Like a Virgin: You Can Be a "First-time Buyer" Even if You've Owned a Home

There are many benefits available to "first time" home buyers. But did you know that you can officially be a first-timer even if you've owned property before? It might seem odd -- very odd -- but the definition of a first-time buyer might well include someone who has owned a home.

That's a very real possibility because of the way a "first-time" buyer is defined by HUD and the Internal Revenue Code. You can actually have owned a home before and still be a "first-time" buyer, an important matter because there are many programs to help first-time purchasers, including in some cases plans with rate and down payment assistance.

It's Official: HUD's Definition of First-time Homebuyer

FHA mortgages are famously associated with first-time buyers, so HUD's definition is a good place to figure out who such people are. HUD uses the following definitions:

A first-time homebuyer is an individual who has had no ownership in a principal residence during the 3-year period ending on the date of purchase (closing date) of the property.

Okay, we've got this one. If you have not owned a home during the past three years, you can now be considered a first-time buyer.

Many past owners may qualify for financing as a first-timer. For instance, some prospective buyers have not owned a home during the past few years because of a bankruptcy or foreclosure. Applying for a loan as a first-time buyer may open opportunities which were not previously available.

Notice that it says, "principal residence." Incredibly, you can own rental property and still be considered a first time buyer.

A first-time homebuyer includes anyone who has only owned with a former spouse while married.

When a married couple buys a home they typically do so as a "tenancy by the entireties." This means they both have a 100-percent interest in the property. Holding property as a married couple has many advantages in terms of estates, taxes and liabilities. In terms of first-time buyer status, the rule here says that if you owned property while married but are now divorced or widowed you can be considered a first-time purchaser. Why? Because by holding title as a married couple you had a joint interest in the property rather than individual ownership.

The definition of a first-time buyer also includes "an individual who has only owned a principal residence not permanently affixed to a permanent foundation, or 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."

In many cases a "principal residence not permanently affixed to a permanent foundation" is a mobile home that does not include the ground underneath the house, a form of housing often regarded as "personal property" rather than real estate. For lenders, such homes are not "real estate" in the sense of something that can be mortgaged, thus having one is not evidence of real estate ownership.

The language regarding condition reflects a social purpose: The government wants people living in decent housing; if your property is not now up to code and cannot be brought up to code, HUD will try and help you find something better. One way to do this is to define individuals with such properties as first-time buyers.

If any of the occupant-owners on the mortgage meet this definition, then the mortgage is considered as having been made to a first-time homebuyer.

Lastly, imagine if a home is bought by two buyers. Buyer #1 has owned a home but Buyer #2 is recently divorced. Since Buyer #2 is a former spouse, that person qualifies for first-time buyer status. Because one person on the title qualifies as a first-timer, both buyers can be considered first-time purchasers.

Check with lenders for further information because HUD's definition of a "first-time" buyer may well vary when compared with other programs, lenders and investors.

Benefits of First-time Buyer Status

First-timers may be eligible for a variety of programs, including mortgage credit certificates (which offset some of your mortgage interest with  tax credits if your income meets program guidelines), down payment assistance, low interest loans, and even discounts on property in redevelopment areas. To track down first-time buyer programs, check with your state housing agency, or try these links:

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