The most common need we see among buyers these days is a great low or no down payment mortgage solution. There is a little known affordable payment, low to no down payment option available with us through the NC Housing Finance Agency (NCHFA). Earlier in 2014, NCHFA unveiled the NC Home Advantage product which turns a normal FHA, USDA, VA, or conventional mortgage into a potential lower fixed rate with the option of adding a zero interest & zero monthly payment, down payment assistance loan.
The NC Home Advantage program can help a buyer overcome several obstacles by turning standard mortgage guidelines into a more affordable, helpful product.
Here are several examples of how the NC Home Advantage Product can overcome obstacles:
Fannie Mae Conventional mortgage 5% down payment minimum with monthly PMI:
- On a conventional loan, the Rate and PMI (private mortgage insurance) are increased for buyers with 640 – 759 credit scores, especially in the lower range. NC Home Advantage Solution: One low interest & PMI monthly rate for all borrowers! This is especially helpful for buyers with credit scores between 640 and 699.
- 5% down payment can be difficult to obtain: NC Home Advantage Solution: A buyer can choose a lower rate 3% down payment option or an option with a little higher interest rate that includes the zero interest, no payment required down payment assistance 2nd mortgage. For higher credit score buyers, we have a great strategy to lower the mortgage payment even more. Ask us how!
FHA mortgage 3.5% down payment:
- Down payment can be of the buyer’s own funds or can be a gift from a family member but sometimes the buyer doesn’t have these funds. NC Home Advantage Solution: The buyer can get a 5% of the first mortgage amount in down payment assistance which can cover the total down payment plus leave a little to go towards the settlement charges.
VA & USDA have limitations on the buyer and/or property. The buyer must be a Veteran, active duty, or qualifying surviving spouse of a veteran for a VA loan and the property and household income must qualify for USDA loans:
VA and USDA allow for 100% financing of the purchase price but what if the seller won’t pay for the settlement costs and the buyer doesn’t have the funds for closing costs. NC Home Advantage Solution: A buyer can use the down payment assistance up to 5% of the first mortgage amount to cover the closing costs and finance them with zero interest or payments.
USDA requires that the property being purchased be located in a USDA eligible area so certain cities in NC such as Raleigh, Durham, Chapel Hill, Greensboro, High Point, Charlotte, Wilmington, Fayetteville, Jacksonville, Goldsboro, Kinston, Greenville, Asheville, Hickory, and Winston Salem, have many areas that do not qualify because the population is too high to be considered rural. Search USDA eligible properties. NC Home Advantage Solution: There is not a geographic location requirement other than the property must be in the state of North Carolina.
USDA requires that the “Household” income (which means everyone that will live in the property, whether on the loan or not) be under the USDA income limit for the county in which the property is located. If the household income is over the limit, the buyer(s) cannot use USDA to purchase a home. Check your household income for USDA eligibility and learn more about USDA loans. NC Home Advantage Solution: NC Home Advantage has an income limit of $85,000 that is only based on the applicants on the loan and not other household members that are not on the mortgage.
VA is a great 100% financing mortgage option but to use the program the buyer needs to be a qualifying Veteran, active military, or surviving spouse of a veteran so most people do not meet that requirement so have been limited on 100% financing options. NC Home Advantage Solution: Buyers can use either a conventional, USDA, or FHA mortgage to obtain right at 100% financing to even over 100% financing to help with closing costs and pre-paid items.
First time buyers and Veterans can combine the solutions of the NC Home Advantage products along with a tax-saving Mortgage Credit Certificate (MCC Tax Credit), to reduce the buyer’s federal income tax liability by as much as $2000 per year for each year the buyer(s) occupy the home. Buyers who qualify by meeting the MCC tax credit income limits (this is a different income limit from the $85,000 Home Advantage income limit) can adjust their federal withholding amount and use the extra take home pay to help them make their mortgage payments more easily. See the MCC tax credit income limits by county here
The formula for the annual tax credit is: loan amount x interest rate x tax credit percentage. Learn more details here
Some examples of buyer scenarios that benefitted from the NC Housing products are which we have recently closed are:
- USDA purchase with 100% financing where all settlement charges were financed and the buyer received an MCC tax credit to use each year towards their tax returns
- 97% Conventional loan with a lower rate of PMI and lower interest rate compared to what their normal conventional loan would have been at 95% of the sales price. The buyer chose to not use down payment assistance but was able to obtain a great loan to fit the buyer’s needs
- FHA first mortgage with a 3% of the first mortgage Down Payment Assistance so the buyer was able to bring just under 1/2% of the price to closing rather than the normal 3.5% down payment required on an FHA loan.