If you are looking for a home and a mortgage, you may have seen a lot of advertisements and offers for first time home buyer programs. Below is more information about the programs available, and other valuable information about what a 1st time home buyer is.
First, you may qualify as a first-time home buyer even if you have bought a home before. The US Department of Housing and Urban Development states that first time home buyer status is not just for people who have never bought a home. For lending purposes, a first-time home buyer can also be one of the following:
- A person or spouse who has not owned a home in the last three years. This means that a married couple can qualify even if only one passes this test.
- A single parent who only owned a home with a spouse when they were married.
- Someone who only owned a primary residence that was a mobile home or other home not attached with a permanent foundation
- Displaced homemakers who only owned a home with a spouse
- A person who owned property that was out of compliance with local building codes and could not be improved
Types of First Time Home Buyer Programs
First time buyer programs can be either a loan program or a financial help program. Both programs can be very helpful to the first-time buyer. A popular option for first time buyers is the FHA loan program. These mortgages are available to borrowers regardless of income, and credit score standards are very flexible. While they are available to people who are not first-time home buyers, they appeal to first time buyers because the down payment standard is very low, only 3.5%. FHA are also a good fit for first time buyers because most of them do not have equity in a previous home and may struggle to come up with the down payment.
Some private lenders with FHA programs may provide very attractive rates and terms to first time buyers who have good credit and can put down more than 3.5%. But you can get an FHA loan even if you have a below-average credit score but 580 is required to get the lowest down payment. FHA should be one of the first options you check when you are a first-time home buyer, but don’t forget to factor in the monthly mortgage insurance payment that is required with FHA.
VA extends a great option for the military veteran who is a first-time buyer. A home purchase backed by the VA can give you a very low rate, no mortgage insurance and even 100% financing. While not a first-time buyer program per SE, it is an excellent program if you can qualify for it. You will need to have okay credit, but there is no exact minimum score.
USDA financing is backed by the Department of Agriculture and are intended for people who buy homes in rural parts of the country. It is popular with first time home buyers because loans are available with 100% financing. Also, low credit scores are okay, and you must meet income requirements. This means your income cannot be more than 115% of the median income for the area you are considering. This is a good option for the first-time buyer in a lower income area who is buying in a rural location.
Freddie Mac extends unique house financing programs that are are available with 3% down payments, which is very helpful to the first-time buyer. If you want to do this program, you must participate in a borrower education program.
Financial Assistance Programs
There also are programs available that offer financial aid to the first-time home buyer. For example, Fannie Mae has its HomePath Ready Buyer Program. In 2015, Fannie Mae launched this program that offers first time home buyers with as much as 3% of the home’s purchase price to help with closing costs.
There are many state home buyer programs as well. These programs help first time buyers to afford a mortgage for a first-time purchase. You should visit the housing website in your state to see details for your state. For example, first time buyers with lower incomes in Texas can get a mortgage credit certificate that converts mortgage interest into a federal income tax credit. New York state buyers can get down payment assistance for up to 3% of the purchase price of the home.
Last, cities and counties also have home buyer assistance programs. For instance, in Miami, FL, there is assistance available for first time buyers through the public housing department and various lenders. The housing department in San Francisco also has first time buyer programs with financial assistance.
The bottom line is that you can get a lot of financial help when you are a first-time buyer. Check what loan programs are available nationally, but also check at the state and local level to see if you can qualify for special programs.
References: Forbes on 1st Time Home Buying