Key Takeaways
- You don’t need a large down payment or perfect credit to buy your first home.
- The best first time buyer loan depends on your credit, income, location, and eligibility.
- Many first time buyers qualify for assistance that lowers upfront and monthly costs.
Buying your first home is exciting, but picking the right first-time home-buyer program can be confusing.
Luckily, you’ve got options to choose from, like low down payment loans, programs for lower credit scores, and some of the best home loans for first-time buyers.
Whether you’re seeking the lowest mortgage payment, the easiest approval, or assistance with closing costs, understanding your loan options puts you in control.
In this article (Skip to...)
- Comparison table
- FHA loan
- Conventional 97 loan
- HomeReady / Home Possible
- VA loan
- USDA loan
- Good Neighbor Next Door
- FAQ
Best first-time home buyer loans
We’ll cover the best first-time home-buyer loans below, but here’s a quick look at six standout programs and what it takes to qualify. Many first-time home-buyer programs also offer down payment and closing cost assistance, which can make a big difference if you don’t have much saved.
Find the best first-time home buyer loan for you. Start here| Minimum Down Payment | Minimum Credit Score | Mortgage Insurance Required? | |
| FHA Loan | 3.5% | 580 | Yes |
| Conventional 97 | 3% | 620 | Yes if <20% down |
| HomeReady/Home Possible | 3% | 620 | Yes if <20% down |
| USDA Loan | 0% | 640 | Yes |
| VA Loan | 0% | Usually 620 | No |
| Good Neighbor Next Door | $100 | 580 | Yes |
If you’re unsure where to start, consider connecting with a loan officer who can guide you through your options. It’s also smart to team up with an experienced real estate agent who knows how to work with first-time buyers and can help with your home-buying process.
1. FHA loan
FHA loans are a popular first-time buyer option because they offer low down payments, flexible credit requirements, and easier qualification than many other mortgage types.
2. The Conventional 97 loan
FHA loans are a popular first-time buyer option because they offer low down payments, flexible credit requirements, and easier qualification than many other mortgage types.
3. Fannie Mae HomeReady and Freddie Mac Home Possible
HomeReady and Home Possible loans are low down payment conventional options designed to help first-time buyers with moderate incomes and limited savings qualify for a home loan.
4. VA loan
VA loans offer eligible service members, veterans, and spouses a powerful path to homeownership with no down payment and lower overall borrowing costs.
5. USDA loan
USDA loans help eligible buyers purchase homes in rural and small-town areas with no down payment and some of the lowest ongoing loan costs available.
6. Good Neighbor Next Door
The Good Neighbor Next Door (GNND) program helps eligible public service professionals buy a HUD-owned home at a steep discount in designated revitalization areas.
Buyer Tip: Don’t Skip Preapproval
Preapproval shows sellers you’re serious and helps you avoid falling in love with a home that’s outside your true budget or program limits.
Other helpful first-time home buyer programs
There are other loan programs and forms of assistance that can make the home buying process easier (and more affordable) if you’re a first-timer.
Find the best first-time home buyer loan for you. Start hereHere are just a few of your options:
- Down payment assistance programs: There are tons of programs and loan options that can help you reduce or even eliminate your down payment entirely. Some don’t even need to be repaid. See our guide for down payment assistance programs in your state
- Closing cost assistance: Similarly, there are also programs that can help you offset your closing costs as well. Again, some of these don’t require repayment
- Down payment gifts: If you have a loved one who’d be willing to help you buy that home, a down payment gift is an option. Just make sure the loan program you’re using allows it (not all of them do)
- Getting a co-borrower: Finally, getting a co-borrower can help you qualify for a home purchase. If they can contribute to your down payment and closing costs, that’s the first step. If they have good credit and a steady, moderate income that can help you qualify for your loan amount, that’s even better
FAQs about the best first-time home buyer loans
Find the best first-time home buyer loan for you. Start hereThe best first-time home-buyer loan depends on your credit score, income, and how much you can put down. If you have good credit, a conventional loan might be your best bet, especially since you can skip private mortgage insurance with a 20% down payment. If your credit score is lower, an FHA loan is often easier to qualify for. For eligible military service members and veterans, VA loans are typically the best mortgage option.
A first-time home buyer is anyone who hasn’t owned a home in the past three years. Even if you’ve owned before, you may still qualify for first-time home buyer programs and down payment assistance if it’s been at least three years.
The easiest first-time home-buyer loan to qualify for is usually the FHA loan, due to its lower credit score requirements and flexible debt-to-income ratios compared to conventional loans.
To get preapproved, you’ll provide a lender with documents like tax returns, W-2s, bank statements, and recent pay stubs. They’ll also run a credit check to assess your eligibility. If you’re just exploring your options, you can get prequalified instead; it’s quicker and doesn’t involve a hard credit pull.
First-time home buyer loans often require borrowers to put 3% to 5% of the purchase price down. Some programs offer down payment assistance, and a few, like VA loans and USDA loans, require no down payment at all.
To qualify for a first-time homeowners loan, most lenders look for a credit score of at least 620. FHA loans may accept scores as low as 580 with a 3.5% down payment, or 500 with 10% down.
Yes, many first-time home-buyer programs offer grants, down payment assistance, or tax credits through federal, state, and local programs.
To compare home loans for first-time buyers, consider the interest rates, private mortgage insurance (PMI), fees, down payment requirements, and eligibility criteria. Use online comparison tools or consult with a mortgage broker or loan officer to find the best mortgage option.
