In the past three years, if you have not owned a principal residence, then you might qualify as a first-time home buyer. If you qualify as the first-time home buyer, it does not mean you have never owned a house previously. If an individual meets the requirements of first-time home buyers, it will help them to unveil many benefits such as low or no down payment mortgage plans, grants, down payment assistance and many more.

Do I qualify as a first-time home buyer?

If you have not owned any principal residence in the past three years, you are usually considered to apply for the first-time buyer mortgages and benefits. There are different first-time home buyer programs which are lenient and offer financial aid in particular areas of redevelopment.

First-time Home Buyer Benefits

As first-time home buyers you can avail various benefits like low or no down payment, grants for closing costs, down payment and federal tax credits. Grants are forgivable loans which are not supposed to be paid back by the borrower.

>>More: First-Time Home Buyer Down Payment Strategies

Is there an income limit to qualify as a first-time home buyer?

When an individual is applying for state, local, or federal government assistance programs only then income limits come into play. There are some mortgage programs such as loans issued or backed by the US Department of Agriculture Affairs also have income limits. Moreover, some low down-payment conventional mortgages also have prescribed income limits.

In such cases, the income might be subject to a benchmark created by local county limits for the households with low-to-moderate income. There are mortgage lenders who will take into account the borrower’s debt-to-income ratio while determining their eligibility. This is even applicable in the case of lenders who are working with loan programs authorized by a state housing agency. Debt-to-income ratio is the amount of debt that is paid off from the individual’s pre-tax income.

How to qualify for a first-time home buyer grant?

Grants are also known as forgivable loans which normally do not require any repayment. These are available to the borrowers with low to moderate income with the help of state first-time home buyer programs. The standards of approval might differ from program to program and also according to the location. However, more often it includes the household income and home sale price limits.

How to qualify for down payment assistance?

Similar to the process of qualifying for grants, the down payment closing cost assistance is usually offered by the local and state housing authorities. The qualifications and standards again vary when applying for a down payment assistance. It is better to look for home selling price and income caps here. It is not surprising if a first-time home buyer class is required to qualify for a down payment assistance or grants. These classes are designed in order to help the borrowers to navigate the process of home buying. Therefore, it can be a good way to evaluate whether these classes are essential or not.

How to find first-time home buyer loans?

Majority of mortgage lenders offer first-time home buyer loan programs if not all. However, if you need to use a lender authorized by the agency in order to qualify for loans tied to assistance provided by local or state housing agencies.

Look for an approved mortgage lenders list on the website of a housing agency.

What are the requirements to qualify for a first-time home buyer loan?

The qualifications and steps involved in the approval process vary from lender to lender and also by the type of mortgage the borrower is applying for. This also varies from lender to lender because every lender has their own requirements as well. However, the general qualification guidelines are stated below:

Conventional Loans:

For conventional loans, the down payment required is 3% with a credit score of at least 620. Debt-to-income ratio should be lower than 50%. The greater the credit score is and the lesser the debt-to-income ratio is, there are better chances of approval.

FHA Loans:

In order to qualify for FHA loans, the basic down payment requirement is as low as 3.5% and you the credit score requirement is 580 or higher. The credit score requirement may go as low as 500 if the down payment made is 10% of the loan amount.

VA Loans:

For loans backed by the Department of Veteran Affairs down payments are not required. These loans also don’t have a minimum credit score as a part of their official requirements, but the majority of the lenders require credit scores between 580 to 620.

USDA Loans:

USDA loans are loan programs which are backed by the US Department of Agriculture. These loan programs also don’t require down payment as a requirement. Moreover, the acceptable credit scores for this loan program are 640 or higher. A lower credit score may be acceptable if the individual is able to show sufficient assets and income proofs.

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