North Carolina's First Home Advantage Program: Down Payment Help for First-Time Buyers
What the NC First Home Advantage Program Covers
North Carolina's First Home Advantage program provides down payment and closing cost assistance to first-time homebuyers through a combination of grants and loans. The program does not give you money outright—instead, it pairs a grant (money you do not repay) with a second mortgage (a loan you do repay over time). The grant portion ranges from a few thousand dollars to as much as 5 percent of your home's purchase price, depending on which lender you work with and your income level.
The program is administered through participating lenders across the state, not through a single state office. This means you apply through the bank or mortgage company that is financing your home purchase, not through a government agency. The lender handles the paperwork, determines your may be able to access based on income and credit, and coordinates with the state to deliver the grant and second mortgage.
The second mortgage—the part you repay—typically carries a lower interest rate than a conventional second mortgage and may have flexible terms. Some versions require no monthly payment until you sell the home or refinance; others build payments into your overall mortgage structure. The exact terms depend on the lender and the specific program option you choose.
Key Takeaways
- The First Home Advantage program combines a grant (money you keep) with a second mortgage (money you repay), and you must apply through a participating lender, not directly to the state.
- Your income must fall below a certain threshold, which varies by county and household size, and you must be a first-time homebuyer or meet other specific conditions the lender sets.
- The grant portion can cover part or all of your down payment and closing costs, while the second mortgage is a loan you repay, often with no monthly payment until you sell or refinance.
- Not all lenders in North Carolina participate in the program, so you will need to contact lenders directly or ask your real estate agent which ones offer First Home Advantage.
- The program has income limits and property price limits that vary by county, so a home affordable in one county may exceed the program's limits in another.
Income and Homebuyer Requirements
To use the First Home Advantage program, your household income must fall below a limit set by the state based on your county and family size. These limits change annually and are tied to the area median income. For example, a single person in one county might have a limit of $50,000, while a family of four in the same county might have a limit of $70,000—but these numbers vary significantly by location, so you must check your specific county.
You must also be a first-time homebuyer, which the program defines as someone who has not owned a home in the past three years. Some lenders offer expanded versions of the program for repeat buyers or for borrowers in targeted neighborhoods, so even if you owned a home before, you may still be able to use the program under certain conditions. Ask the lender directly about their specific rules.
Your credit score typically needs to be at least 620, though some lenders may accept lower scores or require higher ones. The lender will also look at your debt-to-income ratio—how much you owe each month compared to how much you earn—to make sure you can afford the mortgage payment plus the second mortgage payment (if applicable).
How the Grant and Second Mortgage Work Together
The grant is the part of the assistance that does not require repayment. It is applied directly to your down payment and closing costs at closing, reducing the amount of money you need to bring to the table. The size of the grant depends on the lender's program structure and your income level; lower-income buyers often receive larger grants.
The second mortgage is a separate loan secured against your home, sitting behind your primary mortgage. If your primary mortgage is $150,000 and your second mortgage is $20,000, the primary lender gets paid first if you sell or refinance. The second mortgage typically has a lower interest rate than a conventional second mortgage because it is backed by the state program. Some versions charge no interest at all, though this is less common.
The repayment terms vary by lender. Some programs require no monthly payment as long as you live in the home; the loan is repaid when you sell or refinance. Others require a small monthly payment built into your overall housing costs. A few programs forgive the second mortgage after a set number of years (often 5 to 10) if you stay in the home and make all payments on time. Ask your lender which structure they offer before you commit.
Property Price Limits and County Variations
The First Home Advantage program sets a maximum purchase price for the home you are buying. This limit varies by county and is based on the area's median home price. A home that qualifies in a rural county may exceed the limit in an urban county. You can find your county's limit by contacting a participating lender or checking with your local housing authority.
The program also limits the loan amount your lender will provide. If you are buying a $200,000 home and the program's maximum loan in your county is $180,000, you cannot use the program for that purchase. However, if you find a home within the limit, the program can help you bridge the gap between your down payment savings and the full purchase price.
