Did you know that the definition of a first-time buyer in isn’t restricted to people purchasing their first property ever? According to the Department of Housing and Urban Development, it also includes the following:
- A person who has not owned a residence for at least 3 years.
- A single parent who previously co-owned a home while married.
- A homemaker who previously owned with a spouse, but no longer receives financial support from that spouse.
- A person who has only owned a residence not affixed to a permanent foundation, such as a mobile or trailer home.
This allows many people who wouldn’t qualify for a first-time mortgage to take advantage of the benefits offered to those purchasing their first home. These criteria may be lifted if the buyer purchases a home in a targeted area, which is defined as areas of chronic economic distress and may have less stringent criteria for the buyer to meet. Additionally, if your former home did not meet state, local or model building codes and couldn’t be brought into compliance for less than the cost of building a new home, you may also qualify as a first-time home buyer.
You can check different first-time home buyer grants in your state by going to the HUD (Housing and Urban Development) website. You can also check your local county website for more information on first-time home buyer programs and down payment assistance programs. Some states and counties offer various forms of homebuyer assistance programs that offer grants for down payments and closing costs for borrowers. Programs for Public Housing Residence For residence in a public housing situation may qualify to buy the home they’re renting with HUD’s public housing program.
FHA Home Loan Program
FHA loans help more first-time homebuyers become homeowners than any other type of mortgage program available. The guidelines to qualify for these loans are much more flexible than a traditional home loan. A minimum 580 credit score you can qualify for an FHA loan with just 3.5% down. The best thing for first-time home buyers is that your down payment for an FHA loan can be a gift from a family member or friend. This means you can get into your new home with little, or no money upfront. Also, closing costs with an FHA loan are added to the mortgage so you don’t have to pay them upfront.
FHA Loan Requirements
- 500 – 579 FICO score with 10% down
- 580+ FICO score with 3.5% down
- Tax returns, bank statements W2s, and paycheck stubs required
- Primary residence only, no investment properties
- Mortgage insurance Premium (MIP) is required regardless of the loan-to-value ratio
- Steady employment
The USDA home loan program from the U.S. Department of Agriculture is for low-to-moderate income homebuyers in rural areas of the country. If you are buying a home that is in a USDA-eligible location and make an average income or less, you could qualify for a USDA loan. While it may sound like only very small towns and rural areas will be eligible, almost 97% of the country is in an eligible USDA location. USDA mortgages are perfect for first-time home buyers because there is NO down payment required. They are also less expensive than FHA loans because mortgage insurance (MIP) is a half a percent cheaper for USDA mortgages.
The Veterans Administration has a home buyer program for active and retire veterans. VA loans require NO down payment, making the upfront costs associated with getting a mortgage greatly reduced. The VA loan is the cheapest mortgage available because no mortgage insurance is required. This makes VA home loans perfect for any first-time home buyer who is eligible.
Good Neighbor Next Door Program
This first-time home buyer program offered by HUD provides homes for 50% off for teachers, firefighters and police officers. A $100 down payment is all that is required for this great program. Search for available properties in your area on the HUD homestore website.
HomeReady HomePath Mortgage
The HomeReady Homepath program is targeted at first-time home buyers. After taking a required buyer education course you can receive 3% towards closing costs on a mortgage loan. A low down payment of just 3% is required, which is even less than FHA loans. This program is exclusively for first-time homebuyers who plan to occupy the property as their primary residence. You will also need to have a real estate agent to purchase a home through the program. You can view a list of properties on the hudhomestore website.
Native American Direct Loan
The Native American Direct Loan (NADL) is a type of Veteran home loan program for Native American Veterans. NADL allow for qualifying Native Americans to purchase eligible property on recognized trust land. Eligibility rules include:
- Must have a valid Certificate of Eligibility from the Veteran’s Administration
- Property must reside on a Federally recognized trust or Alaska Native corporations
- NADL is for owner occupants only, no investment properties
- Credit score of 640+ is required
- Borrowers with steady income VA provides direct home loans to eligible Native American Veterans to finance the purchase, construction, or improvement of homes on Federal Trust Land, or to refinance a prior NADL to reduce the interest rate.
Not every mortgage lender will be able to approve first-time home buyers who are using a grant, or some type of assistance. Make sure you ask your loan officer if they are able to use the type of grant you have. Other lenders may be able to help you find down payment assistance or grants for first-time home buyers that will help you achieve your dream of home ownership.