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Applying for First-Time Homebuyers Loans

Qualifying for a first-time homebuyer loan can save you thousands of dollars when you purchase what may be your largest investment to-date.[1] But even if you've owned before, you could qualify as a first-time homebuyer if you meet a few different criteria and can provide the required documentation.

Below, learn what constitutes a first-time homebuyer and what types of assistance — including grants, down payment assistance, and more favorable loan terms — may be available to qualifying buyers.

What is a First-Time Homebuyer?

Generally, lenders and federal agencies define a first-time homebuyer as anyone who hasn't owned a principal residence in the last three years.1 This means that if you owned a home in your twenties, sold it and moved, and since then have rented for at least three years, you'll be considered eligible to apply for these loans and benefits—just as if you had never owned a home before.

What First-time Homebuyer Benefits are Available?

Just a few of the benefits include:

· Down payment assistance. This assistance does just what the name describes — helps homeowners out on down payment costs through a forgivable loan or grant. This assistance is generally offered by local or state housing authorities, each of which has its own criteria to qualify.[2]

· No- or low-down payment loans. Certain federally-backed loans, like FHA, VA, and USDA loans, allow buyers to make down payments as low as three-and-a-half percent. Borrowers who have a ten-percent down payment can be approved for an FHA loan even with a poor credit score, while VA and USDA loans have slightly more stringent qualification requirements.2

· Forgivable loans for closing costs. These are available through state first-time homebuyer programs, and provide borrowers with loans to cover closing costs, reducing the overall cost of the mortgage.3 Most of these programs will forgive the loan once you have stayed in the home for a certain period of time or paid down a specific percentage of the principal.

· Federal tax credits. Though this credit was phased out for new borrowers, those who took out a mortgage before 2010 may be able to qualify for the first-time homebuyer tax credit.4

More homebuyer benefits may be available at the local level; just search for "first-time homebuyer programs in [state]" to find more results.

What Information Will You Need to Apply?

Even if you haven't yet found a house you're interested in, you can apply for preapproval for an FHA or USDA loan or investigate your other credit or loan options.[3] It's a good idea to have your documents in order early in the home shopping process. The information the lender or housing authority will ask for generally includes:[4]

· W2s or pay stubs showing your current income

· Prior tax returns

· Copies of bank statements (particularly the statement that shows where you intend to draw the down payment funds)

· Your Social Security or federal ID number

Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.

1 https://www.nerdwallet.com/article/mortgages/qualify-first-time-home-buyer-benefits

2 https://www.hud.gov/buying/loans

3 https://www.nerdwallet.com/blog/mortgages/first-time-home-buyer-programs-by-state/ 4 https://smartasset.com/taxes/first-time-homebuyer-tax-credit

[1] The biggest investment most people will ever make is in their home (omahainsuranceservices.com)

[2] First-Time Home Buyer Programs by State - NerdWallet

[3] USDA Vs. FHA Loans: Which Is Better For You? | Rocket Mortgage

[4] Complete Checklist of Documents Needed for a Mortgage | US News

Sources

The biggest investment most people will ever make is in their home (omahainsuranceservices.com)

First-Time Home Buyer Programs by State - NerdWallet

USDA Vs. FHA Loans: Which Is Better For You? | Rocket Mortgage

Complete Checklist of Documents Needed for a Mortgage | US News

Content Provider: WriterAccess

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