There are many loan programs and grants that cater to first-time home buyers, especially on the state and local levels. While a person who has never owned a home before certainly counts as a first-time home buyer, those who have owned a home before can also qualify as first-time homebuyers under certain circumstances (see eligibility below).
Down Payment Options
The IRS allows first-time homebuyers to borrow against their IRAs without paying the standard 10 percent penalty. These homebuyers may also borrow against their Roth IRAs tax-free after five years of investment (be sure to consult a professional tax advisor). The money must be used for a down payment or acquisition costs on a principal residence for the IRA owner or close family member. There is a lifetime limit of $10,000 on these exceptions, and you must use the money within 120 days.
A first-time home buyer is anyone who has not owned a home for at least the previous two years (says three years below). If the buyer or spouse has owned a home within the previous two years, the IRS does not consider them to be first-time homebuyers.
Since first-time homebuyers are not selling a home and using the profit to buy a home, they often need help with the down payment. An FHA Loan (Federal Housing Administration) helps many first-time buyers, particularly when combined with down payment assistance programs sponsored by state agencies. These state programs give first-time buyers low-cost loans or grants to help them comply with a low down payment required by the FHA.
FHA guidelines sometimes extend its definition of first-time homebuyers to those who owned a home with a spouse. This includes single parents divorced from their spouses or those who are displaced homemakers. Many of these individuals have been on the deed for a home without being on the mortgage. Those who have only owned a mobile home not permanently attached to a foundation are also considered first-time homebuyers.
Any person who has not owned a principal residence in three years qualifies as a first-time homebuyer under FHA guidelines. If your previous home was sold or foreclosed on or you owned an investment property, you may qualify as a first-time homebuyer. If one spouse qualifies and the other does not, then they both may qualify as first-time homebuyers.
To find out your eligibility, contact us directly for details.
Buy a Home with 100% Financing
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Unlike most other financing programs, the VA uses a single qualifying ratio. This allows the veteran, without monthly obligations, to increase the portion of his/her income that can be allocated to a housing payment to that of 41%. This includes principal, interest, taxes and insurance (PITI). Qualifying for a VA loan also takes into consideration the residual income the veteran has after obligations of PITI, maintenance, utilities, income taxes and social security are met. The residual requirements vary with geographic location and family size but are usually easily met if the income-to-debt ratio is within the 41% guideline. If the house obligation is in excess of the 41% but the residual income is 120% (or greater), there is strong support to approve the loan despite exceeding the ratio guidelines.
A USDA loan (United States Department of Agriculture) is a great option for those who qualify in designated rural areas and are within the compliance income limits (determined by location). It can be ideal if the buyer has limited or no money down. There are no maximum loan limits and some of the closing costs may be financed into the total cost of the loan. The program features lower interest rates and can be an affordable option for first-time homebuyers.
NOTE: This loan is for owner-occupied borrowers only.
To find out if a property is eligible, call us and we’ll be glad to look up the property for you OR go to http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do and enter the address in question.