First Steps

12 First-Time Homebuyer Programs

Published on: July 21, 2021

First-time homebuyer programs help consumers overcome the hurdles of buying a first home. Available assistance includes first-time homebuyer grants, down payment assistance programs, first-time homebuyer tax credits, and loans for first-time homebuyers.

If you’re thinking about buying a house, you can find programs for first-time homebuyers through federal, state, regional, and local governments as well as community organizations.

Who qualifies for first-time homebuyer programs?

The U.S. Department of Housing and Urban Development (HUD) defines a first-time homebuyer as anyone who has not owned a principal residence within the past three years. This means government programs for first-time homebuyers and many state, regional, and local first-time homebuyer programs may be available to eligible repeat buyers. 

HUD’s definition of first-time homebuyers extends to the following: 

  • Any homebuyer who has not owned a principal residence in the past three years 
  • Any homebuyer who has only owned a home while married to a former spouse
  • Any homebuyer who has only owned a mobile home (not attached to a permanent foundation) 

This means many first-time homebuyer programs are available to first-time homeowners and buyers who have owned homes previously but lost them due to a short sale or foreclosure. Also, homeowners who only own investment property can leverage first-time homebuyer assistance if buying a first home as a principal residence.

12 types of first-time homebuyer programs

Many new homeowners don’t know what to expect when buying a first home. Thankfully, there are various types of assistance for first-time homebuyers during the process. Whether it’s a loan for first-time homebuyers or down payment assistance programs, each form of help tackles a challenge that new homeowners often face when buying a first home. 

Here’s an overview of the various types of assistance for first-time homebuyers, as well as some first-time homebuyer programs available nationally. 

Loans for first-time homebuyers 

While some of these options are not exclusive to first-time homeowners, these loan programs meet the unique needs of many first-time homebuyers. 

1. FHA loans 

Loans insured by the Federal Housing Administration are popular among new homeowners buying a first home. FHA loans have favorable terms, including a low minimum down payment and flexible credit score requirements. These programs for first-time homebuyers are insured by the government and financed by FHA-approved lenders.   

Loan highlights 

  • Down payments as low as 3.5% 
  • Fixed- and adjustable-rate loans 
  • Upfront and annual mortgage insurance premiums 

Loan qualifications 

  • First-time and repeat buyers 
  • Borrower must live in the home as a primary residence
  • Property must meet HUD safety standards 

Where to apply 

  • Borrowers can apply directly with FHA-approved lenders 

2. USDA loans 

The U.S. Department of Agriculture (USDA) guarantees various programs for first-time homebuyers with low- and moderate incomes. In the Direct Loan program, borrowers finance their home directly with the USDA. And in the Guaranteed Loan program, borrowers finance their home with private lenders, and the USDA ensures the loan. To qualify for USDA loans, borrowers must fall within program income limits and live in designated rural areas.  

Loan highlights 

Loan qualifications 

  • First-time and repeat buyers 
  • Must meet income requirements 
  • Borrowers must live in USDA-designated rural areas (typically determined by population size)

Where to apply 

  • Borrowers apply with the USDA for direct loans or with USDA-approved lenders for the guaranteed loan program 

3. VA loans 

Another government program for first-time homebuyers is the VA loan program. These mortgages — guaranteed by the U.S. Department of Veterans Affairs — are for active-duty servicemembers, veterans, or eligible spouses. They’re popular with eligible first-time homeowners because of the favorable terms, such as no down payment requirement and no mortgage insurance.  

Loan highlights 

  • 100% financing available 
  • No loan limits in many cases 
  • No PMI, although borrowers pay an upfront VA funding fee

Loan qualifications 

  • First-time and repeat buyers 
  • Must be an active-duty servicemember, veteran, or eligible spouse

Where to apply 

  • Borrowers apply with VA-approved lenders  

4. Conventional loans 

First-time homeowners can also purchase a home with a conventional loan. Conventional loans are any mortgage that’s not backed by the government and are subject to loan limits established by Fannie Mae and Freddie Mac, two agencies that guarantee most conventional loans. These mortgages are harder to qualify for than other loans; however, they can be less expensive than government programs for first-time homebuyers because they have fewer fees.  

Loan highlights 

  • 3% down payment (20% down payment to avoid PMI) 
  • Fixed-rate and adjustable-rate mortgages 

Loan qualifications 

  • First-time and repeat buyers 

Where to apply 

  • Borrowers apply directly with conventional lenders 

5. Fannie Mae HomeReady™ 

HomeReady™ is a type of conventional loan for first-time homebuyers and other qualifying borrowers. Loan terms include low down payments, reduced mortgage insurance fees, and high loan-to-value ratios. HomeReady loans are subject to income limits, and borrowers must meet credit requirements.  

