First-Time Home Buyer Guide for North Carolina

Brendan Rigney

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Brendan Rigney

March 24th, 2022
Updated March 24th, 2022

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First-time home buyer requirements in North Carolina | Mortgage assistance programs | Down payment assistance programs | Tax credits | Low-income buyers | Buyers with disabilities| How to buy a home in North Carolina| Frequently asked questions

First-time home buyers in North Carolina have several programs and services that could help them find their first home:

  • Mortgages offered through the North Carolina Housing Finance Agency (NCHFA)
  • Home loans from the federal government, like the Federal Housing Agency, the U.S. Department of Agriculture, and the U.S. Department of Veterans Affairs
  • Conventional loans offered by private lenders, like mortgage companies

North Carolina's public housing agency, NCHFA, offers low-cost mortgages, administers federally backed programs for the state, and offers assistance programs to help home buyers with a down payment, closing costs, or other expenses.

Many of NCHFA's programs are also specifically designed to fit the needs of low-income home buyers!

For instance, the Community Partners Loan Pool program offers generous down payment assistance to low-income households.

» JUMP: Assistance for low-income home buyers

Making the leap to home buyer can seem daunting, but buying your first home has a ton of benefits:

  • A fixed monthly mortgage payment that remains consistent for years, versus ever-increasing rent payments
  • Homeowner-specific assistance programs, like tax credits
  • Building your wealth and improving your credit

🏠 Housing market in North Carolina

Your first home will likely accrue value significantly over the next couple of years. Also, you might be able to lock in a low-interest mortgage, saving you money over the course of the home loan!

🌡 Seller’s market: Buyer demand is exceeding the number of homes available.

📈 High appreciation rate: Home values are increasing significantly. Homes in North Carolina expect to grow in value 7.8% during 2022.

📉 Low mortgage rates: In North Carolina, the average interest rate for new 15-year mortgages is 4.69%. For new 30-year mortgages, the rate is 5.51%.

» READ: 8 Steps to Buying a House in North Carolina

What are first-time home buyer requirements in North Carolina?

Programs in the Tar Heel State for first-time buyers include eligibility criteria. To start, you cannot have owned a primary residence within the past three years to be considered a first-time home buyer.

Mortgage programs offered by NCHFA and other organizations in North Carolina may ask first-time buyers to meet certain benchmarks:

  • Purchasing a home within North Carolina
  • U.S. citizenship
  • The home needs to become the borrower's primary residence

Most mortgage and assistance programs also include requirements tied to finances, like minimum credit scores.

Tools lenders use to evaluate home buyers

Lenders use a credit score to determine a borrower's trustworthiness.

» READ: What Credit Score Is Needed to Buy a House?

Lenders evaluate a borrower's debt-to-income ratio to prevent the borrower from taking on too much debt and defaulting on their loans. Typically, lenders want your DTI to be 36–43% of your gross income.

To calculate your DTI, add all of your recurring monthly debt payments, plus your estimated mortgage payment, and divide it by your gross monthly income (before taxes).

» READ: How to Find High DTI Mortgage Lenders

Lenders use a loan-to-value ratio to ensure they provide ONLY the absolutely necessary amount of money to a borrower.

To determine your LTV, lenders divide your home loan amount by your property's value.

An LTV of more than 80% is considered risky, since it means the lender will lend more money to their customers. However, that doesn’t mean a lender won't offer a loan to a borrower with a high LTV.

Lenders use private mortgage insurance to protect their investment in case a borrower defaults on their loan. PMI usually equals 0.3–1.15% of the loan amount.

Lenders typically require PMI on conventional mortgages where the borrower's down payment is smaller than 20%.

Lenders will cancel PMI automatically once a mortgage's loan-to-value ratio reaches 78%.

» READ: How Much Will My Mortgage Payment Be?

Lenders use a price-to-income ratio to calculate housing affordability.

To calculate PTI, lenders divide median home prices by median household income.

If the PTI of a location is over 2.6, it usually means home prices exceed what people can afford based on the local median household income.

What credit score does a first-time buyer need?

You need a credit score of at least 640 to qualify for NCHFA's flagship program, NC Home Advantage Mortgage loans. To purchase a manufactured home, you need a score of 660.

» MORE: How to Boost Your Credit Score in Six Months

What debt-to-income ratio do you generally need?

NCHFA's mortgages require a max DTI of 43% — meaning only 43% of your monthly income should be put toward debt, mortgage payments, etc..

What level of income do you need?

NCHFA's mortgage and assistance programs all have income limits for borrowers. Though these vary, the absolute cap for all programs is $99,000 in annual income, regardless of household size or county of residence.

