How to Get a Mortgage in North Carolina
Buying a new home can feel like a complicated process in the state of North Carolina. But, knowing the steps you’ll need to take to secure a home loan and the homebuyer programs available in your area in North Carolina will help you get the most out of your move to the state.
In this guide, we’ll go over how to get a mortgage in North Carolina. We'll discuss the mortgage process and the different types of North Carolina mortgages and down payment assistance programs available. We’ll also touch on first-time homebuyer loans in North Carolina, as well as what paperwork you’ll need to secure a mortgage.
Read our other guides to learn more about real estate investing and about getting a mortgage when self employed.
Make sure you are using the best lender available. We recommend Giniel Financial Group.
North Carolina Mortgage Process Overview
Finding housing you can afford in North Carolina can be difficult, especially for first-time homebuyers. It’s best to choose a local mortgage lender who can help you find the right loan for you and save you money throughout your home ownership. But it’s always good to show up prepared.
Read on to learn about the North Carolina housing market, what loans are available in North Carolina, and what steps you can take to better secure one.
Understanding the North Carolina Housing Market
When looking for a place to call home, North Carolina is an attractive option. In the last year alone, the number of homes listed for sale rose by 2.5%, and the average price increased by 14.5%. With 300,000 new residents estimated to move to North Carolina in 2022, demand for housing has risen significantly as well.
Of all the new housing units authorized for construction in the state, 69.4% (68,636) are categorized as single-family homes. The median home value in North Carolina is $182,100, while the median monthly rent with utilities is estimated at $932.
People have been drawn to some of the state’s fastest-growing cities, such as Rolesville, Waxhaw, and Fuquay-Varina. These cities offer a healthy job market with plenty of available positions and ideal conditions for setting up a business. Plus, the competition for homes in desirable areas like Charlotte and Raleigh can be high.
If you’re considering buying or renting a home in North Carolina, now is an excellent time to do so. With the increase in population and demand, the real estate market looks promising for buyers and sellers alike. Keep an eye on housing trends as you search for your perfect home in North Carolina.
Types of First-Time Homebuyer Loans in North Carolina
For those seeking a first-time homebuyer loan in North Carolina, there are several different types you could qualify for.
The types of home loans for first-time buyers in North Carolina are:
- Conventional 97: This loan-to-value purchase program through Fannie Mae or Freddie Mac allows homebuyers with good credit to purchase a home with just 3% down.
- FHA loan: This loan, backed by the Federal Housing Administration, allows those with weaker credit to purchase a house with 3.5% down. However, you will have to get mortgage insurance.
- VA loan: One of the best types of mortgages around, these allow those who qualify to get a house with no money down and often don’t require mortgage insurance. To qualify, you must be a veteran, active military member, reservist, or member of the National Guard.
- USDA loan: These loans through the Department of Agriculture allow those looking to buy homes in designated rural areas for 0% down. You must have a decent credit score, but often these come with low mortgage insurance rates.
- North Carolina Housing Finance Agency (NCHFA): The NCHFA offers its NC Home Advantage Mortgage program to first-time homebuyers. Eligible applicants can receive a fixed-rate mortgage from an NCHFA-approved lender along with down payment assistance of up to 3% of the loan amount. For more information, visit the NC Home Advantage Mortgage page on the NCHFA website.
Should you want a deeper dive into this topic, be sure to read our Different Types of Home Loans article.
The 8 Steps to Buying a House in North Carolina
Whether you’re a first-time homebuyer or are looking to purchase an additional property, knowing the steps to buying a house in North Carolina will help you show up prepared. Here, we discuss the eight steps to buying a home in North Carolina.
- Start Saving For a Down Payment
- Know What Mortgage Lenders Look For
- Get Your Paperwork in Order
- Apply For Mortgage Pre-Approval
- Find Your Real Estate Agent
- Find Your Home and Make an Offer
- Complete Inspections and Appraisals
- Close on Your New Home
Step 1: Start Saving for a Down Payment
A down payment is the portion of your home’s purchase price that you pay at closing. Depending on what type of loan you qualify for, your down payment might range anywhere from 3% to 20%.
