Who Is Considered a First-Time Home Buyer

There are many loan programs and grants that cater to first-time home buyers, especially on the state and local levels. While a person who has never owned a home before certainly counts as a first-time home buyer, those who have owned a home before can also qualify as first-time home buyers under certain circumstances.

Three Year Rule

Any person who has not owned a principal residence in three years qualifies as a first-time home buyer under FHA guidelines. It does not matter if the previous home was sold or foreclosed on. It also does not matter if the person has recently owned an investment property. If a person does not qualify on their own, but his spouse does, then they both qualify as first-time home buyers.

Benefits of Owning

The IRS allows first-time home buyers to borrow against their IRAs without paying the standard 10 percent penalty. These home buyers may also borrow against their Roth IRAs tax-free after five years. The money must be used for a down payment or acquisition costs on a principal residence for the IRA owner or close family member. There is a lifetime limit of $10,000 on these exceptions, and you must use the money within 120 days. A first-time home buyer is anyone who has not owned a home for at least the previous two years. If the buyer or spouse has owned a home within the previous two years, IRS guidelines do not consider them to be first-time home buyers.

In California

The first-time home buyer program of the California Housing Finance Agency, or CalFHA, also considers anyone who has not owned a home in the previous three years to be first-time home buyers. In addition, buyers in federally designated “target areas” are allowed to qualify for CalFHA loans even if they have owned a home in the past three years. CalFHA guidelines have a maximum income limit that varies by county and family size, as well as maximum sales price limits. CalFHA borrowers must complete an education class for home buyers and live in the home for the entire loan term or until it is sold.