Changing qualificationsMany first-time homebuyer programs now require higher credit scores to qualify, says Baker. Although buyers could qualify for an FHA loan with a credit score below 700, they might have to make a higher down payment. Some of the programs instituted by private lenders not affiliated with FHA generally require credit scores above 700, Baker says.
Many programs also contain an education component, so prospective buyers will get help with budgeting, as well as advice on clearing up any debt or credit problems. So even if they don't have the required credit score, a housing or credit counseling agency can help them improve their financial situation as they look for first-time home buying programs that they will qualify for.
Another requirement of many first-time homebuyer programs is that participants must have income below 80 percent of the region's median income. But if your salary was lowered or your bonuses stopped, you might be earning less than 80 percent of the median income now. So even if you didn't qualify before, you might now. However, as median income levels drop, so does the amount that represents 80 percent.
"You may have been somebody that was above the 80 percent median income level five or 10 years ago but now based on family size and median income in your area, you're now below 80 percent and you can take advantage of this," says Baker.
'First time' or first time?Another thing to remember: Don't always take the term "first time" literally. Many programs don't rule you out if you bought a home before. "If you haven't owned a home for three years or more, you are eligible for many of these loans," says Savitt.
“If you've got reasonable credit, a job, you've paid your bills on time and you've got a couple of dollars, you're probably going to qualify.”
Down payment assistance for some first-time home buying programs comes in the form of a second mortgage, and in many cases, some or all of that second mortgage could be waived if the buyer stays in the home a certain number of years, typically between five and seven years. That might have been a limiting requirement during the real estate boom because homeowners often used equity to trade up quickly. Today, as home prices escalate more slowly -- if at all -- people are more likely to stay in one home longer, Baker says.
In addition to looking for first-time home buying programs, prospective buyers should also check out the terms of other programs that have similar advantages. For example, the U.S. Department of Agriculture offers Rural Development Guaranteed Housing Home Financing options, which provide up to 100 percent financing to homeowners in rural areas, typically areas with a population of 20,000 or less.
When looking for a lender to work with, be sure to shop around, says Savitt. "Go to a broker, a bank, a lender and see what you're qualified for." Although some first-time homebuyers may qualify for conventional loans, a first-time home buying program will likely yield better terms and give buyers the option of holding on to their cash rather than using it for a down payment. "If you've got reasonable credit, a job, you've paid your bills on time and you've got a couple of dollars, you're probably going to qualify," Savitt says.