Many of today’s homebuyers rely on mortgage assistance programs to buy a home. There are more than 2,500 grants and loans programs nationally, with at least two active programs in each state, according to a recent report by the Urban Institute.

The bulk of these assistance programs, however, are geared toward first-time homebuyers. But the term “first-time homebuyer” can be misleading with respect to a majority of these programs. The result is that people who are qualified to apply mistakenly pass up the opportunity for assistance.

In fact, what qualifies as a “first-time homebuyer” under many programs is often someone who hasn’t owned a home in at least three years or more. This distinction can make all the difference to applicants who were homeowners more than three years ago and are back in the market today. Alanna McCargo, vice president for housing finance policy at the Urban Institute, agrees that this can be confusing for some buyers.

“There’s a lot of misperception about what it takes to qualify for these programs. People are confused by income levels, they think they made too much, or they don’t realize that they could have owned a home before to qualify,” McCargo says.

The three main barriers to homeownership are down payment, access to credit and affordable housing, according to the Urban Institute’s report.

“Affordability for an average family earning a median income has decreased. It’s more expensive. Access to credit is still a problem. Obviously, if you cannot get a loan in this environment, given how expensive homes are, then you cannot buy a house,” McCargo says.

The increase in low down-payment lending is perhaps a reflection of some of the problems Americans are facing. Traditionally, FHA has been the main source of low down-payment lending, but that’s changed in recent years.

Conventional lenders, like Bank of America, as well as Fannie Mae and Freddie Mac have low down-payment programs.

“There’s a greater demand for low down-payment assistance programs because it’s very difficult to save with high rent prices,” McCargo says. “The only way to get them in is to require less cash at the outset.”

Contact one of the housing counseling agencies that are funded by the U.S. Department of Housing and Urban Development. Agents will help you understand whether you will qualify as a first-time home buyer and which programs will be beneficial to you. If you have down payment or credit concerns, they can also address questions regarding those issues. A list of housing counseling agencies can be found on the HUD website. Search by state to find agencies in your area.

Inquire about state or local resources for first-time home buyers by contacting a housing agency in your area. State housing authorities often have special programs for first-time home buyers, home buyers with limited incomes, single parents and home-buyers with disabilities. Applicants must meet certain eligibility requirements prior to being accepted into the programs.

Begin saving money to be used toward the down payment of your future home. If you are planning on applying for a federally insured FHA loan, you will need to have a down payment of at least 3.5 percent of the purchase price. An additional 3 to 4 percent will also be necessary to cover the closing costs. If you are using another home-buying program, you will need to understand and follow the regulations of that program.

Keep your credit in check by monitoring your score, disputing inaccurate information and keeping credit card balances to a minimum. The higher your credit score, the better chance you’ll have of being approved for a first-time home-buying program.

FHA loans are the most popular type of first time home buyer loan used to purchase a home.

The main reason FHA loans are so popular is because of their low down payment and credit requirements.

Borrowers who have bad credit with a 500 credit score may qualify for an FHA loan with a 10% down payment.

However, with a FICO score below 580, it is highly unlikely a lender will be able to approve a borrower.

If you have a score under 580 we recommend working on improving your credit score before applying for a mortgage.

With a 580 credit score, just a 3.5% down payment is required for an FHA-insured mortgage loan.

For even more personalized ways to save money as a first time home buyer, call Mitzi De La Cruz directly at (916) 871-8132!