The biggest obstacle for most first-time buyers isn't finding the right home—it's finding the money. Between down payments, closing costs, and the reserves lenders want to see, you might need $30,000 or more to buy a modest home. That's a daunting number when you're also paying rent, student loans, and trying to build an emergency fund.
The good news: dozens of programs exist specifically to help first-time buyers bridge these gaps. From federal loan programs with minimal down payments to state grants that don't require repayment, assistance is available if you know where to look. Many buyers leave thousands of dollars on the table simply because they didn't know these programs existed.
Who Qualifies as a First-Time Buyer?
The definition of "first-time buyer" is more generous than you might expect. For most programs, you qualify if you haven't owned a home in the past three years. Sold your condo in 2020 and have been renting since? You're a first-time buyer again. Never had your name on a deed, even if you lived in a home your spouse owned? You qualify.
Some programs extend first-time buyer status even further. You may qualify if you've only owned a home that wasn't permanently attached to a foundation (manufactured housing in some cases), if you're a single parent who only owned with a former spouse, or if you're a displaced homemaker who only owned with a spouse.
Income limits typically apply. Most programs target low-to-moderate income buyers—often households earning up to 80% or 120% of the area median income. These limits vary dramatically by location: qualifying income in San Francisco might be double what it is in rural Kansas.
Federal Loan Programs
The federal government offers several loan programs that make homeownership more accessible, even for buyers with limited savings or imperfect credit.
FHA loans are the go-to for many first-time buyers. With credit scores as low as 580, you can put down just 3.5%. Scores between 500-579 require 10% down but are still possible when conventional lenders say no. FHA loans are assumable and accept gift funds for the entire down payment. The trade-off is mandatory mortgage insurance for the life of most loans.
VA loans offer unmatched terms for eligible veterans and service members: zero down payment, no mortgage insurance, and competitive rates. If you've served, this should be your first call. The VA also limits what fees lenders can charge, reducing closing costs.
USDA loans provide zero-down financing for moderate-income buyers in eligible rural areas—and "rural" includes many suburbs and small towns. Income limits apply, but they're often higher than expected. Check the USDA eligibility map; you might be surprised what qualifies.
Conventional 97 loans allow just 3% down for first-time buyers with good credit. While you'll pay private mortgage insurance with less than 20% down, it's cancelable once you reach sufficient equity—unlike FHA insurance.
Down Payment Assistance Programs
Down payment assistance (DPA) programs help buyers cover upfront costs through grants, forgivable loans, or low-interest second mortgages. These programs are typically run by state housing agencies, local governments, or nonprofits.
Grants are free money that doesn't need to be repaid. They're the most desirable form of assistance but also the most competitive. Some grants cover down payment only; others include closing costs. Amounts typically range from $5,000 to $15,000, though some programs offer more.
Forgivable loans (also called silent seconds) technically must be repaid, but the balance is forgiven if you stay in the home for a specified period—often 5-10 years. Move or sell before then, and you'll owe some or all of the money back. For buyers who plan to stay long-term, these function essentially as grants.
Deferred loans don't require payments until you sell, refinance, or move out. They don't reduce your cash needs at closing, but they give you time to build equity before repaying. Interest rates are usually low or zero.
Matched savings programs (Individual Development Accounts) match your savings at rates of 2:1 or even 4:1. Save $2,000 and get $4,000-$8,000 in matching funds. These require advance planning but offer tremendous returns on your savings effort.
State and Local Programs
Every state has a housing finance agency (HFA) that administers first-time buyer programs. These typically combine below-market interest rates, down payment assistance, and homebuyer education into comprehensive packages.
State HFA loans often feature rates slightly below market, reducing your monthly payment and the total interest paid over the life of the loan. They may bundle with DPA programs—some states offer combined packages covering both down payment and closing costs.
Mortgage Credit Certificates (MCCs) provide ongoing tax benefits rather than upfront cash. An MCC lets you claim a federal tax credit for a portion of your annual mortgage interest—typically 20-30%. On a $200,000 loan at 7%, that could mean $2,800-$4,200 in annual tax credits. Unlike deductions, credits reduce your tax bill dollar-for-dollar.
Local programs from cities and counties add another layer of assistance. Some target specific neighborhoods the city wants to revitalize. Others focus on essential workers like teachers, firefighters, and healthcare employees. Your real estate agent or lender may know about local programs; you can also search your city or county's housing department website.
Finding Programs in Your Area
Start with your state housing finance agency—search "[your state] housing finance agency" to find their website. Most list available programs with eligibility requirements and application instructions. Many require working with approved lenders, so check their lender lists.
Ask your mortgage lender about programs they work with. Good loan officers know the DPA programs in their area and can layer them with your primary mortgage. Some programs are lender-specific, so shopping multiple lenders can uncover different options.
HUD maintains a database of homebuyer programs searchable by state at hud.gov. Nonprofit housing counseling agencies (also listed on HUD's site) can help you navigate options and may know about programs not widely advertised.
Apply early. Many programs have limited funding and work on a first-come, first-served basis. Some require completing homebuyer education courses before approval—these are worthwhile anyway and often free or low-cost.
Browse programs available in your state through our state guides, or start your homebuying journey with our complete first-time buyer guide.