First-Time Home Buyer Programs, Grants and Loans

By: Gina Freeman Updated By: Ryan Tronier Reviewed By: Paul Centopani
April 19, 2024 - 13 min read

Explore resources designed to help first-time buyers become homeowners

Buying your first home can be an overwhelming experience, but first-time home buyer programs are here to help.

If the thought of securing your first mortgage seems daunting, don’t worry—you’re not alone. Numerous resources are available to make homeownership more accessible and affordable for first-time buyers.

This comprehensive guide details the various grants, loans, and assistance programs designed specifically for people like you and turn your dream of owning a home into a reality.

Verify your home buying eligibility. Start here

In this article (Skip to...)

>Related: How to buy a house with $0 down: First-time home buyer

What is a first-time home buyer program?

A first-time home buyer program is a type of financial assistance designed to help individuals or families purchase their first home.

These programs are typically offered by federal, state, or local governments, as well as nonprofit organizations and some employers. The goal is to make homeownership more accessible and affordable for first-time buyers by providing benefits such as:

  • Lower down payment requirements
  • Reduced fixed rates
  • Down payment assistance (grants or low-interest loans)
  • Closing cost assistance
  • Relaxed credit score requirements
  • Homebuyer education courses

First-time home buyer programs often have eligibility criteria based on factors like income, home’s purchase price, and the buyer’s status as a first-time homeowner. By taking advantage of these programs, first-time buyers can overcome common barriers to homeownership and achieve their dream of owning a home.

Who qualifies for first-time home buyer programs?

To qualify for first-time home buyer programs, you typically must:

  • Be a first-time homebuyer (haven’t owned a home in the past 3 years)
  • Meet income and purchase price limits
  • Have a credit score that meets the program’s minimum requirement
  • Use the home as your primary residence
  • Complete a homebuyer education course, if required

Eligibility criteria can vary by program and location, so research the specific requirements for the programs you’re interested in. You can often find helpful information on .gov websites related to housing assistance and first-time home buyer programs.

Types of first-time home buyer programs

First-time home buyers can access various loan programs and grants to help with down payments and closing costs. These include non-profit aid, government-backed mortgages, and tax incentives at both local and federal levels. Educational programs are also available to guide buyers through the home-buying process.

Check your home buying eligibility. Start here

Let’s explore some of the most sought-after loans and grants for first-time home buyers.

Government-backed first-time home buyer programs

Government-backed loans offer a lifeline to first-time home buyers by providing more lenient eligibility criteria compared to conventional loans.

With features like no down payment requirements, reduced interest rates, and more forgiving credit score requirements, these loans—insured by entities such as the FHA, VA, and USDA—reduce the barriers to homeownership. They aim to build a bridge over the financial gaps that often discourage or disqualify newcomers from taking their first step onto the property ladder. These first-time home buyer programs are often the best mortgage option for those just starting out.

Down payment assistance for first-time home buyers

Down payment assistance programs (DPAs), offered by state or local governments, help first-time home buyers with upfront costs. These programs provide grants or loans to cover a portion or all of the down payment and closing costs, making homeownership more attainable. On average, buyers using DPAs save almost $6,000 at closing and $11,000 over the life of their loans.

Down payment assistance loans

While DPAs come in a variety of flavors, all are designed to support home buyers in meeting the upfront costs of purchasing a home.

  • Low-interest loans are additional mortgages with reduced interest rates that are paid back in installments over several years.
  • Deferred-payment loans are interest-free second mortgages that are repaid when the homeowner sells, refinances, or pays off the primary mortgage.
  • Forgivable loans are a type of second mortgage that does not need to be repaid, provided the homeowner remains in the home for a predetermined period and maintains their mortgage payments.

Down payment assistance grants

First-time home buyer grants are essentially monetary gifts to assist with the initial down payment or closing expenses. Generally speaking, these grants are given to borrowers with low to moderate earnings.

They also vary in size and availability depending on where you live. There are also different requirements to qualify for assistance, including a minimum credit score or income limits.

Down payment savings match programs

A down payment match program offers matched funds up to a predetermined amount for down payment and closing expenses. The Homebuyer Dream Program (HDP), for example, provides matching funds up to $7,500 for eligible first-time home buyers who complete a homebuyer education course and meet specific household income and purchase price limits.

