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If you’re a first-time home buyer, you’re in a great position to take advantage of special programs to help you buy a home of your own. First-time home buyer benefits include financial assistance and flexible qualification requirements. We’ll cover what programs are available, what they require, and how to qualify.
You qualify as a first-time home buyer if you haven’t owned or co-owned a home within the past three years. The lender may be more flexible, but it will still look at your credit score, debt-to-income ratio, and available down payment.
First-time buyers still have to meet mortgage lender qualification requirements
You can qualify for most programs even if it’s not your first home, as long as you haven’t owned a property in the past three years. However, if you own a home that you don’t live in, mortgage lenders are unlikely to consider you a first-time home buyer.
As we’ll see, there are a number of programs to help you become a homeowner, whether you’re looking for a starter home, townhouse, or even a forever home. When you’re ready to apply for a mortgage, be sure to tell the lender that you are a first-time home buyer. The loan officer can help you identify their best mortgage loan options.
The two big benefits of being a first-time home buyer are potential financial assistance and more relaxed qualification requirements. For example, you could make a lower down payment or get approved with a lower credit score. First-time home buyer mortgage loans are designed to help regular people get over the initial obstacles to homeownership.
Down payment assistance might give you money towards your down payment and closing costs. It comes in three basic varieties: a non-repayable down payment grant, a forgivable loan, or a deferred-payment loan.
No. Your income has no bearing on your first-time home buyer status. All that matters is whether you’ve owned or co-owned a home in the past three years.
That said, some mortgage programs are aimed at people with low or moderate incomes, especially first-timers. Income limits depend on where you live and your family size.
You may be able to take advantage of more flexible underwriting. You might even get free money toward the down payment and closing costs. Search online or ask your local Housing Finance Authority about programs in your state. You can check the income limits for each program. A mortgage calculator could also help with your home-buying budget.
The requirements to qualify for a first-time home buyer loan vary from program to program. Here are some of the most common mortgages and their requirements.
: An FHA loan is a home loan insured by the Federal Housing Authority. If your credit score is at least 580, you can put as little as 3.5% down. You’ll need to satisfy other criteria as well, such as two years of continuous employment and a reasonable debt-to-income ratio, depending on the lender. Start with our list of FHA mortgage lenders to find out more. : A VA loan is insured by the U.S. Department of Veterans Affairs and it doesn’t require any down payment at all. Members of the armed forces, veterans, or qualified spouses qualify. The interest rate can be significantly lower than the interest rates on other types of government-backed mortgages. The minimum credit score varies from one participating lender to another, but most want you to have a 640 or higher. Use our list of VA lenders to see if you qualify. : The USDA loan program is aimed at low-income borrowers, usually in rural areas. No down payment is required. The minimum credit score is set by the mortgage lender. Most require a 640 credit score. USDA lenders can help you find out whether properties in your area qualify. You probably won’t find a USDA-eligible property in a large metropolitan area. : Unlike the government-backed options above, a conventional loan isn’t insured by federal agencies like the FHA, VA, or USDA. There are several conventional loan options for first-time home buyers. For example, first-timers only need to put 3% down with Fannie Mae’s Conventional 97 loan program and Freddie Mac’s HomeOne® mortgage. Neither program has income restrictions. Many banks also offer their own brand of flexible mortgage financing for first-timers. Find out what options different mortgage lenders can offer you.
First-time home buyers can qualify for almost any loan type. However, some — such as FHA loans and Fannie Mae and Freddie Mac programs — are better-suited to people trying to get a foot on the property ladder. You can choose from a variety of government-backed and conventional loans. Take a look at our list of the best lenders for first-time home buyers to get started.
If you haven’t saved up a lot of money, a low (or even no) down payment is one of the big first-time home buyer benefits. You can access certain loan programs that aren’t open to repeat buyers. And depending on your circumstances, you might qualify for nonprofit or charitable homeownership assistance.
There are plenty of benefits to being a first-time home buyer. You’re bound to have plenty of questions as you enter this new, exciting season of life. If you’re eager to learn more about buying a home, a good next step is taking a first-time homebuyer class or checking out our first-time home buyers guide.
The Ascent’s best lenders for first time homebuyers
If you’re a first-time home buyer, our experts have combed through the top lenders to find the ones that work best for those who are buying their first home. Some of these lenders we’ve even used ourselves!