First-time home buyer requirements are surprisingly flexible
Understanding who qualifies as a first-time home buyer can open doors to various special loan programs and assistance.
While it may seem like these benefits are exclusive to those who have never owned a home, many lenders extend eligibility to anyone who hasn’t held property in the past three years.Verify your first-time home buyer eligibility. Start here
So, whether you’re venturing into homeownership for the first time or making a comeback, you could still reap the financial advantages of qualifying as a first-time home buyer.
In this article (Skip to...)
- First-time buyer benefits
- Is it easy to qualify?
- Mortgage requirements
- Best first-time buyer programs
- Check your eligibility
First-time home buyer requirements
You might be surprised to learn that who qualifies as a first-time home buyer isn’t just limited to those who have never purchased a home.
If you haven’t owned a home in the last three years, you’re likely eligible to apply for first-time home buyer programs. But that’s not all it takes to qualify. You also have to meet the basic home loan requirements set by your mortgage lender and loan program.Verify your first-time home buyer eligibility. Start here
Typical first-time home buyer qualifications include:
- Credit score of at least 620
- Down payment of at least 3%
- Debt-to-income ratio below 43%
- Steady income
- Two-year job history
- Clean credit history
Guidelines on who qualifies as a first-time home buyer can differ from one lending institution to another, so it’s essential to do your research.
Furthermore, these requirements can vary quite a bit depending on which type of home loan you use. And if you plan to apply for down payment assistance, those programs will have their own guidelines.
What are the benefits of being a first-time home buyer?
First-time home buyers often have access to a range of special programs and incentives that are designed to ease their transition from renter to owner.
Whether it’s lower down payment requirements, more lenient credit score criteria, or access to federal grants and tax breaks, first-time home buyer benefits are tailored to help newcomers overcome the typical financial barriers to homeownership.
If you’re buying your very first home, you count as a first-timer by default. But who qualifies as a first-time home buyer will often include those who haven’t owned a home or been listed on a mortgage in the past three years.
Provided you are considered a first-time buyer, here are the main benefits you might receive, depending on your situation.Check your home buying eligibility. Start here
Down payment assistance programs (DPAs)
Down payment assistance programs (DPAs) offer help with your upfront costs, including the down payment and often closing costs, too. Requirements vary by program, but many accept first-time home buyers with low or moderate incomes.
There are a few different types of down payment assistance available:
- Low-interest loan: Funds that you’d repay in parallel with your mortgage
- Interest-free forgivable loan: There are no monthly payments and your loan is forgiven in stages, meaning you owe nothing after a certain number of years
- Home buying grant: Effectively a cash gift with no strings attached
There are more than 2,000 DPA programs across the U.S. And there’s bound to be at least one financial assistance program (probably several) available where you want to buy.
Financial assistance options
Down payment grants, tax credits, closing cost assistance, and other financial programs are typically not advertised, so be sure to ask around. Many first-time home buyer programs have broad availability, though some are restricted to select groups.
For example, the Good Neighbor Next Door program offers a 50% reduction on a home’s purchase price — but only for teachers, firefighters, and EMTs buying a single-family primary residence. In addition, the property must be listed for sale by the U.S. Department of Housing and Urban Development (HUD) in a revitalization area.
Some down payment assistance programs let you choose the level of help you need. For example, the Florida Housing Finance Corporation lets Floridians choose from:
- Florida Assist: Borrow up to $7,500 at 0% APR with no monthly payments. Repay the whole loan amount in the event of “the sale, transfer, satisfaction of the first mortgage, refinancing of the property or until such a time the mortgagor ceases to occupy the property”
- HFA Preferred and HFA Advantage PLUS: You may be able to borrow a Fannie Mae or Freddie Mac second mortgage of 3%, 4%, or 5% of the first loan’s value. At the end of each year of the second mortgage’s five-year term, 20% of the loan is forgiven. So, at the end of the fifth year, you owe nothing
- The Florida Homeownership Loan Program: Borrow a second mortgage at 3% over 15 years. You pay it back monthly in parallel with your main mortgage
However, not all DPAs offer a variety of programs. So look for as many local financial assistance options as you can find and compare them.
Qualifying for first-time home buyer assistance
Each DPA program is independent and gets to set its own rules. Some will help anyone, while others restrict their offerings to first-time buyers.
Programs are often based on a borrower’s household income and require the completion of a homebuyer education course before becoming eligible.
The three-year rule is also a significant guideline in determining who qualifies as a first-time home buyer. And this rule goes for both owning a home and having one’s name on a mortgage agreement within the past three years.
But specific first-time home buyer requirements can vary by loan program. You need to track down the ones that serve your area and ask.Verify your first-time home buyer eligibility. Start here
Is it easier to qualify as a first-time buyer?