Compare quotes from multiple lenders. Start here

Closing cost assistance for first-time buyers

Closing cost assistance programs significantly reduce out-of-pocket expenses for first-time buyers, covering fees such as appraisals, title insurance, and loan origination. This help can free up money for home decorating or future savings.

Homebuyer education and counseling programs

Homebuyer education courses are like a roadmap for buying your first home. They teach you all the steps, from the types of mortgages to finding a good deal. For those stepping onto the property ladder, homebuyer education classes can be the difference between a shaky start and a solid foundation when buying your first home. Many first-time home buyer programs require completion of such a course.

Mortgage Credit Certificates (MCCs) for first-time buyers

Mortgage Credit Certificates, or MCCs, allow new buyers to claim a tax credit for a portion of their annual mortgage interest. Tax credits like these make more available money accessible to qualify for a home loan and help with monthly mortgage payments.

An MCC can be the difference between a property that’s just out of reach and one that’s a good financial fit.

Compare quotes from multiple lenders. Start here

First-time home buyer loan options

Conventional loans

Conventional loans are a popular choice for first time home buyers because they offer flexibility. They’re not backed by the government, which means there’s a variety of loan options out there. For buyers, this means more competitive interest rates and different down payment requirements, which can be as low as 3% of the home’s purchase price. But you’ll pay private mortgage insurance (PMI) if you put less than 20% down. However, you can drop PMI once you build enough equity in the home.

Verify your conventional loan eligibility. Start here

Fannie Mae HomeReady mortgage

The Fannie Mae HomeReady program is tailored for first-time home buyers with moderate incomes. HomeReady offers low down payments — as low as 3% — and you can even use money from gifts, grants, or community assistance for your down payment and closing costs.

This program also considers the income of everyone living in the home, not just the borrower. That means a buyer could qualify for a loan using income from parents or roommates.

Check your HomeReady loan eligibility. Start here

Freddie Mac Home Possible mortgage

Freddie Mac’s Home Possible is a first-time home buyer program that helps low-income borrowers get a mortgage. With down payments as low as 3%, Home Possible aims to help those who might struggle to save for a larger down payment. Moreover, it offers flexibility with sources of funds, meaning down payment money can come from various sources including family, employer assistance, or even sweat equity.

Check your Home Possible eligibility. Start here

FHA loans

FHA loans, backed by the Federal Housing Administration, are popular among borrowers with smaller down payments or credit issues. Buyers with credit scores as low as 580 can qualify with a 3.5% down payment, while those with scores of 500 can qualify with a 10% down payment.

FHA mortgage rates are often lower than conforming rates, but mortgage insurance premiums (MIP) can make the overall cost higher. MIP includes an upfront fee of 1.75% and an annual fee of 0.55% of the loan amount.

Verify your FHA loan eligibility. Start here

FHA mortgage insurance must be paid for the life of the loan. But borrowers can refinance into a new loan type to cancel those premiums down the road. The home purchased must be the buyer’s primary residence.

VA loans

The Department of Veterans Affairs offers the VA loan to eligible active-duty servicemembers, veterans, and some surviving spouses. VA loans offer 100% financing, simplified loan approval standards, and access to the lowest mortgage rates available.

Check your VA loan eligibility. Start here

In addition, VA loan rates consistently beat rates for all other common loan types. VA mortgage rates can often be as much as 40 basis points (0.40%) lower than rates for a comparable conventional loan. In terms of mortgage affordability, the VA loan is hard to beat if you’re eligible.

USDA loans

Available in rural areas and low-density suburbs, the U.S. Department of Agriculture offers its USDA loan as another no-money-down mortgage you can use to finance a home. This loan option features lower mortgage rates, zero down payment, and cheaper mortgage insurance to borrowers with low to moderate income.

Check your USDA loan eligibility. Start here

The only catch? The home has to be in a designated rural area according to USDA standards. That usually means it has to be located in a city with a population of less than 20,000.

Specialized first-time home buyer programs

HomePath Ready Buyer Program

The HomePath Ready Buyer Program is perfect for first-time buyers looking for a deal on a foreclosed home. Offered by Fannie Mae, this program gives you up to 3% in closing cost assistance if you complete their educational course and buy a HomePath property. This first-time home buyer program is ideal for lower-priced homes that need a bit of work.

