Who Qualifies as a First-Time Home Buyer? | Programs 2024

By: Peter Warden Updated By: Ryan Tronier Reviewed By: Paul Centopani
July 10, 2024 - 17 min read

First-time home buyer qualifications 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.

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What is a first-time home buyer?

A first-time home buyer hasn’t owned a primary residence in the last three years. Moreover, first-time home buyers are eligible for special homeowner programs that offer help like down payment assistance and favorable mortgage loan terms to ease the purchase process.

Who qualifies as a first-time home buyer?

First and foremost, to meet the first-time home buyer rules, an individual must not have owned a primary residence during the three years prior to the purchase of a new home. In other words, you are a first-time home buyer if you have not owned a property for the previous three years, regardless of whether you have been renting, living with family, or in another circumstance that did not require real estate ownership.

However, the rules around who qualifies as a first-time home buyer can be surprisingly flexible due to the number of specialty home loan programs designed to help people purchase their dream homes.

Understanding the qualifications for first-time home buyers is the first step towards homeownership. Here, we’ll break down the various scenarios under which different individuals qualify, making it easier for you to see where you might fit in.

Renters looking to own

If you’ve been renting and haven’t owned a home in the past three years, you’re in luck. First-time home buyer programs are specifically created with you in mind, with the goal of assisting renters in becoming homeowners by providing them with support like lower down payment requirements and even closing cost assistance.

Single parents and caregivers

If you’re a single parent re-entering the workforce after going through a divorce, you may wonder about your eligibility as a first-time buyer. The good news is that even if you previously owned a home with a former spouse, you may still meet most first-time home buyer qualifications. This can be true even if your name is on the deed or mortgage.

Similarly, if you’ve stepped away from your career to provide unpaid care to a family member, your journey towards buying a home is not out of reach. There are opportunities designed to support you in meeting the qualifications for a first-time home buyer.

Investment property owners

Owning investment property doesn’t disqualify you from being a first-time buyer. If you’ve been renting a property while not owning a primary residence yourself for at least three years, you still qualify. This scenario often surprises many potential buyers, who assume previous property investments disqualify them.

Mobile home owners

Those who own a mobile home but have not owned a stationary home on a permanent foundation qualify as well. This distinction recognizes the different nature of mobile versus traditional homeownership and opens the door for mobile homeowners to transition to a permanent residence.

Veterans and service members

Our nation’s heroes, including veterans and active service members, enjoy special qualifications for first-time home buyer programs. VA loans, for instance, may allow for no down payment and no private mortgage insurance, making the dream of homeownership more attainable and affordable for those who’ve served our country.

Educators, firefighters, EMTs, and law enforcement

Dedicated to serving our communities, educators, firefighters, EMTs, and law enforcement officers may qualify for unique homeownership programs. Programs like Good Neighbor Next Door offer substantial discounts on homes, acknowledging the vital role these professionals play in our communities.

Additionally, many lenders offer nurse home loans and doctor mortgages to help newly-certified medical professionals buy their first homes.

Target area buyers

Looking to make a difference in certain communities? Purchasing a home in designated target areas can offer more lenient qualifications and incentives. These programs aim to revitalize neighborhoods and make homeownership accessible, often with benefits like reduced home prices or tax incentives.

First-time home buyer requirements

Having explored the types of buyers who fall under the first-time home buyer umbrella, it’s crucial to understand the next layer of qualifications that pave the way to homeownership.

For those who meet the initial eligibility requirement, a few more common rules typically need to be met in order to qualify for a first-time home buyer loan program. Let’s explore each of these to ensure you’re fully prepared for what lies ahead.

Verify your first-time home buyer eligibility. Start here

Down payment requirements

Contrary to the belief that a 20% down payment is always needed, many first-time home buyer programs offer much lower requirements—sometimes as little as 3%. Some programs, like VA and USDA loans, may even waive the down payment requirement entirely for qualifying applicants.

Debt-to-income requirements

Your debt-to-income ratio (DTI) is a critical measure lenders use to gauge your ability to manage monthly payments. A DTI of 43% or lower is generally preferred, though some programs may permit higher ratios. This ratio helps lenders determine if you can comfortably afford your mortgage alongside your existing debts.

Credit score requirements

A healthy credit score is the cornerstone of your home buying eligibility. Most first-time home buyer programs require a minimum credit score, often around 620, to qualify for conventional loans. However, some programs, like FHA loans, are more lenient, allowing scores as low as 580 or even lower with higher down payments.

Credit history

Beyond just your credit score, lenders will review your credit history for patterns of responsible credit use. Late payments, high credit card balances, and accounts in collections can be red flags. A clean credit history paints a picture of financial reliability.

Employment history

A stable employment history, generally for the last two years, is key for mortgage loan approval. Lenders use this to verify income stability and predict future earning potential. Frequent job changes or gaps in employment can raise concerns about income consistency.

Income stability

Lenders look for steady, reliable income when assessing loan eligibility. This means having a consistent work history, typically for the last two years, and evidence that your income will continue. It reassures lenders that you have the means to sustain mortgage payments over time.

