Mortgage

Who qualifies as a first-time purchaser?

Who qualifies as a first-time buyer?

First time home buyers get access to special loans and assistance programs that repeat buyers may not get.

If you've owned a home before, you may think that none of these benefits apply to you. However, this is not always the case.

Many qualify as first time buyers despite having previously bought a home. The most common rule is that you may not have owned a home in the past three years.

So, if you've owned a home in the past but don't currently do so, don't write off first-time buyer programs. You may still be eligible.

Review your initial home buyer eligibility (May 17, 2021).

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What Are the benefits of being a first-time buyer?

By default, when you buy your first home, you are considered the first time buyer. However, you can also be considered a first-time buyer if you have not owned a home in the past three years.

Assuming you're a first-time buyer, here are the top benefits you can get depending on your situation.

Down payment assistance programs (DPAs)

This is where someone who qualifies as a first-time buyer can really score. Down payment assistance programs (DPAs) can help with your upfront costs – including down payment and often closing costs.

Requirements vary by program, but many accept first-time buyers with low or moderate incomes.

With these you can apply for help in the form of:

Low Interest Loan – Funds that you would pay back in parallel with your mortgage. Interest-Free Loan – No monthly payments, and your loan will be granted gradually, which means after a certain number of years you will no longer owe anything with no further conditions

There are more than 2,000 DPA programs in the United States. There has to be at least one (probably several) that cover where you want to buy.

Support options

Some deposit support programs allow you to choose the help you need. For example, Florida Housing Finance Corporation lets Floridians choose from:

Florida Assist – Borrow up to $ 7,500 at 0% APR with no monthly payments. Full repayment in the event of a "sale, transfer, satisfaction of the first mortgage, refinancing of the property, or until the mortgage lender no longer lives in the property" HFA Preferred and HFA Advantage PLUS – You may be able to take out a second loan Fannie Mae or Freddie Mac mortgage of 3%, 4% or 5% of the value of the first loan. At the end of each year of the five-year term of the second mortgage, 20% of the loan is granted. So at the end of the fifth year you owe nothing. Florida Homeownership Loan Program – Borrow a 3% second mortgage over 15 years. You pay it back monthly in parallel with your main mortgage

But not all data protection authorities offer a variety of programs. So look for as many local options as you can find and compare.

Rules for first-time buyers versus returning buyers

Each DPA program is independent and can set its own rules. Some help everyone, while others limit their offers to first-time buyers.

However, many define a first-time buyer as someone who hasn't owned a home or had their name on a mortgage contract in the past three years. Will be yours? You need to locate those serving your area and ask.

Review your initial home buyer eligibility (May 17, 2021).

Is it easier to qualify as a first-time buyer?

A mortgage lender doesn't waive their rules for you just because you are someone who qualifies as a first-time home buyer. Lenders still need to verify that you can afford your monthly payments.

That means you go through the entire underwriting process and review your credit, income, savings, and other personal financial information – just like any other home buyer. Loan programs do not offer any simpler requirements for first time buyers.

But that's as much in your best interest as the lender's. Who would want to be burdened with a home loan that they cannot afford?

The application process will ensure that you get a home within your means and a reasonable monthly mortgage payment.

Mortgage requirements

Mortgage lenders want to know that you are able and willing to make timely payments on your home loan. You use four main criteria to assess your eligibility:

Credit score – People with high scores have proven to be good money managers and responsible borrowers. The higher your credit rating, the more credit options you have – and the lower your interest rate is likely to be
Debt-Income Ratio (DTI) – This measures how much of your gross monthly income is being consumed by existing obligations. This includes debt and credit card payments, housing costs (based on your new home), and things like alimony and child support
deposit – The higher your down payment, the better the mortgage deal that you are likely to be offered. However, many loans come with small down payments of only 3% or 3.5% of the purchase price. And if you qualify for a VA loan or a USDA loan, you may not need a down payment at all
Adequate and reliable income – You need a decent employment record showing you can keep a job that pays off in order to be able to afford a mortgage on top of your existing debt

Below we list the minimum credit values ​​and down payments required for different types of credit. Information on the DTI requirements can be found here.

All of this applies to both an existing homeowner and someone who qualifies as a first-time buyer.

Some mortgage programs – like the USDA loan and the Fannie Mae HomeReady loan – also have income restrictions associated with them. For these, your household income must be near or below the median income in the area where you are buying.

