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First-Time Home Buyer Benefits: Qualification and Requirements

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Kimberly Rotter, AFC®
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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.

How do I qualify as a first-time home buyer?

You qualify as a first-time home buyer if you haven't owned or co-owned a home within the past three years. First-time buyers still have to meet mortgage lender qualification requirements. The lender may be more flexible, but will still look at your credit score, debt-to-income ratio, and available down payment.

You can qualify for most first-time home buyer 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.

What are the benefits of being a first-time home buyer?

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.

Read more: Down payment assistance: available programs and how to apply

Do I have to make a certain amount to qualify as a first-time home buyer?

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, especially first-time buyers, with low or moderate incomes. Income limits depend on where you live and your family size.

As a first-time home buyer, you may be able to take advantage of more flexible underwriting. If your income qualifies, 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.

What are the requirements to qualify for a first-time home buyer loan?

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.

  • FHA loan: An FHA loan is a home loan insured by the Federal Housing Authority. If your credit score is at least 580, you can make a down payment as small as 3.5% of the purchase price. 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.
  • VA loan: 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, and some 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.
  • USDA loan: 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.
  • Conventional loan: Unlike the government-backed options above, a conventional loan isn't insured by federal agencies. There are several conventional loan options for first-time home buyers. For example, first-timers only need a 3% down payment with Fannie Mae's Conventional 97 loan program or 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.

What types of loans are available for first-time home buyers?

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 home buyer class or checking out our first-time home buyers guide.

Still have questions?

Read more about first-time home buyer benefits:

Motley Fool Money's best lenders for first time home buyers

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!

Best lenders for first-time home buyers

FAQs

  • To be considered a first-time home buyer, you cannot have owned or co-owned a residence in the past three years. You'll also need to qualify for the mortgage like any other borrower. The mortgage lender will have a minimum credit score requirement and a maximum debt-to-income ratio. You'll probably need to have some cash reserves in the bank. Many first-time home buyer loans have a home buyer education requirement.

  • First-time home buyers can get financial assistance and access to special loan programs. There are a number of loan programs designed to help first-time home buyers buy property. These programs may offer more flexible down payment, credit score, and debt-to-income ratio requirements. As a first-time home buyer, you'll also be eligible for many types of down payment assistance.

  • A first-time home buyer can get any type of mortgage loan, as well as some loan types that are reserved for first-timers only. Fannie Mae and Freddie Mac both offer special first-time home buyer mortgages which are available from most major mortgage lenders. Individual lenders may also offer their own brand of first-time home buyer mortgages.