Who is eligible for first-time home buyer programs?
First-time home buyers get access to special loans and assistance programs that repeat buyers might not.
If you’ve owned a home before, you might think none of these perks apply to you. But that’s not always the case.
Many qualify as first-time buyers even though they’ve previously bought a house. The most common rule is that you can’t have owned a home in the past three years.
So, if you owned a home in the past but don’t at the moment, you might still be eligible.
In this article (Skip to...)
- First-time buyer benefits
- Is it easy to qualify?
- Mortgage requirements
- Best first-time buyer programs
- Check your eligibility
What are the benefits of being a first-time home buyer?
If you’re buying your very first home, you count as a first-time home buyer by default. But you might also count as a first-time buyer if you haven’t owned a home 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)
This is where someone who is new to the home-buying process can really benefit. Down payment assistance programs (DPAs) offer help with your upfront costs — including the down payment and often closing costs.
Requirements vary by program, but many accept first-time home buyers with low or moderate income.
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: 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 help is typically not advertised, so be sure to ask around.
Our first-time home buyer guide has tips to help you both discover and get prequalified for first-time home buyer loans and grants in your area.
Options like the Good Neighbor Next Door program aren’t specific to first-time buyers, but offer a 50% reduction on a home’s purchase price to specific types of buyers including teachers, firefighters, and EMTs. However, 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 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 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
But not all DPAs offer a variety of programs. So look for as many local financial assistance options as you can find and compare them.
First time home buyer qualifications
Each DPA program is independent and gets to set its own rules. So some will help anyone, while others restrict their offerings to first-time buyers.
Many programs are based on a buyer’s household income, and many require borrowers to take a homebuyer education course before becoming eligible.
However, many first-time home buyer programs are designed for buyers who haven’t owned a home or had their name on a mortgage agreement within the previous three years.
But this specific first-time home buyer qualification will vary by loan program. You need to track down the ones that serve your area and ask.
Is it easier to qualify as a first-time buyer?
A mortgage lender won’t waive its rules for you just because you qualify as a first-time home buyer. Lenders still need to verify you can afford your monthly payments.
That means you’ll go through the full underwriting process — verifying your credit, income, savings, and other personal finance information — just like any other home buyer would. Loan programs don’t offer easier requirements for first-time buyers.
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’re getting 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:
- Credit score: People with high scores have proved 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 apply both to existing homeowners and someone who qualifies as a first-time home buyer.
Some mortgage programs — like USDA loans and Fannie Mae’s HomeReady loan — 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.
Best mortgage programs for first-time buyers
Traditionally, saving for a down payment has been the biggest obstacle for those wishing to buy their first home. But that’s often a phantom barrier.
Yes, there are advantages to having a 20% down payment. For instance, you won’t pay private mortgage insurance (PMI).
But why not use a low-down-payment mortgage first? You can refinance once home price inflation and your monthly payments have gifted you the 20% in home equity. That has provided a shortcut for millions of homeowners in the past.
Low down payment mortgages
All the most popular low-down-payment mortgages are open to first-time buyers. These include:
- Fannie Mae HomeReady and Freddie Mac Home Possible loans (3% down): Minimum credit score of 620
- Conventional loans (3% down): The conventional 97 mortgage requires just 3% down and a 620 FICO score
- FHA loans (3.5% down): Backed by the Federal Housing Administration, these loans are offered to primary residences only and require a minimum 580 credit score
- VA loans (0% down): Backed by the Department of Veterans Affairs for eligible veterans and service members. Minimum credit score vary by lender, 580-640 range is common
- USDA loans (0% down): Backed by the US Department of Agriculture for primary residences in eligible rural areas. A minimum credit score of 640 or higher is common
All these loan options are open to existing homeowners as well as first-time buyers.
True, there are occasional advantages for first-time buyers. For example, repeat purchasers with VA loans pay a slightly higher funding fee on closing.
And your loan officer or real estate agent might offer a little extra help throughout the process if it’s your first home purchase.
But, on the whole, the perks of these loans are open to any home buyer. That means you can likely find a low-down-payment loan or one with lower credit requirements, even if you don’t qualify as a first-time home buyer.
The key is to shop around and explore all your mortgage options. Qualifying could be easier than you think.
FAQ for first-time buyers
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 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, and 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 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 admin 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
You can estimate your homeownership eligibility based on your credit score, income, savings, and debts. We’ve shared some general mortgage requirements above.
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.
Get pre-approved by a lender to check your mortgage rates and make sure you can afford the house you want.