First Time Homebuyer Programs

First-time homebuyer programs are government and state-backed deals that offer lower down payments, reduced interest rates, and sometimes straight-up cash grants to help you buy your first home. Millions of dollars go unclaimed every year because buyers don’t know these programs exist.

And here’s a trick most people miss: in many programs, “first-time buyer” means you haven’t owned a home in the last three years. Sold your house in 2023? You might qualify again in 2026.

Federal Programs

FHA Loans

The Federal Housing Administration insures loans with as little as 3.5% down and credit scores as low as 580. On a $300,000 home, that’s $10,500 down instead of $60,000 for a conventional 20% down payment. The catch? You’ll pay mortgage insurance premiums (MIP) — 1.75% upfront plus 0.55% annually on most loans. That adds roughly $137/month on a $300,000 loan.

FHA isn’t exclusively for first-time buyers, but it’s where most of them end up. Income limits don’t apply, though loan limits do — $541,287 in most counties for 2026, higher in expensive markets.

USDA Loans

Zero down payment. Really. If you’re buying in a rural or suburban area (which covers about 97% of the U.S. land mass), and your household income is under 115% of the area median, USDA loans offer 0% down with competitive rates. The guarantee fee is lower than FHA’s MIP too — 1% upfront and 0.35% annually.

The income limit for a family of four in most areas is around $110,650. Check USDA’s eligibility map — many suburbs that don’t feel “rural” still qualify.

VA Loans

For veterans, active military, and surviving spouses: 0% down, no monthly mortgage insurance, and typically the lowest rates available. VA loans are the single best mortgage product in the country. If you’re eligible, use it. The funding fee (1.25%–3.3%) can be rolled into the loan.

Conventional 97

Fannie Mae and Freddie Mac offer conventional loans with just 3% down for first-time buyers. On a $300,000 home, that’s $9,000 down. You’ll pay PMI until you hit 20% equity, but PMI on conventional loans drops off automatically — unlike FHA’s permanent MIP on most loans originated after 2013.

Down Payment Assistance (DPA)

Every state runs down payment assistance programs, and many cities and counties have their own on top of that. These come in several flavors:

• Grants: Free money you never repay. Typical amounts range from $5,000–$25,000
• Forgivable loans: You owe nothing if you stay in the home 5–10 years. Move early and you repay a prorated amount
• Deferred loans: No payments until you sell, refinance, or pay off the first mortgage
• Matched savings: Programs like Individual Development Accounts (IDAs) match your savings 2:1 or 3:1

Income limits apply to almost all DPA programs. Most cap household income at 80%–120% of the area median income (AMI). In a metro area where AMI is $85,000, you’d typically need to earn under $102,000.

State Program Examples

These programs change annually. Check your state’s housing finance agency website for current offerings and application deadlines.

Tax Credits for First-Time Buyers

Beyond down payment help, some states offer Mortgage Credit Certificates (MCCs). An MCC lets you claim a federal tax credit of 20%–25% of your annual mortgage interest. On a $300,000 loan at 7%, that’s roughly $4,200–$5,250 per year directly off your tax bill — not a deduction, a credit. That’s dollar-for-dollar savings.

MCCs last the life of the loan, so the benefit compounds year after year. Income and purchase price limits apply, and you must apply through a participating lender before closing. Not every state offers them, but those that do provide a benefit most buyers never hear about.

How to Stack Programs

The real power move is combining programs. Example: pair an FHA loan (3.5% down) with a state DPA grant that covers your down payment and closing costs. You could potentially buy a home with $0–$2,000 out of pocket. This isn’t theoretical — thousands of buyers do it every year.

The key is finding a lender who knows your state’s programs inside out. Not every lender participates in every program. Ask specifically: “Do you originate loans through [state housing agency] programs?”

Frequently Asked Questions

Do I really need 20% down?

Absolutely not. That’s the most persistent myth in real estate. The median first-time buyer puts down 6%–8%. With FHA (3.5%), Conventional 97 (3%), VA (0%), or USDA (0%), you have options far below 20%. The only advantage of 20% down is avoiding mortgage insurance. Run your specific scenario through our affordability calculator to see what different down payment amounts mean for your monthly payment.

How do I find programs in my area?

Start with your state’s housing finance agency — every state has one. Then check HUD’s local homebuying programs list. Your lender and buyer’s agent should also know what’s available locally. Don’t rely on just one source. Use our mortgage calculator to compare monthly payments with and without assistance.