Home LoansMortgage

11 First-Time Homebuyer Programs and Loans

first time home buyer programs

Buying your first home comes with challenges, which is why there’s a wide range of first-time homebuyer programs that can help make the transition to homeownership easier.

Depending on your ability to save for a down payment, your creditworthiness, income and other factors, a program designed for first-time homebuyers may benefit you.

Here’s a list of first-time homebuyer loans and programs to help you buy your first home:

  1. Fannie Mae loans
  2. Freddie Mac loans
  3. FHA loans
  4. FHA 203(k) program
  5. VA loans
  6. USDA loans
  7. Good Neighbor Next Door
  8. HUD’s Dollar Homes
  9. HomePath ReadyBuyer
  10. Native American Direct Loans
  11. Local first-time homebuyer grants and programs

1. Fannie Mae loans

Fannie Mae offers two conventional first-time homebuyer loans that require just a 3% down payment: the HomeReady mortgage (for both first-time and repeat homebuyers) and the Standard 97% LTV (qualification is limited only to first-time homebuyers). The acronym “LTV” stands for loan-to-value ratio, which is the percentage of a home’s value that is financed through a mortgage.

To qualify, you’ll need: 

  • A credit score of 620 and 25% down or
  • A credit score of 680 to 720 and a debt-to-income ratio at or below 45%.

Who it’s best for: Both the HomeReady and Standard 97% LTV homebuying programs are ideal for first-time homebuyers who have access to at least a 3% down payment and a good credit history.

Private mortgage insurance is required when you make less than a 20% down payment. You’ll pay for PMI until your LTV ratio reaches 80% on Fannie Mae loans.

2. Freddie Mac loans

The HomeOne and Home Possible programs offered by Freddie Mac both have 3% down payment requirements. Only first-time homebuyers can qualify for a HomeOne loan, while both first-time and repeat buyers can qualify for a Home Possible mortgage.
To qualify, you’ll need: 

  • A 660 credit score or higher to put 3% down for both loans.
  • A 620 credit score and 25% down for a HomeOne mortgage.
  • Borrowers without a credit score may qualify for a Home Possible mortgage, but must make a minimum 5% down payment.

Private mortgage insurance is required when you make less than a 20% down payment. You’ll pay for PMI until your LTV ratio reaches 80% on Freddie Mac loans.
Who it’s best for: Buyers who lack credit but have adequate down payment savings can benefit from a Home Possible mortgage, while first-time buyers with a good-to-excellent credit score might find the HomeOne mortgage more suitable.

3. FHA loans

The Federal Housing Administration insures FHA loans, which have looser borrowing requirements than conventional loans, and first-time buyers can use the program to buy a one- to four-unit primary residence.
To qualify, you’ll need: 

  • A 580 credit score to put 3% down or
  • A 500 credit score and 10% down.
  • A maximum 43% debt-to-income ratio.

You’re also required to pay mortgage insurance premiums for FHA loans. There are upfront and annual fees. Annual MIP is divided by 12 and added to your monthly mortgage payment. If you make at least a 10% down payment, you’ll pay for mortgage insurance for 11 years. Otherwise, you’ll pay MIP for the life of your loan.
Who it’s best for: An FHA loan may be ideal for those with lackluster credit and limited access to down payment funds. FHA loans also are a good entry for house hacking, which allows you to buy a multi-unit home to live in one unit and rent out the others.

4. FHA 203(k) program

An FHA 203(k) loan allows you to finance both the home purchase and needed repairs/improvements, and combine both amounts into one mortgage.

To qualify, you’ll need:

  • To meet the standard borrower and property eligibility requirements for FHA loans.
  • A rehabilitation project cost of at least $5,000.
  • A loan amount that doesn’t exceed your home’s purchase price plus rehab costs or 110% of the after-repair value, whichever is less.

Who it’s best for: This loan program is ideal for homebuyers who prefer a fixer-upper but don’t already have the cash on hand to cover renovation costs.