Some program limits are specific to your community or county. NCHFA's Self-Help Loan Pool and Community Partners Loan Pool programs require your income to be at or below 80% of the AMI.

Income limits for select programs
1–2 person households
3+ person households
NC Home Advantage Mortgage
$99,000
$99,000
NC Home Adv. + NC 1st Home Adv. Down Payment
$70,000–99,000
$83,000–99,000
NC Home Adv. Mortgage Tax Credit
$70,000–99,000
$83,000–99,000
Self-Help Loan Pool
80% of AMI
80% of AMI
Community Partners Loan Pool
80% of AMI
80% of AMI

What are first-time home buyer programs in North Carolina?

North Carolina Housing Finance Agency (NCHFA) is the primary agency for first-time home buyers who seek affordable mortgages, assistance loans, or alternatives to conventional private mortgages. Borrowers also have other options available, like with programs run by nonprofits or cities.

Editor's note

There are NO grant programs for first-time home buyers in North Carolina.

Fortunately, NCHFA and other organizations in the state offer a host of mortgages, assistance loans, and tax credits for both first-time and experienced home buyers.

What are first-time mortgage assistance programs in North Carolina?

First-time buyers in the state can access affordable, low-interest home loans through the state, the federal government, and private lenders.

Loan type
Credit score
DTI
Interest rate
Minimum down payment
Fannie Mae conventional
640
43%
4.125–5.125%
3%
Freddie Mac conventional
640
43%
4.125–4.5%
3%
Federal Housing Administration (FHA)
580
43%
4–5.5%
3.5%
U.S. Department of Agriculture (USDA)
640
41%
4–5.5%
0%
U.S. Department of Veterans Affairs (VA)
N/A
41%
4%–5.5%
0%

Government programs

NC Home Advantage Mortgage, NCHFA's primary mortgage program, offers home loans and down payment assistance to all North Carolina home buyers meet NCHFA's eligibility criteria:

  • A credit score of at least 640
  • A DTI of no more than 43%
  • An annual income of no more than $99,000

Through this program, NCHFA provides up to 100% of financing for fixed-rate, 30-year loans from federal and national organizations like Fannie Mae and Freddie Mac.

Fannie Mae and Freddie Mac are federally backed organizations that partner with local groups to provide mortgages to low- and moderate-income families.

Loans from Fannie Mae and Freddie Mac are often conventional mortgages, but they can include down payment requirements as low as 3%.

» MORE: First-Time Home Buyer Programs Everyone Should Know About

In addition to the loans themselves, the NC Home Advantage Mortgage program offers down payment assistance of 5% of the purchase price.

This down payment assistance is serviced as a 0% interest loan with no monthly payments. After 10 years, the loan is forgiven 20% per year — fully forgiven after a total of 15 years (as long as the home remains your primary residence).

🚨 Down payment assistance from NC Home Advantage Mortgage is not to be confused with the NC 1st Home Advantage Down Payment program!

You can use NC Home Advantage Mortgage loans with NCHFA's NC 1st Home Advantage Down Payment assistance and mortgage tax credit programs.

Self-Help Loan Pool program (SHLP) provides financing for homes built or refurbished by nonprofit housing organizations (like local Habitat for Humanity affiliates).

Funds through SHLP are offered as a single, 0% interest loan of 20–33 years. NCHFA finances the home up to $35,000 (or $50,000 in select counties), and participating SHLP organizations provide the remaining funds.

Unlike other NCHFA programs, SHLP has its own set of requirements for borrowers:

  • Enrollment in a self-help housing program, working with a nonprofit on the construction or rehabilitation of a home
  • Completion of home buyer education courses and two hours of individual counseling before purchasing a home
  • Household income that doesn't exceed 80% of the AMI
  • A home purchase price that meets county purchase price and income limits

» JUMP: Assistance for low-income home buyers

Nongovernment programs

First-time home buyers can stick with conventional mortgages. If you have good credit or a higher income, a conventional loan might work better for you since you won't need to meet NCHFA's eligibility requirements.

» MORE: How Much Will My Mortgage Payment Be?

Get Pre-approved Today!

Get matched with a lender who can tell you how much house you can afford. To get started, where do you plan on buying?

What are first-time down payment assistance programs in North Carolina?

Several programs in North Carolina can help you with the down payment on your first home.

Government programs

NC Home Advantage Mortgage program provides down payment assistance for all buyers — in addition to administering federal loans.

This is a second, 0% interest loan capped at 5% of the home purchase price. The loan doesn't require monthly payments, and it's fully forgiven after 15 years.

NC 1st Home Advantage Down Payment Assistance loan program provides up to $8,000 to first-time home buyers and veterans ONLY.

