First-Time Home Buyer Programs

What does the first-time homebuyer program help with?

Fannie Mae and Freddie Mac have long had programs designed to help first-time homebuyers, including reduced fees and more friendly terms. Both recently updated their respective programs to offer even more incentive and relief.  

If you qualify as a first-time homebuyer, you may be eligible for waiver of the following standard fees:

• Credit Score Fee: Borrowers with lower credit scores will pay a fee at closing depending on how low the score. With the new first-time homebuyer benefits, you don’t have to worry about applying with a lower credit score.
• Condo Fee: Depending on your loan-to-value ratio, you may be subject to a fee when you buy a condo. You don’t need to worry about this with the new program updates.
• Manufactured Home Fee: Using a conventional loan to buy a Manufactured Home would usually mean you pay a percentage of your total loan amount as a one-time fee. The updates to first-time homebuyer programs eliminate this fee and allow borrowers to more comfortably consider manufactured homes.
• Adjustable-Rate Mortgage Fee: Depending on your loan-to-value, you may be subject to a fee when you take out a conventional mortgage with an adjustable rate. With the updates to the first-time home buyer program, you will pay zero fees.
• Debt-to-Income Fee: Borrowers with debt-to-income ratios (DTI) above 40% are subject to a fee when getting a conventional loan. If you are a first-time homebuyer, you can now avoid this fee.

Great! Well, how do I qualify?

A first-time homebuyer is anyone purchasing a primary residence and has not owned a home within the previous three years. When applying, this just needs to be one borrower. So, you can apply with a co-borrower that fits this definition and still be eligible. The other major qualifier is income. Borrowers qualify based on their household income compared to the area median income (AMI). AMI marks the middle of an area's income distribution, meaning half of the households make more and half make less. Borrowers can make 100 – 120% of the AMI depending on the conforming loan limit in the area.  

In most places, the conforming loan limit is $726,200. To qualify as a first-time homebuyer in these areas, you cannot make more than 100% of the AMI. In high-cost areas, the conforming loan limit can go up to $1,089,399. Borrowers in these areas can make up to 120% of the AMI and still qualify as a first-time homebuyer.  

Finding your first home.

Now that you know a little more about Fannie Mae’s and Freddie Mac’s updates, let get into the fun part – finding your first home!  

As a first-time homebuyer, there are several things you should consider as you start looking for a home. Some of the most important things to consider include:

• Location: Think about the location of the home and whether it meets your needs. Consider factors such as proximity to work, schools and other amenities.
• Size and type of home: Decide on the size and type of home that meets your needs. Do you need a lot of square footage, or would you prefer more acreage? Do you mind sharing walls with neighbors, like in a condo or townhouse, or do you need a detached, single-family home?
• Financing: We’ve got you covered here. Give us a call.
• Condition of the home: Consider the condition of the home, including any repairs or updates it may require.
• Real estate agent: Working with a REALTOR® can make the process significantly easier to manage, especially for a first-time homebuyer. A REALTOR® will provide valuable assistance and guidance throughout the process.
• Your budget: Determine how much you can afford to spend on a home, based on your income, savings, and debt. Your CapCenter Loan Consultant will help nail down your exact budget, but you can still look to get an idea.  

How much can I afford?

You can work with your CapCenter loan consultant to determine just how much house you can afford. Still, there are some things to consider before or as you apply. Some of the most important include:  

• Your income: Lenders generally like to see that your monthly mortgage payments are no more than 29% of your gross monthly income. Gross income is what you make before any taxes and deductions.  
• Your debt-to-income ratio: This is the percentage of your monthly income that goes towards paying off debts, including your mortgage, credit card payments and student loans. There is no hard rule, but lenders generally like to see a total debt-to-income ratio around 36%.
• Your down payment: The larger your down payment, the less you'll need to borrow and the lower your monthly mortgage payments will be.
• Interest rate: A higher interest rate means higher monthly mortgage payments.
• Length of the loan: A longer loan term means lower monthly mortgage payments, but you'll pay more in interest over the life of the loan.

To get an idea how much mortgage you can afford, you can use our online mortgage calculator or speak with one of our Client Relations Specialists. It's also a good idea to create a budget to see how much you can realistically afford to spend on a home.  

Owning a home does not just help you build equity and give you a place that is uniquely your own. It can also help around tax time.  

Are there tax incentives for buying a home?

There are several tax incentives that you may be able to take advantage of when you buy a home. These include:

• Mortgage interest deduction: You may be able to deduct the interest you pay on your mortgage from your taxable income.
• Property tax deduction: If you itemize your deductions, you may be able to deduct the property taxes you pay on your home.
• Energy-efficient home improvement credit: If you make energy-efficient improvements to your home, you may be able to claim a credit on your taxes.

It's important to note that the specific tax incentives available to you will depend on your individual circumstances and the laws in your jurisdiction. We recommend speaking with a tax professional or doing some research on your own to determine which incentives you may be eligible for.