Whether you’re looking for coastal charm, a quirky mountain town, big-city amenities and sports teams, or something in between, you’re likely to find it in North Carolina. Which explains why the Tar Heel State has become a magnet for anyone who’s seeking good schools, good health care, good weather, and good fun.
Unfortunately, that’s not so good for first-time homebuyers in North Carolina. Rising prices and lower inventory have made the housing market pretty daunting.
According to Redfin, the median home sales price in North Carolina rose to $360,900 in May 2022 — a 17% increase in just 12 months. In some communities, the numbers have been much higher. In the capital city of Raleigh, home prices were up 19.4% year-over-year, with a median selling price of $430,000 in May. And in Wake Forest, where home prices were 46% higher than last year, the median reached $555,000.
The good news is that North Carolina first-time homebuyers may be able to get financial help through state and local programs. There also are longstanding federal programs that could improve a buyer’s chances of success.
Recommended: The SoFi Guide to First-Time Home Buying
Who Is Considered a First-Time Homebuyer in North Carolina?
For most programs offered in North Carolina and elsewhere, applicants are considered first-time homebuyers if they haven’t ever owned a home (of course) or haven’t owned a home for at least the past three years.
4 North Carolina Programs for First-Time Homebuyers
Most first-time homebuyer programs in North Carolina are designed to help low- to moderate-income buyers who need help coming up with a down payment or closing costs.
Program participants typically must meet eligibility requirements regarding their income, credit scores, and debt-to-income ratio (DTI). There also may be home price limits, and the home usually must be owner occupied. Also, at least one of the buyers may have to complete a homebuyer education course.
Veterans and buyers who are purchasing homes in certain census tracts may be eligible for the same perks as first-time buyers.
The North Carolina Housing Finance Agency (NCHFA) offers several programs.
1. OHCS Bond Residential Loan Program
The second mortgage doesn’t have to be repaid unless the home is sold, or the first mortgage is paid off or refinanced, within the first 15 years of the loan term.
Benefits and requirements include:
• Competitive interest rates and up to 5% down payment assistance for FHA, USDA and VA loans; 3% down payment assistance on conventional loans
• Second loan amount may be reduced by 20% annually in years 11-15
• Loan can be used to purchase a single-family home, townhouse, condominium, townhouse, duplex (FHA loans only), or new manufactured home (FHA, VA, or USDA loans only; minimum 660 credit score)
• Borrowers’ annual income cannot exceed $126,000
• Minimum credit score of 640
• Maximum DTI of 43%
• Available to first-time and repeat homebuyers
A participating lender can help you get started; find a lender online or call 1-800-393-0988.
2. NCHFA NC 1st Home Advantage Down Payment
The down payment assistance comes as a 0% interest deferred second mortgage that doesn’t have to be repaid unless the home is sold, or the first mortgage is paid off or refinanced, within the first 15 years of the loan term.
Benefits and requirements include:
• Loan amount may be reduced by 20% annually in years 11-15
• Must meet requirements for and obtain an NC Home Advantage Mortgage
• Limited to first-time homebuyers and veterans
A participating lender can help you get started; or call 1-800-393-0988.
3. NCHFA Community Partners Loan Pool
Only newly constructed homes or existing homes in “like new” condition (less than 10 years old or with an effective life of 10 years or less) are eligible.
Benefits and requirements include:
• Up to 25% of the home’s purchase price, not to exceed $40,000, when combined with an NC Home Advantage Mortgage
• Up to 10% of the purchase price when combined with a USDA Section 502 loan
• Income and sales price limits apply
• Borrower must prove sufficient, stable income to afford and maintain the purchased home
• Minimum credit score of 640
• Maximum DTI is 45%
• Must complete an approved homebuyer education course and at least two hours of housing counseling. (Borrowers must establish a plan for education and counseling before signing a sales contract on a property.)
To apply, contact a community partner.
4. NC Home Advantage Tax Credit
The certificate can be combined with the NC Home Advantage Mortgage program but not with the NC 1st Home Advantage Down Payment program.
Recommended: Understanding Mortgage Basics
Other North Carolina Homebuyer Programs
If you’ve already chosen the North Carolina city or county you hope to make your home, you also may want to research local buyer assistance programs.
For example, the city of Greensboro’s Neighborhood Development Department offers eligible homebuyers up to $10,000 in down payment assistance (not to exceed 20% of their home’s overall purchase price) in the form of a 0% interest, no-payment second mortgage that is forgiven after five years of living in the home. For eligibility requirements, check out the Homebuyer Down Payment Assistance Program.
If you can’t find assistance in your chosen location, check back occasionally for offers. Some first-time homebuyer programs base their opportunities (and deadlines) on the funds they expect to become available. When their money runs out, they may press pause.
How to Apply to North Carolina Programs for First-Time Homebuyers
For most mortgage and assistance programs, contacting a participating lender is the first step. Follow the links provided.
Federal Programs for First-Time Homebuyers
Several federal government programs are designed for people who have low credit scores or limited cash for a down payment. Although most of these programs are available to repeat homeowners, like state programs, they can be especially helpful to people who are buying a first home or who haven’t owned a home in several years.
The mortgages are generally for single-family homes, two- to four-unit properties that will be owner occupied, approved condos, townhomes, planned unit developments, and some manufactured homes.