Income limits

Many first-time home buyer programs set income limits based on the Area Median Income (AMI) to ensure accessibility. Your eligibility for certain loan types and assistance programs may be influenced by your household income relative to the AMI in your area. Income limits help make sure that moderate and low-income households are truly benefiting from these programs .

The qualifications for a first-time home buyer can differ between lending institutions, so conducting thorough research is key. Moreover, these requirements may significantly vary depending on the specific first-time home buyer loan you choose.

If you’re considering applying for down payment assistance, remember that these programs have their own set of guidelines.

Types of first-time home buyer loan programs

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 mortgage loans often come with perks like lower down payments and more forgiving credit score 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.

Conventional loan

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.

FHA loan

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 life of the loan. However, many borrowers choose to refinance their FHA loans into a different loan type, such as a conventional mortgage. This strategy is often used to eliminate MIP once sufficient home equity has been accumulated

VA loan

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 or mortgage insurance. They also have more flexible qualification guidelines, making them an excellent choice for those who meet the requirements.

USDA loan

The U.S. Department of Agriculture offers USDA loans for buyers in suburban and rural areas. These mortgage loans often have low or no down payment requirements and favorable terms. Income limitations and property location criteria apply.

Fannie Mae HomeReady Mortgage

Fannie Mae aims to increase homeownership among more moderate and low-income Americans through its HomeReady mortgage. With only a 3% down payment needed, this home loan program provides affordable mortgage interest rates. Additionally, HomeReady allows non-borrower household income to help qualify and offers flexibility regarding income sources.

Freddie Mac Home Possible

Similar to Fannie Mae, Freddie Mac’s mission is to help more moderate and low-income Americans purchase their dream homes with its Home Possible mortgage program. 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 mortgages or adjustable-rate mortgages.

State-specific programs

Many states offer unique opportunities through housing finance agencies, local initiatives, and nonprofit organizations aimed at supporting first-time buyers. These state-specific programs often collaborate with approved lenders to offer tailored assistance, such as grants for down payments, special loan terms, and educational resources to navigate the home buying process successfully.

For example, in Texas, the Texas State Affordable Housing Corporation (TSAHC) provides remarkable options for first-time home buyers. The TSAHC offers programs like the Homes for Texas Heroes and Home Sweet Texas Home Loan Programs, which not only present competitive interest rates but also down payment and closing cost assistance up to 5% of the loan amount.

Whether you’re in Texas or another state, exploring local first-time home buyer programs can uncover valuable resources to help you achieve your dream of homeownership.

First-time home buyer assistance programs

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.

Check your home buying eligibility. Start here

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.

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 home. 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:

  1. 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”
  2. 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
  3. 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.

Homebuyer education

Many assistance programs require completion of a homebuyer education course. These courses, often provided by a HUD-approved counseling agency, offer valuable insights into the home buying process and financial management.

Mortgage credit certificates (MCCs)

A mortgage credit certificate provides a tax credit of up to $2,000 per year for the life of your loan. MCCs, offered through participating lenders, can significantly reduce your tax liability, making homeownership more affordable over time.

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. Be sure to check .gov websites for information on local programs, including details on price limits and maximum sales price for eligible properties.

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.

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 loan options 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, Realtors, 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, maintenance costs, renovations or repairs, and private mortgage insurance (PMI) if 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: First-time home buyer requirements

Verify your first-time home buyer eligibility. Start here

Are you a first-time buyer if you've owned a property before?

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.

What if I'm a first-time buyer and my partner isn't?

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.

What is the minimum income to qualify for first-time buyers?

There’s no minimum income required to buy a house. But lenders will closely examine your personal finances to ensure you can manage the mortgage payments along with your other financial obligations. How much you have to earn will depend on your existing debts, your down payment, and the home price you hope to afford.

Can I buy a house with no money out of pocket?

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.

What's the minimum credit score for a first-time homebuyer?

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.

How much money do I really need to buy a house?

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.

Is it hard to get a first-time buyer loan?

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 home 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 below.

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Peter Warden
Authored By: Peter Warden
The Mortgage Reports Editor
Peter Warden has been writing for a decade about mortgages, personal finance, credit cards, and insurance. His work has appeared across a wide range of media. He lives in a small town with his partner of 25 years.
Ryan Tronier
Updated By: Ryan Tronier
The Mortgage Reports Editor
Ryan Tronier is a personal finance writer and editor. His work has been published on NBC, ABC, USATODAY, Yahoo Finance, MSN Money, and more. Ryan is the former managing editor of the finance website Sapling, as well as the former personal finance editor at Slickdeals.
Paul Centopani
Reviewed By: Paul Centopani
The Mortgage Reports Editor
Paul Centopani is a writer and editor who started covering the lending and housing markets in 2018. Previous to joining The Mortgage Reports, he was a reporter for National Mortgage News. Paul grew up in Connecticut, graduated from Binghamton University and now lives in Chicago after a decade in New York and the D.C. area.