First-time homebuyer qualifications

Key takeaways

• First-time homebuyers are those who have never owned a home or have not owned a home in the last three years.

• First-time buyers — especially those with low or moderate incomes — might qualify for a more affordable mortgage with down payment and closing cost assistance.

• If you want a first-time buyer loan or assistance, you’ll likely need to complete a homebuyer education course.

Eligible first-time homebuyers have access to a variety of mortgage and down payment assistance programs. Here’s how to know whether you qualify.

Did you know? Fifty percent (roughly 350,000) of Bankrate users are first-time homebuyers.

Source: Bankrate and 2024 Annual Data

What are the qualifications for a first-time homebuyer?

The term “first-time homebuyer” can be misleading. Under many programs, you qualify as a first-time buyer if you’ve never owned a home before or haven’t in the last three years. So you may have owned a home before, but not recently.

You might also qualify as a first-time homebuyer if you:

• Are a stay-at-home or single parent who jointly owned a marital home in the past three years with your spouse; or

• Have not solely owned a marital home or solely or jointly owned any investment or second properties.

First-time homebuyer vs. first-generation buyer

A first-generation homebuyer is someone whose parents or legal guardians never owned a home during the homebuyer’s lifetime. A first-time homebuyer is someone who either hasn’t owned a home or hasn’t in the past three years and doesn’t factor in generational homeownership. First-generation homebuyer programs are generally designed to target low-income households.

Other first-time homebuyer qualifications

The three-year requirement isn’t the only criteria you’ll need to meet to qualify for many first-time homebuyer assistance programs. Other requirements may include:

• At least a 620 credit score — some programs require at least 640 or 680

• 43 percent or lower debt-to-income (DTI) ratio

• A contribution toward a down payment, which varies depending on the loan program

• An income and a purchase price within program limits

• Buying a home in a specific city, county or state

• Completion of a homebuyer education course

Each state and homebuyer assistance program requirements might vary slightly.

Some first-time buyer programs have income limits. These typically vary based on location and are often capped at 80 percent of the area’s median income (AMI). Your loan officer can help you determine whether your income falls under the limit specified for a given program. You can also see your area’s limit using this lookup tool.

What are the benefits of being a first-time buyer?

If you can qualify for an assistance program — which are often offered through states’ housing finance agencies — you’ll likely receive a series of benefits, such as:

• More affordable monthly payments: First-time homebuyer loans often have below-market mortgage rates and reduced rates on private mortgage insurance (PMI) — if it’s required at all. Saving money on these costs helps lower your monthly payment.

• Lower down payments: These loans may also include down payment assistance, or allow you to get help with your down payment from a third-party program. Some programs also provide funds for closing costs assistance.

• First-time homebuyer support: If you’re buying a home for the first time, many cities and counties offer first-time homebuyer support programs and education courses. These community organizations can also help you apply for grants and assistance programs.

Next steps for first-time buyers

If it’s your first time buying a home, you might be facing information overload or daunted by the search. Here’s what to focus on first:

1. Examine your financial situation. Take a hard look at your credit score, DTI ratio, earnings and savings. Set a realistic budget for your home purchase, including the down payment and closing costs. The 28/36 rule is a good starting point.

2. Do your homework. Find out what first-time buyer programs you qualify for. Many programs require borrowers to complete an education class, so get that task out of the way as early as possible. The good news: You might be able to complete this course online.

3. Get preapproved for a mortgage. When you’re ready to start house-hunting, get preapproved for financing. This helps you understand how much a lender is willing to let you borrow, and it allows you to make offers on homes.

4. Shop around. Rates, requirements and deals vary by mortgage lender, so it’s wise to shop around until you find your best fit. Read mortgage lender reviews and then narrow down your search to your top three before inquiring about what they can offer you.

Learn more: 5 lessons I stumbled into as a first-time homebuyer

FAQ

• Can you still qualify as a first-time buyer if your partner isn’t?

  You can still qualify as a first-time buyer if either you or your spouse have not owned a primary home in three years, according to the U.S. Department of Housing and Urban Development. This requirement applies only if you and your partner are legally married or in a civil partnership.

• How do first-time homebuyer qualifications vary by state?

  There isn’t much variation between first-time homebuyer qualifications by state. Most lenders adhere to requirements laid out by Fannie Mae and Freddie Mac, which back 3 percent conventional loans, regardless of where they operate. To qualify for a state HFA program as a first-time homebuyer, you’ll have to buy a home within the state. You might be able to get a mortgage through an HFA program as a repeat buyer, but often only if you’re buying in a government-designated “targeted area.” Check with your state housing agency to find out the exact requirements for programs in your area.

• How much money do I need for a down payment as a first-time homebuyer?

  If you’re buying a home with a conventional loan, and you don’t have assistance, you’ll need at least 3 percent down. (Some lenders allow for just 1 percent down on a conventional loan, covering the remaining 2 percent with a grant.) For an FHA loan, the minimum requirement is 3.5 percent. If you’re buying with a VA or USDA loan, you don’t need any down payment in most cases.

• When are you considered a first-time homebuyer again?

  You can be considered a first-time homebuyer again if you haven’t owned a home in at least three years.