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Mortgages

First-Time Home Buyer Programs

Updated Mar 28, 2024
10-min read
Aly Yale Author Photo
Written by Aly Yale
Aly Yale Author Photo
Written by Aly Yale

Expertise: Home equity, mortgages, real estate

Aly Yale is a freelance writer with more than a decade of experience covering real estate and personal finance topics.

Learn more about Aly Yale

Buying a house is a big decision—and it’s one many Americans are now putting off due to looming student loan debt and ever-rising home prices. Fortunately, delaying your purchase isn’t the only way to afford buying a home.

Thanks to a wide array of state and federal first-time home buyer programs, qualifying for a mortgage and purchasing a house may be easier than you think.

On this Page:

Federal First-time Home Buyer Programs

Your first option as a new home buyer is to apply for a mortgage backed by a federal program. Federal first-time home buyer programs offer both low-cost mortgage options as well as down payment and closing cost assistance.

There are a number of sources for these programs, including the Federal Housing Administration, the Department of Veterans Affairs, and the U.S. Department of Agriculture.

FHA First Time Home Buyer Program & Down Payment Assistance

The Federal Housing Administration is a government agency that insures mortgages issued by FHA-approved lenders across the country.

FHA-insured loans are designed to make homeownership more affordable for lower- and middle-income earning Americans.

Eligibility

Each lender may impose their own eligibility requirements. But here are the general qualifications required by the FHA:

  • Minimum Credit Score: 500
  • Minimum Down Payment: 3.5% (with a 580 credit score), 10% (with a 500 credit score)
  • Income Limits: 31% debt-to-income ratio (housing costs only); 43% debt-to-income ratio (all monthly debts included)
  • Property Requirements: Must be your primary residence; Must meet HUD minimum property standards
  • Other Details: Requires mortgage insurance up-front and annually

VA First-time Home Buyer Program & Down Payment Assistance

The Department of Veterans Affairs also offers popular loans for first-time home buyers.

Designed specifically for veterans, military members, and their surviving spouses, VA loans require no down payment and offer 100% financing. This means you can roll your closing costs into the loan balance and pay them off over time.

>> Read More: Best VA Lenders: 0% Down Payments for Veterans

Eligibility

Eligibility requirements can vary from one lender to the next. But here are the basic qualifications required by the Department of Veterans Affairs.

  • Minimum Credit Score: Varies by lender, but generally 620 or higher
  • Minimum Down Payment: None
  • Income Limits: 41% debt-to-income ratio (all monthly debts included)
  • Property Requirements: Must be your primary residence
  • Other Details: Must meet military service requirements (See VA.gov for details)

USDA First-time Home Buyer Program

The U.S. Department of Agriculture also offers home loan programs that can make buying a house more affordable. USDA loans require no down payment but are only available for real estate purchases in eligible rural parts of the country.

Eligibility

Eligibility may vary by lender, but here are the basic qualifications required by the USDA.

  • Minimum Credit Score: Varies by lender, but generally 640 or higher
  • Minimum Down Payment: None
  • Income Limits: You can’t make more than 115% of the median household income for the area; 29% debt-to-income ratio (housing costs only); 41% debt-to-income ratio (all monthly debts included)
  • Property Requirements: Must be your primary residence; Must be located in an eligible rural area

NADL First-time Home Buyer Program

The Native American Veteran Direct Loan is offered to Native American Veterans and their spouses. The program offers low interest rates and requires no down payment or private mortgage insurance.

Eligibility

Eligibility may vary by lender, but here are the basic qualifications required by the VA.

  • Minimum Credit Score: Varies by lender, but generally 620 or higher
  • Minimum Down Payment: None
  • Income Requirements: 41% debt-to-income ratio (all monthly debts included)
  • Property Requirements: Must be your primary residence; Must be located on Federal trust land
  • Other Details: You must have a valid Certificate of Eligibility from the Department of Veterans Affairs

The Good Neighbor Next Door Program

Good Neighbor Next Door is a low-cost home buying program designed for public servants, including police officers, teachers, emergency medical technicians, and other similar professionals. Qualified buyers receive 50% off HUD-owned properties in their area.

Eligibility

Eligibility may vary by lender, but here are the basic qualifications required by the U.S. Department of Housing and Urban Development.

  • Minimum Credit Score: 500 for an FHA mortgage
  • Minimum Down Payment: $100 if you qualify for an FHA mortgage
  • Income Requirements: 41% debt-to-income ratio (all monthly debts included)
  • Property Requirements: Must be your primary residence for three years; Must be a HUD-owned property
  • Other Details: You must be a qualified public servant

203k Rehab Loans

FHA 203k loans are an option if you’re looking to purchase a fixer-upper or home that requires significant repairs. These mortgages come with all the benefits of a traditional FHA loan, while also giving you the funds necessary to renovate and repair your property prior to move-in.

