A 2018 study by the Urban Institute identified the top three barriers to home ownership to be affordability, credit and misconceptions about down payment requirements. Many consumers believe a 20% down payment is necessary to purchase a home and manage monthly mortgage costs. In reality, the median loan-to-value ratio for North Carolina home buyers is 94%, close to the national median of 95%. When the Urban Institute’s Housing Finance Policy Center compared affordability for median homes purchased with 3.5% down payment and 20% down payment, it found that a home purchased with 3.5% down payment would require a median-income family to spend 24% of their income on monthly mortgage payments, while the same family who put down 20% would have to spend about 21% of their income. Even lower down payment requirements are perceived as a barrier by would-be home buyers who are struggling to save and unaware of available assistance.
Fortunately, there are both educational resources to help would-be homeowners better understand the home buying process as well as financial resources to make home possible. “Home Buying 101” includes information on down payments, closing costs and mortgage and homeowner insurance, as well as information about financial assistance to make homes more affordable. These include the NC Home Advantage Mortgage™, NC 1st Home Advantage Down Payment Assistance and the NC Home Advantage Tax Credit.