If you’re looking into buying a home, here’s what you should know about first-time homebuyer programs. Think this doesn’t apply to you? Read on… the government’s definition of “first-time homebuyer” is much broader than you might think.

Generally speaking, all levels of government in the United States have a policy of promoting homeownership. This is most evident in the programs and perks available to first-time home buyers—the assumption is that these are the buyers who need the most help in becoming homeowners.
 

Who is a first-time homebuyer?

This might seem simple: If you’ve ever owned a home before, you’re not a first-time homebuyer. But that’s not actually how eligibility for most first-time homebuyer programs is determined.

Here’s who qualifies for federal first-time homebuyer programs:

• You or your spouse hasn’t owned a home in the past three years. Only one spouse has to qualify
• You previously owned a home with your spouse, but you’re now divorced or widowed and looking to buy a house on your own
• You’ve owned a home in the past three years, but it was a mobile home or it didn’t meet local building codes and couldn’t be brought up to code for less than the cost of rebuilding completely.

If, for example, you sold your home four years ago and bought a mobile home and now want to buy a house, you would qualify as a first-time homebuyer.

State and local first-time homebuyer programs might have different eligibility requirements, however, so make sure to check when you’re shopping around for programs.
 

What are the perks?

The Federal government offers a number of programs for first-time buyers.

The most flexible program is run through the Federal Housing Administration, of the FHA. The FHA guarantees loans for first-time homebuyers, allowing buyers to make a down payment of as little as 3.5% of the purchase price. FHA loans are also a good way for people with less-than-ideal credit histories to qualify for a loan. This program is available to anyone, anywhere—provided they meet the first-time homebuyer criteria and other income guidelines.

The U.S. Department of Agriculture also offers special loans for first-time homebuyers — allowing buyers to borrow 100% of the home’s value. This is limited to rural areas, but is for home purchases… so you don’t have to operate a farm, just live in a rural area.

If you or your spouse is a veteran, the Veterans’ Administration is another good resource, offering generous loans that often have better terms than a traditional loan would have. You don’t have to be a first-time homebuyer to get a VA loan.

If you’re planning on buying a fixer-upper, you should look into the Energy Efficient Mortgage program, which allows you to finance the cost of making your home greener, or the HUD 203(k) loans, which allow you to finance significant improvements to the home. Neither of these programs is specific to first-time homebuyers.

Don’t stop at these federal programs, however, many important first-time homebuyer programs are offered by state and local governments. You can search for state programs here, and check with your city or county government about any programs specific to the area you’re considering buying in.

If you’re a first-time homebuyer, it’s a good idea to consult with local HUD-approved housing counseling agency. They can help you navigate the homebuying process and identify any programs you might qualify for… and make sure you’re not leaving any money on the table.

Lastly, beware of first-time homebuyer programs advertised by banks, as these are often little more than marketing schemes that offer no real advantage to the buyer.