Relying on how expensive the home you’re purchasing is, your down payment could be anywhere from a few thousand dollars to well over $60,000. It’s best to show up to the homebuying arena with some money already saved up.
Should you need help with saving or making a down payment in North Carolina, there are some assistance programs that can help you. Some are catered toward first-time buyers, and some help low-income buyers. Each program has its own eligibility requirements, so make sure you qualify before applying.
North Carolina down payment assistance programs include:
- North Carolina Housing Finance Agency (NCHFA) NC 1st Home Advantage Down Payment: Offered to first-time homebuyers by the NCHFA, the NC 1st Home Advantage Down Payment program can assist with the additional costs of buying a home. Eligible applicants may be able to receive $8,000 in down payment assistance as a deferred second mortgage forgiven after 15 years. For more information, visit the NC 1st Home Advantage Down Payment page on the NCHFA website.
- US Department of Housing and Urban Development (HUD): North Carolina also has homeownership assistance programs through HUD. These include statewide programs, such as USDA Rural Development programs, to help reduce costs for low-income families. Local programs also exist, depending on the area of North Carolina in which you want to purchase a home. For more information, visit the North Carolina HUD Homeownership Assistance page.
Step 2: Know What Mortgage Lenders Look For
Before seeking out a lender, you should know what they will be looking for in regards to giving you a home loan. This will help you better prepare and show up with everything in order, making securing your loan even easier.
Some of the factors lenders will look at are:
- Income and job history: Lenders need to know you have a steady income that can ensure you’ll be able to pay back your loan. Often your lender will need to view at least two years worth of employment history and any other sources of income (alimony, child support, etc.).
- Credit score: Your credit score is an indication of how you manage your money. Most conventional loans require a minimum score of 620. With government-backed loans, you’ll need a score of at least 580.
- Debt-to-income (DTI) ratio: This helps lenders assess if you have the consistent cash flow to support a home loan. DTI is calculated by taking your monthly debt payments (credit cards, student loans, etc.) and dividing this by your gross monthly income. Lenders are aiming for you to have a DTI of 50% or less.
- Assets: Lenders will want to know if you have any extra money in a financial institution to ensure you can still make payments if you run into monetary trouble. Some examples of asset types are savings accounts, retirement accounts, and taxable investments.
- Property type: What kind of home you’re looking to purchase will also factor into what type of loan a lender will consider for you. Single-family homes that will be used as primary residences will take priority over investment properties that come with more risk.
Step 3: Get Your Paperwork in Order
When applying for a loan, you will need to have all your paperwork ready. This includes proof of income, bank statements, credit reports, tax returns, and other documents that may be required by the lender. The more organized you are with your paperwork, the easier it will be for a lender to approve your loan.
| Proof of Income | Credit Documentation | Assets and Liabilities |
| Two years of federal tax forms | Permission to view your credit report | 60 days of account statements |
| Most recent W-2s and pay stubs | Documentation of extenuating circumstances to damaged credit | Statements from retirement or investment accounts |
| 1099 forms (if self-employed) | Documents for the sale of any assets | |
| Divorce decrees or child support decisions | Verification of gift funds deposited into your account | |
| Six months of legal documentation of alimony or child support received |
When applying for a loan, you will need to have all your paperwork ready. This includes proof of income, bank statements, credit reports, tax returns, and other documents that may be required by the lender. The more organized you are with your paperwork, the easier it will be for a lender to approve your loan.
Let's walk through some of the different paperwork you may need:
- Proof of Income
When it comes to getting a loan, your income is the most important factor. Lenders want to see proof that you are able to make timely payments on the loan and will conduct a thorough review of your income. This may include pay stubs, W2s, or bank statements as evidence of consistent employment and earnings.
