Getting the right mortgage for a first time home buyer first time home buyer programs

First-Time Home Buyers

  • FHA loan – A loan insured by the Federal Housing Administration that’s ideal for borrowers with lower credit scores or little money saved up for a down payment.

  • USDA loan – A loan program guaranteed by the U.S. Department of Agriculture for lower-income borrowers in eligible rural areas.

  • VA loan – A loan backed by the U.S. Department of Veteran Affairs for military personnel, veterans and their families. VA loans have minimal closing costs, competitive rates and no down payment requirement, however, a funding fee is required for some borrowers.

  • Good Neighbor Next Door – A HUD program that provides housing aid — a discount of 50 percent on a home’s list price in revitalization areas — for law enforcement officers, firefighters, emergency medical technicians and pre-kindergarten through 12th-grade teachers.

  • Fannie Mae or Freddie Mac – Loans backed by Fannie Mae or Freddie Mac require 3 percent down for conventional mortgages making them ideal for first-time buyers who have strong credit but little savings for a down payment.

  • HomePath ReadyBuyer Program – A program that provides 3 percent in closing-cost assistance to first-time buyers who complete an educational course and purchase a foreclosed Fannie Mae property.

  • Energy-efficient mortgage – An EEM is backed by FHA or VA loan programs and allows borrowers to combine the cost of energy-efficient upgrades onto a primary loan upfront — all without a larger down payment.

  • FHA Section 203(k) – An FHA-backed loan that lets you borrow the funds needed to pay for home improvement projects and roll the costs into one loan with your primary mortgage.

  • Local first-time homebuyer programs and grants – Many states and cities offer first-time buyer programs and grants for down payment or closing cost assistance. These programs typically come with income restrictions and have to be repaid when you sell the home.

  • Native American Direct Loan – Backed by the VA, this program provides direct home loans to eligible Native American veterans to buy, renovate or build homes on federal trust land.

FHA Loans

FHA loan


  • Require lower credit score than conventional mortgages
  • Low down payment requirement of 3.5 percent


  • Requires upfront and annual mortgage insurance premiums
  • Overall borrowing costs tend to be higher

Best for: Buyers with less-than-pristine credit and those who don’t have a large down payment.

If you’re not sitting on a pile of down payment cash and you have a spotty credit record, there’s a loan for that. Insured by the Federal Housing Administration, FHA loans typically come with smaller down payments and lower credit score requirements than most conventional loans. First-time homebuyers can buy a home with a minimum credit score of 580 and as little as 3.5 percent down, or a credit score of 500 to 579 with at least 10 percent down.

FHA loans have one big catch called mortgage insurance. You’ll pay an upfront premium and annual premiums, driving up your overall borrowing costs. Unlike homeowners insurance, this coverage doesn’t protect you; it protects the lender in case you default on the loan. It’s the price borrowers pay when they have less skin in the game.

Learn more about finding the best FHA lender for you.

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