This 0% interest second mortgage has no monthly payments. After 10 years, the loan is forgiven 20% per year — fully forgiven after 15 years.

The NC 1st Home Advantage DPA loan program is explicitly for first-time home buyers and veterans. Like other NCHFA programs, these loans require a minimum credit score of 640 and maximum DTI of 43%.

The NC 1st Home Advantage DPA program has stricter income limits than NCHFA's primary mortgage program. These vary by county, ranging from $70,000 in Surry County to $99,000 in Wake County.

Additionally, homes can't be priced higher than $345,000.

NC Home Advantage Mortgage vs. NC 1st Home Down Payment


NC Home Advantage Mortgage's down payment assistance
NC 1st Home Advantage Down Payment loan
Maximum assistance
5% of purchase price
$8,000
First-time home buyer requirement?
No
Yes
Income restrictions
$99,000 in annual income
Varies by county
Purchase price limit
None
$345,000
Borrowers can combine a NC Home Advantage Mortgage with an NC 1st Home Down Payment loan as long as they don't use the mortgage program's down payment assistance.

Community Partners Loan Pool (CPLP), a collaboration between NCHFA and local governments or nonprofits, offers a forgivable, 0% interest second mortgage to use toward a down payment.

You can receive up to $30,000 or 20% of the home purchase price (10% for USDA Section 502 loans), whichever is lower. There are no monthly payments, and the loan is forgiven at the end of the loan term.

CPLP has participation requirements in addition to NCHFA's general guidelines:

  • Household income at or below 80% of the AMI
  • A maximum of 32% of monthly income spent on housing costs, like payments on this and other home loans
  • Completion of a home buyer education course and two hours of housing counseling with CPLP members or through eHome America
  • Completion of a homeownership-readiness plan with the participating CPLP member

The home you're buying must also meet a few criteria:

  • Be in new or like-new condition
  • Fall below county-level purchase limits
  • Receive a Certificate of Occupancy from the state or otherwise passed inspection from a licensed professional

City-specific programs

Certain cities in North Carolina offer their own down payment assistance programs.

Charlotte's HouseCharlotte program offers five different kinds of down payment, closing costs, and interest rate buy down loans. Rates and loan amounts vary according to the borrower's income and background.

Participants need to complete home buyer education with a HUD-approved housing counseling agency.

HouseCharlotte loans are compatible with conventional mortgages and home loans offered by the FHA, VA, and CLPL.

» JUMP: Programs for low-income home buyers

The City of Raleigh's Homebuyer Assistance Program can provide up to $20,000 for down payment, closing costs, or any gap in their mortgage financing. These 0% interest loans are fully forgiven after 20 years.

Raleigh's assistance program includes a few requirements for participants:

  • Completion of city-sponsored homeownership education courses
  • Annual income below program limits — one-person households can't make more than $52,750; the limit for two-person households is $60,250

A home financed through Raleigh's assistance program needs to be a single-family home, townhome, or condominium (no manufactured homes). An eligible home can't be bought for more than $256,000, or $265,000 if it's newly built.

Greensboro's Housing Connect GSO program offers up to $10,000 or 20% of the purchase price, whichever is lower, to use toward a down payment or closing costs.

The loan is fully forgiven after five years, at 20% per year.

Like other local programs, the Housing Connect GSO assistance program has its own eligibility criteria for home buyers:

  • Secure a fixed-rate 15- or 30-year mortgage.
  • Contribute at least $500 out of pocket toward this loan.
  • Complete an eight-hour counseling course provided by the city.
  • Meet income limits: two-person households can't make more than 120% of the AMI, while the limit for larger households is 140%.

💸 You can receive an additional $5,000 from Greensboro's down payment assistance program if you buy a home in a designated redevelopment areas.

What are first-time home closing cost assistance programs in North Carolina?

Home buyers also need to cover closing costs. Some down payment assistance programs in North Carolina allow you to use funds to cover closing costs, too:

  • NC 1st Home Advantage Down Payment program
  • Charlotte's HouseCharlotte Program
  • Raleigh's Homebuyer Assistance Program
  • Greensboro's Housing Connect GSO

What are first-time home buyer tax credit programs in North Carolina?

First-time home buyers can earn a tax credit when approved for a mortgage. This can take a big bite out of the federal taxes you owe each year.

The credit's amount usually reflects a percentage of the annual interest paid on your mortgage.

For instance, the NC Home Advantage Tax Credit offered by the NCHFA matches up to 30% of the mortgage interest you pay each year. If the home is newly constructed, the credit matches up to 50%. Regardless, the credit is capped at $2,000.

