Our Programs
FirstHome Mortgage
Downpayment assistance up to $7,000
Second mortgage up to $20,000
Job loss protection
Mortgage Credit Certificates
Income tax return requirement
Recapture: What does it mean for your client?
FirstHome Mortgage
We sell tax-exempt Mortgage Revenue Bonds to investors and use the funds to finance low-cost mortgages for first-time home buyers whose income has kept them out of the housing market.
Because these loans are financed with Mortgage Revenue Bonds, you may hear lenders refer to them as “MRB” loans.
Partnering with our participating lenders, we offer 30-year, fixed-rate conventional, FHA, VA, and USDA mortgages at below-market interest rates.
100% financing may be available for VA and USDA loans. Downpayments for FHA and conventional loans are generally 3% of the sales price.
How does it work?
Because they are financed with tax-exempt bonds, our mortgages usually have interest rates that are approximately one percentage point below the market rate. A decrease of one percentage point in the interest rate could increase your client’s purchasing power by approximately $15,000.
If a potential home buyer has an annual income of $44,000, and her car payment and other debts total $400 a month, that client would have approximately $1,100 available for a monthly house payment. Depending on where the home is located, property taxes and hazard insurance will cost about $275, leaving $825 to pay the principal and interest on the mortgage.
The chart below shows what the purchasing power would be, based on different interest rates.
If the interest rate is: |
Your client can afford: |
5.0% |
$153,600 |
5.5% |
$145,300 |
6.0% |
$137,600 |
6.5% |
$130,500 |
7.0% |
$124,000 |
Home buyer eligibility
To qualify, a home buyer:
- Must be a first-time home buyer or not have owned a principal residence during the past three years. Even if they are not first-time buyers, your clients may be able to use a FirstHome Mortgage if they are buying in an area designated as economically distressed.
- Must have an annual household income that falls within the allowed limits, up to $81,500 depending on family size and the county where the home is located.
- Must be purchasing a home with a sales price up to $220,000 for new construction, and up to $210,000 for an existing home.
- Must buy a home in North Carolina and occupy it within 60 days of closing.
- Must be a reasonable credit risk.
Eligible properties
Most types of homes qualify for the FirstHome Mortgage. Eligible properties include:
- New and previously owned detached homes
- Townhouses and Planned Unit Developments (PUDs)
- Condominiums
- New doublewide manufactured homes on permanent foundations, purchased through land-home transactions.
While existing manufactured homes cannot be financed with the First-Time Home Buyer Mortgage, they may qualify for a Mortgage Credit Certificate (MCC).
back to top
Downpayment assistance up to $7000
Home buyers who need help with a down payment and closing costs may qualify for interest-free, deferred second mortgages up to $7,000. The buyer pays $750 out-of-pocket and the loan pays up to $7,000 of the balance.
These second mortgage loans are processed by the lender at the same time as the FirstHome Mortgage.
No payment is due on the principal for 30 years from the date of closing. However, payment becomes due upon selling the home, refinancing, loan default, or if the home ceases to be the principal residence of the owner.
Home buyers must meet the same eligibility requirements as for the FirstHome Mortgage with the addition of the following:
- Buyer income is up to $75,650 for a family of eight and depending on the county where the home is located. Sales price of the home is up to $210,000.
- The lender does a cash-flow analysis for the buyer.
- Homes built before January 1, 1978, are not eligible.
The North Carolina Housing Finance Agency has been providing this downpayment assistance for several years using federal HOME funds. Currently, some of the funding comes from the American Dream Downpayment Initiative (ADDI), signed into law in December 2003.
Please direct home buyers to the Home Buyer section of this Web site for more information on our downpayment assistance or advise them to call us at 1-800-393-0988 and ask to speak with an underwriter.
back to top
Second mortgage up to $20,000
In some cases, your clients may qualify to purchase homes in conjunction with a local nonprofit or government agency that uses financing from our New Homes Loan Pool. These transactions include deferred second mortgage loans up to $20,000. The second mortgage is targeted to home buyers with incomes below 80% of the area’s median income. The primary financing can come from a FirstHome Mortgage or a bank mortgage product.
The maximum second mortgage amount is $20,000, or 20% of the sales price, whichever is less. The minimum loan amount is $7,500. Review the list of agencies that have offered this assistance.
back to top
Job loss protection
The Job Loss Feature can help buyers who lose their jobs. To qualify, the homeowner must be eligible for unemployment benefits and must have kept current on mortgage payments up to the time of job loss.
