Many loan programs are only for a first-time homebuyer. Does that mean only those that have never owned a home? It may shock you to hear that the answer is ‘no.’ There are other stipulations that can make you a first-time homebuyer and therefore eligible for a variety of great programs.
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The True First-Time Homebuyer
Of course, the true first-time homebuyer is the person that never owned a home before. Maybe you rented or you lived with your parents. Whatever the case may be, you never signed on the dotted line on a mortgage.
First-time homebuyers typically have a hard time coming up with a large down payment. Because they don’t have a home with equity to sell, they have to rely on their savings. This is why many programs cater to the ‘true’ first-time homebuyer because they need help with the down payment.
The ‘Other’ First-Time Homebuyer
There are first-time homebuyers that have owned a home before. It sounds strange, but it’s the homeowners that owned a home before and now they don’t. Typically, you have to be without a home that you own for three years in order for loan programs to consider you a first-time homebuyer again.’
The borrowers that typically fit this mold are those that either sold their home for one reason or another and now rent or those that lost their home in foreclosure. Whatever the case may be, if you don’t have a home now and you haven’t owned one for three years, you may qualify for the first-time homebuyer benefits.
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Divorced First-Time Homebuyers
If you were married before but aren’t now, you may qualify as a first-time homebuyer. Here’s how. Did your spouse own the home before you got married? Or did your spouse buy the home in his name only even after you were married? If you didn’t sign your name on the dotted line on the mortgage, you may qualify as a first-time homebuyer.
Qualifying for Loan Programs as a First-Time Homebuyer
Before you start applying for loan programs, whether you are a first-time homebuyer or not, you should know how to maximize your chances of approval:
- Maximize your credit score – Government-backed loan programs have low credit score requirements, but that doesn’t mean you shouldn’t try to increase your score. The higher the credit score you offer a lender, the better terms you’ll get. Try to achieve the highest score possible so that you can obtain those great terms.
- Save as much money as you can – You’ll need some type of down payment unless you qualify for VA or USDA financing. The more money that you have to put down on the home, the better your chances of approval becomes. Even if you don’t put all of the money you saved down on the home, it puts you in a good light with the lender if you have reserves on hand.
- Keep your debts down – Lenders don’t like you to have other debts. You need to try to pay off as many debts as possible. This way your income compared to your debts is low enough for lenders to feel comfortable giving you a new mortgage.
- Have stable employment/income – You may not need a 2-year history at the same job anymore, but any consistency that you can show a lender, the better your chances of approval become. Lenders want to see that you are at least working in the same industry and have income that is either stable or rising over the years.
First-time homebuyers have many loan options available to them. If you want to apply for special programs or grants for first-time homebuyers, you’ll need to be an actual first-time buyer or one that hasn’t owned a home in at least three years. If you don’t qualify as the first-time buyer, there are plenty of other government-backed and conventional loan programs that you can use as well.