When you think of a first time home buyer, you probably think of someone who never purchased a home before. This is the literal definition of the term. There are other people who may fall into the category and not realize it. Each mortgage program has their own guidelines regarding who they consider a first-time buyer. Armed with this information, you might be privy to more loan programs and benefits than you realize.
The Timeframe Matters
First, let’s look at the least likely people to realize they are first time home buyers. These are the people who owned a home in the past. However, if more than 3 years has passed since you owned the home, you are a first-timer again. This is the rule the IRS set up when they provided the tax credit for first-time buyers.
You might wonder who would be without a house for three years. The possibilities are endless, but here are a few common situations:
- Borrowers who lost their home in foreclosure
- Borrowers who moved to change jobs or be with family and couldn’t afford to buy a house yet
- Borrowers who filed for bankruptcy
These are just a few of the examples. Whatever the reason, though, as long as it has been 3 years, these borrowers can participate in any of the available grants that provide first-timers with money for their loan.
Divorce and Being a First-Time Homebuyer
Something many people do not think about is the borrowers who were once married and are now divorced. If they lived in a home that their spouse owned, they assume they are not a first-time buyer. However, if the borrower was on the title to the home, but not on the mortgage itself, this constitutes a first time home buyer.
Knowing this can help those going through a divorce, especially the party that did not have ownership in the home. When you are a first-time buyer, it opens up many opportunities for down payment assistance as well as other grants that make home ownership possible.
Borrowing from Your IRA
If you have an IRA and lack the down payment funds needed to purchase a home, you may be eligible to borrow from your IRA. Again, you must be a first time home buyer. In this case, however, the IRS considers anyone who has not owned a home in the last 2 years as a first time buyer. In most cases, you can borrow up to $10,000 of your IRA for a down payment or for closing costs. However, you will be responsible for the taxes when you file your taxes for the year.
Mortgage Programs for First Time Buyers
Unfortunately, today there are not many mortgage programs geared directly towards first time home buyers. The FHA loan used to be known as the first timers loan, but today many others use it as well. The FHA and USDA loans do offer many benefits for those buying a home for the first time, though. The USDA loan does not require any money down on the home and the FHA loans require only 3.5%. If you are a first time buyer, you may qualify for help for the down payment for the FHA loan. There may be grants available from your city, county, or state. You must apply for the grants in order to receive them, though.
If you are starting over again, after a foreclosure or bankruptcy, consider yourself a first time home buyer. Waiting the 3 years to claim this title is often worth it, especially if you can find grants in your area. Getting help to put money down on the home allows you to have money for closing costs or even to cover the cost of moving. Talk to your lender about the possibility of being considered a first time buyer so that you can reap all of the benefits that are available to you.
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