Who can qualify as a first-time homebuyer? You may be surprised

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Ask a Lender
June 21, 2017 | Updated September 21, 2017


Key Points

Defining a first-time homebuyer

  • If you have not owned a principal residence for three years you may qualify as a first-time homebuyer.
  • Single parents, displaced homemakers and mobile home owners may also be considered first-time homebuyers.
  • If your spouse qualifies, you may also be eligible.

Federal, state and local governments have a variety of programs in place to assist first-time homebuyers obtain financing for a home. Despite the common challenge of scraping up enough money for a down payment or qualifying for an affordable mortgage, as of February 2017 the number of first-time homebuyers had increased 35 percent since 2014.

The term “first-time homebuyer” can be misleading, however, as the eligibility requirements are far broader than simply having never purchased a home before.

Who qualifies

What constitutes a first-time homebuyer? According to the U.S. Department of Housing and Urban Development (HUD), any of the following scenarios qualify:

  • You have never owned a principal residence.
  • You have not owned a principal residence for three years. If you do not meet this requirement but your spouse does, you are together still considered first-time buyers.
  • You are a single parent who has only owned a home together with your former spouse while married.
  • You are a displaced homemaker who has only owned a home together with your former spouse. A displaced homemaker is defined as an adult who has not been employed full time for several years while caring for a family and now faces employment challenges.
  • You have only owned a principal residence that was not permanently fixed to a permanent foundation — for example, a mobile home.
  • You have only owned a property that did not comply with state or local building codes and couldn’t become compliant without building a permanent structure.

Having a previous home that was foreclosed on or owning a separate investment or vacation property does not disqualify you as a first-time buyer.

Federal programs

The most popular loans for first-time homebuyers are those guaranteed by the Federal Housing Administration (FHA). These government-backed private loans allow eligible borrowers to obtain mortgages with down payments of as low as 3.5 percent, reduced closing costs and more lenient credit requirements. See if you are eligible for other federally backed programs as well, such as a U.S. Department of Veterans Affairs (VA) loan, U.S. Department of Agriculture (USDA) loan or loan for American Indians and Alaska Natives.

Freddie Mac and Fannie Mae also offer special programs for first-time buyers, such as Fannie Mae’s HomePath ReadyBuyer Program, which provides first-time homebuyers with up to 3 percent assistance with home closing costs once the borrower completes an online course.

Down payment assistance

The Internal Revenue Service allows first-time homebuyers to pull up to $10,000 from traditional Individual Retirement Accounts (IRA) without penalty if used for a home down payment. This figure can be higher for those with Roth IRAs. These withdrawals are subject to taxes, however, and removing any money from your retirement account should be taken after careful consideration so as not to damage your long-term finances.

There are also a variety of state, county and local programs for first-time homebuyer counseling and down payment assistance. The HUD’s Local Information page is a good resource for finding programs in your area, as is your state housing authority. Remember that being a first-time homebuyer may not be the only eligibility requirement for such programs; income level and credit score are often determining factors, as well. As with any loan, no matter what type of mortgage you seek, improving your credit score and comparing lenders will help you obtain more favorable mortgage conditions.

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