Federal Housing Administration (FHA) Loans
Gift money for the down payment is allowed from certain donors and will be documented in a gift letter for the mortgage.
FHA loans always require mortgage insurance: a 1.75% upfront fee and annual premiums for the life of the loan, unless you make a down payment of at least 10%, which allows the removal of mortgage insurance after 11 years. You can learn more about FHA loans in general and FHA mortgage limits by area by area.
Freddie Mac Home Possible Mortgages
The Home Possible mortgage is for buyers who have a credit score of at least 660.
Once you pay 20% of your loan, mortgage insurance will be canceled, which will lower your mortgage payments.
Fannie Mae HomeReady Mortgages
For income limits, a comparison to an FHA loan, and other information, go to this Fannie Mae site.
Fannie Mae Standard 97 LTV Loan
Department of Veterans Affairs (VA) Loans
Native American Veteran Direct Loans (NADLs)
U.S. Department of Agriculture (USDA) Loans
The USDA also directly issues loans to low- and very low-income people. For loan basics and income and property eligibility, head to this USDA site.
HUD Good Neighbor Next Door Program
First-Time Homebuyer Stats for 2022
Ever wonder where you fit amid the mix of buyers who are out there shopping for their first home or first in a while? Here are some stats from a recent National Association of Realtors Profile of Home Buyers and Sellers:
Percentage of buyers nationwide who are first-time buyers: 34%
Median household income of first-time buyers nationwide: $86,500
Type of home purchased by first-time buyers nationwide:
• Detached single-family home: 80%
• Townhouse/rowhouse: 9%
• Condo/apartment (five or more units): 1%
• Duplex/condo/apartment (two to four units: 2%
• Other: 8%
Median home price for first-time buyers nationwide: $252,000
Median down payment for first-time buyers nationwide: 7%
Median age of first-time buyers nationwide: 33
Relationship status of first-time buyers nationwide:
• Married: 50%
• Single females: 20%
• Unmarried couples: 17%
• Single males: 11%
First-time buyers with kids nationwide:
• No children: 70%
• One child: 15%
• Two children: 11%
• Three or more children: 5%
Additional Financing Tips for First-Time Homebuyers
In addition to federal and state government-sponsored lending programs, there are other financial strategies that may help you become a homeowner. Some examples:
• Traditional IRA withdrawals. The IRS allows qualifying first-time homebuyers a one-time, penalty-free withdrawal of up to $10,000 from their IRA if the money is used to buy, build, or rebuild a home. The IRS considers anyone who has not owned a primary residence in the past three years a first-time homebuyer. You will still owe income tax on the IRA withdrawal. If you’re married and your spouse has an IRA, they may also make a penalty-free withdrawal of $10,000 to purchase a home. The downside, of course, is that large withdrawals may jeopardize your retirement savings.
• Roth IRA withdrawals. Because Roth IRA contributions are made with after-tax money, the IRS allows tax- and penalty-free withdrawals of contributions for any reason as long as you’ve held the account for five years. You may also withdraw up to $10,000 in earnings from your Roth IRA without paying taxes or penalties if you are a qualifying first-time homebuyer and you have had the account for five years. With accounts held for less than five years, homebuyers will pay income tax on earnings withdrawn.
• 401(k) loans. If your employer allows borrowing from the 401(k) plan that it sponsors, you may consider taking a loan against the 401(k) account to help finance your home purchase. With most plans, you can borrow up to 50% of your 401(k) balance, up to $50,000, without incurring taxes or penalties. You pay interest on the loan, which is paid into your 401(k) account. You usually have to pay back the loan within five years, but if you’re using the money to buy a house, you may have up to 15 years to repay.
• State and local down payment assistance programs. Usually offered at the regional or county level, these programs provide flexible second mortgages for first-time buyers looking into how to afford a down payment.
• The mortgage credit certificate program. First-time homeowners and those who buy in targeted areas can claim a portion of their mortgage interest as a tax credit, up to $2,000. Any additional interest paid can still be used as an itemized deduction. To qualify for the credit, you must be a first-time homebuyer, live in the home, and meet income and purchase price requirements, which vary by state. If you refinance, the credit disappears, and if you sell the house before nine years, you may have to pay some of the tax credit back. There are fees associated with applying for and receiving the mortgage credit certificate that vary by state. Often the savings from the lifetime of the credit can outweigh these fees.
• Your employer. Your employer may offer access to lower-cost lenders and real estate agents in your area, as well as home buying education courses.
• Your lender. Always ask your lender about any first-time homebuyer grant or down payment assistance programs available from government, nonprofit, and community organizations in your area.
Low- and moderate-income North Carolina first-time homebuyers have an array of mortgage and down payment assistance programs to aim for. Other first-time buyers can look into the vast melange of mortgages on their own for a good fit.
Should I take first-time homebuyer classes?
Do first-time homebuyers with bad credit qualify for homeownership assistance?
What credit score do I need for first-time homebuyer assistance in North Carolina?
Is there a first-time homebuyer tax credit in North Carolina?
Is there a first-time homebuyer assistance program for veterans in North Carolina?
Nationwide, VA loans are available to eligible service members, veterans, and eligible surviving spouses.
What is the average age of first-time homebuyers?
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