Here is a list of documents that are commonly used to prove income:
- Pay stubs from the past three months
- Bank statements from the last two years showing consistent deposits
- Tax returns from the previous year (for self-employed borrowers)
- Retirement income statement or pension award letter (for retired applicants)
By showing proof of a steady income, you can increase your chances of getting approved for a loan. Your lender may also ask you to provide additional documents as part of the loan approval process.
- Bank Statements
The next set of documents you need to provide are bank statements. These documents will help your lender assess your financial situation and determine whether or not you’re eligible to receive a loan.
Bank statements generally must include your name and address as well as details of any deposits or withdrawals to/from the account in question over a period of time. This period can range from 2-3 months all the way up 1 year, depending on the requirements set by your specific lender. Be sure to double check what documents they require and keep them up-to-date so that you have everything needed when it comes time to submit an application.
- Credit Reports
Your credit report is another important document that lenders will use to assess your financial situation. It’s important to make sure your credit report is accurate, up-to-date, and free from errors. If there are any discrepancies in the report, it could impact your loan approval chances.
A credit report includes your credit history, payment history, and open accounts. It also provides an overall picture of your creditworthiness and how likely you are to repay a loan. By understanding your specific situation, lenders can make an informed decision about whether or not to approve your loan application.
- Tax Returns
Finally, tax returns are often required for loan applications. If you’re self-employed, the lender may ask for a copy of your most recent tax returns to verify your income and expenses. They will also use this information to assess how much money you can borrow and what type of loan terms are available.
By having all these documents ready, you can make sure your loan application process is as smooth and stress-free as possible. Your lender may also require additional documents, so be sure to check their guidelines and ask any questions you may have.
Step 4: Apply for Mortgage Pre-Approval
Most sellers in North Carolina will require pre-approval before showing you their home. To get pre-approved for a mortgage, all you need to do is fill out an application and provide some financial details.
From there, you’ll get a peek at your mortgage pre-approval amount and can receive a pre-approval letter. A pre-approval letter lets sellers know you are financially able to make an offer on their home.
Factors that determine your pre-approval amount:
- Total Income: You want to aim for your monthly housing costs to be under 30% of your total monthly income. This lets lenders know you earn enough to make consistent mortgage payments.
- Personal Debt: We mentioned needing to calculate your DTI earlier. If you don’t already have that number, lenders will consider your credit card, student loan, and other types of debt and divide it by your total income to measure this.
- Cash Reserves: Again, this falls under the category of assets and accounts. Lenders will want to know you have enough money in the bank to cover the down payment and closing costs without going broke.
Giniel Financial Group offers complimentary pre-approval letters. All you have to do is type in your zip code to get started. Try it for free.
Step 5: Find Your Real Estate Agent
Having a real estate agent will make navigating the process of purchasing a home in North Carolina a whole lot easier. Your agent will help you make offers, review contracts, and negotiate the closing process. They will also connect you to inspectors and other necessary services for purchasing a home.
The right type of real estate agent can make all the difference, which is why we recommend homebuyers in North Carolina use Giniel Financial Group. Not only will Giniel provide brokerage and underwriting services, they also work directly with local realtors. This means you won’t have to search for a loan and then search for a real estate agent. You can get everything you need in one place, from start to finish.
However, should you find yourself on the hunt for a realtor outside of Giniel Financial Group, be sure to know what to look for. Things to consider include years of experience, what sort of reviews they have, the number of transactions in the past year, and if they have experience working in your price range.
Be sure to ask your agent questions about your desired neighborhoods and what their strategy is for helping you find and close on a home. Most importantly, make sure you feel comfortable with them — this process is going to most likely take a while, and you want a good working relationship.
Step 6: Find Your Home and Make an Offer
This is another area where your real estate agent will come in handy. Let them know what area you’d like to live in, and they can help you view properties and get a feel for the neighborhood.
Some useful tips to keep in mind when house hunting is to prioritize what you need to have over what you want to have. This way, your realtor can help you better find a house that fits your budget and your desired location.
Homebuying also fluctuates with the seasons. Typically, more homes are sold during the summer than during the winter. Searching during a time when more homes are on the market will give you a better range of options.
