First Time Home Buyers
First Time Home Buyer
Things You Need To Know
10 Ways to Prepare for Homeownership
1. Decide what you can afford. Generally, you can afford a home equal in value to between two and three times your gross income.
2. Develop your home wish list. Then, prioritize the features on your list.3. Select where you want to live. Compile a list of three or four neighborhoods you’d like to live in, taking into account items such as schools, recreational facilities, area expansion plans, and safety.
4. Start saving. Do you have enough money saved to qualify for a mortgage and cover your down payment? Ideally, you should have 20 percent of the purchase price saved as a down payment. Also, don’t forget to factor in closing costs. Closing costs — including taxes, attorney’s fee, and transfer fees — average between 2 and 7 percent of the home price.
5. Get your credit in order. Obtain a copy of your credit report to make sure it is accurate and to correct any errors immediately. A credit report provides a history of your credit, bad debts, and any late payments.
6. Determine your mortgage qualifications.How large of mortgage do you qualify for? Also, explore different loan options — such as 30-year or 15-year fixed mortgages or ARMs — and decide what’s best for you.
7. Get preapproved. Organize all the documentation a lender will need to preapprove you for a loan. You might need W-2 forms, copies of at least one pay stub, account numbers, and copies of two to four months of bank or credit union statements.
8. Weigh other sources of help with a down payment. Do you qualify for any special mortgage or down payment assistance programs? Check with your state and local government on down payment assistance programs for first-time buyers. Or, if you have an IRA account, you can use the money you’ve saved to buy your fist home without paying a penalty for early withdrawal.
9. Calculate the costs of homeownership. This should include property taxes, insurance, maintenance and utilities, and association fees, if applicable.
10. Contact a REALTOR®. Find an experienced REALTOR® who can help guide you through the process
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Program Requirements And Loan Types |
Typical First-Time Home Buyer Program Requirements
While program requirements may vary from agency to agency, the following are typical requirements:
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The applicant must be a first-time home buyer. A first-time home buyer is most often defined as someone, including his or her spouse, who has not had an ownership interest in a principal residence at any time during the past three years. The term includes displaced homemakers and single parents. This requirement is not necessary if the property is located in a federally designated target area.
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The buyer must meet income requirements:
Low Income- 50 to 80 percent of the area median income (AMI)
Moderate Income- 80 to 120 percent of the (AMI)
The qualifying income includes the total household income: the income of all adults 18 years of age or older who are residing in the property. For an example of income limits, see chart below.
- Maximum purchase price may not exceed limits established for the area.
- Applicant may be required to live in the home being purchased for the entire term of the loan, or until the home sold or refinanced. The program is not eligible for property purchased as an investment or rental.
- Applicant must complete an agency-approved home buyer education training class.
- For local programs, the prospective property must be located within the city limits or unincorporated county areas.
- Applicant must be a citizen of the United States or a qualified alien.
Common Programs & Loan Types
There are several types of finance assistance programs offered for first-time buyers. Down payment assistance is the focus of several programs. Other offer specific loan products designed to help first-time home buyers. The following are the most common types of programs that are currently offeed and a list of typical conditions attached to a loan program:
- DownPayment/Closing Cost Assistance-A deferred loan, usually at 0 percent interest with loan due on sale, title transfer, or first mortgage repayment, or in 30 years.
- Second Loan (Second Mortgage)-A mortgage loan in addition to the first, or primary, mortgage loan. This is a loan subordinated to the first mortgage.
- Shared Appreciation Loan- This is applicable to city and county down payment-assistance programs. It involves loan with a zero or low-interest rate in exchange for sharing the property's increased future value with the lender. The appreciation is calculated by substracting the original sales price from the current sales price or the current appriased market value. The principal balance amount plus a share of the appreciation will be due at the end of the term or when the borrower sells, rents, or transfer title of the property.
- Deferred Loan- A second , third, or fourth mortgage that does not have to be repaid until the end of the loan period, the house is sold or refinanced, or title of propety is transfrerred.
