North Carolina residents have a champion which offers affordable housing products through approved mortgage lenders. The NC Housing Finance Agency, also known as NCHFA, helps bridge the gap towards home ownership. Although most believe this agency’s products are solely first time home buyer products, there are repeat buyer programs as well. So, why should North Carolina buyers consider asking a lender about NC Housing products? That’s easy! By placing a priority on helping buyers afford a home, it offers down payment assistance, tax credits, foreclosure assistance, and more.
NCHFA Most Popular Buyer Programs Include…
- NC 1st Home Advantage Down Payment
- NC Home Advantage
- $2000 NC Home Advantage Tax Credit
In addition to traditional first mortgage guidelines, NCHFA has additional requirements. Examples may include lower debt to income ratios, automated approvals, and income limits. In order to have a better understanding of the NC Housing offerings, let’s expand on the benefits of these NC home loan options.
First Time Home Buyer NC 1st Home Advantage Down Payment
NC first time home buyers have a great way to overcome the down payment shortage problem that plagues so many. Luckily, NCHFA provides an $8000 down payment assistance for these first time home buyers. When it comes to DPA funds, it may be used for both down payment and paying closing costs / prepaids. Combining the down payment assistance with seller paid closing costs could allow first time buyers to purchase with no out of pocket money necessary.
But, there is more! First of all, this is not considered a grant. NCHFA is quick to point that out. Rather it is down payment assistance because it is a second mortgage loan, although at superbly favorable terms. How about no interest or monthly payments charged? Additionally, the DPA may be forgiven. yet, there are times where the funds could possibly be paid back. To learn if this $8000 DPA makes sense, contact an NCHFA approved, OVM Financial loan officer.
NC Home Advantage Down Payment Assistance
First of all, this form of DPA is not a set dollar amount like above. Instead, this DPA is calculated as a percentage. Although, it is not a percentage of the purchase price. Rather, the 3% or 5% is based on a percentage of the total first mortgage loan amount. Many make this minor mistake when trying to figure their loan amounts. Another cool feature of this DPA product is that it is not just for first time home buyers. That’s right! A repeat buyer may also use this DPA product!
Like the $8000 DPA, the Home Advantage loan DPA funds may be used towards down payment and/or closing costs / prepaids. More often, this form of DPA is a smaller amount. Therefore, using a seller paid closing cost strategy really comes in handy with this first time buyer product.
$2000 MCC Tax Credit
First time home buyers and Veterans have a wonderful opportunity that continues long after the day of closing. The NC Home Advantage Tax Credit offers qualifying buyers up to $2,000 every year. Take note that a first time home buyer does not mean first time ever buying a home. Anyone may be considered a first time home buyer if they have not owned a home within the last 3 years! In order to take advantage of the annual tax credit, there is an additional closing cost. Currently NC Housing charges $475 and lenders are allowed to charge an additional $300 on top of that.
How Does the $2000 Tax Credit Work?
There is a 30% tax credit for used homes and a 50% tax credit for brand new homes. One of these tax credit percentages are used to determine the potential maximum annual tax credit. Here is how the calculation works:
Loan amount * Interest Rate * Tax Credit Percentage = Potential Annual Tax Credit
$100,000 * .05 * .30 = $1,500 tax credit
Notice we state “potential” tax credit. Each year the credit requires sufficient tax liability to take advantage of the credit. Speaking of credit, this is a true bottom line tax credit. It is a true dollar for dollar reduction in tax liability. Conversely, a tax deduction just lowers taxable income and so the effect is not as much.
The $2000 mortgage credit certificate may be combined with the NC Home Advantage program. Although, the NC 1st Home Advantage program does allow the MCC tax credit.
A really cool story is recently a buyer who received an MCC tax credit 9 years ago called to tell me that he has received about $15,000 or more in tax credits during these few years of home ownership. How about that?!
NCHFA Income Limits
In order to use popular home buying assistance, income limits come into play. . In addition to these guidelines, either maximum household income limits or borrower qualifying income limits apply. Depending on the program being used, lenders must apply one of the two income limit requirements.
NCHFA Household Income Limits
Both the NC 1st Home Advantage and the NC Home Advantage Tax Credit require that buyers meet maximum “household income limit” requirements. Only the actual borrowers’ income and debts are used in the maximum 43% debt to income ratio. Additionally, all income from the household must fall within the household income maximum threshold. Sometimes, calculating qualification for income limits may get tricky. So, one’s best bet is to ask a knowledgeable NCHFA approved lender / loan officer. Therefore, if looking to use the $8000 down payment assistance or up to a $2000 tax credit per year, the household income limits will apply.
3% or 5% Down Payment Assistance Income Limits
The NC Home Advantage down payment assistance program has been around the longest. Unlike the $8000 DPA or the $2000 tax credit, using 3% or 5% down payment assistance does not have a household income limit. Often, buyers may fall out of the parameters of the $8000 or $2000 because of the household income limit. Fortunately, NCHFA offers options to help others.
So, besides the down payment assistance and the ability for repeat buyers to qualify, the major advantage to this product is how the income limit is used. In order to meet the NC Home Advantage guidelines, only the actual borrowers’ “qualifying” income is used in the income limit. Currently set at $87,500 and only using the borrower’s income, often fits most NC buyers.
Other Down Payment Assistance Programs
In addition to NC, we also offer assistance for Virginia and South Carolina buyers. Virginia residents have the ability to use down payment assistance or grants combined with first mortgage programs. Offered through VHDA approved lenders such as OVM Financial, it gives Virginia buyers several advantages.
South Carolina offers a $6000 down payment assistance to combine with several first mortgage products. It is a great solution for buyers needing a little extra help to buy a home in the Palmetto state.
A recent NCHFA article states, “In an analysis of the most recent HUD and Census data on all low-income North Carolinians (including both renters and homeowners earning no more than 80 percent of area median income), the NC Housing Finance Agency found that for every eight households in need of affordable housing, only one unit exists.“. This really drives home the importance of affordable housing products like these mentioned along with VA, USDA, FHA, and conventional products.