A mortgage lender won’t waive its rules for you just because you’re a borrower who qualifies as a first-time home buyer. Lenders still need to verify that you can afford your monthly payments.Check your home buying eligibility. Start here
That means you’ll go through the full underwriting process, which involves verifying your credit, income, savings, and personal financial information, just like any other home buyer would.
But that’s in your interest as much as the lender’s. Who wants to be saddled with a home loan amount they can’t afford? The application process will ensure you get a house within your means and a reasonable monthly mortgage payment.
Mortgage requirements for home buyers
Mortgage lenders want to know that you’re able and willing to make timely payments on your home loan. They use four main criteria to assess your eligibility:Verify your first-time home buyer eligibility. Start here
- Credit score: People with high scores have proven that they’re good money managers and responsible borrowers. The higher your credit score, the more loan options you’ll have — and the lower your interest rate is likely to be
- Debt-to-income ratio (DTI): This measures how much of your gross monthly income is eaten up by existing commitments. Those include debt and credit card payments, housing costs (assessed on your new home), and things like alimony and child support
- Down payment: The bigger your down payment, the better the mortgage deal you’re likely to be offered. But many loans come with low down payments of only 3% or 3.5% of the purchase price. And if you qualify for a VA loan or USDA loan, you might not need any down payment at all
- Adequate and reliable income: You’ll need a decent employment record that suggests you can hold down a job that pays enough for you to afford a mortgage on top of your existing debts
Below, we list the minimum credit scores and down payments required for different loan types. And you can find out about DTI requirements here.
All these criteria apply both to existing homeowners and to someone who qualifies as a first-time home buyer.
Some mortgage programs come with income limits, too. With these, your household income must be near or below the median income in the area where you’re buying.
However, many loans that are popular with first-time home buyers — like the FHA loan and 3%-down Conventional 97 — allow any amount of income.
Mortgage programs for first-time buyers
You might be wondering who qualifies as a first-time home buyer or how to navigate the maze of mortgage options. The good news is that there are specialized mortgage programs designed just for people like you.Check your mortgage options. Start here
These programs often come with perks like lower down payments and more forgiving credit requirements, all to make that step onto the property ladder a bit less steep. And most popular low-down-payment mortgages are open to both repeat and first-time buyers.
This is a popular choice for people buying their first home. It has a fixed interest rate and monthly payments that stay the same for the life of the loan. Conventional mortgages usually have a down payment requirement of at least 3% to 5% of the price of the home, which makes them available to a large number of buyers.
The Federal Housing Administration (FHA) backs FHA loans, which assist first-time buyers with low credit scores or limited down payment resources. You can qualify for an FHA loan with a down payment as low as 3.5% of the purchase price. It is important to note that mortgage insurance premiums (MIP) are required on FHA loans throughout the loan term.
The Department of Veterans Affairs offers attractive terms and benefits to eligible veterans, active-duty service members, and surviving spouses. VA loans usually do not require a down payment and do not necessitate mortgage insurance. They also have more flexible qualification guidelines, making them an excellent choice for those who meet the requirements.
The U.S. Department of Agriculture offers USDA loans for buyers in suburban and rural areas. These loans often have low or no down payment requirements and favorable terms. Income limitations and property location criteria apply.
This mortgage program from Fannie Mae aims to increase low- to moderate-income buyers’ access to affordable financing. HomeReady mortgages require a down payment as low as 3% and offer competitive mortgage interest rates. They also provide flexibility regarding income sources and allow non-borrower household income to help qualify.
Freddie Mac Home Possible
Freddie Mac provides the Home Possible mortgage program to assist low- to moderate-income first-time home buyers. It allows for a down payment as low as 3% and offers flexible sources of down payment funds, including gifts, grants, or loans from family, employers, or community organizations.
Home Possible mortgages have reduced mortgage insurance requirements, making them more affordable. Borrowers may also benefit from competitive interest rates and options for fixed-rate or adjustable-rate mortgages.
Many states offer unique programs and incentives for first-time home buyers. These programs can include down payment assistance, grants, or special loan programs tailored to specific
Steps to take as a first-time home buyer
Becoming a first-time home buyer is an exciting milestone, but it can also feel overwhelming. To help navigate the process smoothly, here are some essential steps to take:
- Assess your personal finances. Evaluate your credit score, debt-to-income ratio, and savings. Determine a realistic budget for your home purchase, including the down payment and closing costs.
- Get pre-approved for a mortgage. Contact lenders and get pre-approved for a mortgage loan. This step provides a clear understanding of your purchasing power and helps streamline the home-buying process.
