Best First-Time Home Buyer Loans of 2025

What’s the best first-time home buyer loan?

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
• USDA loan
• VA 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.

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, backed by the Federal Housing Administration, are among the most popular loans for first-time home buyers thanks to their low interest rates and flexible income requirements. With a credit score of at least 580, you can qualify with just a 3.5% down payment. If you can put down 10%, your score can be as low as 500.

This type of loan is generally easier to qualify for than most others, which makes the FHA mortgage one of the best home loans for first-time buyers. The trade-off is mortgage insurance premiums (MIP), which includes an upfront fee and ongoing monthly payments. But you’re not stuck with it forever; you can refinance into a different loan later to remove MIP.

2. The Conventional 97 loan

The Conventional 97 is one of the best first-time home-buyer loans for people with good credit who want a low down payment option—just 3%. While you’ll need to pay private mortgage insurance (PMI), unlike the FHA loan, it’s not permanent. You can remove PMI once you’ve built enough equity. To qualify, you’ll need a credit score of at least 620. If your score is lower, an FHA loan may be a better option. But if you meet the minimum credit score requirement, this first-time buyer mortgage can offer more long-term savings and flexibility.

3. Fannie Mae HomeReady and Freddie Mac Home Possible

Fannie Mae HomeReady and Freddie Mac Home Possible loans are conventional mortgage programs designed for first-time homebuyers who may not have a substantial amount saved for a down payment. Both require just 3% down and accept credit scores starting at 620. Once you’ve built enough equity, you can cancel private mortgage insurance. They also let you use gift funds or roommate income for your down payment, and you’ll need to take a homebuyer education course to qualify. If your credit score is solid and you're looking for home loans for first-time buyers with long-term savings potential, these options are worth exploring.

4. VA loan

The VA loan is among the best first-time home-buyer programs, but it’s only available to military service members, veterans, and eligible spouses. Backed by the Department of Veterans Affairs, it offers significant benefits—like no down payment, lower mortgage rates, and no monthly mortgage insurance, which keeps your monthly payments lower. You can also qualify with a lower credit score than many other loans, and closing costs are often cheaper. Not all mortgage lenders offer this type of loan, so shop around for participating lenders. If you qualify, the VA loan is one of the best home loans for first-time buyers, with almost no downside

5. USDA loan

The USDA loan is one of the best loans for first-time home buyers looking to purchase in rural areas or small towns. Backed by the U.S. Department of Agriculture, this government-backed mortgage loan offers a zero-down payment option, low interest rates, and the most affordable mortgage insurance on the market. USDA loans help moderate-income buyers who meet area median income limits (AMI). You’ll need to purchase in a USDA-approved area, typically located outside major cities, which you can verify using the USDA eligibility map. If you’re looking for a low-cost home mortgage loan and you qualify, the USDA loan is a strong option for buying your first home.

6. Good Neighbor Next Door

Good Neighbor Next Door (GNND) is a unique homebuyer program offered by the Department of Housing and Urban Development (HUD) that helps public service professionals buy a home at a 50% discount. It’s open to teachers, law enforcement officers, firefighters, and EMTs purchasing a primary residence in designated revitalization areas. In exchange, participants agree to reside in the home for three years. You must also buy a home listed for sale by HUD. You can check the listings for your state using the HUD Special Programs site. If you qualify, this is one of the most generous first-time home-buyer programs for community professionals who are ready to put down roots and become homeowners.

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.

Here 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

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The bottom line? Homeownership isn’t as out of reach as you likely think. With the right loan program in place, qualifying for a home loan isn’t just possible — it can be affordable, too.