Loan highlights 

  • 3% minimum down payment 
  • Fixed-rate and adjustable-rate mortgages 
  • Can combine loan with down payment assistance programs 

Loan qualifications 

  • First-time buyers and repeat buyers 
  • Subject to income limits 

Where to apply 

  • Borrowers apply directly with conventional lenders 

6. Freddie Mac Home Possible® 

Home Possible® is another type of conventional loan for first-time homebuyers and low- and moderate-income borrowers. Loan terms include low down payment requirements and discounted fees. To qualify, borrowers must meet income and credit requirements.  

Loan highlights 

  • 3% minimum down payment 
  • Fixed- and adjustable-rate mortgages 
  • Can combine loan with down payment assistance programs 
  • Can use loan on one- to four-unit properties

Loan qualifications 

  • First-time buyers and repeat buyers 
  • Subject to income limits 

Where to apply 

  • Borrowers apply directly with conventional lenders 

7. Freddie Mac HomeOne Mortgage 

HomeOne℠ is a conventional, low-down-payment loan for first-time homebuyers. With this mortgage option, borrowers can put as little as 3% down. HomeOne is available to all first-time homebuyers regardless of income or property location.  

Loan highlights 

  • 3% minimum down payment 
  • Fixed-rate loans 
  • Can combine loan with down payment assistance programs 

Loan qualifications 

  • Must be a first-time homebuyer (as defined by HUD)
  • Available for one-unit properties only 
  • Must attend homebuyer education (if all borrowers are first-time buyers) 

Where to apply 

  • Borrowers apply directly with conventional lenders 

First-time homebuyer grants and additional programs for first-time homebuyers 

8. Habitat for Humanity 

Consumers thinking about buying a house can build and purchase a home through Habitat for Humanity, a national non-profit agency. The organization helps first-time homebuyers and others in need of affordable and safe housing. Eligible homeowners put in “sweat equity” by helping to build their homes or by putting in volunteer hours. In return, the borrowers receive a mortgage with affordable payments. 

Program highlights 

  • Borrowers partner with Habitat Humanity by putting in “sweat equity” to build their homes 
  • Borrowers receive loans with affordable payments 

Program qualifications 

  • Must need affordable or safe housing 
  • Must be able to help build home or put in volunteer hours 
  • Must be able to afford mortgage payments

Where to apply 

9. Housing Choice Voucher (HCV) Homeownership Program 

The HCV program provides assistance for first-time homebuyers who meet specific income limits. Borrowers admitted to the HCV program may be eligible for a first-time homebuyer grant or receive monthly assistance.  

Program highlights 

  • Borrowers receive monthly housing assistance towards homeownership expenses or a down payment grant   

Program qualifications 

  • Must be a first-time homebuyer 
  • Must meet income and employment requirements 
  • Must complete a homeownership and housing counseling program 

Where to apply 

10. Good Neighbor Next Door (GNND) 

HUD offers a first-time homebuyer program for borrowers who work in specific professions. With this program, law enforcement officers, teachers, firefighters, and EMTs may qualify for discounted purchase prices as well as lower down payment requirements if they purchase HUD-owned homes in specific areas. This program not only provides benefits for first-time homebuyers but also revitalizes targeted neighborhoods. 

Program highlights 

  • Borrowers purchase HUD-owned homes in specific areas at 50% off the purchase price  
  • Discount is in the form of a no-interest, payment-free second mortgage  
  • Borrowers can combine with other first-time homebuyer programs and may use any type of financing  
  • Borrowers may qualify for lower down payment requirements with an FHA loan

Program qualifications 

  • Open to first-time and repeat buyers 
  • Must be a law enforcement officer, teacher, firefighter, or EMT 
  • Borrower must live in the home as their principal residence for at least three years

Where to apply 

  • Eligible buyers search for qualifying HUD listings in their state and submit their interest in purchasing a property. 

11. Down payment assistance programs  

Many state, regional, non-profit organizations, and private lenders offer down payment assistance programs for first-time homebuyers. The terms of these programs vary, and the assistance can come in multiple forms.  

In some cases, programs provide first-time homebuyer grants that the borrower does not need to repay. In other cases, borrowers can access a low-interest rate second mortgage. Additionally, some down payment assistance programs provide a forgivable or 0% interest loan if the borrower remains in the home for a specific amount of time. Typically, borrowers may use the funds towards their down payment or closing costs. 

Program highlights 

  • Down payment and closing cost assistance  
  • Can be in the form of a grant, low or no-interest loan, or forgivable loan 
  • Can pair with other first-time homebuyer programs

Program qualifications 

  • Must be a first-time homebuyer 
  • May be subject to income or purchase price limits 
  • Subject to individual program requirements

Where to apply 

  • Borrowers apply directly with their state, local, or community program, or lender. Some employers may also offer down payment assistance programs 

First-time home buyer tax credits

In addition to loans for first-time homebuyers, borrowers can take advantage of first-time homebuyer tax credits available in some states. 