- Research and define your requirements. Identify your desired location, property type, and specific features you need in a home. Consider factors like proximity to amenities, schools, and transportation.
- Start house hunting. Use online listings, attend open houses, and visit neighborhoods of interest. Take notes, compare properties, and consider future resale value.
If you’re ready to begin the process of buying a home, our home buying guide will get you started.
How to get the most out of first-time home buyer benefits
When it comes to getting the most out of the benefits available to first-time home buyers, using effective strategies can make a big difference. Here are four important tips that will help you get the most out of buying a home.
Research first-time home buyer incentives
Guidelines on who qualifies as a first-time home buyer can differ from one lending institution to another, so it’s essential to do your research and understand the various incentive programs available.
Most of the time, these programs help first-time buyers by giving them money, grants, or loans with friendly terms. Look into local, state, and federal programs to see if you can get help.
Look into down payment programs, loans that don’t have to be paid back, and tax credits that can help make buying a home less expensive. By taking advantage of these programs, you can save a lot of money up front and have more money to spend.
Work with knowledgeable professionals
The process of buying a home can be hard to understand, especially for first-time buyers. Working with experts like real estate agents, lenders, and mortgage brokers can make a world of difference.
Choose a reputable real estate agent who works a lot with people who are buying their first home. They can help you understand the process, give you good advice, and negotiate on your behalf. In the same way, a lender who knows what they’re doing can help you look at different mortgage options and find the best rates and terms for your situation.
Budget for additional expenses
Aside from the purchase price, it’s important to think about and budget for other costs that come with owning a home. Among these costs are property taxes, homeowner’s insurance, private mortgage insurance (if needed), maintenance costs, and any renovations or repairs that might be needed.
By figuring out these costs ahead of time and adding them to your budget, you can avoid unpleasant financial surprises down the road. Proper budgeting ensures that you can comfortably afford not only the mortgage payments but also the ongoing costs of home ownership.
Be mindful of future resale value
As a first-time home buyer, you should think about the property’s resale value down the road. While you may intend to stay in the house for the foreseeable future, life circumstances can change. Location, school districts, neighborhood development, and amenities can all have an impact on the desirability and potential appreciation of your property.
Prioritize properties in areas with high market potential and growing infrastructure. This approach will help protect your investment and give you more options if you decide to sell in the future.
FAQ: Who qualifies as a first-time home buyer?Verify your first-time home buyer eligibility. Start here
You may be. But not if you currently own your own home. Many lenders and assistance programs apply a three-year rule. You count as a first-time buyer if you haven’t owned a home or had your name on a mortgage agreement within the previous three years.
You may still count as a first-time buyer. Most lenders and DPA programs follow the policy of the U.S. Department of Housing and Urban Development. HUD says a first-time buyer is an individual who has had no ownership in a principal residence during the 3-year period ending on the date of purchase of the property. This includes a spouse (if either meets the above test, they are considered first-time homebuyers). So you should be fine.
There’s no minimum income required to buy a house. You just need to be able to comfortably afford mortgage loan payments. How much you have to earn will depend on your existing debts, your down payment, and the home price you hope to afford.
It’s rare, but not impossible. You’d probably need help from a down payment assistance program or your family to cover everything you need. Remember, you have to pay closing costs as well as the down payment. So even borrowers with zero-down-payment mortgages often need some help—or savings.
Technically, it’s 500. But that’s an FHA loan with a down payment of 10% or higher. With a 3.5% down payment, you’d need a score of at least 580. Other types of mortgages typically require higher minimum scores, around 620 or 640. And some individual lenders may want higher FICO scores than those minimums.
Minimum down payments are typically 3–5% of the home purchase price. But you need to budget another 2-5% of the purchase price for other home-buying expenses. Those include upfront fees, closing costs, earnest money, prepaid property taxes, and homeowners insurance. Don’t forget: Some down payment assistance programs can help with these other costs. So search out the best one in the area where you’re buying.
It depends on what you mean by hard. Most lenders love first-time buyers and will do all they can to help. Plus, down payment and closing cost assistance can lower your out-of-pocket costs. The hard part is often finding the right home for your price point and doing all the administrative work required. However, millions have successfully bought their own homes in the past, so don’t lose heart; the process might be tough, but it’s certainly not impossible!
Check your eligibility as a first-time buyer
Many people wrongly assume they don’t meet the criteria of a first-time home buyer and miss out on potential benefits.
You can estimate your homeownership eligibility based on your credit score, income, savings, and debts. But a mortgage lender gets the final say. So if you’re ready to start house hunting, the first thing you should do is get a lender’s stamp of approval.
To check your mortgage rates and make sure you can afford the house you want, get pre-approved by a lender.Time to make a move? Let us find the right mortgage for you