If you’re shopping for a home, you’ve probably encountered programs offering advantages to first-time home buyers. If you’ve owned a home in the past, you may have assumed that you weren’t eligible to participate in these programs, but don’t be so quick to pass up on the potential for savings. You might be pleasantly surprised because the definition of first-time home buyer probably isn’t quite what you think it is. Who determines who gets to be a novice home buyer? Who qualifies as a first-time home buyer?
Who Qualifies as a First-Time Home Buyer?
As Investopedia explains, the U.S. Department of Housing and Urban Development sets the rules when it comes to deciding who qualifies as a first-time home buyer. Whether you are actually buying your first house or not, if you meet these rules, you may be able to qualify for financial aid from the state programs, tax breaks, and federally backed loans available for novice home buyers.
Defining a First-Time Home Buyer
The U.S. Department of Housing and Urban Development defines a first-time home buyer as an individual who meets any of the following conditions:
- A person who hasn’t had any ownership of a principal residence in the three-year period prior to the home purchase is considered a first-time home buyer.
- If one member of a married couple has owned a home, but the other spouse has not, they can purchase a home jointly. Both will be treated as first-time home buyers.
- A single parent whose only experience with homeownership was with a former spouse while married will be treated as a first-time home buyer.
- A displaced homemaker who has only owned with a spouse will also be recognized as a novice home buyer.
- A person whose previous ownership was limited to a principal residence that wasn’t permanently affixed to a permanent foundation should be treated as a first-time home buyer.
- Someone who has only owned properties that did not comply with building codes and that could not be brought into compliance for less than the cost of constructing a permanent structure is also recognized as a novice home buyer.
Home Loans, Secondary Loan Programs, and Down Payment Grants
The perks for first-time home buyers come in a variety of forms, so it’s important to pay attention to the details so that you understand your responsibilities before accepting their benefits. As Experian indicates:
- Home Loans: Financial instruments that allow you to borrow funds to purchase a property, home loans must be repaid. Some loans are conventional loans. Others are insured by a government agency. The Federal Housing Administration’s FHA loans, Department of Veterans Affairs’ VA loans, and the Department of Agriculture’s USDA loans are all popular with first-time home buyers.
- Secondary Loan Programs*: Some states and organizations will offer small secondary loans to provide assistance with down payments and other expenses. The terms vary widely. In some cases, the interest rate matches the first one. In others, the secondary mortgage has a deferred payment schedule that does not require any payment for several years unless the borrower refinances or sells.
- Down Payment Grants*: Grants are funds that do not need to be repaid. Various state and nonprofit organizations offer grants to help home buyers with their down payments.
Why Getting Preapproved Is a Smart First Step
The prospect of buying your first home is exciting, but before you start touring homes, you may want to visit your lender. As Credit Karma points out, getting preapproved for a loan first offers numerous advantages. It lets you know what you can afford to spend and if there are any unexpected hiccups with your finances. Having that preapproval letter also signals to real estate agents and sellers that you’re a serious buyer. As an added bonus, it should make the actual loan approval process go a little more smoothly.
Whether you’re a first-time buyer eager to take the plunge on a brand-new home, a veteran investor interested in a construction loan to remodel one of your properties, or a homeowner wondering if now is the right time to refinance, PrimeLending KC is waiting for your call. Contact us today.
*Certain restrictions apply. Not available in all areas. Please contact your PrimeLending loan officer for more details.