First Time Home Buyers

Did you know?

The average age of a first-time homebuyer has risen to 38 years old. With rising costs and affordability challenges, homeownership can feel out of reach for many. But here’s some good news: there are special programs designed just for first-time buyers!

First-time homebuyers may be eligible for a variety of incentives and benefits when applying for a mortgage. These incentives are designed to make homeownership more accessible by lowering the upfront financial burden or reducing long-term costs. Here are some of the most common benefits:

1. Lower Minimum Down Payments

  • Conventional Loans: Some conventional loan programs, like Fannie Mae’s HomeReady® or Freddie Mac’s Home Possible® loans, allow for down payments as low as 3% for first-time buyers.

  • FHA Loans: The Federal Housing Administration (FHA) insures loans with down payments as low as 3.5% for first-time buyers. FHA loans are often attractive because they allow for lower credit scores compared to conventional loans.

  • VA Loans: For eligible veterans and active-duty military, VA loans offer zero down payment options, making them a great option for first-time buyers who qualify.

2. Lower Interest Rates

  • First-time homebuyers may qualify for lower interest rates through specialized programs or by obtaining a loan through certain lenders or government-backed loans (e.g., FHA, VA, USDA).

  • Some states, counties, or cities also offer homebuyer assistance programs that may provide discounts on interest rates.

3. Reduced Mortgage Insurance Costs

  • Private Mortgage Insurance (PMI): For conventional loans with less than 20% down, first-time buyers often need to pay for PMI. However, some loan programs (like HomeReady or Home Possible) allow for reduced PMI rates.

  • FHA Loans: FHA loans require mortgage insurance, but in some cases, buyers may qualify for a lower mortgage insurance premium (MIP) depending on their credit score, down payment, or the specific FHA program they use.

4. Down Payment Assistance (DPA) Programs

  • Many states and local governments offer Down Payment Assistance Programs (DPA) for first-time homebuyers. These programs may provide grants, forgivable loans, or low-interest loans to help cover the down payment and/or closing costs.

  • Some DPA programs have specific eligibility requirements, such as income limits, purchase price limits, or the buyer’s credit score.

5. Closing Cost Assistance

  • In addition to down payment assistance, some first-time homebuyer programs offer assistance with closing costs, which can be a significant burden for buyers. This can come in the form of grants, loans, or lender credits.

  • Some states offer first-time homebuyer tax credits that can be applied to help cover closing costs.

6. Tax Credits

  • First-Time Homebuyer Tax Credit: While the federal tax credit for first-time homebuyers (introduced after the 2008 housing crisis) expired, some states offer their own tax credits or deductions for first-time homebuyers, which may help offset costs related to buying a home. These vary by state, so it's important to check with your state’s housing authority.

  • Mortgage Credit Certificates (MCCs): Some states and local governments offer MCCs, which provide a tax credit for a portion of the mortgage interest paid each year. This can make homeownership more affordable by reducing your annual tax liability.

7. Special Loan Programs

  • Freddie Mac and Fannie Mae Loans: These government-sponsored enterprises offer special loan programs for first-time homebuyers with lower down payments and more flexible qualifying criteria, such as the HomeReady and Home Possible programs.

  • State-Specific Programs: Some states, including California, have specialized mortgage programs for first-time buyers that offer lower rates, reduced fees, and more relaxed credit score requirements. These programs may also provide additional protections for buyers.

Eligibility for First-Time Homebuyer Benefits

To be considered a first-time homebuyer, most programs define it as someone who:

  • Has never owned a home before.

  • Has not owned a home in the last 3 years (this can include people who have previously owned homes but have not owned a property in the last 36 months).

  • Is purchasing a primary residence (second homes or investment properties typically don't qualify).

Key Considerations:

  • Income Limits: Many programs have income limits to ensure that the benefits go to those who need them most.

  • Home Price Limits: Some programs impose limits on how expensive a home you can purchase to qualify for the incentive.

  • Credit Score Requirements: Although first-time buyer programs may be more lenient on credit score, most programs still have minimum requirements.

Final Thoughts

It’s important to work with a mortgage broker who understands these programs and can guide you through the process of identifying the incentives you are eligible for and applying for them. We’re happy to introduce you to some of the best in the business!