OVM Financial is happy to announce a new product for NC first time buyers or qualifying military veterans. It is called the NC 1st Home Advantage Program, and it provides an $8,000 down payment assistance tool to help buyers achieve homeownership. Although we have offered other NC down payment assistance programs, this DPA provides advantages in certain cases. Let’s dig into the details.
Many people struggle to save funds for a home down payment, but, today there are several affordable options available to help buyers achieve homeownership with little to no down payment. The newest product available, which was unveiled March 1, 2018, provides funds that assist not only in down payment but also with closing costs. This program is offered through the NC Housing Finance Agency. Although, NCHFA does not work directly with the borrower on these loans. Rather, approved lenders offer this and other NCHFA products directly to consumers.
Updated $8,000 Down Payment Assistance Purchase Price Limits Below:
NC Down Payment Assistance Advantages
This product was made to cover a large need for NC buyers and has many key advantages.
- New or existing homes
- All 100 NC counties qualify
- Allows up to a $260,000 purchase price ** Updated 6/1/2018 **
- No payment & zero interest
- DPA forgiven after 15 years **
** NC down payment assistance balance is forgiven 20% per year during years 11-15. So, total DPA forgiven after 15 years
$8,000 Down Payment Assistance Requirements
- Household income limits (vary by county & household size)
- Maximum 43% debt ratio
- First-time buyer or qualifying military veterans only
- May not be combined with MCC or other NCHFA DPA product
- 640 minimum credit score
- Must have 2 or 3 qualifying credit scores
One area to notice is that the income limit is based on “household” income. This means every occupant, whether on the loan or not, must document income. The income limits increase based on the number of household occupants. It is divided into 3 groups which are 1, 2, and 3+ occupants. Typically, higher income counties such as Wake, Orange, Mecklenburg, and more have higher income limits.
What if your household makes higher than the income limits? Good news! There are other DPA options that provide 3 or 5% down payment assistance which has an income limit based solely on the borrower’s income, not the household. There are often other strategies for low to no down payment loans as well that your OVM loan officer can review.
How Does the $8,000 Down Payment Assistance Work?
Sounds pretty good, doesn’t it? Well, let’s get into how DPA works. In order to use this $8,000 in DPA funds, there must be a first mortgage. The first mortgage products we offer in conjunction with the DPA are FHA and VA loans. Let’s explain how DPA works with each loan product.
Using FHA with NC Down Payment Assistance
FHA loans require a 3.5% down payment based on a home’s sales price. FHA is a flexible home loan product that provides an avenue for buyers to affordably own a home. So, when using an FHA loan for a home purchase, the 3.5% down payment and closing costs must be covered. Buyers have the option of paying both of these at closing through their own funds, gift funds, seller paid costs, or in this case down payment assistance. This $8,000 may be used towards both of these areas. The cool part is that buyers are able to borrow these funds without making payments or accruing interest. Depending on the home price and the costs, $8,000 may not cover everything. Therefore, the difference could again be covered by buyer funds, gift, or seller contributions. Often, it is possible to combine the DPA with seller concessions to create a truly “no money out of pocket” purchase closing! With FHA flexibility plus this down payment source, it provides an option for NC buyers to consider.
Using VA with NC Down Payment Assistance
In many cases, a VA home loan is a no down payment option for service members, veterans, or qualified surviving spouses. Then, with seller paid closing costs a VA loan typically works out for bringing no money to closing. Check out an informative article, “How military buyers and veterans can include closing costs in their purchase,“ but, what happens when the seller won’t or can’t pay for closing costs? How about an $8,000 down payment assistance loan? $8,000 will typically cover closing costs, the first year of insurance, and escrow setup for a purchase. Although, the DPA is only available to military veterans (non-active duty). Whether using DPA funds or not, a VA loan may be the best loan in America. Check with an OVM Financial loan officer to determine your qualification.
So Many Low to No Down Payment Options
As we mentioned above, VA loans provide 100% financing and FHA offers a low 3.5% down payment. Additionally, there are other great home loan products. USDA Guaranteed Loans are a no money down option that is flexible on credit, liberal income limits, and very affordable terms. USDA loans actually have the lowest funding fee and mortgage insurance (called an annual fee) of all government loans. This means affordability! Contrary to many beliefs, conventional loans also offer as low as 3% down payment. Conventional loans provide flexible options for buyers. A primary benefit is how conventional loans treat student loans with income-based repayment terms. Finally, we have renovation loans that combine a home purchase with home improvements. Renovation loans allow buyers to customize a home with options for low down payment too.