Are you looking into buying your first home? Congratulations! Now begins the fun part of calculating how much house you can afford, researching locations, and looking for a trustworthy realtor to work with. And don’t forget financing: this part can feel intimidating for first-time homebuyers because they don’t have funds from a previous home sale to help cover the costs.
Luckily, there are multiple first-time homebuyer programs and initiatives out there that can offer first-timers a leg up. These programs are sponsored by various government entities and non-profit organizations to help aspiring homebuyers achieve their homeownership dream. Let’s take a look at the best mortgages, grants, and other programs that any first-time homebuyer should know about.
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Major first-time homebuyers program categories
First-time homebuyers have an array of programs and grants they may qualify for, depending on their income, occupation, and location. To make it easier, we grouped them into three main categories:
- Federal mortgage programs
- State initiatives
- Additional grants and incentives
Federal programs for first-time homebuyers with affordable mortgages for first-time homebuyers
Federal initiatives for first-time homebuyers include some of the most well-known programs. Most of them are available to repeat homeowners as well but might have better conditions and become especially beneficial for financing your first home.
Here’s a short overview of the most popular options you can look into available nationwide. Remember that the exact requirements depend on your lender and could differ based on your financial health.
| Program | Minimum credit score | Down payment | Additional fees | Special features and requirements |
|---|---|---|---|---|
| FHA loan | 500 with 10% down payment 580 with 3.5% down payment | 3.5–10% minimum | • Upfront MIP: 1.75% • Annual MIP that depends on the remaining loan balance | • Primary residence only • Requires mortgage insurance premium (MIP) • May qualify with a credit score as low as 500 |
| USDA loan | 640 | 0% | • Upfront guarantee fee at closing • Annual guarantee fee | • Property must be located in an eligible rural area • Income cannot exceed 115% of the area median income • Primary residence only |
| VA loan | 620 | 0% | • Funding fee: 1.25-2.15% for first-time homebuyers | • Suitable only for members of the military, veterans, and their spouses • Need to provide the Certificate of Eligibility (COE) • No monthly mortgage insurance • Primary residence only |
| HomeReady | 620 | 3% minimum | • Mortgage insurance (reduced payments for above 90% LTV; might be able to cancel MI when your equity reaches 20%) | • Income cannot exceed 80% of the area median • Better rates for 680+ credit scores • Additional $2,500 credit for down payment or closing costs for very low-income buyers |
FHA (Federal Housing Administration) loan
While the FHA loan was not designed specifically for first-time homebuyers, it is a pretty popular choice for them. This loan has comparably low down payment requirements and allows people with a fairly low credit score to qualify for a mortgage.
Usually, homebuyers can qualify for an FHA loan with a credit score of 580, and the minimum down payment can be as low as 3.5%. However, you could apply even with a credit score of 500 or higher, but you would have to make a down payment of at least 10% in this situation.[1] This shows the requirement’s leniency when you consider that the current national average for a down payment is 15% in 2024.[2]
Because of such favorable conditions, all FHA loans come with a mortgage insurance premium (MIP). This premium—part of which (1.75%) is paid upfront and part paid annually—was set in place to protect the lender if a homebuyer defaults.[3]
USDA (United States Department of Agriculture) guaranteed loan
The USDA loan program is designed for first-time homebuyers who are interested in purchasing a property in eligible rural areas around the country. To qualify for a USDA loan, a buyer has to meet income requirements (the household income cannot exceed 115% of the median in the area).[4] So, if the median income for a two-person household in the area is $75,000, you and your partner can only make up to $86,250 annually to qualify for the USDA loan.
While USDA sets no official minimal credit score, lenders usually require borrowers to have a credit score of 640 or higher.[5] However, even if your score is slightly lower, the lender might approve the loan by looking at your full financial picture and factors such as debt-to-income ratio and income.
Unlike many other loans on the market, a USDA loan does not require a down payment, which is another reason why it’s so attractive to potential homebuyers.[6] However, the borrower would have to pay a guarantee fee at closing as well as an annual fee (the USDA adjusts the exact number every fiscal year).
VA (US Department of Veterans Affairs) loan
VA loans are available to active-duty military service members, veterans, and eligible spouses. They were created to make homeownership more accessible to those who serve the country and have many great features that appeal to first-time homebuyers. To confirm your eligibility for a VA loan, you must show your lender a Certificate of Eligibility (COE), which you can request online or by mail.