Once you find the home that’s best for you, your realtor will help you submit an offer. From here, you can begin the negotiation process with the seller. Your real estate agent will also help you navigate some of the trickier processes like seller concession, repair credits, and inspection contingencies.
Should you feel like you want to add a personal touch, you can include a letter to the seller. This will let them know that you will be a wonderful caretaker of the property and encourage them to work with you throughout this process.
Step 7: Complete Inspections and Appraisals
This part of the homebuying process allows you to better evaluate the condition of the house before officially purchasing it. After this step, you may be able to renegotiate the terms of your contract with the seller.
Inspections
An inspection is when a licensed professional comes and evaluates the home for any potential issues. In North Carolina, your inspector should check the roof, foundation, electrical system, HVAC system, and plumbing of your future home. However, a septic inspection may have to be done separately.
While it’s not a requirement in North Carolina, it is recommended that buyers complete radon testing and termite inspection before purchasing a home. Investing in some of these more niche inspections can possibly save you quite a bit of money and avoid a huge headache in the future.
Appraisals
Your lender will hire an appraiser to examine the home and determine how much it’s valued at. This is to ensure the house is worth the money being loaned to you.
Should the appraisal come back lower than expected, you might have to renegotiate the price with the seller or possibly fork over a larger down payment.
Recommended: Use a local lending service like Giniel Financial to make the appraisal process easier to navigate.
Step 8: Close on Your New Home
Once you’ve finished with all inspections and appraisals, you’ll receive a Closing Disclosure. This has all the information on your loan, your monthly payment, down payment, interest rate, and closing costs. From here, your lender should approve your financing; once complete, you will be officially ready for closing.
Closing on a home in North Carolina requires you to meet at the title company to finalize paperwork and settle closing costs. On the closing date, you will sign several documents. These include the mortgage note, the deed, and the disclosure statements. From here, it’s time to move on to settling the closing costs.
Closing costs are broken down into four different categories:
- Lender fees: These cover the cost of originating and underwriting your loan. Sometimes survey fees may be included.
- Title and escrow charges: These cover the cost of the title search, title insurance, and closing; and are paid to the title company.
- Prepaid costs: This can include homeowners insurance, property taxes, and any other ongoing costs of homeownership.
- Other closing costs: A catchall for other associated costs that vary from buyer to buyer. These can include pest inspection fees, real estate attorney expenses, and some of the more niche inspection costs mentioned earlier.
Once you sign on your loan, you’re officially a homeowner.
Moving Forward
Hopefully, this information has helped to better prepare you for the journey of homeownership. Whether you are a first-time homebuyer or have done this in the past, it’s always good to know what you need to show up with.
As always, the process is significantly easier with professional help along the way. We recommend searching for a local lender who can provide real estate services, inspection and appraisal services, and be available to answer any questions. To learn more, be sure to read our Best Mortgage Lenders for LLC Owners review.
Recommended Lending Services
We think the team at Giniel Financial Group is thoughtful, professional, and comes with almost everything a new homebuyer would need to easily navigate the process. Get started by using their free assessment tools, or contact them to get started securing a loan.
Giniel Financial
FAQ
Yes, the North Carolina Housing Finance Agency’s (NCHFA’s) NC Home Advantage Mortgage program offers first-time homebuyers a fixed-rate mortgage through approved lenders along with down payment assistance of up to 3% of the loan amount. Additional assistance can come from the NCHFA’s NC 1st Home Advantage Down Payment program, which offers $8,000 in down payment assistance. Use the link above to learn more about the benefits of these programs.
To apply for a home loan, you’ll need proof of income and job history, your credit score, your calculated debt-to-income ratio, and proof of additional assets. For more information, read our section on Getting Your Paperwork in Order.
There are several different types of loans. The two main types are conventional — those not backed by the government — and government-insured loans.
Conventional loans include fixed-rate and adjustable-rate mortgages. Government loans include FHA, USDA, and VA loans. To learn more about these types of loans, their qualifications, and what they offer, be sure to read our Different Types of Home Loans article.
