Not so straight forward

Most easily and simply put, a First-Time Home Buyer is an individual looking to buy their very first primary residence. However, it’s not really as simple as that which is good news for a lot of people.

Alternative Definitions

The Federal Housing Administration (FHA) uses the above definition to define a First-Time Homebuyer.

The Department of Housing and Urban Development (HUD) has stated that home ownership stabilizes neighborhoods, and is a source of freedom and autonomy for Americans. So, while the primary definition of a First-Time Home Buyer is an individual who has never before owned a home, the explanation for HUD and the FHA goes further.

For couples, if one spouse is a homeowner but the other has never owned a home before then both spouses, as a cohesive unit, are considered First-Time Homebuyers.
A displaced homemaker- a person whose primary work has been within and for the home for a substantial number of years- who has only ever owned a home with their spouse is considered a First-Time Home Buyer
A single parent who owned a home with their former spouse is a First-Time Homebuyer for the FHA.
If the residence you owned and lived in did not comply with local and state building codes, and new construction would have cost less to bring the original building up to standards and compliance, you are a First-Time Home Buyer
If the home you owned was not permanently affixed to a foundation as in the cases of RV’s and some mobile homes you are a First-Time Home Buyer.
If you haven’t owned a home for at least 2 years prior to purchasing a new home, for the purposes of a penalty free IRA Withdrawal, you meet the requirements of a First-Time Home Buyer.
For some mortgage programs, if you haven’t owned a home in the past 3 years, you may qualify as a First-Time Home Buyer. Check the details of specific mortgage programs with your lender or realtor.

For Different Reasons and Programs

In the case of an IRA Withdraw, you can withdraw up to $10,000.000 from your IRA to purchase a home even if you’re not 59.5 years of age. This purchase does not need to be a traditional home, and you will have to pay income taxes on the withdrawal.

Mortgage programs that offer preferred terms to First-Time Home Buyers are:

  • FHA Loans for qualified military personnel, veterans, and spouses
  • United States Department of Agriculture (USDA) Home buyers assistance Program for homes in certain rural areas
  • Good Neighbor Next Door, originally called the Teacher Next Door Program, was expanded to include Law Enforcement, Firefighters, and Emergency Medical Technicians. This is a HUD sponsored program which allows a 50% discount on the list price of homes located in certain revitalization areas.
  • Home Upgrade Programs
  • EEM’s
  • HUD 203(k) loans
  • VA Loans
  • Dollar Homes
  • Fannie Mae and Freddie Mac

Homebuyer Tips

Research Neighborhoods for Best Fit -quality of neighborhood, quality of/and distance to school, distance and commute to work, ask realtor for crime rate statistics
Attend Open Houses and Think Long Term – This will help you get to know the area. A good strategy when buying is to find the most affordable homes in the Best Neighborhood (this allows you more room to build value/equity in your home)
Get Pre-Approved - Even if You Don’t Think you will Buy for an Extended Period of Time, it will Help you plan/budget - Maybe payoff debt, work on improving credit (if necessary), set proper expectations for total needed funds to purchase a home, help to make you an informed consumer (educate yourself)
While Saving for Your Home Purchase Try to also Build an Emergency Fund. Owning a Home can be expensive (repairs/maintenance)
Try not to get emotionally attached to a property while shopping. You need to stay objective to make the right decision
Find a Realtor that you Feel will Represent you well
Before Writing an Offer for a Property, be sure to drive by the home at different times of the day to check on traffic/noise levels, neighborhood activity, etc. Ask Questions of both your realtor and lender to be sure you understand the process as well as your ultimate financial and legal commitment by signing a real estate contract.

Common Mistakes

Buyer Changes Jobs After the Pre-Approval and doesn’t inform Lender. This could affect loan approval.
Make Numerous Transfers of Money Among Different Bank Accounts
Go from Salaried Individual to Self-Employed After Pre-Approval-this can affect your loan approval
Open New Credit Accounts
Make Large Purchases Before Closing (Washer/Dryer, new Car, etc.)
Don’t Make Arrangements for Closing Funds Soon Enough (401K/Retirement, Investment Account Funds, Gift from Family Member...some of these take time to process/receive
Don’t Realize that all Parties on the Loan Need to be at Closing to Sign Loan Paperwork
Don’t Realize that the Realtor is Paid by the Seller of the Home. It doesn’t cost the Buyer anything to have a Realtor represent them
Don’t Realize that a Realtor can Show them Any Home Listed for Sale. It doesn’t have to be the Realtor’s personal Listing.

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