Explore your mortgage options
Adulting isn’t easy. One of the more challenging adulthood milestones to reach is buying your first house, especially trying to save up for the down payment.
But we have some encouraging news to share.
There are first-time home buyer programs for aspiring buyers in your exact situation. These programs have one explicit mission: to make homeownership a reality for buyers who need a little extra help getting their foot in the door.
With these programs, you can take the first step toward buying your own house. Read on to find out who qualifies for these programs (the answer might surprise you) and what’s available.
What Are First-Time Home Buyer Programs?
As a first-time home buyer, you’ve got plenty of options when it comes to finding assistance buying a home. These programs come in a variety of offerings, including loans, first-time home buyer grants and education courses.
They’re provided at both the federal and state government levels, which can help you access the financial or educational support you need.
In many cases, you can have your closing costs waived or reduced with these programs.
Depending on where you live, you may be able to take advantage of state-operated cost assistance programs. First responders, teachers, communities of color and active-duty or retired members of the military may be able to access additional help.
No matter where you call home in the United States, there are programs that can help you finance your first house.
What First-Time Home Buyer Programs Exist?
If you’re looking for options to assist with your home purchase, explore some of the programs that may be available to you.
These programs might include: federal programs (like government-sponsored loans or the Good Neighbor Next Door program), Fannie Mae and Freddie Mac programs, state and local programs, down payment assistance, closing cost assistance, tax credits, employer-assisted housing (EAH) programs, and more.
There are several government-sponsored programs available to help first-time home buyers achieve their goal of purchasing a home.
Mortgages backed by the government offer qualifying individuals options to purchase a home with a lower down payment than conventional mortgages.
These options include:
- VA loans: Backed by the U.S. Department of Veterans Affairs (VA), these loans are eligible to active or retired veterans and their surviving spouses. With these loans, borrowers can purchase a home without a down payment requirement.
- FHA loans: Backed by the Federal Housing Administration (FHA), these loans are geared to first-time home buyers with lower credit scores and have a down payment requirement of 3.5% or higher.
- USDA loans: Backed by the U.S. Department of Agriculture (USDA), these loans are geared toward low-income borrowers in qualifying rural areas and have no down payment requirement.
Good Neighbor Next Door program
The Department of Housing and Urban Development (HUD) offers a Good Neighbor Next Door program. This program is available for eligible law enforcement officers, teachers, firefighters or emergency medical technicians (EMTs) who can commit to making their new home their primary residence – for at least 36 months – in an approved HUD community revitalization area. In return, participants will receive a substantial 50% discount off the list price of the property.
Energy-efficient mortgage program
Eligible individuals buying or building an energy-efficient home, who’re willing to get a home energy assessment from an approved assessor, may qualify for the HUD energy-efficient mortgage program.
FHA Section 203(k) loans
Qualifying individuals who purchase a home as their primary residence and plan to occupy it within 60 days of closing may be eligible for an FHA Section 203(k) loan. These loans help low-credit borrowers purchase homes that may be seen as “fixer uppers” by providing the funds needed to purchase the home and make repairs or improvements with one lump-sum payment.
Native American Direct loans
If you’re a veteran, and you or your spouse are Native American, you may qualify for the Direct Loan (NADL) program. This program provides qualifying borrowers with a loan to buy, build or improve a home on federal trust land.
Fannie Mae and Freddie Mac programs
Both Fannie Mae and Freddie Mac have developed their own first-time home buyer programs to help make homeownership more accessible.
HomePath®Ready BuyerTM program
Fannie Mae’s HomePath®Ready BuyerTM program helps eligible borrowers purchase a previously foreclosed property with as little as 3% down and up to 3% in closing cost assistance with a HomePath® conventional mortgage.
Home Possible® mortgage program
The Freddie Mac Home Possible® mortgage program is designed to assist low-income, first-time home buyers purchase a home at an affordable price point. The down payment requirement for this program is just 3%.
Freddie Mac’s HomeOne® mortgage program is similar to both the HomePath® and Home Possible® programs with a minimal 3% down payment requirement. However, there are specific criteria that must be met in order to qualify.
State and local programs
Many states also offer their own programs at the local government level. You can find programs in your area by accessing one of the databases offered by HUD or the National Council of State Housing Agencies (NCSHA).