Like USDA loans, the US Department of Veterans Affairs does not require a particular credit score to qualify. Still, lenders typically want borrowers to have a credit score of 620 or higher.[7] If your credit score is a bit lower, you could still try your luck at applying, considering you have a good debt-to-income ratio and income.
Another perk of the VA loan for first-time homebuyers is that it usually does not require a down payment, so you don’t have to wait until you save up enough.[8] It also has better terms and lower interest rates than many other loans and does not require a buyer to pay PMI (although first-time homebuyers will have to pay a one-time VA funding fee ranging from 1.25% to 2.15%).[9]
HomeReady
This program was created by Fannie Mae to assist low-to-moderate-income borrowers on the path toward homeownership. To qualify for the program, your income must not exceed 80% of the median income in the area.[10] For example, if the area’s median income is $80,000, you cannot make more than $64,000 to apply for HomeReady.
This loan could be a good alternative to FHA for buyers with a decent credit score but a higher DTI ratio and lower income. The required down payment can be as low as 3%, which is lower than what’s required for an FHA loan.[11] But, the required minimum credit score is 620, although you can get better rates (even better than traditional loans) if your score is higher than 680.[12]
State initiatives for first-time homebuyers
In addition to federal initiatives, there are plenty of state programs that could help bring your dream of homeownership to life. If you want to learn more about how to buy a house in your area as a first-time homebuyer, head to our guide dedicated to your state here:
| Region | States |
|---|---|
| Northeast | Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Vermont |
| Midwest | Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, Wisconsin |
| South | Alabama, Arkansas, Delaware, Florida, Georgia, Kentucky, Louisiana, Maryland, Mississippi, North Carolina, Oklahoma, South Carolina, Tennessee, Texas, Virginia, Washington, DC, West Virginia |
| West | Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington, Wyoming |
Common requirements in first-time homebuyer state programs
The exact eligibility rules and conditions will depend on the state and specific program. However, the typical requirements a potential homebuyer must check off to use a similar program in their state include the following:
- Be a first-time homebuyer.
- Use the property as your primary residence.
- Pass an educational course that covers the basics of the home-buying process, mortgages, and property management.
- Meet income eligibility requirements (many of the programs set maximum income limits based on the median income in the area).
- Meet minimum credit score requirements (could vary anywhere from 620 to 680).
Additional assistance programs and grants for first-time homebuyers
Now, let’s take a look at some lesser-known initiatives and grants that may help aspiring first-time homebuyers lessen the burden of home purchases. Some of these can even be combined with the mortgage programs we mentioned before, such as VA or USDA loans.
Good Neighbor Next Door (GNND)
This HUD (U.S. Department of Housing and Urban Development) program was designed to revitalize communities and assist some essential workers who want to buy in the area where they work. This program is only available in areas designated by HUD, and you can check listings in your state.
To qualify for this loan, you must be a teacher, law enforcement officer, firefighter, or emergency service technician (EMT). Eligible homebuyers receive 50% of the list price of the home but, in return, must live in the property for at least 36 months after purchase.
First-generation homebuyer grants
Some states have additional programs that help first-generation homebuyers with down payment or closing costs. These initiatives anticipate that it’s harder to buy a home if you don’t have the advantage of intergenerational wealth and your parent’s financial support when buying. If you fall into this category, check if it’s currently available in your state, as some of these programs are open only for a limited time, while others accept applications on an ongoing basis.
Down payment assistance (DPA)
These grants are designed to make homeownership more attainable for lower-income individuals who find it hard to save up or don’t want to use their 401(k) for a down payment. Some of them are cash grants, while others come in the form of tax credits or loans. Learn more about whether DPA is available in your area and see if you’re qualified.
Which first-time homebuyer program should you choose?
The program(s) you may qualify for as a first-time homebuyer will depend on your financial situation and where you want to buy a home, among other things. While there are many different types of loans and programs for first-time homeowners available—both nationwide and in particular states—whether or not you qualify is a whole different story.
For most of these programs to help those buying their first place, it usually comes down to a few key questions:
- What is your credit score?
- What is your profession?
- Have you served in the armed forces?
- How much can you put as a down payment?
- Where are you looking to live?
The answers to these main questions can unlock or eliminate programs, which should help you narrow down your options to something manageable. That’s the easy part. From there, it’s time to apply to the first-time homebuyer programs you qualify for and work with these various organizations to secure something you’ve only dreamed of until now: owning your very own home.
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