A first-time homebuyer isn’t only someone purchasing a first home. It can be anyone who has not owned a principal residence in the past three years, some single parents, a spouse who has not owned a home, and more.
If the thought of a down payment and closing costs sends a chill down your spine, realize that first-time homebuyers often have access to special grants, loans, and programs.
Key Points
• If you haven’t owned a home in the last three years, you may still be considered a first-time homebuyer.
• Many first-time homebuyer mortgages let buyers put down less than 20%.
• Veterans, service members, and certain civil servants may have access to special first-time homebuyer programs.
• You may be able to get an FHA mortgage with a credit score of 500, though you will have to make a down payment of at least 10%.
• First-time homebuyer programs may provide advantageous terms, but there can also be insurance and fee requirements.
“First-Time Homebuyer” Under the Microscope
To get a sense of who qualifies for a mortgage as a first-time homebuyer, let’s take a look at the government’s definition.
The U.S. Department of Housing and Urban Development (HUD) says first-time buyers meet any of these criteria:
• An individual who has not held ownership in a principal residence during the three-year period ending on the date of the purchase.
• A single parent who has only owned a home with a former spouse.
• An individual who is a displaced homemaker (has worked only in the home for a substantial number of years providing unpaid household services for family members) and has only owned a home with a spouse.
• Both spouses if one spouse is or was a homeowner but the other has not owned a home.
• A person who has only owned a principal residence that was not permanently attached to a foundation (such as a mobile home when the wheels are in place).
• An individual who has owned a property that is not in compliance with state, local, or model building codes and that cannot be brought into compliance for less than the cost of constructing a permanent structure.
For conventional (nongovernment) financing through private lenders, Fannie Mae’s criteria are similar.
Recommended: The Complete First-Time Homebuyer Guide
First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.
Questions? Call (888)-541-0398.
Options for First-Time Homebuyers
First-time homebuyers may not realize that they, like other buyers, may qualify to buy a home with much less than 20% down.
They also have access to first-time homebuyer programs that may ease the credit requirements of homeownership.
Federal Government-Backed Mortgages
When the federal government insures mortgages, the loans pose less of a risk to lenders. This means lenders may offer you a lower interest rate.
There are three government-backed home loan options: FHA loans, USDA loans, and VA loans. In exchange for a low down payment, you’ll pay an upfront and annual mortgage insurance premium for FHA loans, an upfront guarantee fee and annual fee for USDA loans, or a one-time funding fee for VA loans.
Note: SoFi does not offer USDA loans at this time. However, SoFi does offer FHA, VA, and conventional loan options.
FHA Loans
The Federal Housing Administration, part of HUD, insures fixed-rate mortgages issued by approved lenders. On average, more than 80% of FHA-insured mortgages are for first-time homebuyers each year.
If you have a FICO® credit score of 580 or higher, you could get an FHA loan with just 3.5% down. If you have a score between 500 and 579, you may still qualify for a loan with 10% down.
USDA Loans
The U.S. Department of Agriculture offers assistance to buy (or, in some cases, even build) a home in certain rural areas. Your income has to be within a certain percentage of the average median income for the area.
If you qualify, the loan requires no down payment and offers a fixed interest rate.
VA Loans
A mortgage guaranteed in part by the Department of Veterans Affairs requires no down payment and is available for military members, veterans, and certain surviving military spouses.
Although a VA loan does not state a minimum credit score, lenders who make the loan will set their minimum score for the product based on their risk tolerance.
💡 Quick Tip: When house hunting, don’t forget to lock in your home mortgage loan rate so there are no surprises if your offer is accepted.
Government-Backed Conventional Mortgages
Fannie Mae and Freddie Mac, government-backed mortgage companies, do not originate home loans. Instead, they buy and guarantee mortgages issued through lenders in the secondary mortgage market.
They make mortgages available that are geared toward lower-income, lower-credit score borrowers.
Freddie Mac’s Home Possible program offers down payment options as low as 3%. There are also sweat equity down payment options and flexible terms.
Fannie Mae’s 97% LTV (loan-to-value) program also offers 3% down payment loans.
A Mortgage for Certain Civil Servants
If you’re a law enforcement officer, firefighter, or EMT working for a federal, state, local, or Indian tribal government agency, or a teacher at a public or private school, the HUD-backed Good Neighbor Next Door Program could be a good fit. It provides 50% off the listing price of a foreclosed home in specific revitalization areas. In turn, you have to commit to living there for 36 months.
Homes are listed on the HUD website each week, and you have to put an offer in within seven days. Only a registered HUD broker can submit a bid for you on a property.