Finding a Participating Lender
The First Home Advantage program is not offered by every bank or mortgage company in North Carolina. You will need to contact lenders directly and ask whether they participate. Start with banks and credit unions in your area, as well as mortgage brokers who work with multiple lenders. Your real estate agent may also know which lenders in your region offer the program.
When you call a lender, ask specifically about the First Home Advantage program and whether they have current funding available. Some lenders may have paused the program temporarily due to funding limits, so it is worth checking with more than one. Once you find a participating lender, they will walk you through their specific application process, which typically includes a credit check, income verification, and a pre-qualification letter.
You can also contact your local housing authority or a nonprofit housing counselor to ask which lenders in your area participate. Many nonprofits offer free homebuyer education classes and can connect you with lenders who actively use the program.
Down Payment and Closing Cost Breakdown
The First Home Advantage grant can be used for both your down payment and your closing costs. Closing costs typically include loan origination fees, appraisal fees, title insurance, property taxes, homeowners insurance, and other charges that add up to 2 to 5 percent of the home's purchase price. By covering some or all of these costs with the grant, the program reduces the total cash you need at closing.
For example, if you are buying a $150,000 home and the lender offers a 3 percent grant ($4,500), you could use that $4,500 toward your down payment, your closing costs, or a combination of both. If your down payment is $7,500 and your closing costs are $4,000, the $4,500 grant could cover most of the closing costs, leaving you to pay only the down payment from your own savings.
The exact allocation depends on your situation and the lender's rules. Discuss with your lender how they recommend splitting the grant between down payment and closing costs based on your savings and the home price.
What Happens After You Close
Once you close on your home, you own it outright (subject to your primary mortgage and the second mortgage). The second mortgage is recorded against your property, just like your primary mortgage. If your lender's program requires monthly payments on the second mortgage, those payments will be due each month along with your primary mortgage payment.
If the program offers deferred payment (no monthly payment until you sell or refinance), you simply live in the home and make your primary mortgage payments. When you eventually sell or refinance, the second mortgage balance is paid off from the sale proceeds or rolled into your new loan. If the program includes loan forgiveness after a set period, the lender will notify you when the loan is forgiven and will release the lien against your property.
Keep in mind that the second mortgage affects your ability to refinance or take out other loans in the future, because lenders will see it as an existing debt. However, because it typically has a lower balance and interest rate than a conventional second mortgage, it is usually less of a barrier than other forms of borrowing.
Frequently Asked Questions
Do I have to repay the grant portion of the assistance?
No. The grant is a one-time gift that does not require repayment. You only repay the second mortgage portion, and only if and when you sell or refinance (depending on the lender's terms). The grant stays with you regardless of what happens to your home value or your financial situation.
What if I do not have any down payment savings?
The First Home Advantage program can work with little or no down payment from you, depending on the lender. Some lenders will use the grant plus a larger second mortgage to cover the full down payment and closing costs, so you bring almost no cash to closing. Ask the lender whether they offer a zero-down or low-down option within the program.
Can I use this program if I am self-employed or have irregular income?
Self-employed borrowers can use the program, but the lender will require more documentation of your income—typically two years of tax returns and possibly profit-and-loss statements. Irregular income is harder to verify, but some lenders will average your income over time or use bank statements to show consistent deposits. Contact the lender directly with your income details to see whether they can work with your situation.
What happens to the second mortgage if I sell my home?
When you sell, the second mortgage is paid off from the sale proceeds before you receive any money. If your home sells for more than you owe on both mortgages, you keep the difference. If it sells for less, you may owe money after the sale, depending on your state's laws and your lender's terms. Discuss this scenario with your lender before you buy.
Can I pay off the second mortgage early?
Most lenders allow early repayment of the second mortgage without penalty, but confirm this with your lender before closing. Paying it off early can improve your credit and reduce your overall debt, though it means using cash you might otherwise invest or save.