Buying a house is exciting. Alongside the thrill of house hunting comes the anxiety of the unknown. Knowing how to buy a house and find the right mortgage to make your dream a reality are valid concerns. With multiple mortgage options, how do you decide which mortgage is right for you? Although these are good questions, there are answers, and buying a house doesn’t have to be a stressful experience.
Home mortgage options vary from state to state; sometimes, different options exist at a city or county level. In the Carolinas, there are multiple options to help home buyers, including state-specific programs to help first-time home buyers find the perfect house. Some of these programs help first time home buyers afford their new home by offering little or no money down mortgage requirements.
Here’s How to Buy a House in the Carolinas
Looking for a home can quickly become overwhelming. That's why potential buyers should consider the following steps before actively searching for a house.
Know What You're Looking For
Know what you're looking for before you contact a real estate agent. How many bedrooms and bathrooms are needed? Is the main floor bedroom required? How important is the location?
Setting basic guidelines can help focus the search, but they should be flexible. Are three full bathrooms a must, or would two full and one-half baths work? When house hunting, know what your minimum requirements are, but remain flexible. Sometimes, the best option is unexpected.
Before looking at homes, potential buyers need to understand the costs associated with home mortgages. Mortgage payments usually include property taxes and may require private mortgage insurance. These costs are added to the purchase price to arrive at a monthly payment.
Down payments and closing costs should also be factored into the initial cost of buying a home. The following table lists key factors for the most common loan options.
|Loan||Down Payment||Credit Score||Qualifications|
|Conventional||20%||620||Most lenders require 640|
|Conventional (97)||3%||620||Varies by Lender|
|FHA||3.5%||580||500 if 10% down payment|
|VA||0%||620||Varies by Lender|
|USDA||0%||640||Varies by Lender|
Depending on the type of loan, government guidelines such as loan maximums may apply. These requirements usually change annually, so check the appropriate website for the latest requirements.
Find Real Estate Agent or Attorney
Real estate agents can help answer questions and show available homes; however, potential buyers can do the search themselves. In South Carolina, buyers must hire a real estate attorney to be involved in real estate transactions. Attorneys typically provide the following services:
- Reviewing the contract
- Conducting a title search
- Applying for title insurance
- Preparing documents
- Supervising closing
- Disbursing funds
- Recording legal documents
How to Buy a House with a Small Down Payment
Not everyone can afford the 20% down payment that conventional loans require. If you're looking for a mortgage product in the Carolinas with a small down payment, consider the following options.
Conventional Loans have been the traditional mortgage option for years. For borrowers that meet the requirements, Conventional Loans mean lower interest rates, faster processing times, and more lending options such as fixed or adjustable interest rates. Loan terms are usually 15 or 30 years, but the down payment can be prohibitive.
97% Conventional Loan
97% conventional loans are a mortgage product that allows a 3% down payment. It has the following requirements:
- Mortgages are fixed-rate, although adjustable rates are available under special circumstances.
- The property must be a primary residence.
- The buyer must be a first-time homeowner.
- The loan amount cannot exceed $647,200.
To qualify as a first-time home buyer, only one of the buyers must be a first-time homeowner. A first-time buyer is anyone who has not owned a home within three years of applying for a loan. Since the down payment may be gifted, 97% conventional loans offer a lower monthly payment than other small down payment options.
FHA Loans are government-backed loans. The Federal Housing Administration (FHA) insures the loan against default, making the loan more attractive to lenders and providing an entry path for first time home buyers.
FHA Loans have the following requirements:
- A credit score of 580
- A down payment of 3.5%
- Mortgage terms of 15 or 30 years
- Private Mortgage Insurance
Many lenders offer FHA-backed loans, so shop around for the best rates. FHA Loans are suitable for borrowers with a lower credit score and smaller down payments. The monthly mortgage payments may be slightly higher because of PMI.
If you qualify for a Veteran Administration (VA) home mortgage, you already have access to a no-down-payment loan. The VA guarantees a portion of the loan amount, making the home loan more attractive to lenders. Any authorized lender offers VA-backed loans. The primary benefits of a VA home mortgage are:
- No down payment
- Low interest rates
- Limited closing costs
- No PMI
VA-backed loans are a life-time benefit, meaning qualified military personnel can use the loan multiple times. VA-backed loans are one of the more attractive options for those who qualify.
The US Department of Agriculture backs home loans in rural areas. These loans are not just for first-time buyers and can include funds for repairs to an existing property. To qualify for a USDA Loan, the home must be located in a designated rural area in South Carolina. These loans are especially attractive to buyers struggling to make a down payment and require:
- No down payment.
- Fixed-rate 30-year term
First Time Home Buyer Programs
Several programs are offered under the South Carolina State Housing Finance and Development Authority or SC Housing. These include the following:
- South Carolina Housing Down Payment. The SC Housing Authority offers a down payment assistance program that may help with a down payment or closing costs. It also offers assistance to first-time buyers looking for a loan.
- Palmetto Home Advantage. Palmetto Home Advantage offers financing for FHA, VA, and USDA loans. Down payment assistance can cover up to 5% of the loan amount and is available in all counties.
- Mortgage Credit Certification. South Carolina has a mortgage tax credit program. The Mortgage Credit Certificate (MCC) for home buyers provides a tax credit of up to $2,000 per year for the life of the loan.
- County First. County First is designed for rural homebuyers in underserved communities. Funds are available for move-up and first-time buyers. The program includes an $8,500 forgivable down payment and special fixed-rate financing.
Individual counties may have programs that can assist first time home buyers with down payments or loans.
Carolina Trust First-Time Buyer Program
Carolina Trust Federal Credit Union has a First-Time Buyer Program that offers loans at competitive rates with the following:
- 100% financing
- Up to 30-year term
- No down payment
- No PMI
- No income restrictions
As with most first time home buyer programs, borrows must complete a counseling program before closing. These are 5/1 adjustable rate mortgages where the first five years are at a fixed rate. Beginning in year six, the rate is adjusted based on market conditions with variations no greater than 2% per year or 5% over the initial rate.*
Where to Apply for a Mortgage
As you learn how to buy a house, your first step should be to talk to your trusted local lender. Carolina Trust can help you determine the best mortgage for your needs and budget. Once you are pre-approved for your mortgage, you can start house hunting for your perfect home.
*Loan approval and Annual Percentage Rate subject to credit worthiness. Loan type subject to property and borrower qualifications. Other restrictions apply.