifying Income” (like the $87500 mentioned above) or they might use “Household Income” (like the new $8000 program and USDA Home Loans). This is a big difference, and it’s not what qualifies you for a mortgage, it’s what income is used to qualify you for the PROGRAM. With the 3.5% and the 5% Down Payment Assistance, we use QUALIFYING income to see if you meet the program guidelines.
This means that if a couple is only going to buy the home using one spouses income and debts, and that person’s income is under $87,500 – we are golden. If the person received a bonus last year, and without the bonus we are under the $87,500, we are golden. We are required to use the same kind of income we would be using for the Fannie Mae Home Ready calculations… meaning we are required to count income from any borrowers listed on the mortgage note whose income is considered in evaluating creditworthiness for the mortgage.
With these programs, if you have a “side hustle,” and we are not using that income to qualify you for the mortgage, it will not kick you over the limit.
NC Housing Finance Agency began branding their products:
- NC Home Advantage Mortgage™—For move-up and first-time buyers with incomes up to $87,500; offers up to 5% downpayment assistance
- NC 1st Home Advantage Down Payment—For first-time buyers and military veterans with eligible incomes depending upon family size and county; $8,000 downpayment help
- NC Home Advantage Tax Credit—For first-time buyers and military veterans who are approved for a Mortgage Credit Certificate before purchase; up to $2,000 in federal tax savings per year.
With the New First Time Home Buyer Program in NC for $8000 we are going to consider ALL of the Household income. This means everyone over the age of 18 living in the home will need to provide documentation of their income for the past 3 years, even if they are not on the mortgage. For the most part, the income limits are somewhat lower for the $8000 program, with Wake Count being the exception. In Wake County the limit for a family of 3 is $87,500 – just like the limit for the 3% or 5% program.
Program Requirements New First Time Home Buyer Program in NC
The $8000 Down Payment Assistance Program in NC does not require monthly payments, and is not accruing interest. Meaning, you are getting the $8000 to buy your new home, and there are no interest charges, there are no payments that you have to make along the way. After you live in the home for 10 years, the money is forgiven in years 11-15 at a rate of 20% or $1600 a year. Are you required to stay in the home for 15 years? Heavens no.
If you Sell the home, convert it to a rental property or refinance the loan then you have to pay the $8000 back. So let’s think about that math…
EXAMPLE ONLY – Nothing’s guaranteed
Purchase Price in 2018 $225,000… Appreciation for next 5 years at a rate of 3% per year = Home Value of $260,835!
You will probably have to pay a commission… but still, you’ve made great money at that point, plus you’ve been paying the mortgage down with each monthly payment!! If the $8000 is how you get into this home ownership thing, then that’s what’s important, right?
Credit requirements for the New First Time Home Buyer Program in NC vary depending on the program you are using. For a Conventional loan, you can not show bankruptcy within the past 2 to 4 years (depending on which one you went through). For FHA, you can apply one year after the payout on Chapter 13, and two years from discharge for Chapter 7.
The Minimum credit score for all borrowers is 640. This means that two of your three credit scores must be over the 640 mark. Here are a few things to remember about credit scores:
- Mortgage Credit Scores generally differ (usually a little lower) than the ones you get from your “annual” report from the agencies. That difference is normally something we can EASILY help you make up, with minor adjustments – usually paying a credit card down, or adding credit.
- Paying off Collection Accounts is not always required, however if you have THOUSANDS of dollars of collections outstanding, you will likely be required to make some sort of payment arrangements. We would ask that you talk to us BEFORE dong anything with your collections A NEW collection will hurt your scores, an OLD Collection is probably not hurting it very much – so talk to us FIRST.
- Having everything in Dispute isn’t going to help your scores either. Good credit for at least 12 months is the best way to build great credit scores. I’m Southern… so I often tell folks to “let sleeping dawgs lie.” It’s an old expression that mostly refers to (in this case) to just leave the past problems in the past and work to build new GOOD credit.