12. Mortgage Credit Tax Certificate (MCC) 

The MCC is a first-time homebuyer tax credit available at the state or local level. With the MCC, eligible homeowners can claim a federal tax credit for a portion of the mortgage interest paid each year. This program provides assistance for first-time homebuyers in lower-income households and has income limits. 

Program highlights 

  • Borrowers can claim a dollar-for-dollar federal tax credit for a portion of their mortgage interest each year 
  • Maximum credit is $2,000 
  • Available in some but not all states

Program qualifications 

  • Must be a first-time homebuyer 
  • Must meet income requirements 
  • Property must be the borrower’s primary residence 
  • Subject to the purchase price restrictions

Where to apply 

Borrowers apply directly with state and local housing finance agencies

Benefits of first-time homebuyer programs

Depending on the terms, programs for first-time homebuyers reduce the costs of homeownership, allow higher loan limits, and reduce the amount needed for a down payment and closing costs. 

In many cases, first-time homebuyer programs not only help borrowers get into homes but also stimulate a local economy or revive struggling neighborhoods.  

Here are some of the benefits for first-time homebuyers available through first-home buyer programs. 

Low down payment requirements. Many government programs for first-time homebuyers and some non-government programs require no down payment or as little as 3% down. 

Assistance with the down payment and closing costs. Down payment assistance programs help borrowers cover their down payment and closing costs. This type of assistance for first-time homebuyers can come in the form of a grant, forgivable loan, or low-interest loan. 

Flexible credit and income requirements. Many programs are easier to qualify for than typical financing.  

Below-market interest rates. Some loans for first-time homebuyers offer competitive interest rates or reduced interest rates if borrowers meet specific criteria. 

Reduced taxes. First-time homeowners with access to the first-time homebuyer tax credit pay lower taxes.

How to find state and local first-time homebuyer programs near you

In addition to national first-time homebuyer programs, you may find more assistance for first-time homebuyers locally. Many state and local governments, and regional and local community groups, offer programs for first-time homebuyers to incentivize homeownership in a particular area.   

The types of programs for first-time homebuyers on the state and local levels vary. For example, some states may offer a first-time homebuyer tax credit. In other cases, local organizations may partner with lenders to provide first-time homebuyer grants or down payment assistance programs. 

It can take a little legwork to find local first-time homebuyer programs. These sources will help you discover programs for buying a home in your area: 

First-time homebuyer FAQs

How do I find the best home lenders for first-time buyers? 

Loan options vary by lender, so it’s best to consult with a few banks or mortgage lenders and ask about their first-time homebuyer programs. Then, compare the various loans to see which meets your needs as a first-time homeowner. Additionally, your local FAM Mortgage Advisor can provide details on which loans offer benefits for first-time homebuyers. 

Do first-time homebuyers get a discount? 

There is no official discount for first-time homeowners. However, some loan programs for first-time homebuyers offer below-market interest rates, which may be harder to qualify for as a first-time homeowner. Other first-time homebuyer programs, such as state programs, may provide interest rate discounts for buyers in a specific profession or those purchasing homes in targeted areas. Additionally, some government programs for first-time homebuyers, such as VA loans, place a cap on lender fees, which helps to keep closing costs down.  

What credit score do I need as a first-time homebuyer? 

First-time homebuyer programs have various eligibility criteria, but many have lenient credit score requirements. For example, FHA borrowers can purchase a home with a credit score as low as 500, depending on their down payment. Other government programs for first-time homebuyers, such as VA and USDA loans, do not have a minimum credit score. However, many lenders place their own credit score requirements on loan programs for buying a home.  

Can I combine first-time homebuyer programs? 

Yes, in some cases, you may be able to use two first-time homebuyer programs for the same home purchase. For example, you may qualify for a government loan for first-time homebuyers as well as one of your state’s down payment assistance programs. Make sure you’re familiar with the terms of the first-time homebuyer programs you apply for; they’ll indicate your ability to use multiple types of assistance for first-time homebuyers. 

Can borrowers with a past foreclosure or short sale qualify for first-time homebuyer programs? 

Yes, buyers who lost a previous home to foreclosure or short sale may qualify for programs for first-time homebuyers if three years or more have passed since they owned a principal residence. Some loan programs may have longer wait times to qualify for a first-time homebuyer program following these events, so check with your lender for specific program guidelines.

 

Editor’s note: Not all lenders offer all of the first-time homebuyer loans and programs listed within this article, and each lender has their own borrowing guidelines that may differ from the requirements listed above. For detailed information about Finance of America Mortgage’s loan programs and borrowing guidelines, please contact a FAM Loan Advisor.

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