The First Timer
Why does the first time home buyer seem to be placed on such a lofty perch? Whether they really are or not is less the issue than what the first time home buyer does: drive the home buying market.
Think about that for a moment. If you’re not a first time home buyer and you’re getting ready to sell your current home and move up to a larger one, who do you think might be buying your home? That’s right, a first time home buyer. And unless you can afford two mortgage payments at once and have plenty of money in the bank for a new down payment without selling your current home you’ll need a first timer.
You sell your house so you can buy another house who has sold a house to you so they can buy still yet another house…and on it goes. You get the picture.
What's Available for the First Timer?
So what exactly is available for the first time home buyer? For those seeking a mortgage loan, there are several opportunities for first timers to help them finance their purchase. Most of these opportunities come in the form of grants or loans that help with a down payment and closing costs. If you’re a first time home buyer and have little or nothing for a down payment then a state or local government may have some money for you.
These funds can be an outright gift or are often in the form of a second loan. And most of these second loans don’t require any payments whatsoever as long as the note remains on the home for a minimum of three years. There are as many different grant and loan assistance programs as there are states and counties but in general terms, this is how they work. Other special first time programs offer below market interest rates or other special assistance.
So who is the first time home buyer? Someone that hasn’t owned a home before, right? Simple enough. Yet the strict definition of a first time home buyer is someone that hasn’t owned a home for the previous three years. If you’ve owned a home and sold it four years ago and not owned once since then you may still be eligible for one of these programs.
How does a lender or government agency find out if you’ve owned a home before? First, they’ll simply ask you but they’ll also back your statement up by first reviewing your credit report. If there is a mortgage listed on the credit report with activity within three years then you won’t qualify as a first time buyer. Second, a lender can review your previous three years’ tax returns to see if you declared any mortgage interest as a tax deduction. If so, then you won’t qualify.
First time programs are designed to grease the wheels of a local home buying market and the best way to do that is to stimulate the smaller, starter home sector so the real estate wheels can begin to turn.