Qualify as a 1st-Time Homebuyer for a Mortgage, Even If You Owned a Home in the Past!

Many first-time buyers could use some help qualifying for their first mortgage, which is why the government and financial institutions have developed specific first-time homebuyer programs to help ease the burden and make the dream of owning a home a reality.

By the sounds of it, a first-time homebuyer loan probably sounds like it’s only available to someone who’s never bought a home before. But what about people who could use a second chance at getting some of those benefits in order to buy a home?

For instance, perhaps you once owned a home, but life threw you a curveball, and you need to sell that home and rent a place to live, or move in with family. Or maybe you were just relocated for your job for a period of time and it didn’t make sense for you to own a home for a while.

No matter what the reason is, buying a home again when you don’t currently own one can often be like you’re starting from scratch for many reasons. Fortunately, you may be able to qualify for a first-time homebuyer loan even if you have owned a home in the past!

As Bankrate recently reported, the term “first-time homebuyer” can be misleading, because you can actually qualify for some first-time buyer programs as long as you haven’t owned a home in the past three years.

The Main Benefit of First-Time Buyer Programs

While there could be other benefits to going the first-time buyer route — such as a lower down payment, potential down payment or closing cost assistance — the main benefit is likely to be that they have more relaxed qualification requirements for a buyer.

You should certainly be concerned with getting a competitive interest rate, but don’t be surprised or alarmed if the interest rate isn’t lower than other types of mortgages. In fact, they may even have additional costs or higher rates than other types of loans, but they serve the purpose of making it possible for you to buy a house when it may have otherwise been difficult for you to qualify for a mortgage.

What Are Typical Qualifications You Need to Meet?

There are many different first-time home buyer programs and the requirements will vary from one to another, and each lender may even have different guidelines they adhere to.

But according this recent article from The Mortgage Reports, the typical first-time buyer guidelines for 2023 are:

At least a 620 credit score, although you may need at least 640 or 680 for some programs.

A 3% down payment.
A debt-to-income (DTI) ratio of 43% or lower.
A consistent income.
Two straight years of employment history.

Of course, there are exceptions and some gray areas that a lender may be able to work with if you don’t meet all of those criteria, and some programs may have slightly more lenient qualifications than those.

The Best Way to Figure Out If You Qualify (And If It’s Even Your Best Option)

Don’t judge whether or not you qualify for a first-time homebuyer program based upon those typical guidelines. Trying to figure it out on your own is difficult, and ultimately you’ll need to be approved by a lender anyway, so your best bet is to speak to a few mortgage reps who are well-versed in helping first-time buyers.

A good way to find mortgage professionals is to speak with a real estate agent you trust, since they deal with so many of them in their career. He or she will have a list of lenders they recommend, and can give you the scoop on ones they feel would be best suited to helping you understand all of your options.

A first-time buyer program may be your best option… but it also might not be! Just because you’re a first-time buyer doesn’t mean you won’t qualify for other types of loans, nor does it mean that the benefits of first-time buyer programs will be better than other types of loans and programs potentially available to you.

Once a mortgage expert has the full picture of your qualifications and situation, he or she will be able to explain the pros and cons of each type of loan you qualify for, and help you decide on which one to choose.

By the sounds of it, a first-time homebuyer loan probably sounds like it’s only available to someone who’s never bought a home before. But you may be able to qualify for one even if you’ve owned a home in the past, as long as it wasn’t in the last three years.

This can be helpful if you need more flexible qualification criteria in order to qualify for a loan, but it may not be your only (or best) option.

Speak to a real estate agent you trust and ask him or her for a list of mortgage experts they recommend who are great at helping first-time buyers. A great mortgage rep can help you figure out all of their options, and which one is the best one to choose for your overall qualifications and situation.

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