As you might imagine, individuals who have never owned a home are good candidates. In addition, some programs offer First Time Home Buyer loans to people who have not found a home within the last three years. Again, check to see what’s available to you

You may have to meet certain income restrictionsto qualify for a subsidized first time home buyer loan. In general, these programs try to limit benefits to people with low and moderate income levels. If you earn too much, you won’t qualify for the program.

First Time Home Buyer Loan Restrictions

Most programs put a dollar limit on the property you’re buying. You probably can’t use a first time home buyer loan to buy the more expensive properties in your area. Instead, you’ll be limited to properties on the lower end of the spectrum. Again, the idea is to benefit people who have the most need.

You also have to live in the home as your primary residence. If you're going to rent the place out, don’t use the first time home buyer loan. Finally, the home you buy most likely has to meet some physical requirements. It must be in good condition and free from any safety hazards (such as lead-based paint, and good roof, for example).

First Time Home Buyer Loan Pitfalls

For some first time home buyers, these programs are perfect. They open the door to home ownership where a family would not have been able to buy a home. Communities also benefit from first time home buyer loans – homeowners take care of their property, get involved, and contribute to the economy. Nevertheless, first time home buyer loans can be the wrong choice in some cases.

With a subsidized first time home buyer loan, you face some challenges:

* Lower value home may not be the home you want
* You might lose some of the benefits of the program if you sell your home too soon
* You may have to pay recapture tax for some of the benefits you received
* You may be limited to a short list of loan types (only 30 year Fixed Rate mortgages for example)
* You may have to share increased home values with the program

Given these restrictions, you may do best to avoid subsidized first time home buyer loans. A California mortgage Broker, notes that you’ll probably come out ahead using a plain-vanilla mortgage if you’ve got decent credit. With a FICO Credit Score above 720, you probably won’t see an advantage with the subsidized first time home buyer loan. Once you get below 680, the subsidized program will start to look better. These days, you can get traditional mortgages with very little down.

The best thing to do is to explore all your options. Take a look at what your traditional mortgage lender is offering, and compare it to the subsidized first time home buyer loans. Once you see how the numbers compare, consider the cost of flexibility.