First-time home buying assistance for educators, healthcare workers, and first responders

Several specialized programs cater to first-time home buyers in critical professions, such as education, healthcare, law enforcement, and emergency services. These initiatives acknowledge the vital contributions of these professionals and offer unique benefits to help them achieve homeownership.

  • The Good Neighbor Next Door program provides a significant 50% discount on the list price of homes located in revitalization areas for teachers, firefighters, police officers, and EMTs. Buyers must commit to living in the property for at least three years, as the program aims to invest in and revitalize communities.
  • Educators may explore teacher home loan programs that offer guidance and financial benefits tailored to their needs, such as down payment assistance and preferential mortgage rates.
  • Nurses can take advantage of nurse home loans that may provide benefits such as relaxed credit score requirements or special grant opportunities.
  • Similarly, doctors might find that physician mortgage loans offer unique advantages, like no private mortgage insurance and higher loan limits.

Each of these first-time home buyer programs is tailored to help those who give so much to our communities to establish their own homes within them.

Energy-efficient mortgage (EEM)

An energy-efficient mortgage (EEM) is great for first time buyers interested in making their home more energy-efficient. If a home needs upgrades like new insulation, windows, or solar panels, an EEM lets you roll the cost of these improvements into your mortgage. This means you only have one payment and you can start saving on your energy bills right away. It’s a forward-thinking option that can lower living costs over time.

Native American Direct Loan (NADL)

For first time home buyers who are either Native American or married to one, the Native American Direct Loan (NADL) program is a valuable resource. NADL offers special terms: low-interest, no down payment, and no private mortgage insurance required. It’s specifically for buying, building, or improving homes on federal trust land.

First-time home buyer programs for students and graduates

If you’re a recent college graduate, there are programs that may assist you in securing your first mortgage. Take Maryland’s “You’ve Earned It!” initiative, which provides interest rate discounts on mortgages, as well as down payment assistance, to recent graduates who have earned a degree in the past three years.

Just like many graduate-focused homeownership programs, this initiative encourages you to stay in the state by requiring you to live in the home for a certain period, ensuring that the support is benefiting local communities and keeping educated professionals in the area.

Compare quotes from multiple lenders. Start here

State and local first-time home buyer programs

The U.S. Department of Housing and Urban Development (HUD) offers a directory of first-time home buyer programs by state. For more information, see our complete guide to first-time home buyer grants in your state.

Nonprofit first-time home buyer assistance

First-time home buyers with lower incomes may be eligible for assistance from charities or nonprofits. These organizations can provide help with learning about homeownership and the costs involved in buying a home. Eligibility is often based on income and other specific criteria.

Compare quotes from multiple lenders. Start here

Neighborhood Assistance Corporation of America

NACA is a nationwide group that assists households that might not have stable finances. They offer advice and education about mortgages. They also connect low-income people with participating lenders that are open to working with them.

One of the big benefits of NACA loans is that they don’t require a down payment or closing costs, and they don’t look at your credit score. This approach can provide a more tailored way to buying a home.

Habitat for Humanity

Habitat for Humanity is a global nonprofit organization dedicated to providing affordable housing solutions to families in need. By mobilizing volunteers, Habitat builds homes for low-income families at minimal cost, ensuring homeownership is accessible and not profit-driven. This initiative significantly reduces housing expenses, offering a sustainable path to stability for families that would otherwise face financial barriers to owning a home.

Employer-sponsored first-time home buyer programs

Some companies offer help with buying a home through employer-assisted housing (EAH) programs, often in neighborhoods close to where you work. EAH programs usually focus on certain jobs, and there might be other rules to follow, like being a first-time buyer, working there for a certain amount of time, or household income limits.

Speak with your manager or HR representative to discuss your options and find out if your company provides assistance with closing costs or a down payment.

How to find and apply for first-time home buyer programs

Verify your home buying options. Start here

As a first-time home buyer, understanding the homebuying process and finding assistance programs can be overwhelming. However, with the right information and guidance, you can successfully find and apply for first-time home buyer programs that suit your needs.