5. VA loans

The U.S. Department of Veterans Affairs insures VA loans for eligible military service members, veterans and surviving spouses. There’s no down payment or PMI required, and borrowers can buy up to a four-unit home. VA borrowers must pay a funding fee, which can be rolled into the loan amount or waived for borrowers in certain situations. There’s also no limit to how many times you can use the VA loan benefit.

To qualify, you’ll need:

  • A minimum 620 credit score (required by VA-approved lenders).
  • A  DTI ratio of 41% or less.
  • A certificate of eligibility from the VA.

Who it’s best for: Eligible military borrowers who are first-time (or repeat) homebuyers should consider a VA loan as one of their top choices, especially if they’re facing a down payment hurdle.

6. USDA loans

The U.S. Department of Agriculture helps low- to moderate-income families buy a home by guaranteeing USDA loans. There’s no down payment required, and the USDA guarantees 90% of the loan amount to reduce the risk that mortgage lenders assume.

To qualify, you’ll need: 

  • A minimum 640 credit score.
  • To meet USDA income eligibility requirements.
  • Purchase a home in a designated rural area.

A USDA loan might make sense if you prefer to live in a rural area, have a modest income and a decent credit score.

7. Good Neighbor Next Door

Law enforcement officers, teachers, firefighters and emergency medical technicians can buy a home through Good Neighbor Next Door. Repeat and first-time homebuyers can get 50% off the list price of a home in a revitalization area designated by the Department of Housing and Urban Development (HUD).

To qualify, you’ll need to:

  • Use an FHA, VA or conventional mortgage for your home purchase, or pay in cash.
  • Sign a second mortgage and note equal to the home price discount amount, though no payments are required.
  • Live in the home for at least three years.

Who it’s best for: The program is ideal for public service professionals who want to buy a home in the community they serve at a steep discount.

8. HUD’s Dollar Homes

HUD’s Dollar Homes program is a federal-local partnership designed to help low- and middle-income consumers buy foreclosed homes owned by HUD. While you can’t directly buy a home through the program, you can get one from local governments and nonprofit organizations for $1, plus closing costs.

To qualify, you’ll need:

  • To contact your local housing finance agency to determine if this program is available in your area.
  • To buy a property that’s been on the market for at least six months and likely be a “tear-down” home.
  • To shoulder the rehabilitation costs associated with getting the home move-in ready.

Who it’s best for: The Dollar Homes program may work for you if you’d like to pay next to nothing to buy a home and take on an extensive rehab project.

9. HomePath ReadyBuyer

Fannie Mae’s HomePath ReadyBuyer program is another first-time homebuyer program that provides homebuyer education and offers up to 3% in closing cost assistance.

To qualify, you’ll need to:

  • Purchase a HomePath home, a property that’s owned by Fannie Mae.
  • Complete a homebuying education course.
  • Occupy the home within 60 days of purchase.

If you’re interested in first-time homebuyer incentives like closing cost assistance, the HomePath ReadyBuyer program might be a good fit for you.

10. Native American Direct Loans

The VA offers a homebuying program to Native American veterans, called the Native American Direct Loan (NADL). The purpose of the program is to provide financing to eligible veterans to buy, build or make improvements to a home on federal trust land. There’s no down payment required and the closing costs are low.

To qualify, you’ll need to:

  • Get a certificate of eligibility from the VA.
  • Have satisfactory credit and stable, sufficient income.
  • Live in the home as your primary residence.

Who it’s best for: Eligible veterans looking for a low-cost, government-backed homebuying program can benefit from a NADL.

11. Local first-time homebuyer programs and grants

State and local governments often provide some of the most generous financial assistance available through their own first-time homebuyer programs and grants. Assistance may come in the form of closing cost assistance or down payment assistance, or energy-efficiency grants.

A knowledgeable real estate agent may also help you find local homebuying programs. HUD is another resource that lists state-by-state program information.

Who it’s best for: Any first-time homebuyer who can meet program eligibility requirements and needs extra help with a down payment or closing costs.

 

Compare Mortgage Loan Offers