If you’re using an FHA loan to buy a home in the Good Neighbor Next Door Program, the down payment will be $100. If using a VA loan to purchase a house through the program, buyers will receive 100% financing. If using a conventional home loan, the usual down payment requirements stay the same.
State, County, and City Assistance
It isn’t just the federal government that helps to get first-time buyers into homes. State, county, and city governments and nonprofit organizations run many down payment assistance programs.
HUD is the gatekeeper, steering buyers to state and local programs and offering advice from HUD home assistance counselors.
The National Council of State Housing Agencies has a state-by-state list of housing finance agencies, which cater to low- and middle-income households. Contact the agency to learn about the programs it offers and to get answers to housing finance questions.
💡 Quick Tip: Jumbo mortgage loans are the answer for borrowers who need to borrow more than the conforming loan limit values set by the Federal Housing Finance Agency ($806,500 in most places, or $1,209,750 in many high-cost areas). If you have your eye on a pricier property, a jumbo loan could be a good solution.
Using Gift Money
First-time homebuyers might also want to think about seeking down payment and closing cost help from family members.
If you’re using a cash gift, your lender will want a formal gift letter, and the gift cannot be a loan. Home loans backed by Fannie Mae and Freddie Mac only allow down payment gifts from someone related to the borrower. Government-backed loans have looser requirements.
Want to use your 401(k) to make a down payment? You could, but financial advisors frown on the idea. Borrowing from your 401(k) can do damage to your retirement savings.
Get matched with a local
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$9,500‡ cash back when you close.
Pair up with a local real estate agent through HomeStory and unlock up to
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The Takeaway
First-time homebuyers may still be in good shape even if they don’t have much of a down payment or their credit isn’t stellar. Lots of programs, from local to federal, give first-time homeowners a break.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.
FAQ
Can you be considered a first-time homebuyer twice?
Yes, there are multiple scenarios in which you can be considered a first-time homebuyer. When you’re buying your first home is one, of course, but others include if you or your partner has not owned a home for three years prior to your closing, if you are a displaced homemaker who previously owned a home with your spouse, or if you are a single parent who previously owned owned a home with your ex.
What credit score is needed for a first-time homebuyer?
For a conventional loan, a first-time homebuyer will typically need a credit score of 620 or more. However, many homebuyers may be eligible for government-backed loans potentially available to people with lower scores, like FHA loans, VA loans, and USDA loans.
SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
†Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.
Qualifying for the reward requires using a real estate agent that participates in HomeStory’s broker to broker agreement to complete the real estate buy and/or sell transaction. You retain the right to negotiate buyer and or seller representation agreements. Upon successful close of the transaction, the Real Estate Agent pays a fee to HomeStory Real Estate Services. All Agents have been independently vetted by HomeStory to meet performance expectations required to participate in the program. If you are currently working with a REALTOR®, please disregard this notice. It is not our intention to solicit the offerings of other REALTORS®. A reward is not available where prohibited by state law, including Alaska, Iowa, Louisiana and Missouri. A reduced agent commission may be available for sellers in lieu of the reward in Mississippi, New Jersey, Oklahoma, and Oregon and should be discussed with the agent upon enrollment. No reward will be available for buyers in Mississippi, Oklahoma, and Oregon. A commission credit may be available for buyers in lieu of the reward in New Jersey and must be discussed with the agent upon enrollment and included in a Buyer Agency Agreement with Rebate Provision. Rewards in Kansas and Tennessee are required to be delivered by gift card.
HomeStory will issue the reward using the payment option you select and will be sent to the client enrolled in the program within 45 days of HomeStory Real Estate Services receipt of settlement statements and any other documentation reasonably required to calculate the applicable reward amount. Real estate agent fees and commissions still apply. Short sale transactions do not qualify for the reward. Depending on state regulations highlighted above, reward amount is based on sale price of the home purchased and/or sold and cannot exceed $9,500 per buy or sell transaction. Employer-sponsored relocations may preclude participation in the reward program offering. SoFi is not responsible for the reward.
SoFi Bank, N.A. (NMLS #696891) does not perform any activity that is or could be construed as unlicensed real estate activity, and SoFi is not licensed as a real estate broker. Agents of SoFi are not authorized to perform real estate activity.
If your property is currently listed with a REALTOR®, please disregard this notice. It is not our intention to solicit the offerings of other REALTORS®.
Reward is valid for 18 months from date of enrollment. After 18 months, you must re-enroll to be eligible for a reward.
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