However, many loans that are popular with first-time home buyers – like the FHA loan and 3% discounted conventional 97 – allow any level of income.

Review your initial home buyer eligibility (May 17, 2021).

Best First Time Buyer Mortgage Programs

Traditionally, saving for a down payment has been the biggest barrier for those looking to buy their first home. But that's often a phantom barrier.

Yes, a 20% deposit has advantages. For example, you don't pay private mortgage insurance (PMI).

But why not get a low down payment mortgage first? You can refinance once home price inflation and your monthly payments give you the 20% of home equity. This was short for millions of homeowners in the past.

Low down payment mortgages

All major low-down payment mortgages are available to first-time buyers. These include:

Fannie Mae HomeReady and Freddie Mac Home Possible Loans (3% less) – min. 620 credit scoreConventional Loans (3% less) – The conventional mortgage of 97 only requires 3% less and a FICO score of 620FHA loan (3.5% less) – Supported by the Federal Housing Administration. Minimum. 580 credit scoreVA loan (0% less) – Supported by the Department of Veterans Affairs. Minimum. Credit score varies depending on the lender; the 580-640 range is commonUSDA loan (0% less) – Supported by the US Department of Agriculture. A minimum credit score of 640 or higher is common

All of this is open to both existing homeowners and first-time buyers.

True, there are occasional benefits for first-time buyers. For example, repeat buyers with VA loans pay a slightly higher financing fee upon completion.

And your loan officer or real estate agent may offer additional help throughout the process if this is your first home purchase.

But, by and large, the benefits of these loans are available to any home buyer. This means that even if you don't qualify as a first-time buyer, you can likely find a low down payment loan or a loan with lower credit requirements.

The key is to shop around and explore all of your mortgage options. Qualifying could be easier than you think.

Review Your Mortgage Options (May 17, 2021)

FAQ for first time buyers

Are you a first time buyer if you've previously owned a property?

You can be. But not if you currently own your own home. Many lenders and aid programs use a three year rule. You are considered a first-time buyer if you haven't owned a home or had your name on a mortgage contract in the past three years.

What if it's a first time buyer and my partner isn't?

You can still be considered a first-time buyer. Most lenders and DPA programs follow the policies of the United States Department of Housing and Urban Development. According to the HUD, a first-time buyer is: An individual who has not owned a primary residence for the three year period ending on the property's purchase date. This includes a spouse (if either one passes the above test, they are considered a first-time buyer). So you should be fine.

What is the minimum income to qualify for first time buyers?

No minimum income is required to buy a home. You just need to be able to conveniently afford mortgage loan payments. How much you need to earn depends on your existing debt, down payment, and the home price you want to afford.

Can I buy a house out of pocket with no money?

It's rare, but not impossible. You will likely need help from a down payment assistance program or your family to cover whatever you need. Remember that you will have to pay both the closing costs and the down payment. Even borrowers with no down payment mortgages often need help – or savings.

What is the minimum score for a first-time buyer?

Technically it's 500. However, this is an FHA loan with a 10% or more down payment. A 3.5% down payment requires a score of at least 580. Other types of mortgages typically require higher minimums around 620 or 640. Some individual lenders may want FICO scores higher than these minimums.

How much money do I realistically need to buy a house?

The minimum down payments are usually 3-5% of the purchase price. However, you need to allow another 2-5% of the purchase price for other purchase costs. This includes upfront fees, closing costs, money earned, as well as prepaid property taxes and homeowner insurance. Remember, some deposit support programs can help with these other costs. So look for the best in the region where you are buying.

Is It Difficult to Get First Time Buyer Loan?

It depends on what you mean by "hard". Most lenders love first-time buyers and will go out of their way to help. In addition, down payments and final cost support can reduce your outlay costs. Often times the hard part is finding the right home for your price and doing all the necessary administrative work. However, millions have successfully bought their own homes in the past, so don't be discouraged – the process may be difficult, but it is certainly not impossible!

Check your eligibility as a first-time buyer

You can estimate your eligibility to own a home based on your creditworthiness, income, savings, and debt. We shared some general mortgage requirements above.

But a mortgage lender has the final say. So when you are ready to start looking for a home, the first thing you should do is get a lender's approval stamp.

Get pre-approval from a lender to check your mortgage rates and make sure you can afford the home you want.

Check your new plan (May 17, 2021)

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