You hear of loan programs where you have to be a first-time homebuyer to qualify. Just what makes up a first-time homebuyer? How do you know if you qualify for the program?
Typical First-Time Homebuyers
Your typical and most obvious type of first-time homebuyers are those that have never owned their own home before. Whether you move from your mom and dad’s house or you rented an apartment prior to purchasing a home, it’s your first home, so you are a first-time homebuyer. Because you don’t have a home to sell, you may have a harder time coming up with a down payment, which many first-time homebuyer programs help.
The ‘Second’ First-Time Homebuyer
Did you know that even if you owned a home in the past, you may still qualify as a first-time homebuyer? Programs, such as Freddie Mac’s Home Possible program consider first-time homebuyers, those that have not owned a home in the last three years. This could mean that you either sold the home and didn’t buy another one or that you lost the home in a foreclosure and couldn’t own another home.
The Divorced First-Time Homebuyer
Were you once married, but now you are divorced? If you lived in a home that your spouse owned, you assume you are no longer a first-time homebuyer. That might not be the case, though. If your name was not on the mortgage, you are considered a first-time homebuyer after the divorce. This is the case even if you were on the title to the property.
What First-Time Homebuyers Need to Know
Do you fall into one of the above categories? Then there are a few things you need to know about buying a home for the first time:
- You may not need a large down payment. There are down payment assistance programs that help you get the down payment you need. There are also programs, like the USDA loan that doesn’t require a down payment or the FHA loan that only requires a 3.5% down payment.
- You need to show some type of housing history. Since you didn’t own a home last year, you need to prove that you paid for some type of housing. The most common proof is rent. If you paid rent for the last 12 months, a lender will need to see the proof that you paid it on time. Lenders also use the amount you paid to determine your level of ‘payment shock’ or the amount your payment increases as a result of the new mortgage.
- Government-backed loans, such as FHA, VA, or USDA loans have flexible guidelines. You don’t need perfect credit, a large down payment, or a lot of income. These government-backed loans make it easier to qualify with their flexible guidelines.
If you lost a home in foreclosure or you went through a divorce, you may be a first-time homebuyer all over again. Whether you have to wait 3 years or you can buy a home as a first-time buyer right now, there are many benefits waiting for you. Just make sure you make your housing payments on time during the time leading up to your home purchase, even if they are just rent payments. Lenders are going to verify that you can afford the payments by looking at your past housing history.