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What Is a First-Time Homebuyer?
A first-time homebuyer is someone buying their principal residence for the first time, often eligible for government programs and financial benefits.
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What Is a 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 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. The term is not age-specific, so a first-time buyer can be in their 20s, 30s, 40, or of any age.
There are various government programs to assist some first-time homebuyers. Also, the IRS allows early withdrawals from retirement savings accounts to these first-time buyers. There are even some programs that are not strictly for first-time buyers.
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.
The U.S. Department of Housing and Urban Development (HUD) expands that definition even further. According to the agency, a first-time homebuyer is:
Someone who hasn't owned a principal residence for the three-year period ending on the date of purchase of the new home
An individual who has never owned a principal residence even if the person's spouse was a homeowner
Any single parent who previously owned a home with an ex-spouse
A displaced homemaker who only owned property with a spouse
A person who owns property that is not in compliance with local or state building codes and can't be brought into compliance
First-time homebuyers who fall into any of the above categories may be eligible for certain government-sponsored programs that can offer financial assistance.
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.
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.
U.S. Department of Agriculture (USDA) Benefits
The U.S. Department of Agriculture's homebuyer assistance program is targeted at people who want to buy or upgrade homes in rural areas that are currently in poor condition.
U.S. Department of Veterans Affairs (VA) Benefits
The U.S. Department of Veterans Affairs (VA) helps first-time homebuyers who are active-duty military members, veterans, and surviving spouses. These VA loans provide competitive interest rates and require no down payment. The VA guarantees part of the loan.
Lender-Offered Benefits
Certain lenders provide first-time homebuyers with perks that are sponsored by the government. For instance, first-time homebuyers with low to moderate income levels may
qualify for grants or loans that don't require repayment as long as the borrower remains in the home for a certain period of time.
IRS Benefits
A first-time homebuyer may be able to withdraw funds from an individual retirement account
(IRA) without incurring the 10% early-distribution penalty that is ordinarily applied to IRA
distributions that occur before the IRA owner reaches 59.5 years old.
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Notice To Texas Loan Applicants: Consumers wishing to file a complaint against a mortgage banker, or a licensed mortgage banker residential mortgage loan originator, should complete and send a complaint form to the Texas Department of Savings and Mortgage Lending, 2601 North Lamar, Suite 201, Austin, TX 78705. Complaint forms and instructions may be obtained from the department’s website at www.sml.texas.gov https://bit.ly/3B5pAfz.
A toll-free consumer hotline is available at 1-877-276-5550. The department maintains a recovery fund to make payments of certain actual out of pocket damages sustained by borrowers caused by acts of licensed mortgage banker residential mortgage loan originators. A written application for reimbursement from the recovery fund must be filed with and investigated by the department prior to the payment of a claim. For more information about the recovery fund, please consult the department’s website at www.sml.texas.gov