Who Qualifies as a First Time Home Buyer

Knowing who qualifies as a first time home buyer is important for several reasons. The good news is you may have purchased a home in the past and still qualify as a first time buyer.

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There are several tax programs in place to aid first time home buyers. A first time home buyer may be entitled to a tax credit for purchasing a home. There is a lot of confusion regarding these tax credit programs, mainly because there is more than one. For each of these tax credits, you may be considered a first time home buyer if you have not owned a home in the previous three years.

The Housing and Economic Recovery Act of 2008 provided a tax credit to certain home buyers. It only applies to homes purchases made between April 8, 2008 and July 1, 2009. This credit reduces an individual's tax bill or may increase the refund received by the tax payer for the year of the home purchase. This tax credit is paid out even if the home buyer does not owe any other tax.

It is important to note that this tax credit is not free. It works as an interest free loan. The tax credit is paid back over a period of 15 years. For example, if an individual receives the maximum credit of $7500, this is repaid over the next 15 years in additional tax payments of $500 per year. The IRS provides more information on this tax credit.

The second first time home buyer credit was established through the American Recovery and Reinvestment Act of 2009. This credit is one that is not repaid to the government. Rather, those who purchase a home prior to December 1, 2009 may be eligible for a first time home buyer credit. To qualify for this tax credit, the home owner must live in the home for at least 36 months from the purchase date. The tax credit is for 10 percent of the purchase price of the home up to $8,000. The tax credit phases out for those who have an adjusted gross income over $75,000 or $150,000 for joint filers.

The Federal Housing Administration, or FHA, provides a great deal of first time home buyer programs individuals may qualify for. The FHA helps individuals who may not otherwise qualify to purchase a home to do so. You do not have to be a first time homeowner to obtain an FHA loan, but FHA can help those with no previous home ownership experience to purchase in several ways.

• Low Down Payments: First time home buyers may not have a large down payment available. Most lenders prefer 20 percent down to buy a home. With FHA, the down payment may be as low as 3.5 percent of the home's purchase price.

• Low Closing Costs: In some situations, closing costs can amount to five percent or more of the purchase price. FHA closing costs are smaller, making the home more affordable to purchase.

• Easier Credit Qualifications: Those with credit scores under 650 may still qualify for an FHA loan, which is becoming difficult to do with conventional lenders.

The FHA also helps individuals qualify for a home purchase for manufactured housing, mobile homes and aids seniors with reverse mortgages.

To qualify for FHA loan programs you may need to meet special qualifications including have employment or a steady source of income. Who qualifies as a first time home buyer for these programs? FHA sees any individual who has not owned a home in the past three years to be eligible for FHA programs. Special restrictions are in place for those who may have foreclosed on a property in the past.

For more information on the FHA loan programs available, including qualification requirements, visit the U.S. Department of Housing and Urban Development website.

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