First time homebuyers can get access to special home loan programs and down payment assistance that repeat buyers may not.
If you have never owned a home before, you will qualify as a first time homebuyer. But did you know that if you have owned a home in the past, you may qualify as a first time homebuyer again? Many lenders and loan programs define a “first time homebuyer” as someone that has not owned a home in three years. So if you owned a home in the past and are looking to buy again, you may qualify for first time homebuyer programs.
First time buyer qualifications are usually:
- credit score of at least 620, frequently 640 (sometimes higher)
- down payment of at least 3%
- debt to income ratios below 45%, some may allow you to go to 50%
- steady income with a two year job history
- first time homebuyer – not owning a property in the past three years
The requirements will vary based on the type of loan you are using. Most require you to take a first time homebuyer class and have a minimum amount into the transaction (in some cases as little as $1000).
So what programs are available to first time homebuyers? It depends on the area you live in, but in Minnesota there are several programs. Minnesota Housing is a major first time homebuyer program. You can get up to $12,500 in deferred down payment assistance if you meet the income guidelines. If you are over the guidelines for the deferred program, you can still get up to $17,000 in assistance but it has to be paid back with interest in the first 10 years. Some programs offer grants. In Scott County, you can get up to a $4000 grant that doesn’t have to be paid back. There are different programs in some cities that offer assistance. Woodbury has a program, so does Eden Prairie. If you aren’t sure what is available, check with a loan officer that works with first time homebuyer programs. Some mortgage companies do not offer first time home buyer programs other than Home Ready and Home Possible. Those programs are great but do not offer assistance.
Every down payment assistance program is slightly different and they set their own rules. Most allow buyers that have not owned a home in the past three years. Many have income guidelines and some have requirements for the amount of assets you can have after closing.
These programs can definitely help you purchase your first home so make sure you ask about them. Make sure the loan officer you are talking with understands the program and any special requirements.