Can My Spouse Qualify as a First-Time Home Buyer?

Many people pursuing homeownership look for benefits aimed at first-time buyers. For married couples, eligibility can be complicated when one spouse has owned a home before and the other has not. Understanding the specific rules is the first step in determining if your household can qualify for these programs.

The Official Definition of a First-Time Home Buyer

The U.S. Department of Housing and Urban Development (HUD) provides the standard definition for many federal housing programs, which centers on the “3-year rule.” An individual is considered a first-time home buyer if they have not had an ownership interest in a principal residence during the 3-year period ending on the date of purchase.

An “ownership interest” means having your name on the title of a property used as your main home. The rule is designed to help those who have been out of the housing market. The HUD definition also includes considerations for individuals like single parents or displaced homemakers who previously owned a home only with a former spouse.

Applying the Rules to a Married Couple

For loans insured by the Federal Housing Administration (FHA), if one spouse has not owned a home in the last three years, the couple is generally considered to meet the first-time home buyer definition. This holds true even if the other spouse is a recent homeowner. This allows the couple to access FHA loans, which are known for lower down payment requirements, often as low as 3.5%.

Conventional loans, which are not insured by a government agency, have guidelines set by entities like Fannie Mae and Freddie Mac that focus on an individual applicant’s history. A spouse who has never owned a home can apply as a first-time home buyer using their individual income and credit history to qualify. The previously owning spouse does not have to be a borrower on the loan, allowing the qualifying spouse to access first-time buyer programs.

State law determines how ownership is viewed, based on whether you live in a community property or common law state. In community property states, assets acquired during marriage are owned equally by both spouses, regardless of whose name is on the title. This can mean a spouse has an ownership interest in a home purchased by their partner during the marriage, affecting their 3-year rule eligibility.

In common law states, ownership of property is determined by whose name is on the title. If only one spouse’s name is on the deed, the other spouse does not have an automatic ownership interest. This distinction directly impacts how a lender will apply the 3-year rule to a spouse who was not on the title of a previously owned property.

Accessing Specific First-Time Home Buyer Programs

Qualifying as a first-time home buyer provides access to programs that help with the initial costs of purchasing a home. Many state and local governments offer down payment assistance (DPA) programs, such as grants or low-interest loans. These programs often have stricter eligibility rules regarding a spouse’s prior homeownership, so couples must research the requirements for the specific programs in their area.

Another benefit is the ability to withdraw funds from a traditional Individual Retirement Arrangement (IRA) without the 10% early withdrawal penalty. The IRS allows a lifetime maximum of $10,000 for a first-time home purchase. For this purpose, the IRS defines a first-time home buyer as someone who has not owned a principal residence during the 2-year period before the new home is acquired. For a married couple to use this, both spouses must meet this 2-year requirement, allowing each to withdraw up to $10,000 from their respective IRAs.