The Job Loss Feature pays principal and interest payments for four months. The homeowner is responsible for the escrow portion of the mortgage payment (taxes and insurance). Funds are sent directly to the loan servicer. These funds are a second mortgage with no interest and no monthly payments. The homeowner repays this loan when they sell, transfer or refinance the home; if the loan goes into default; or if the home ceases to be the principal residence.
Other benefits may apply. Homeowners can contact their servicers for additional information.
back to top
Mortgage Credit Certificates (MCC)
Home buyers who meet the income qualifications and eligibility requirements but do not qualify for a low-interest mortgage because of credit problems or high qualifying ratios may be eligible for a Mortgage Credit Certificate (MCC).
An MCC can be used with almost any type of mortgage, including adjustable rate mortgages. However, it cannot be used with our FirstHome Mortgage.
The participating lender sets the terms of the mortgage. This includes the interest rate, down payment, underwriting criteria, discount points, and closing costs. While the North Carolina Housing Finance Agency issues MCCs to qualified buyers, we do not originate loans. The buyer gets the loan from one of our participating lender.
How does it work?
Suppose your client qualifies for an MCC and obtains a 30-year, 6.5% fixed-rate mortgage of $97,000. The first year’s interest payment is approximately $6,300. The MCC allows the homeowner to take a federal income tax credit of $1,260 ($6,300 x 20%) for that year.
If the homeowner’s federal income tax liability is $1,260 or more after all other credits and deductions, that homeowner receives the entire benefit of the MCC tax credit – $1,260. In figuring taxes, the homeowner also takes a deduction for the remaining 80% of the mortgage interest.
If the federal income tax liability is less than $1,260 ($800 for example), the tax is reduced by only $800 that year. However, remaining credit can be claimed on tax returns for the next three years, if tax liability increases.
A homeowner can benefit immediately from the MCC by filing a revised W-4 (Employee’s Withholding Allowance Certificate). In this example, the federal tax would be reduced by $105 a month ($1,260 / 12). The extra $105 increases the buyer’s take-home pay and helps make house payments more affordable.
Eligible properties
Most types of homes qualify for the MCC. Eligible properties include:
- New and previously owned detached homes
- Townhouses and planned unit developments
- Condominiums
- New and existing doublewide manufactured homes on permanent foundations, purchased in land-home transactions.
back to top
Income tax return requirement
Each home buyer submits the last three years of signed federal income tax returns when applying for a FirstHome Mortgage or an MCC. Tax returns are the most reliable way of determining whether a person is a first-time home buyer: the return and the included schedules will not show deductions related to homeownership. (Buyers purchasing homes in targeted areas do not have to meet this requirement.) In addition, W-2s are required for each job held by the borrowers in the last calendar year.
February 15 is the date that marks a new tax year for this purpose. If your client will be closing on a new house prior to February 15, 2008, that client will need the income tax returns for 2004, 2005 and 2006. If closing happens after February 15, 2008, your client will need the tax returns for 2005, 2006, and 2007.
For all three years, your client needs to provide all forms submitted, whether 1040A, 1040EZ, TeleFile tax record, or 1040. If your client does not have the necessary tax returns, copies of the missing returns can be ordered from the IRS.
To get a copy of the most recent return, along with W-2s, your client will need to send IRS form 4506 along with a $39 payment to the IRS at the address listed on the form.
For returns not requiring W-2s (transcripts), your client can either call (800) 829-1040 and follow the directions on the voice prompts, or send IRS form 4506T to the IRS. There is no charge for transcripts and they should arrive in the mail within 10 business days.
back to top
Recapture: What does it mean for your client?
The federal recapture tax applies to loans received through the FirstHome Mortgage and also to the Mortgage Credit Certificate.
However, most borrowers will never have to pay the recapture tax. For the tax to apply, all three of the following conditions must exist.
- The owner must sell the home within 10 years of purchase.
- Household income must rise significantly.
- The owner must receive a substantial gain from the sale.
Even if repayment is due, it will never exceed 6.25% of the original mortgage. To read about the recapture tax in detail, see our homeowner brochure For Sale: What Recapture Means for You (English) or For Sale: What Recapture Means for You (Spanish).
back to top
|
Lenders & Servicers
Real Estate Agents
