First-Time Homebuyer Qualifications

Meeting qualification guidelines could unlock valuable mortgage benefits

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First-time homebuyer programs are designed to make purchasing a home easier and more affordable. Some programs help buyers by reducing or eliminating down payment requirements. Others provide financial assistance to cover down payments and closing costs.

You might be able to take advantage of these benefits if you meet first-time homebuyer qualifications. The good news is qualifying as a first-time buyer may be easier than you think–even if this isn’t your first home purchase.

Key Takeaways

  • First-time homebuyer programs can help you purchase a home with fewer financial obstacles.
  • First-time homebuyer qualification requirements can vary based on the loan program.
  • Generally, a first-time buyer is someone who has not owned a principal residence in the last three years.
  • Some first-time homebuyer programs may impose income limits when determining eligibility.

HUD Qualifications for First-Time Homebuyers

The Department of Housing and Urban Development (HUD) doesn't make loans to homebuyers directly. Instead, HUD insures and guarantees loans made through these programs:

  • Federal Housing Administration (FHA) loans
  • Good Neighbor Next Door
  • Helping Public Housing Residents Buy Homes
  • Section 184 Indian Home Loan Guarantee

HUD has specific guidelines for who meets first-time homebuyer qualifications. Generally, you're considered to be a first-time buyer under HUD rules if you:

  • Haven't owned a principal residence within three years prior to purchasing a home
  • Are a single parent who has only owned a home with a former spouse while you were married
  • Are a displaced homemaker who has only owned a home with a spouse
  • Have only owned a principal residence that did not have a permanent foundation (i.e., a mobile or manufactured home)
  • Have only owned a home that was not compliant with state, local, or model building codes and could not be brought into compliance for less than the cost of constructing a new permanent residence

Under HUD rules, a first-time buyer doesn't necessarily mean someone who has never owned a home before. If you meet any of these criteria, you could still technically be considered a first-time buyer for HUD loan programs even if you've owned a home in the past.

HUD home loan programs have additional requirements with regard to credit scores, income, and the property being purchased.

State and Local First-Time Homebuyer Programs

First-time buyers can also look to state and local programs for help with buying a home. These programs can vary in terms of the first-time buyer qualifications you need to meet and the type of assistance offered. You can visit HUD.gov to look up the options available in your state, or contact your state's housing authority.

Here are some examples of how state homebuyer programs work and what's required to be considered a first-time buyer.

CalHFA FHA Program

The CalHFA FHA Program offers 30-year, fixed-rate FHA loans to first-time buyers who reside in California. To qualify for help, buyers must:

  • Plan to use the property they're buying as a primary residence
  • Complete homebuyer education counseling through an approved organization
  • Meet income limits for eligibility

Income limits are set by county. This program is open to buyers who are purchasing single-family homes, including one-unit condos or manufactured homes.

Florida First-Time Buyer Programs

The Florida Housing Finance Corporation offers 30-year, fixed-rate mortgage loans for first-time buyers in partnership with participating lenders throughout the state. Homebuyers are required to complete approved homebuyer counseling and meet the IRS definition of a first-time buyer. Under IRS rules, a first-time buyer is anyone who hasn't owned a principal residence during the three years prior to the date of purchasing a home.

First-time buyers can also take advantage of down payment assistance programs. These programs allow you to take out a second mortgage to cover your down payment costs, but they can reduce the amount of cash you need upfront.

When considering down payment assistance, be aware of what form it will take and whether you're obligated to repay any of the money you receive.

New York HomeFirst Down Payment Assistance Program

The HomeFirst Down Payment Assistance Program offers up to $100,000 to qualified homebuyers who are purchasing a home in one of the five boroughs of New York City. These funds can be used to cover the down payment or closing costs on a one- to four-family home, condominium, or cooperative.

You have to be a first-time homebuyer to qualify, as well as meet the following criteria:

  • Complete homebuyer education through an approved counselor
  • Fulfill income eligibility requirements
  • Put down a minimum of 3% toward the purchase of a home
  • Contribute some of your savings toward the down payment or closing costs
  • Purchase an eligible property
  • Pass a Housing Quality Standards (HQS) inspection

Assistance is received as a 0% interest loan. This loan is forgivable, but payment may be due if:

  • You stop using the home as your primary residence
  • You sell the home for more than you paid for it
  • You refinance the home for an amount greater than the existing mortgage balance (i.e., you opt for a cash-out refinance)
  • You falsify your loan documents

There is a residency requirement to qualify. The homebuyer has to live in the home for at least 10 years if they received $40,000 or less in funding, or 15 years if they received more than $40,000.

Other First-Time Homebuyer Qualifications

Meeting first-time homebuyer qualifications can be the first step toward getting a mortgage. But there are other factors lenders can consider to determine whether to approve you for a loan, including:

  • Income
  • Credit score
  • Assets
  • Debt-to-income ratio
  • Loan-to-value (LTV) ratio and the size of your down payment

Geography and veteran status can also come into play if you're applying for a USDA loan or a VA loan. Freddie Mac also requires homebuyer education for first-time buyers who are purchasing a home through the HomeOne program. Fannie Mae has the same requirement for its HomeReady first-time buyer mortgage program.

Familiarizing yourself with the details of the first-time buyer program you're interested in can help you gauge how likely you are to qualify. Also, keep in mind that higher credit scores and income and lower debt levels can work in your favor when qualifying for a mortgage.

The Bottom Line

First-time homebuyer programs could help you achieve your homeownership goals. Understanding how these programs work and how to meet first-time homebuyer qualifications can help you make the most of them.

Frequently Asked Questions (FAQs)

What are the benefits of being a first-time homebuyer?

Qualifying as a first-time homebuyer could help you take advantage of certain benefits, such as low-interest-rate loans or down payment assistance. You may also be able to qualify for a mortgage with lower credit scores or income.

How much can I afford to spend as a first-time homebuyer?

The amount you can afford to spend as a first-time homebuyer can be determined by your income and monthly expenses. Using a home affordability calculator can help you estimate how much you can realistically budget to purchase a property.

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Article Sources

  1. Department of Housing and Urban Development. “Buying a Home.”

  2. Department of Housing and Urban Development. “How Does HUD Define a First-Time Homebuyer?Section 184 Indian Home Loan Guarantee Program.”

  3. California Housing Finance Agency. “CalHFA FHA Program.”

  4. IRS. "First Time Homebuyer Credit Questions and Answers: Basic Information."

  5. NYC Housing Preservation and Development. "HomeFirst Down Payment Assistance Program."

  6. NYC Department of Housing Preservation and Development. "HomeFirst Down Payment Assistance Program Term Sheet," Page 5.

  7. NYC Department of Housing Preservation and Development. "HomeFirst Down Payment Assistance Program Term Sheet," Page 4.

  8. Freddie Mac. "HomeOne."

  9. Fannie Mae. "HomeReady Mortgage."