Affordable housing is something everyone in the country strives to find. There are areas of the country where that is more difficult than others. This is especially the case when it comes to first-time home buyers who aren’t selling homes to fund their new purchases and may have a great deal of difficulty coming up with the 20 percent, or more, down many lenders desire. That is why there are programs available to help the first time home buyer secure the mortgage they need to pursue the American dream.
Qualifying For A First Time Home Buyer Loan
Before borrowers go about securing a loan as a first time home buyer, it’s important to understand what that means in terms of modern lenders. The brain-free edition of the answer is that it means that someone has never owned a home before. However, there is more to the story than that.
In fact, it is possible to qualify for a variety of first-time buyers program benefits for people who have owned homes before. These are some of the exceptions to the first time caveat.
- For the FHA, it is possible for borrowers to qualify as first-time borrowers if they have not owned a primary residence for three years or more leading up to the purchase.
- Additionally, spouses are treated separately. If a spouse has owned a home but the borrower has not, they can purchase a home together as first-time borrowers.
- If the previously owned home was not permanently attached to a foundation (such as a mobile home, houseboat, or RV), it is possible to qualify as a first time home borrower.
- In some situations, property damage (from tornado, fire, flood, etc.) may allow borrowers to qualify as first-time borrowers. There are two conditions that must be met for this to happen. First, the property must not meet local and state building codes in its current condition. Second, the costs to repair the property must exceed the costs of purchasing or building a new property.
- The FHA considers homeowners displaced by divorce to be first-time homebuyers if the borrower is a parent and that it is the only primary resident the borrower owned with their former spouse.
These are caveats and considerations exclusively for the FHA first time buyers program. They do not include all other programs, which may have other specifications for offering first home mortgage benefits to borrowers.
Is A Down Payment Required For A First Time Home Buyer Loan?
The truthful answer is in most cases, yes. There are a variety of different loan programs available for a first home mortgage that each have different requirements.
For instance, the FHA requires a minimum credit score of 500 to qualify to purchase a home with a down payment of at least ten percent. Borrowers who have a credit score of 580 may qualify to purchase a home with as little as 3.5 percent down.
VA loans are available for first time home buyers and can be used again for subsequent home purchases, which are ideal for service members who may move several times throughout their military careers. These loans require no down payment, as they are guaranteed by the VA, and require no private mortgage insurance (PMI) which are required by many other first-time buyer programs.
Many cities and states also offer grants and other programs to encourage home buyers to move into their cities. These funds can be used to help supplement down payments and may be sufficient to cover the entire down payment requirement in some cases.
USDA loans also offer assistance to first-time borrowers, though their requirements for a first home mortgage credit score are higher than FHA requirements, typically preferring borrowers to have credit scores of 640 or higher. This program offers low, fixed interest rates and requires no down payment. The caveat is that they are only available in certain rural areas and may be used to buy, build, repair, or refinance homes in these areas.
Of course, it is up to the borrower to understand his or her own unique financial situation, current obligations, and ability to afford a home. Home ownership is more expensive than renting in terms of the fact that owners are responsible for maintenance and repairs. So, keep that in mind when budgeting to buy a first home.
There are few things in life more rewarding than homeownership, however, and the satisfaction of owning a first home makes the process of buying one completely worthwhile. The programs above, designed to help buyer’s get in their first home, help.
If you are interested in even more lifestyle-related articles and information from us here at Bit Rebels then we have a lot to choose from.