Are you looking to purchase a home and take advantage of the great benefits available for first time home buyers? You may also be trying to figure out ways to acquire multiple properties as you begin our journey as a real estate investor.
If so, it’s important that you understand what qualifies as a first time homebuyer. Even if you’ve owned a home in the past, you may still qualify as a first time home buyer.
According to the US Department of Housing and Urban Development (HUD), there are certain criteria that must be met in order to qualify.
In this article, we will discuss what qualifies as a first time home buyer and how you can take advantage of the benefits offered by Federal Housing Administration (FHA) loan programs in order to acquire more than one property and have a low down payment.
Definition of First Time Home Buyer
A first time home buyer is someone who meets certain criteria set by the US Department of Housing and Urban Development (HUD). These our commonly called first time home buyer loans.
These individuals qualify for special mortgage programs offered by the FHA.
The benefit of these loans are low down payments, cheaper closing costs, payment assistance programs, and easier qualifications standards.
Therefore, these loans can be great to acquire your first property or multiple properties.
The definition of first time home buyer is as follows:
- An individual who has not held ownership in a primary residence during the previous three-year period.
- For couples, if one spouse is/was a homeowner but the other has not owned a home, both are considered first time home buyers.
- A single parent who has only owned a home with a former spouse while married.
- An individual who is a displaced homemaker and has only owned a home with a spouse.
- An individual who has only owned a principal residence not permanently affixed to a permanent foundation in accordance with applicable regulations.
If you fall into one of these categories, you qualify as a first time home buyer.
Next I’m going to show you how you can use this law and acquire multiple properties using an FHA loan vs a conventional loan.
Taking Advantage Of Being A First Time Home Buyer To Acquire Multiple Properties
Buying real estate is a proven method of developing wealth over time. There is a lot written about how to acquire property with other people’s money or buying it with as little down payment as possible.
Below I’m going to show you three ways to acquire an investment portfolio by qualifying multiple times as a first time home buyer and qualifying for an FHA loan.
Couples Can Buy Two Properties As First Time Home Buyers
If you are married and you both have incomes you may acquire two properties using FHA loans. Many think you have to be a surviving spouse or if you are divorced, this isn’t the case.
In order to do this, you’d both have to qualify for this mortgage program on your own.
One spouse would buy a property based on their income only. In addition, they would be the only one on the mortgage and on title. In short, the other spouse can have nothing to do with the property. This is also easier to do if one spouse has a property prior to getting married.
After your spouse has acquired a property, the other then does the same thing. I.e. they qualify for the mortgage with their income only and they are the only ones listed on the title.
You would have to wait 12 to 18 months after acquiring the first property because you have to live in the property for at least twelve months to claim it as your primary house.
Also, if you are really trying to house hack, I’d make your first home a duplex if you can qualify for the mortgage (or triplex/fourplex if you can afford it).
Moving, Renting, Then Buying Again As A First Time Home Buyer
The past year has seen many people who already own a home make the decision to relocate.
If they can afford it, they may keep their old house and rent it out.
However, when they first move to their new location, they typically no longer qualify for first time home buyer programs or FHA loans.
Nevertheless, there is a special loophole that allows these buyers to purchase another home at the end of three years using an FHA loan as a first time home buyer.
Essentially, if they rent a home in their new location for three years, they become eligible as a first time home buyer once more.
I’d also highly recommend putting the rental property into an LLC. This will provide extra protection and make sure ownership of the property remains separate from their own finances.
The key here is that with patience and proper planning, it is possible to qualify as a first time home buyer once more. This can lead to great savings and opportunities when it comes time to buy a new home.
I would urge anyone considering this route to speak with an experienced mortgage professional for all of the details and their specific situation. They’ll be able to provide valuable advice that will help guide you along the way!
Mobile Home Strategy
This strategy is ideal for those looking for a long-term approach to creating a real estate portfolio. Mobile homes have come a long way and are now much more comfortable and desirable living spaces.
If you live in a mobile home, you can still qualify as a first time home buyer when you purchase a residence, which can then be used as a primary home.
Stay in this new residence for one year, then move back to your mobile home and rent the house out, putting it into an LLC if you wish.
If you repeat this pattern every three years, you could accumulate six properties over two or three decades using FHA loan, i.e. low down payments. With enough money available, you may even have the means to purchase duplexes. This could be a great opportunity to grow your real estate portfolio.
As a first time home buyer, it is important to understand what options are available and how they can be used in order to maximize savings.
FHA loans provide the opportunity for a low down payment and have specific requirements when it comes to being considered as a first-time homeowner.
Couples may also qualify for two properties using this mortgage program, with one spouse having sole ownership of each property.
Furthermore, those who move after purchasing their original home may still qualify as first-time homeowners again if they rent out their old residence for at least three years.
Lastly, living in a mobile home does not disqualify an individual from becoming eligible for an FHA loan; instead, these individuals could potentially create a real estate portfolio by renting out the new residence after occupying it for 12 months.
With careful planning and consideration of all these possibilities, you can find ways to save money while securing your future investments!