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Ready to buy a home of your own? A first-time home buyer program might be just what you need to get your foot in the door.
Why bother researching special programs? Possible free money, for one thing. You might qualify for financial assistance to help with your closing costs or down payment. Also, the underwriting guidelines can be more generous than they are for other types of mortgages. For a first-time buyer, the credit score needed for a mortgage may be lower than you think.
Take a look.
A first-time home buyer program is a mortgage program designed to help remove typical obstacles to owning a home. Benefits include free homeownership education, more generous underwriting guidelines, and help with the down payment or closing costs.
Qualifying as a first-time buyer usually means that you have not owned or co-owned a home within the previous three years ending on your loan closing date. Some programs are available to co-applicants (such as a couple buying a home together) as long as one person qualifies as a first-timer.
You'll also have to meet the other requirements specified by the program or the lender. For example, you may need to satisfy the lender's minimum credit score or complete a homeownership education course.
If you're a first-time home buyer, our experts have combed through the top lenders to find the ones that work best for those who are buying their first home. Some of these lenders we've even used ourselves!
We've compiled a first-time home buying guides to help you confidently take the next step to land your best mortgage deal. Check out The Ascent's first-time home buyers guide for essential education.
Here are some of the most popular home loan programs for first-time buyers.
What it is: A mortgage loan insured by the Federal Housing Authority.
Where to find it: Most mortgage lenders offer these types of loans. To help you start your research, we analyzed dozens of lenders' products and services to create a list of the best FHA lenders.
Who it's great for: A VA loan is for eligible service members, veterans, and some spouses. If you qualify, it's a great way to buy a home with little-to-no money out of pocket.
What it is: A home loan insured by the U.S. Department of Veterans Affairs.
Where to find it: Many mortgage lenders offer these loans, but a few make it their specialty. Our list of the best VA lenders can help you get started.
Who it's great for: A USDA mortgage loan program is specifically designed for lower income families in rural communities.
What it is: A home loan insured by the U.S. Department of Agriculture.
Where to find it: We rounded up the best USDA lenders to help you start your research.
Who it's great for: Fannie Mae and Freddie Mac home loans are for any potential borrower looking for help overcoming common obstacles to owning a home.
What it is: Fannie Mae and Freddie Mac are the home mortgage companies created by the federal government to insure mortgages. You can get Fannie and Freddie loans from your lender.
Both have loans designed to help first-time home buyers become homeowners. Here are a few examples of programs they offer:
Where to find it: Most of the best mortgage lenders offer one or more Fannie or Freddie home loans.
Who it's great for: The HomePath® Ready Buyer™ program is for first-time home buyers who are willing to take a homeownership education course.
What it is: A way to get up to 3% off closing costs.
Where to find it: Eligibility hinges on language that you will add to your purchase contract. It's a good idea to work with a real estate agent who is familiar with the program. If your agent isn't, you can get guidance directly from Fannie Mae via the HomePath website.
Who it's great for: The National Homebuyers Fund is for low- and middle-income buyers who want assistance with down payments.
What it is: A nonprofit organization that provides assistance with down payments in the form of gifts and forgivable loans.
Where to find it: Contact the National Homebuyers Fund at 866-643-4968 for a list of participating lenders.
Who it's great for: The FHA's EEM (energy-efficient mortgage) is great for energy-conscious home buyers who want to invest now for long-term lower utility costs.
What it is: A loan option for borrowers who want to finance energy-efficient improvements.
Where to find it: The request for an EEM has to come from the FHA lender. When you research lenders, ask if they can do an EEM.
Who it's great for: First-time buyers who have a lower income or for repeat buyers purchasing a home in a designated distressed area.
What it is: A nonrefundable tax credit equal to a portion of the mortgage interest paid, up to $2,000. This tax credit can reduce your federal tax liability. If your tax liability is smaller than your tax credit, you won't get a refund for the difference.
Where to find it: You will request the mortgage credit certificate from your state's Housing Finance Authority via an approved lender prior to your loan closing. Ask your lender about it while you're still shopping for a mortgage.
Who it's great for: State and local first-time home buyer programs and grants are for people who need help with their down payment and closing costs.
What it is: A mortgage program designed to lower barriers to owning a home by helping with the down payment, closing costs, mortgage insurance, or other common financial obstacles.
Where to find it: Most programs are run by the city or county. Start with your state's Housing Finance Authority, or search for your state on HUD's website and then look for the section called "Homeownership Assistance." Each program has its own requirements and approved lenders.
Who it's great for: The Good Neighbor Next Door program is a home-buyer assistance program for firefighters, law enforcement officers, teachers, and emergency medical technicians buying a home in a designated revitalization area.
What it is: A way to buy a single-family home for 50% off its appraised value and only $100 down.
Where to find it: You can find eligible homes on HUD's homestore website. From any listing, you can click the Find A Broker button to find a registered broker who can submit your offer. Each property is only available for seven days.
Who it's great for: Dollar Homes are for families with low-to-moderate incomes.
What it is: A way to buy a HUD home for $1 plus closing costs.
Where to find it: This program is administered by states. Check HUD to find available properties, and then click the Find A Broker button to make an offer. Dollar Homes are rarely available.
Who it's great for: The FHA Section 203(k) loan is for buyers who want to borrow extra money for renovations or improvements.
What it is: A home loan that covers both the purchase and the property rehabilitation.
Where to find it: You can use HUD's lender search tool to find a participating lender that has done a 203(k) loan in the last 12 months. This won't show you all approved lenders, but it will tell you whether the mortgage lender you want to work with has recent experience navigating this program. Enter the name of the lender and check the 203(k) box.
Who it's great for: The Native American Direct Loan is for Native American veterans and some spouses.
What it is: A low cost mortgage loan for Native American veterans who are members of participating tribes and buying a home on federal trust land.
Where to find it: First get a Certificate of Eligibility (COE) and then contact a VA home loan representative at 1-877-827-3702.
Here are the eligibility guidelines that apply to most first-time home buyer programs. You'll need to get specific requirements from any lender you apply with.
Use a mortgage calculator to figure out how much home you can afford as you get ready to apply. Remember that property taxes, homeowners insurance, homeowners association fees, private mortgage insurance, utilities, and maintenance are all expenses of owning a home. Whether you're looking for a condo in the city or a starter home in the country, these programs can help you step into home ownership with confidence.
The Fannie Mae HomePath Ready Buyer mortgage and the Freddie Mac HomeOne mortgage are national programs for first-time home buyers.
The HomePath Ready Buyer program is for eligible buyers purchasing a HomePath home. The buyer must complete a homeownership education course and can get a closing cost credit worth up to 3% of the price paid on the home.
The Freddie Mac HomeOne mortgage program works great with various down payment assistance programs. At least one borrower on the loan must be a first-time buyer, and there are no income or geographic restrictions.
The shortest path to down-payment assistance is to work directly with the city or county agency offering the program. The agency will give you a list of approved lenders and tell you exactly how to qualify.
In most cases, to qualify for a first-time home buyer program, you cannot have owned or co-owned residential property within the past three years. Some programs are limited to low and moderate income households, and others are limited to homes in designated areas.
Each first-time home buyer program is different, but most require a minimum credit score between 580 and 640.
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