First Time Home Buyer Loans Offer Affordable Living in NC

Mortgage and Lending with Blue Ridge Bank Mortgage NMLS # 78989

Buying a first home is a significant life milestone, and we recognize the importance. It can be very exciting, yet nerve-wracking. Our goal is to share first time home buyer NC mortgage loan options and explain why an up-front mortgage pre approval is key. North Carolina is one of the most unique states for the buyer as it provides something for just about everyone. This article is a comprehensive overview of first time buyer solutions for NC residents.

A buyer could live in the mountains, coastal areas, on a lake, in the country, or live the city life in Charlotte, Wilmington, Raleigh or others. On top of that, NC offers a thriving job market and a temperate climate. Let’s dig into how one can achieve the dream of home ownership in the Tarheel state (sorry Duke, State, Wake, and other fans!). Don’t worry, if you are buying in Virginia, Maryland, South Carolina, Georgia, Tennessee, Florida, or Texas, most of the same products are available.

First Time Home Buyer NC – Educate Yourself

First time home buyers should absorb information like a sponge! Learn all you can when looking to purchase a home. We believe that an informed and knowledgeable buyer is a successful buyer. As you will see in this article, there are a ton of mortgage loans available. Not that buyers need to fully understand them all, but base knowledge makes for a better mortgage experience.

Here are a couple of tidbits many do not realize. The term “first time home buyer” does not mean it’s the buyers first time ever buying a home. As far as mortgage lending goes, a first time home buyer means not owning a home in the last 3 years. Also, if you’re not a first time buyer and feeling left out, keep reading. Most of this article applies to all stages of the home buying process.

First Time Home Buyer NC – Mortgage Pre approval

During the home purchase process, there are a lot of firsts, but the most important is to get preapproved prior to shopping for a home. In a perfect world, a first time buyer would contact us to start the mortgage qualification process. Too many times we see buyers who are already well into their executed contract before actually starting with the mortgage qualification. This could potentially be a recipe for disaster as it pushes the buyer into a rush to close quickly and make decisions quicker than they should.

Why would you want to figure your qualification after signing a contract?  

Now, we get it that buying a home is a lot more exciting than the approval. There’s nothing wrong with window shopping online. Yet, THE way to go is to become a strong, qualified, and prepared buyer. Along the way, your loan officer is there to answer questions and providing helpful tips as well.

Reasons To Get Approved Up-Front

Which of the Following Mortgage Loans Fit You Best?

As mentioned above, there are a good number of first time buyer NC loans. We also state which of the following are also offered to subsequent buyers. Check out the basics on each of these home loans below and then give us a call to ask questions and/or start your qualification.

USDA Loans First Time Home Buyer NC

USDA loans are probably the least known, misunderstood, yet awesome purchase loan there is. It is a no money down purchase loan with unbelievable terms and flexible underwriting guidelines. The misconceptions about USDA home loans include believing it is only for farm loans, very low income, or very low home prices. This couldn’t be further from the truth!

The lowest income limits for USDA guaranteed loans are $82,700 for 1 – 4 family households and $109,150 for 5 or more. Although, some higher cost areas offer higher household income limits. As far as loan amounts go, these are NOT just $60,000 homes. We have actually closed recent USDA loans exceeding $300,000. Finally, there is the farm misconception which makes sense. The initials do stand for the US Department of Agriculture. Contrary to belief, USDA will not even lend on farms with operating income.  Furthermore, if you check out the USDA property eligibility map, it is easy to see that a large portion of US properties are USDA eligible.

One last misconception is that USDA is only for first time buyers. This is not true. Actually, a borrower may sell a current home to buy another with a USDA loan. It is even possible if moving far enough away, to own another property and get a new USDA guaranteed loan.

USDA Loan Benefits

  • Only 30-year fixed rates
  • Up to $453,100 loan amount
  • Credit scores from 620 – 850
  • Seller may pay closing costs up to 6% of the sales price
  • Lowest funding fee for government loans (as of 8/2/18)
  • Very low mortgage insurance (called annual fee on USDA loans)
  • Stick built homes, off frame modular, townhomes, approved condos

Apply For A USDA Loan

VA Loans Help First Time Military Buyers in NC

We have said many times that VA loans may be the best home loan available in America. Up to 100% financing available for qualifying service members, Veterans, and qualified surviving spouses. North Carolina is home to many current service members and Veterans.  So, we understand how important this loan is for NC Veterans. Many of our local offices and loan officers work within the military communities. Thus, we close more VA loans than any other type of loan.

Why is this important? Because most lenders can close a VA loan, but knowing the fine details of VA guidelines helps create strategies and solutions. One helpful tip that can make a big difference to a disabled Veteran is the possibility of free property taxes.  Basically, that means it is a lot more than just no money down. VA loans are not just for first time buyers. Actually, it may be used right many times. Contact an OVM Financial loan officer to learn that difference.