Here's how a tax credit from the NCHFA could work:

  1. Your $200,000 mortgage has an interest rate of 3.75%, meaning you pay $7,500 each year in interest ($200,000 x 3.75% = $7,500).
  2. With the NC Home Advantage Tax Credit, you can save up to 30% of this amount on your federal taxes ($7,500 x 30% = $2,250).
  3. Deduct the final amount from your federal taxes (up to $2,000 each year).

The NC Home Advantage Tax Credit can be combined with the NC Home Advantage Mortgage program.

What assistance is available for first-time home buyers with low income?

Some programs provided by NCHFA and other agencies are specifically designed for households that have an annual income at or below 80% of the statewide AMI. In North Carolina, this means an annual income of $41,022 for a household of one and $53,487 for a household of two.

You might still qualify for NCHFA programs if you have a higher income for several reasons:

  • Several programs use county-level AMI, meaning 80% of a community's median income may be higher or lower than in the state
  • NC Home Advantage Mortgage program caps eligibility at $99,000 in annual income — well above the statewide AMI.

Government programs

NCHFA's Self-Help Loan Pool is a mortgage program aimed at filling the unique needs of low-income households — specifically those who fall at or below 80% of their county's AMI.

The SHLP program provides financing for homes recently built or rehabbed by local housing nonprofits, like Habitat for Humanity affiliates.

Additionally, some federal loan programs focus on low-income home buyers. For instance, USDA loans help low-income borrowers move to rural areas with low interest rates, for example.

» JUMP: First-time mortgage assistance programs

Some down payment assistance programs are for low-income home buyers.

NCHFA's Community Partners Loan Pool offers up to $30,000 in down payment assistance to home buyers with incomes at or below 80% of the county AMI.

Local programs for low-income buyers

Program
Down payment assistance amount
Income limits
HouseCharlotte (Charlotte)
$10,000 (for 10 years, or 5 years for public servants)
$17,000 (for 15 years in high-cost neighborhoods)
80% of AMI
Homebuyer Assistance Program (Raleigh)
Up to $20,000
$53,600–101,050 (based on 1–8 person household)
Housing Connect GSO (Greensboro)
Up to $10,000 or 20% of purchase price
120–140% of AMI

What assistance is available for first-time home buyers with disabilities?

If you or someone in your household lives with a disability, NCHFA can provide extra assistance in making your home more accessible.

🤔 Under North Carolina housing law, a person is considered disabled if they live with a mental or physical impairment that substantially limits one or more major life activities.

NCHFA's Essential Single-Family Rehabilitation program provides interest-free and forgivable loans to low-income homeowners who are elderly or living with a disability.

Buying a house for the first time?

Buying a home can be much less stressful than you imagine if you break the process down into more manageable steps.

» MORE: 8 Steps to Buying a House in North Carolina

Step 1: Evaluate your financial situation

Get a 360-degree view of your income, debt, credit score, and other finances. All of these are factors in what kind of home loan and assistance you receive.

Step 2: Choose the right neighborhood

Where would you like to live? Look into a place's local culture and amenities (and home values) to help you pick your next neighborhood.

Step 3: Find a great real estate agent in North Carolina

A local real estate agent can make all the difference in finding your first home. They'll have the inside track on the market, and they can provide more context about the neighborhood.

You can pick an agent that's right for you based on their experience, which homes they work with best, or online reviews.

» FIND: Top Real Estate Agents in North Carolina

Step 4: Get pre-approved for a mortgage

Sellers don't usually let you tour their house without you first getting pre-approved for a home loan. Compare interest rates and loan types to help find the lender that's right for you.

Step 5: Start house hunting in North Carolina

Before touring homes, make a list of the things you need in your first home, plus some "nice to haves."

Also, keep in mind WHEN you're house hunting — the real estate market is seasonal, after all.

Step 6: Make offers

When you make an offer, have some ways to sweeten the deal on hand. Consider waiving contingencies or writing a letter to the seller to set yourself apart from other potential buyers.

Step 7: Inspections and appraisals

Before closing the purchase, get a licensed inspector and an appraiser to make sure the home is fit for your needs and its price reflects its true value.

Step 8: Final walkthrough and closing

Conduct one more walkthrough of the home. Make sure everything is ready for your move and that the home meets your standards.

North Carolina is an "attorney state," meaning an attorney needs to be present during the closing process of the home purchase!

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FAQs for first-time home buyers in North Carolina

The North Carolina Housing Finance Agency offers first-time home buyers and veterans 30-year, fixed-rate mortgages from Fannie Mae Freddie Mac, FHA, USDA, and VA. Home loans can also include down payment assistance.

To qualify for a mortgage from NCHFA, you can't have owned an NC home in the past three years.

NCHFA programs typically require a credit score of 640 or higher, though other organizations have lower requirements.

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