 What is a first time home buyer loan? |
 Sometimes a first time home buyer loan is an actual loan program created by the State or City to promote home ownership. In that case, the fund is created, qualifying guidelines are established, and lenders are invited to participate by offering the loan program to their customers.
An example would be the State of Illinois's IDHA program, which is low interest money available to first time homebuyers through the Illinois Housing Authority. Another example is the City of Rockford offering grants to first time homebuyers to help with the down payment and closing costs to buy a home.
Many times regular mortgage loans through FHA, Fannie Mae and Freddie Mac are presented as first time home buyer loans because the guidelines have been expanded to make it easier to enter the housing market. Those programs may or may not be limited to first timers and they may or may not have any real advantage to your situation.
An example of an expanded guideline might be that the debt ratio can be higher or the credit file can be developed with alternative methods. It might even mean that several members of a family living together can pool their income and downpayment to buy a house.
Note that FHA is not limited to first time homebuyers or even buyers who marginally qualify. The FHA programs are used most often for those buyers, but FHA authorities would love to have some low-risk loans in the portfolio, too.
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