- Recoverable Grant- A small loan (or grant) that has to be repaid under certain conditions but otherwise becomes a true grant and does not have to be paid back.
Typical Homeownership Program Income Limits
Income limitations vary based on specific programs and regions but , as a guide, the following income limits applied for CALHFA-funded programs in 2008:
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Existing Resale 1 or 2 Persons |
3+ Persons |
New Construction 1 or 2 persons |
3+ Persons |
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Alameda County |
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| Moderate Income |
$103,320 |
$120,540 |
$103.320 |
$120.540 |
| Low Income |
$90,960 |
$71,291 |
$72,324 |
$83,173 |
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Los Angeles County |
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| Moderate Income |
$90,960 |
$106,120 |
$90,960 |
$106,120 |
| Low Income |
$54,576 |
$62,762 |
$63,672 |
$73,223 |
| Orange County | ||||
| Moderate Income |
$111,600 |
$130,200 |
$111,600 |
$130,200 |
| Low Income |
$66,960 |
$77,004 |
$78,120 |
$89,838 |
| Riverside County | ||||
| Moderate Income |
$79,920 |
$93,240 |
$79,920 |
$93,240 |
| Low Income |
$39,960 |
$49,954 |
$47,952 |
$55,154 |
| Sacramento County | ||||
| Moderate Income |
$85,200 |
$99,400 |
$85,200 |
$93,240 |
| Low Income |
$42,600 |
$48,990 |
$51,120 |
$58,788 |
| San Diego County | ||||
| Moderate Income |
$94,800 |
$110,600 |
$94,800 |
$110,600 |
| Low Income |
$56,880 |
$65,412 |
$66,360 |
$76,314 |
| San Francisco County | ||||
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Moderate Income |
$135,720 |
$158,340 |
$135,720 |
$158,340 |
| Low Income |
$81,432 |
$93,412 |
$95,004 |
$109,255 |
| San Joaquin County | ||||
| Moderate Income |
$76,560 |
$85,820 |
$73,560 |
$85,820 |
| Low Income |
$36,780 |
$42,297 |
$44,136 |
$50,756 |
| Santa Clara County | ||||
| Moderate Income |
$127,320 |
$148,540 |
$127,320 |
$148,540 |
| Low Income |
$76,392 |
$87,851 |
$89,124 |
$102,493 |
| Stanislaus County | ||||
| Moderate Income |
$67,800 |
$79,100 |
$67,800 |
$79,100 |
| Low Income |
$33,900 |
$38,985 |
$40,680 |
$46,782 |
Federal Programs Offered |
U.S. Department of Housing and Urban Development
Phone: 202.708.1112
Web site: www.hud.gov
Home Investment Partnerships Program (HOME)
HOME is a federal block grant implemented through the state and local governments. States are automatically eligible for HOME funds. However, local jurisdictions must meet a minimun allocation threshold in order to be participating jurisdiction. Households receiving HUD assistance must be low-income. HOME income limits are published each year by HUD.
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San Diego Phone: 619.578.7490 Web site:www.sdhc.net Shared Appreciation Program Eligibility: Low Income Type: Deferred, Shared appreation Loan Maximum Loan: $70,187 or 25% of purchase price, whichever is less. Loan Term: 30 years Interest: 0% |
Roseville Phone: 916.774.5270 Web site: www.roseville.ca.us/housing First Time Home Buyer Downpayment Assistance Program Elgibility: Low Income Type: Deferred shared appreciation loan Maximun Loan: $120,00 Loan Term: 30 years or due upon sale of the property, change of use, unapproved refinance, or change of ownership, which ever occurs first. Interest 0% |
California Housing Finance Agency Eligibility requirements for CalHFA programs and general procedures for first-time homebuyers.
CalHFA Borrowing Requirement In order to qualify for a CalHFA loan, certain requirements must be met.
See the HUD website and State websites for your specific areas and contact your lender as soon as you start considering the purchase of a new home. These guides are for your information only and are not guarranteed to be acurate at the time of purchase.
