Who is a first-time buyer?

Q: In speaking with lenders, it looks as though there are advantages for “first-time” buyers. However, one lender said it was possible to have both owned a home previously and still qualify as a “first-time” buyer. Please explain.

A: It’s not unreasonable to think that a “first-time” buyer is defined as someone who has never held title to real estate. However, we’re talking about the world of lending, a place where definitions sometimes have odd twists and turns.

According to HUD, a first-time buyer is someone who meets any of the following definitions:

An individual who has had no ownership in a principal residence during the three years ending on the date of purchase of the property are considered first-time homebuyers.

A single parent who has only owned with a former spouse while married.

An individual who is a displaced homemaker and has only owned with a spouse.

An individual who has only owned a principal residence not permanently affixed to a permanent foundation in accordance with applicable regulations.

An individual who has only owned a property that was not in compliance with state, local or model building codes and cannot be brought into compliance for less than the cost of constructing a permanent structure.

The definition of “first-time” buyer is more flexible than might be expected. Tracey Shell, with DownPayment Resource.com, explains that “when you consider HUD’s definition, it means if a buyer previously owned a home three or more years ago, but has rented the past three years, they would be considered a first-time home buyer again under many programs today. This could help buyers who owned a home but may have a history of foreclosure or short sale. After they’ve taken the time to improve their credit, complete homeownership education and save, they could qualify as a firsttime homebuyer.”

Not only are there mortgage programs directed toward firsttime buyers, but there are also programs to help first-timers with such things as down payments and interest rates. “We know firsttime homebuyers are especially challenged when saving for the down payment because they don’t have the proceeds from a home sale to help fund it,” explains Shell. “So you often see messages about homeownership programs directed to first-time homebuyers. But there are many eligibility nuances with each program. That’s why it’s important for all buyers to investigate what’s available in their market.”