Here’s a step-by-step guide to help you through the process:

1. Research available programs

Start by exploring first-time home buyer programs offered by the U.S. Department of Housing and Urban Development (HUD), your state and local governments, and non-profit organizations. Look for down payment assistance programs, closing cost assistance, and specialized loan programs like FHA loans, VA loans, and USDA loans.

2. Check your eligibility

Review the eligibility criteria for each program, which may include factors such as income limits, credit score requirements, and purchase price limits. Some first-time home buyer programs may also require you to complete a homebuyer education course.

3. Determine your budget

Assess your financial situation and determine how much you can afford to spend on a home. Consider factors like your household income, monthly payments, and potential mortgage insurance costs.

4. Get pre-approved

Contact participating lenders, such as mortgage lenders or loan officers, to get pre-approved for a first-time home buyer loan. This process will give you a clear idea of your loan amount and interest rate options.

5. Find a home

Work with a real estate agent to find a single-family home, condominium, or townhouse that meets your needs and fits within your budget. Keep in mind that some programs may have specific requirements for the type of home you can purchase.

6. Apply for assistance

Once you’ve found a home, submit your application for the first-time home buyer programs you qualify for. Be prepared to provide documentation such as proof of income, tax returns, and bank statements.

7. Close on your home

After your application is approved and you’ve completed any necessary homebuyer education courses, you can close on your new home. Be sure to review your loan documents carefully and ask questions if anything is unclear.

Remember, first-time home buyer programs are designed to make homeownership more accessible and affordable for moderate-income households. By taking advantage of these programs, you can reduce your down payment, secure a competitive interest rate, and receive tax credits that can help offset the costs of buying your first home.

FAQ: First-time home buyer programs

Find your best first-time home buyer interest rate. Start here

What is the best option for first-time home buyers?

The best option for first-time home buyers depends on their individual circumstances, such as income, credit score, and location. However, popular options include FHA loans, USDA loans, and conventional loans with low down payment requirements. First-time home buyer programs offering down payment assistance, closing cost assistance, and tax credits can also be highly beneficial.

What credit score do you need to buy a house for the first time?

First-time home buyers typically need a credit score of at least 620 for conventional loans, 640 for USDA loans, and 580 for FHA loans with a 3.5% down payment. Higher scores can lead to better mortgage terms and a larger home buying budget.

What is the maximum income to qualify for first-time home buyer programs?

Many first-time home buyer programs, like FHA and VA loans, have no maximum income limit. However, some programs, such as USDA loans and down payment assistance grants, impose income caps based on the local median income.

How do I get a first-time home buyer grant?

Research programs offered by state and local governments and nonprofits in your area. Eligibility typically requires being a first-time buyer with a low-to-moderate income. Ensure the mortgage program allows you to use grant funds towards your down payment and/or closing costs.

Check your home buying eligibility today

The easiest way to find out whether you qualify for a first-time home buyer program is to check if you’re eligible for financing.

You can get started below. Getting verified by a lender is free, and it only takes a few minutes to begin.

Time to make a move? Let us find the right mortgage for you

Gina Freeman
Authored By: Gina Freeman
The Mortgage Reports contributor
With more than 10 years in the mortgage industry, and another 10 years writing about it, Gina Freeman brings a wealth of knowledge to The Mortgage Reports as its Associate Editor. Gina works with a team of world-class real estate and finance writers to bring timely and helpful news and advice to the audience. Her specialty is helping consumers understand complex and intimidating topics.
Ryan Tronier
Updated By: Ryan Tronier
The Mortgage Reports Editor
Ryan Tronier is a personal finance writer and editor. His work has been published on NBC, ABC, USATODAY, Yahoo Finance, MSN Money, and more. Ryan is the former managing editor of the finance website Sapling, as well as the former personal finance editor at Slickdeals.
Paul Centopani
Reviewed By: Paul Centopani
The Mortgage Reports Editor
Paul Centopani is a writer and editor who started covering the lending and housing markets in 2018. Previous to joining The Mortgage Reports, he was a reporter for National Mortgage News. Paul grew up in Connecticut, graduated from Binghamton University and now lives in Chicago after a decade in New York and the D.C. area.