You are typically considered first-time homebuyers when you haven’t owned a home before.
However, the definition of a first-time principal residence buyer is not as straightforward as it may seem. There are several exceptions for a home loan that can make it easier for people looking to purchase a home to be considered as first-time buyers.
The simplest definition of a first-time home buyer is a person who has never owned a home before. First-time home buyers range from people who were renting before deciding to buy their first home for their household to guests staying at their parent’s house because of lower income.
You have owned a home for up to three years
Have you previously owned a home in an urban state for the last three years and then sold it? You may then qualify for first-time buyer programs if you decide to buy a home again. The three-year period extends until the date of purchase of the new house.
In the case of a couple, it’s sufficient for one spouse to cover the three-year criteria.
You owned a mobile home
A mobile home is not considered a permanent primary residence because it doesn’t have permanent foundations. If you used to live in a mobile home you qualify for the minimum down payment, benefits, advantages, and tax breaks offered by programs for first-time home buyers.
You are a single parent who owned a home with your ex-spouse
If you owned a home with your ex-spouse, you meet the requirements as a first-time buyer. Your previous home was owned together with your ex-spouse, while you are now applying for a mortgage as a buyer on your own.
You are a displaced homemaker
You owned a home with your former spouse and were a homemaker, taking care of the home and family. If you divorce and choose to re-enter the workforce, you qualify as a displaced homemaker and benefit from all the advantages extended to first-time payment and closing cost benefits.
You own an unsafe house that doesn’t comply with the building code
Let’s say for example that you own a house that is unsafe and doesn’t cover safety, hygiene, and building codes. If bringing the unsafe house to comply with the current building code is more expensive than buying or constructing a new home, in most cases you qualify as a first-time home buyer.
What Are the Benefits of Buying a Home as a First-Time Buyer?
Homeownership is expensive, particularly for first-time buyers. Saving enough money in the current economy for the down payment is a daunting task. With rising interest rates and soaring house prices, first-time buyers find it hard to make it onto the property ladder.
Thankfully, first-time home buyers eager to buy a house can get loan benefits, program incentives, and credit advantages when they are about to make their home purchase. As part of their finance strategy, many might be wondering about the specific advantages, especially the available tax credits.
Understanding the real estate market and seeking lender advice for eligibility can be beneficial for potential homeowners, as there are many government first-time buyer programs and incentives to help people climb onto the property ladder.
Here are some of the benefits of being a first-time homeowner.
Lower interest rates
Lenders are offering more competitive interest rates and payment schedules for first-time home buyers. Lower interest rates mean lower interest charges throughout the lifespan of the mortgage and lower monthly mortgage rate payments.
Government-sponsored programs and loans
Government-sponsored loans and programs can help people get a mortgage. There is also assistance available with closing costs to help first-time buyers enter the property market.
For example, there are cash grants from the local government to help with the down payment and alleviate this burden. Additionally, there are many Down Payment Assistance Programs (DPAs) across the United States to designed to help with down payments and lower the burden of home buying.
IRS tax advantages
The IRS offers tax advantages to first-time home buyers as they are allowed to make withdrawals from their savings with favorable tax advantages. There are no penalties such as the 10% early-distribution penalty for early withdrawals in these cases.
Federal Department of Housing Administration programs for first-time homebuyers
Federal housing finance initiatives, including Fannie Mae or Freddie Mac Inc., fall under the Federal Department of Housing Administration. They play a vital role in first-time buyer access, home affordability, and mortgage loan insurance.
Home buyers can find it hard to put money aside for the down payment and the closing cost and other expenses can quickly add up. That’s why there are possible measures to help these people achieve homeownership on the most favorable terms.
Programs from the Federal Housing Administration thus offer financial support and favorable mortgage insurance, ensuring that individuals or married couples of all backgrounds can apply for their dream real estate, regardless of their mortgage program.
These entities often have a minimum set of requirements that applicants need to meet to receive assistance based on their personal finances. Moreover, they uphold the principles of equal housing development, promoting fair pay and inclusivity in the housing market process.
Incentives such as down payment assistance and other first-time homebuyer assistance include low down payment, a more competitive mortgage interest rate, the allowance of higher credit score requirements, and even financial assistance with closing costs.
Credit Score and Income
Having a solid credit score, minimal debt, and some history of using a credit card responsibly can expedite the process and help you qualify for a first-time home buyer loan.
Minimum credit score
To be considered eligible for most first-time home buyer loans, applicants are generally expected to have a minimum credit score. This is often determined by the lender’s requirements.
Minimum income and home improvement
Household income affects payment estimates for home improvement as well. In fact, it is a crucial factor in payment calculations for home improvement as it determines your borrowing capacity and loan terms.
A payment calculator uses your income to provide an estimate of your monthly payments, ensuring that the home improvement expenses align with your financial situation when buying a house.
Additionally, using a refinance calculator can help you assess if refinancing your mortgage could lower those payments or offer better terms based on your current income and credit standing.
Explore Further Options
If you don’t meet the above criteria, you can always explore further options. In the realm of housing and urban development, a variety of loan programs such as the FHA loan program, VA loans from the Department of Veterans Affairs for surviving spouses, or Conventional mortgages from a conventional loan program, are available for potential homeowners.
While many consider conventional loans due to often competitive mortgage rates, you should understand the importance of one’s debt-to-income ratio. The DTI ratio can greatly influence the terms of both the initial payment and subsequent closing costs associated with a mortgage.
Contact Society Mortgage
If all this is confusing, real estate agents from Society Mortgage can provide all the information about first-time home assistance.
The first-time home buyer definition is quite flexible, so we can help you check whether you qualify. You could benefit from favorable repayment terms, lower interest, and government-sponsored programs to lower the down payment and the closing costs.
To make the most out of their home’s investment, visit the official government websites for comprehensive information or ask our Society Mortgage real estate agent. We’ll be happy to offer you advice about certain score requirements, first-time homebuyer programs, home loans, and urban development prices. We are always helpful and know the current programs available to first-time buyers.
Reach out to your Society Mortgage local housing department or one of our trusted financial advisors to help guide you through the process, especially when it comes to understanding the complexities of FHA loans, the monthly loan amount, or securing closing cost assistance.
Don’t know where to start from? Are you buying your first house? Do you need information on how to use a home affordability calculator? Contact a mortgage loan officer, your trusted housing lender.
Frequently Asked Questions
Yes. Under certain circumstances, you may qualify as a first-time homebuyer. You may be eligible for many first-time buyer programs if you haven’t owned a home in three years.
Yes. Under many programs, “first-time homebuyer” refers to those who have never owned a home before or those who haven’t owned a home in the last three years.
Yes, you can apply for an FHA loan even if you’ve had one before. But you usually can’t have more than one FHA loan at a time.
