First Time Home Buyer Programs are designed to help buyers to get into a home more easily. However, just because you’re a first time homebuyer doesn’t mean you should use a first time home buyer loan. Most of these programs have restrictions and strings attached. While they are a perfect fit for some, first time home buyer loans are the wrong choice for others.

What is a First Time Home Buyer Program

Buying your first home is a “big deal.”  Most people are concerned about one or both of the following issues:

• How can I raise enough cash to get into the home?

• How am I going to afford the higher payments?

There are many differences in programs offered depending on where you live.  However, the general idea of how they help is this:

• Allow for a very low (or no) down payment / 100% loan

• Subsidize interest costs (they pay all or part of it)

• Offer grants
• Forgive loans
• Limit fees that lenders are allowed to charge
• Defer payments

Who Qualifies for First Time Homebuyer Loans?

Most of the programs offered in North Carolina allow people who have not owned a home previously to qualify.  In addition, if you have not owned a home in the last three years, you might also qualify for some of the programs.

You may have to meet certain income restrictions to qualify for a subsidized first time home buyer loan. In general, these programs try to limit benefits to people with low and moderate income levels. If you earn too much, you won’t qualify for the program… also, if you have liquid assets over $5,000 you might not qualify.

What to Watch For With First Time Homebuyer Programs

There are usually restrictions with these programs.  For instance, most programs put a dollar limit on the property you’re buying. You probably can’t use a first time home buyer loan to buy the more expensive properties in your area. Instead, you’ll be limited to properties on the lower end of the spectrum. Again, the idea is to benefit people who have the most need.  There are also income restrictions for many of these properties.  In our area the rule of thumb is around $86,000 for a family of 4.

You also have to live in the home as your primary residence. If you’re going to rent the place out, don’t use the first time home buyer loan. Finally, the home you buy most likely has to meet some physical requirements. It must be in good condition and free from any safety hazards (such as lead-based paint, for example).

Given these restrictions, many homebuyers prefer using a “plain-vanilla” FHA mortgage.  If you qualify for this program, you probably won’t see an advantage to the subsidized first time home buyer loan because of the re-capature costs and penalties they impose when you sell your home.

FHA does NOT charge a re-capture penalty like some “true” First Time Home Buyer Programs do!

To get pre-qualified for your first mortgage – Contact Steve and Eleanor Thorne, FHA Experts at Corporate Investors Mortgage Group in Raleigh, NC  919-649-5058