Are you planning to buy a home in Raleigh, North Carolina? Learn how Raleigh’s tax incentives for homebuyers seeking financial benefits make it perfect for you.
Raleigh is offering various tax incentives made to assist and increase the number of first-time homebuyers. These incentives make homeownership affordable and boost the economic vitality of the region.
Understanding Tax Incentives
Tax incentives are financial advantages provided by government entities to increase the number of property investments. These incentives can be in different forms, such as tax credits, deductions, or direct grants. These are made to assist with reducing the overall cost of purchasing and owning a home.
Types of Tax Incentives Available
Raleigh Homebuyers can benefit from the state rebates, local property tax cuts, and direct grants that reduce the upfront and ongoing costs associated with purchasing a home. These incentives are particularly targeted towards first-time buyers, veterans, and individuals purchasing properties in designated areas.
- State-Level Incentives
The NC Home Advantage Tax Credit grants eligible first-time buyers (those who haven't owned a home as their principal residence in the past 3 years) and military veterans to save up to $2,000 a year on their federal taxes with a Mortgage Credit Certificate (MCC). This enables you to save more money to put toward your mortgage payment. Once qualified, you may claim a federal tax credit for 30% of the interest you pay on an existing home (50% on a newly built home)—up to $2,000 per year for every year you live in your home. You may also be eligible for our NC Home Advantage Mortgage™ with down payment assistance to boost your savings even more.
If you are a first-time homebuyer in North Carolina, the North Carolina Housing Finance Agency (NCHFA) public agency offers several programs in the state:
- NC Home Advantage Mortgage
- NC 1st Home Advantage Down Payment
- NC Home Advantage Tax Credit
- Community Partners Loan Pool (CPLP)
- Self-Help Loan Pool (SHLP)
We would suggest consulting with a lender before you apply.
Source: NCHFA
- Property Tax Reductions
Local property tax incentives are available to reduce yearly living costs, making homeownership more achievable and sustainable. If you are an elderly or disabled and own your home, you may qualify for a reduction of your property taxes. To check for eligibility, you must be either 65 or older, or totally and permanently disabled. You also must own and live in your home, unless you are living elsewhere for medical reasons.
Source: Legal Aid of North Carolina
- Mortgage Interest Deductions
Homebuyers can also benefit from deductions on mortgage interest, significantly decreasing federal tax obligations and enhancing affordability. When you’re budgeting for a home purchase, it’s important to have an estimate of your monthly mortgage payment. Access the calculator by completing the Home Information and Loan Information in the link below.
Source: Paul Norment CrossCountry Mortgage
- Local Incentives in Raleigh
The homebuyer assistance programs offer zero-interest loans to assist with the down payment and in closing costs or a gap in financing. In this program, the loans are deferred; which means no payments are due until the home is finally sold or when the owner no longer uses the home as their primary residence. See conditions that may apply.
Source: RaleighNC.gov
- Community Home Buying Programs
We also work with local nonprofits and government agencies to offer down payment assistance through our community home buying programs. If you are planning on buying a home and your income is below 80% of your county’s median income, you may be eligible for up to 25% of the sales price in down payment help (maximum loan of $50,000) through the Community Partners Loan Pool. You may also be eligible to receive home buying help through the Self Help Loan Pool, which provides zero interest, shared mortgage financing to help eligible low- and moderate-income buyers that will help you greatly with your finances.
Source: NCHFA
- Historic Property Incentives
Incentives for buying and renovating historic properties are also available, encouraging the preservation of Raleigh’s architectural heritage while making these unique homes more accessible to buyers.
Get your property checked if it is located in a National Register Historic District to see if you qualify for a state and/or federal income tax credits toward rehabilitating your historic residential or commercial building. The NC State Historic Preservation Office (SHPO) administers the historic tax credit program. You may contact the NC State Historic Preservation Office (SHPO) for more information.
Source: RaleighNC.gov
How to Qualify for Tax Incentives
Eligibility for these programs typically requires meeting specific income and purchase price limits, being a first-time homebuyer or a veteran, and using the property as a primary residence. Prospective buyers should apply through participating lenders who can guide them through the qualification process.
Necessary Documentation
Applying for tax incentives requires thorough documentation. To qualify for first-time homebuyer programs in North Carolina, you typically need to reach a certain credit score, income, and sales price limits, depending on the program you choose. Here's how to apply:
Step 1: Select the appropriate program by reviewing their requirements to ensure you qualify.
Step 2: Consult with a HUD-approved housing counselor if you have questions about the programs or the application process.
Step 3: Identify a lender from the list maintained by the NCHFA or, for community partner programs, find a suitable community partner lender.
Step 4: Apply for the mortgage through your chosen lender by providing necessary documents like W-2 or tax forms for income verification and get pre-approved for a mortgage before house shopping.
Common Pitfalls to Avoid
When purchasing a home in North Carolina, avoid common pitfalls to ensure a smoother process. First, get pre-approved for a mortgage to understand your budget and appear serious to sellers. Ensure you conduct a thorough home inspection to detect unseen issues, which can save future expenses. Don’t overlook additional costs such as closing fees, property taxes, and maintenance, which can significantly impact your budget. Research neighborhoods thoroughly to ensure they meet your lifestyle needs and help prevent buyer’s remorse. Lastly, maintain objectivity; let logic guide your decisions rather than emotions to avoid overstretching your budget. Following these guidelines can help you navigate the complexities of home-buying more effectively.
Why Utilize Tax Incentives?
Taking advantage of tax incentives in purchasing a home in North Carolina can ease the financial load for first-time buyers and veterans. These incentives improve the affordability of homeownership by potentially allocating more budget for associated costs such as renovations, furnishings, and savings. As a strategic financial measure, these incentives contribute to wider initiatives aimed at promoting homeownership and ensuring stability in the local real estate markets. This approach not only supports individual homeowners but also bolsters the overall economic health of the community.
By taking advantage of these incentives, homebuyers can significantly reduce their initial and ongoing costs, making homeownership in Raleigh both attainable and rewarding. For more detailed information and to ensure eligibility, reach out to us at 919.526.0401 or [email protected]