VA Loan Benefits for a First Time Home Buyer NC

  • 600 minimum credit score & possibly lower
  • Higher debt ratios allowed
  • Seller may pay all closing costs plus buyer debts
  • May have 2 VA loans at once
  • Manual underwriting allowed
  • No monthly PMI
  • Disabled Veterans are exempt from the financed VA funding fee
  • Using rent on current residence being vacated to buy another
  • VA condo purchase

Streamlined VA Home Loan Process Read more

First Time Home Buyer NC FHA Benefits

When most first time home buyers think of a first timer loan, they think of FHA. Obviously, it is not the only option but it is very popular because of the flexibility offered. Why is flexibility so important? Often buyers don’t fit in the perfect box of having an 800 credit score, saved a large down payment, long-time job, along with low debt payments and high income. Typically, first time buyers need help in one or more of these areas. Luckily, FHA excels in these scenarios. Don’t have down payment? FHA allows many solutions for it such as a gift, borrowing against an asset, selling certain assets, or down payment assistance.

FHA Flexibility

Have some dings on credit? FHA’s flexibility here is probably what it is best known for. For some circumstances, it is possible to build a credit file with alternative items such as rental, utilities, cell phone, and other pay histories which are typically not on credit reports.  Even though FHA is flexible, there must be evidence of satisfactory payment history. Additionally, FHA offers flexibility with income.  Examples include one year commission experience, brand new graduate with an hourly or salaried job, job gaps, and more. FHA definitely does its part of creating an affordable housing solution for first time buyers. Finally, FHA does allow other buyers who have owned before to use FHA.

FHA First Time Home Buyer NC Benefits

  • 600 minimum credit score, exceptions to lower scores
  • Gift down payment
  • Up to 55% debt ratio and possibly higher
  • Manual underwriting allowed
  • Previous bankruptcy, foreclosure, and a short sale may be allowed
  • Options to keep collections open – learn more
  • HUD $100 down program for eligible HUD owned foreclosure properties

Down Payment Assistance NC

A common theme among these loan options is frequently the lack of down payment funding from first-time home buyers. Even though there are many allowed sources like a gift, selling or borrowing against an asset, retirement funds, and more, these sources may not be available for some. That is where down payment assistance NC programs come to the rescue. At OVM Financial, we are proud to offer DPA options for North Carolina residents. An important point to remember is that the down payment assistance is not a stand-alone product. If another lender does not offer this program, contact an OVM loan officer and we could switch your loan over. We would look to provide the first mortgage loan along with the DPA.

Down Payment Assistance NC Options – First Time Home Buyer

$8,000, payment and interest-free…That’s quite the deal for NC first time home buyers. Plus, military Veterans don’t even have to be first time buyers! Just think, that means a buyer just needs to qualify for the first mortgage and then the down payment is usually covered. We offer this program, and it is provided by the NC Housing Finance Agency, is called the NC 1st Home Advantage Down Payment Assistance program. Actually, for purchase prices under $260,000, there would be assistance towards closing costs as well.  Another strategy to combine with the $8,000 DPA is to include seller paid closing costs (If an FHA first mortgage, then 6% of the price is allowed). On a sample $228,000 purchase price, the 3.5% FHA down payment is covered by the $8,000 (3.5% of $228,000 is $7980) and seller paid costs could potentially cover all closing costs, the first year of insurance, plus escrow setup.

Learn More About NC Down Payment Assistance

NC Home Advantage Program

Then, there are the NC Home Advantage programs which offer either 3 or 5% of the first mortgage loan amount in down payment assistance. Unlike the above mentioned $8,000 DPA, this product’s DPA is a function of the first mortgage loan. Keep in mind that it is not 3 or 5% of the purchase price. If the first mortgage loan amount is $100,000, then the 3% DPA would be $3,000. Like the $8,000, the DPA is interest and payment free.

There are a few key differences between this and the $8,000. First, these DPA products are available for first and subsequent buyers.  Unlike the $8,000 DPA which has a household income limit, these have an income based on the borrower’s qualifying income on the application. So, if a non-borrowing household member makes $1,000,000 a year in income, it doesn’t matter on these DPA options.  Plus, if the borrower is salaried at $80,000 and earns a commission of $100,000 per year, the commission isn’t figured into the max household limit if it isn’t needed in qualifying the borrower. This could be very helpful in higher income households.

Conventional 97 Loans Offering 3% Down – First Time Home Buyer NC

Another misconception is that conventional loans require a minimum 5% down. Some even still believe the minimum is 20%. As the heading mentions, there are conventional 97% loans so a buyer can purchase a home with very little down. Plus, the 3% down payment may be a gift or by other potential sources. Conventional, also know as conforming loans, are split into two main categories:  Fannie Mae and Freddie Mac. Although they both offer conventional 97 loans, they each have their unique advantages. Both offer qualifying buyers a discounted mortgage insurance rate which makes home ownership more affordable by lowering the house payment. Check out the differences between these products and then contact your OVM loan officer to find out which fits your goals and scenario best.