Unlike other first-time home buyer government programs, 203k loans can exceed the property’s value up to 10%.

Eligibility

Eligibility may vary by lender, but here are the basic qualifications required by the FHA.

  • Minimum Credit Score: Varies by lender, but usually 580 or higher
  • Minimum Down Payment: 3.5%
  • Income Requirements: 31% debt-to-income ratio (housing costs only); 43% debt-to-income ratio (all monthly debts included)
  • Property Requirements: Must be your primary residence; Must meet HUD minimum property standards
  • Other Details: Requires mortgage insurance up-front and annually

HomeReady HomePath Mortgage Program

Fannie Mae’s HomeReady mortgage program is a low-down-payment option that first-time buyers might find beneficial. It requires completion of a home buyer education course in order to qualify.

Eligibility

Eligibility may vary by lender, but here are the basic qualifications required by Fannie Mae.

  • Minimum Credit Score: 620
  • Minimum Down Payment: 3%
  • Income Requirements: You can’t make more than 100% of the area’s median income, 43% debt-to-income ratio (all monthly debts included)
  • Property Requirements: Must be your primary residence
  • Other Details: Requires completion of a homeownership education course

Energy Efficient Mortgage Program

The Energy Efficient Mortgage is an FHA loan program that helps borrowers purchase energy-efficient homes or make energy-saving upgrades to their properties. EEM loans can be used to refinance a mortgage as well.

Eligibility

Eligibility may vary by lender, but here are the basic qualifications required by the FHA.

  • Credit Score: 500
  • Minimum Down Payment: 3.5% (with a 580 credit score), 10% (with a 500 credit score)
  • Income Requirements: 45% debt-to-income ratio (all monthly debts included)
  • Property Requirements: Must be your primary residence
  • Other Details: Requires a home energy assessment

Fannie Mae & Freddie Mac Conventional Loans

Conventional loans are also an option for first-time home buyers. Though they require higher FICO credit scores than other loan programs, you need just a 3% down payment with some lenders.

Conventional loans are also an option if you’re looking to rent your property or purchase it as an investment.

Eligibility

Eligibility may vary by lender, but here are the basic qualifications required by the Fannie Mae and Freddie Mac.

  • Credit Score: 620
  • Minimum Down Payment: 3%
  • Income Requirements: 45% debt-to-income ratio (all monthly debts included)
  • Property Requirements: None

State-based First-Time Home Buyer Programs

You can also look to your state for affordable loan options and first-time home buyer down payment assistance. Many of these programs are offered through the Department of Housing and Urban Development or your state’s individual housing agency.

HUD Programs for First-time Home Buyers

The U.S. Department of Housing and Urban Development, more commonly referred to as HUD, offers federal housing programs and assistance throughout the country. The agency’s mission is to make housing safer, more affordable, and more accessible for all Americans.

HUD Dollar Home Program

HUD’s Dollar Home Program offers HUD-owned properties for just $1 each to qualifying buyers. These are homes acquired through foreclosure actions. When the FHA is unable to sell these homes after six months, they are made available through the Dollar Home program at HUD.gov.

HUD also offers other state-based programs for first-time buyers. See the full list at HUD.gov’s state directory.

6 Tips for First-time Homebuyers

If you have homeownership in your sights, it’s best to start preparing early. Doing so can help you reduce the interest rate you qualify for, as well as improve your chances of getting approved for a mortgage loan.

Specifically, you should:

  • Know your credit score. Pull your annual credit report (it’s free) and work on improving your score if it’s less-than-ideal. Remember that a higher score will mean lower interest rates (and more savings in the long run).
  • Know your debt-to-income ratio. If it’s higher than most loan programs allow, work on paying down your debts before purchasing a home. Taking on a side gig or increasing your income in other ways can help, too.
  • Save up a bigger down payment. Larger down payments can qualify you for lower interest rates and help you get a lower monthly payment. On some loan programs, they can also help you avoid costly private mortgage insurance. Our mortgage calculator can show you how your down payment amount can impact your monthly payments.
  • Shop around for your loan. Rates and fees vary greatly between lenders, so get several quotes from the best mortgage lenders before choosing a loan. Make sure to get pre-approved, too, as this can give sellers more confidence in your offers.
  • Know how your rate works. Mortgage loans come with fixed or adjustable mortgage rates. Adjustable-rate loans require little interest upfront but can increase over time. Fixed-rate loans offer a consistent rate and payment for the entirety of the loan. Make sure you weigh the pros and cons of both options before choosing your mortgage.
  • Don’t forget about closing costs. Your down payment isn’t the only thing you’ll need to save up for. Closing costs typically clock in between 2% and 5% of the total loan amount, so put these expenses on your radar as well.

Though these tips won’t guarantee loan approval, when combined with one of the federal or state assistance programs mentioned above, they will set the stage for a smoother, more affordable home purchase on the whole.: