Several months ago, we shared about some low-down-payment loans that can save you a lot of money upfront on a home purchase. Great as they are, these low or zero down payment mortgage programs aren’t your only hope for being able to afford a house. Also available to many buyers are down payment assistance programs. Read on to learn about some down payment assistance programs and options you may have never considered.
NC 1st Home Advantage Down Payment
If you are a first-time homebuyer or military veteran in North Carolina, you may be eligible for $8,000 in down payment assistance via the NC 1st Home Advantage Down Payment. This option is available through the North Carolina Housing Finance Agency and is a deferred second mortgage. If you qualify, you don’t need to repay the down payment assistance unless you sell, refinance or move out of the home in the first 15 years after move-in. The down payment loan is forgiven 20% per year at the end of years 11–15. So after Year 15, it’s completely forgiven. In other words, you won’t have to pay back a penny of it – even if you then decide to move. Sound too good to be true? Well, if might be if you’re not eligible. But if you are eligible, it’s quite the deal.
To gain eligibility, you’ll need a credit score of 640 or higher. Also, your income and home sale price can’t exceed a certain amount. For more on this popular down payment assistance program, including additional requirements, click here.
The simplest and oldest form of down payment assistance is known as a grant. This is a gift that someone you know (and presumably love) provides you at closing out of the goodness of their heart. Most grants cover some or all of your down payment and/or closing costs.
Since a grant is a gift, you’re not expected to pay it back. Ever. In fact, it’s unlikely the person who gave it to you would ever accept repayment. To put it another way, there are no strings attached. And, of course, you don’t need a certain credit score or income level for someone to bless you with a grant. That’s totally their choice. Just maybe you’ll be lucky enough to get one from someone you hold dear. Wouldn’t that be wonderful?
To find down payment assistance programs, it’s a good idea to start by checking with your state housing finance authority. Here’s the link for South Carolina, and here’s North Carolina. Some programs are also available at the local level. So, check with your county and city government as well.
It’s important to be aware that not all down payment assistance programs work like the NC 1st Home Advantage Down Payment. This is classified as a zero-interest, “forgivable” loan because you’ll never have to pay it back if you meet certain conditions. Zero-interest, deferred-payment loans work differently. You’ll eventually have to pay the loan back, but it typically won’t be until you sell your home, refinance or pay off the mortgage. Similarly, low-interest loans make homeownership more attainable, but they involve yet another method. In this case, you will pay the down payment and closing costs over a period of as many as 10 years. While this might not be your first choice among down payment assistance programs, it alleviates the burden of having to pony up this money all at once.
At Fairway of the Carolinas, we’re happy to answer any questions you have about down payment assistance programs. Our mortgage advisers will first let you know if you’re eligible and then walk you through any available options. And the same is true for the homebuying process in general. Give us a call today and let us get you sailing down the path to homeownership this fall.