Fannie Mae Home Ready 3% Down Payment

Many think conventional loans are for the highly qualified borrowers with solid ratios, credit scores, and down payment. Of course, those work very well with Fannie and any other loan, but the Fannie Mae HomeReady loan takes conforming loans to another level. The minimum 3% down payment may come from a gift or other sources.

Fannie Mae Student Loan Solution

Additionally, the Home Ready loan provides an awesome solution for today’s common student loan debt problem. Many borrowers, especially first time home buyers, carry significant student loan debt. Thus, these debts may create roadblocks to home ownership.  Yet, for those buyers with Income Based Repayment (IBR) or Income-Driven Repayment plans, there is a solution! Other loans like FHA or USDA require lenders to use 1% of the outstanding student loan balance as a qualifying payment. This can cause significant qualifying issues. $100,000 in student loan debt would mean using $1,000 as a payment. That’s hard for anyone to qualify like that.

The Fannie Mae Home Ready program allows borrowers to qualify using the actual IBR payment. This includes an IBR payment of $0. That’s right, if your minimum required student loan payment is $0, then $0 is used in your home qualification. Home Ready does have a household income limit for buyers which we will help a buyer in determining this and other qualifications. Also, HomeReady does not require someone to be a first time home buyer.

Freddie Mac Home Possible

Fannie Mae’s brother has the Freddie Mac Home Possible loan product. Just like Fannie, it allows 3% down, lower mortgage insurance than conventional 5% down options, gifted down payment, and more. The Freddie Mac Home Possible program also treats Income Based Repayment student loans in a favorable way compared to FHA and USDA. Although, Freddie Mac is not as lenient as Fannie Mae is in this area.

One area we have had much success with recently is when buyers exceed the Fannie Mae household income limits for the local area.  Freddie Mac often has an advantage in this area. Why? Home Possible has more areas with no income limit. That allows more buyers at higher purchase prices to qualify with low down payment. For instance, we have closed several 97 conventional Home Possible loans exceeding $300,000 with just 3% down. The buyers’ income exceeds $80,000 and even $100,000 but did not have the 5% or more down payment. Like many of the other products, don’t think of this as just a low-income program. Most are quite liberal so that most buyers have low down payment options with us.

Gift of Equity Purchase Available for First Time Home Buyer NC

A fairly common occurrence these days are buyers purchasing from family members. Often the selling family member is selling the home at a discount to the buyer. This is where the gift of equity options come into play for both the seller and buyer. The seller is able to sell the home and keep it in the family and/or help the family member, which is usually the goal. The buyer benefits by potentially buying a home with no money out of pocket. This includes the closing costs as well! The basic requirements are that the buyer and seller are close family members and there is sufficient equity in the property between the price and the net amount the seller desires.

Gift of equity buyers may use FHA, conventional, USDA, and VA loans. Each has their own special advantages and requirements.  If you’re a buyer looking to buy a family home, let’s talk to find the best solution for you as a homeowner.

First Time Home Buyer NC Renovation Loans

If you are a prospective home buyer, you know you have been watching some HGTV! Guys, go ahead and admit it so we can move forward! If you have watched any HGTV, chances are, you have seen the heavily popular renovation and rehab programs. These contractors and buyers are making money, getting instant equity, and or creating an advantage compared to other buyers interested in the properties in need of work.

If you fit the category of first time home buyer NC and have an interest in some homes in need of some TLC, you will often hear your Realtor® and lender ask you to move on to the next property. “That one won’t qualify for an FHA or VA appraisal” is likely what a buyer would hear. But, guess what?! There are loans that specialize in helping buyers purchase these fixer uppers and they are called renovation loans. Did you know that many of these buyers on HGTV are getting renovations to make these dream homes possible?

Renovation Loan Types

Luckily, our renovation loans are available to first time home buyers as well as subsequent buyers. Usually, buyers will find that a good amount of lenders offer 203k, meaning they close one every once in a while, but because these are not in their wheelhouse, buyers are usually pushed to find another property. What if you could buy a home and include renovations for VA home loans, FHA, and conventional loans (including primary, second homes, and investment properties)? That is what we offer and the down payment amounts are the same as the traditional products. VA is still no money down, FHA 203k is still 3.5% down, and conventional loans are the following: 97% for primary, 90% for second homes, and 80% for investment properties.

Want to make your own HGTV dream home? Contact us about getting qualified for a VA renovation, FHA 203k, or Fannie Mae Homestyle Renovation loan. A first time home buyer NC option couldn’t be better.

First Time Home Buyer NC Tips Summary

First-Time Home Buyer NC Products

Ok, that was a lot of information, but that is because we have so many first time home buyer NC options and we truly care about creating home ownership opportunities. It excites us to offer affordable and flexible home loan products for North Carolina buyers.  Hopefully, you have found this to be an informative article that provides the base knowledge necessary to consider the next step of home ownership. If you’re not in North Carolina, don’t worry! We offer these products in other states as well. Just the down payment assistance products differ in each state. Let’s continue the education, give us a call now.

Original article link written by Russell Smith

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Russell Smith - Your Mortgage Lending Expert

NMLS # 78989


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