About First-Time Homebuyer:
First-time homebuyers often qualify for special benefits such as lower minimum down payments, special grants, and assistance with paying closing costs that are sponsored by state and federal governments. Many lenders offer first-time homebuyers incentives and special loans.
The government has programs that assist first-time homebuyers in some circumstances.
The IRS allows early withdrawals from retirement savings accounts to first-time homebuyers.
The term first-time homebuyer generally refers to a person who is buying a principal residence for the very first time. However, the definition is sometimes more generous. And there are many programs that help people get into their own homes that are not strictly for first-time buyers.
- A first-time homebuyer can be defined as a person who is buying a principal residence for the first time.
- Some federal programs define a “first-time” buyer as one who has not owned a home in three years.
- Many homebuyers qualify for financial help through various government-sponsored programs.
- Certain lenders compete for the business of first-time homebuyers by offering special benefits and loan terms.
- First-time homebuyers are generally able to withdraw from their retirement funds without incurring the 10% early withdrawal penalty imposed by the IRS.
Understanding First-Time Homebuyers:
- Strictly speaking, a first-time homebuyer is an individual who is purchasing a primary residence for the first time. This home is deemed the homebuyer’s principal residence, or the primary location that the person inhabits.
- It may also be referred to as their primary residence or main residence. Keep in mind, though, that a principal residence may not always be a conventional house. For instance, it could be a boat that someone resides on full-time.
Fannie Mae’s Definition of First-Time Homebuyer:
- Like HUD, Fannie Mae defines a first-time homebuyer as a person who has not owned a residential property in the last three years.
- The Federal National Mortgage Association, generally known as Fannie Mae, works to extend home ownership to more Americans through a number of programs. Its HomeReady program assists homebuyers with unconventional income sources and as little as three percent to put down on a mortgage.2
- Its consumer website has the details on its programs to assist homebuyers in buying or upgrading a home.
- Fannie Mae does not originate mortgages. It buys mortgages that banks originate, guarantees their repayment, and then packages them for resale on the secondary market. This encourages lenders to grant more mortgages to buyers with less-than-ideal financial circumstances.
Federal Housing Administration (FHA) Loans:
- The Federal Housing Administration (FHA) has been working since 1934 to help homebuyers with modest means to buy homes. Their programs aren’t restricted to first-time homebuyers, although they can be particularly relevant to first-time buyers struggling to qualify for a loan.
- Qualified applicants can put down as little as 3.5% as a down payment, and the FHA’s credit qualifications are less strict than a bank’s.
- The FHA also offers reduced closing costs, helps seniors stay in their own homes, and helps homeowners finance energy-efficient updates.4
- They don’t do this by issuing mortgages but by backing mortgages issued by private lenders like banks. They guarantee the mortgage so that the bank doesn’t turn down a less-than-ideal applicant.