Down payment assistance
The down payment is likely the largest expense you’ll face when purchasing a new home. While most mortgages require you to make a down payment, there are several down payment assistance (DPA) programs that can help you lower or eliminate these costs.
Only first-time home buyers are eligible for these specific loans and grants.
DPA loans include:
- Second mortgages: These will be paid off at the end of your mortgage term.
- Deferred payment loans: These will be paid in full when you choose to sell your home or refinance your existing mortgage.
- Forgiven loans: These loans are forgiven after a set period of time, if you violate the terms of your agreement before the end of that period, sell or refinance the home.
Unlike DPA loans, you won’t need to repay any DPA grants you qualify for. Many of these programs are accessible through your state government, local nonprofit organizations or community credit unions – so you’ll need to check with them to find out what requirements they have. You can also ask your real estate agent or loan provider if they’re aware of any programs in your area.
Closing cost assistance
When buying a home, another major expense you’ll face is closing costs. With closing cost assistance grants or loans, you may be eligible to have some or all of these expenses covered. These programs work similarly to down payment programs, so consider seeking out information about these programs from your local government, nonprofit organizations, real estate agent or loan provider.
When filing your taxes, you may be eligible for a first-time home buyer’s tax credit, which would be applied to either your tax bill or directly to your refund. You’ll need to check with a tax advisor to see if there are any credits you may qualify for at the state level, as the federal tax credit of 2010 has since expired.
The good news is there are several proposed programs currently being passed through Congress. These could benefit first-time homeowners through a tax credit or deduction.
Employer-Assisted Housing (EAH) programs
As a new employment incentive, some employers are now offering employer-assisted housing (EAH) programs. EAHs can assist employees with covering their down payment or closing costs. These may be offered directly through your employer in the form of a loan or grant, or your labor union may assist you with the fees associated with buying your first home. You’ll want to talk with your current employer to see if these options exist. Or if you’re in the market for a new job, check out the career site of prospective employers to see if this benefit is available.
There are several nonprofit organizations that specialize in helping low-income families purchase their first home. You may have heard of national organizations such as Habitat for Humanity, which builds homes for low-income individuals. There’s also Neighborhood Assistance Corporation of America (NACA), which offers mortgage counseling and education. However, many of these organizations are specific to regional areas.
You can learn more about local housing programs in your area through HUD’s website.
First-time home buyer education courses
Buying a home for the first time can be overwhelming. On top of the financial stress the process may cause, it can also be difficult to know where to start. Thankfully, there are several first-time buyer education classes available online or through local community organizations that can help you get started on your path to homeownership. Most of these programs are free or low-cost.
Is a First-Time Home Buyer Program Right for Me?
Entering the housing market is exciting, but it requires discipline and a good financial head on your shoulders. The best approach to buying your first home is to take things slow. It also helps to have a clean, established credit history and a healthy credit score before you begin your search for a mortgage lender.
Do some research and explore the payment assistance programs that can help you become a homeowner, as every program has different qualifying requirements and approval processes.
Find out what you can afford.
Research what your monthly payment might look like with our intuitive mortgage calculator.
The Short Version
- First-time home buyer programs provide borrowers with benefits like grants, tax credits and federally-backed loans
- Some first-time loan options have a lower credit score requirement than conventional mortgage loans
- You can usually buy your first home with less than the standard minimum down payment, often putting just 3% – 6% down
National Association of Realtors. “Tackling Home Financing and Down Payment Misconceptions.” Retrieved December 2022 from https://www.nar.realtor/blogs/economists-outlook/tackling-home-financing-and-down-payment-misconceptions
Consumer Financial Protection Bureau. “How to decide how much to spend on your down payment.” Retrieved December 2022 from https://www.consumerfinance.gov/about-us/blog/how-decide-how-much-spend-your-down-payment/
U.S. Department of Housing and Urban Development. “ABOUT GOOD NEIGHBOR NEXT DOOR”. Retrieved December 2022 from https://www.hud.gov/program_offices/housing/sfh/reo/goodn/gnndabot
HomePath by Fannie Mae. “The better path to finding a home”. Retrieved December 2022 from https://homepath.fanniemae.com/
Freddie Mac Single-Family. “Home Possible®”. Retreived December 2022 from https://sf.freddiemac.com/working-with-us/origination-underwriting/mortgage-products/home-possible