First time home buyer programs and loans: a complete guide
First time home buyer programs can make the jump from renting to owning far more manageable. Down payment assistance, grants and low-interest loans cut the upfront cost of a house, condo or townhome, and many programs include education that walks you through the process.
This guide explains the benefits of first-time buyer programs, the most common types of help, typical eligibility rules, how to apply, and how to compare your options so you choose the program that fits your situation.
Who counts as a first-time home buyer?
For most programs, a first-time buyer is someone who has not owned a home in the past three years, so many past owners qualify again.
That definition surprises a lot of people. If you sold a home several years ago and have rented since, you may still be eligible for first-time buyer assistance. Rules vary by program, so check each one’s definition before you rule yourself out.
First-time home buyer programs exist at the federal, state and local level, and through nonprofits and lenders. Some offer cash toward a down payment or closing costs, some offer grants that never need to be repaid, and others offer loans with low down payments or reduced interest rates.
Because programs differ so much from state to state and city to city, the best first step is to list what is available where you want to buy, then compare the terms side by side.
- Larger down payment
- Market interest rate
- Navigate the process alone
- Down payment assistance
- Possible lower rate
- Education and support
Also helpful
Listed and sold 25 properties and personally bought and sold four fix-and-flip properties, all generated from probate leads.
Carolynn Castillo
Realtor & Broker · eXp Realty
Benefits of first-time home buyer programs
Owning a home is a major milestone. First-time buyer programs help in several ways, and the right mix can save thousands of dollars upfront and over the life of the loan.
Lower upfront cost
Down payment and closing cost help reduces the cash you need to get the keys.
Lower interest
Some programs offer reduced rates, which lowers your monthly payment and total interest.
Education
Homebuyer courses explain budgets, credit, mortgages and closing so nothing catches you off guard.
Support
Housing counselors and participating lenders guide you through applications and paperwork.
More choices
With help on the down payment, more homes, condos and townhomes may fit your budget.
Faster ownership
Instead of saving for years, assistance can move your purchase timeline forward.
Every program has trade-offs, such as residency requirements or repayment if you sell early. Read the terms so the benefits stay benefits.
Shannon Thompson
Investor · Joe Homebuyer of Atlanta
Watch Shannon Thompson share their experience using ForeclosuresDaily.com.
Types of first-time home buyer programs and loans
Most assistance falls into three groups. Many buyers combine more than one, such as a low-down-payment loan with a down payment grant.
Down payment and closing cost assistance
These programs cover part of your down payment or closing costs. Some are forgivable loans that disappear if you stay in the home for a set time; others are repaid when you sell or refinance.
- Forgivable loans
- Deferred loans
Read the repayment terms carefully before you accept.
Grants
Grants do not need to be repaid, which makes them especially attractive. They are often offered by state housing agencies, cities and nonprofits, and may have income or location limits.
- State agencies
- Nonprofits
Funds can run out, so apply early in the program year.
Low down payment and low-rate loans
Government-backed loans such as FHA loans allow small down payments, VA loans can require no down payment for eligible veterans, and USDA loans serve eligible rural areas. Some conventional programs also offer low down payments.
- FHA
- VA
- USDA
Compare the total cost, including mortgage insurance, not just the rate.
Common misconceptions
Two myths keep many people from applying. First, these programs are not only for low-income buyers or people with poor credit; many are open to a wide range of incomes. Second, the paperwork is manageable, and many programs offer help with applications.
Dispel the myths, then explore every option you might qualify for.
Typical requirements to expect
- 1No home owned in the past three years
- 2Income at or below a program limit
- 3A minimum credit score
- 4A homebuyer education course
- 5The home will be your primary residence
- 6Property type or location limits
Andrew Litchfield
Webinar host
Andrew Litchfield hosted a ForeclosuresDaily.com monthly webinar for real estate investors.
How much do you need for a down payment?
The down payment is often the biggest hurdle for first-time buyers. Low-down-payment loans and assistance programs can shrink it dramatically. The example below shows simple arithmetic on a hypothetical home price so you can see the difference.
Down payment = Home price × Down payment %
Then subtract any grant or assistance you receive to find the cash you need.
Plus closing costs, unless a program helps with those too.
Look at the full cost
A lower down payment usually means a larger loan and, often, mortgage insurance. Compare the monthly payment and the total cost over time, not just the cash due at closing.
Keep reserves
Lenders and programs may want to see savings left after closing. A cushion for repairs and emergencies also protects you in your first year as an owner.
Anthony Coletti
Real estate investor
Watch Anthony Coletti share their experience using ForeclosuresDaily.com.
Nancy Wallace-Laab
Investor · nearly 20 years
Nancy focuses on the best outcome for both the seller and the investor, drawing on nearly 20 years of real estate investing experience.
Phillip Warrick
Full-time investor since 2003
Full-time real estate investor since 2003, with over 20 years of experience.
How to apply for first-time home buyer programs
- 1
Research and compare
Look at federal, state and local government programs, plus nonprofits and housing counseling agencies. Online tools can help you compare options.
- 2
Gather your documents
Expect to provide proof of income, identification and tax returns. Some programs also require a homebuyer education certificate.
- 3
Apply and stay organized
Complete the loan application, submit the paperwork and respond quickly to lender requests. Some programs also require an inspection or appraisal.
What to weigh side by side
- Type and amount of assistance
- Interest rate and fees
- Repayment or forgiveness terms
- Income and credit requirements
- Property type or location limits
- How long you must live in the home
Housing counselors approved by the U.S. Department of Housing and Urban Development can help you compare options. Start at HUD.gov.
Jeremy Resmer
Webinar host
Jeremy Resmer hosted a ForeclosuresDaily.com monthly webinar for real estate investors.
Tips for navigating the home buying process
Programs make buying more affordable, but the process still has many steps. A little preparation goes a long way, and asking questions is always better than guessing.
Work with experienced pros
An agent who regularly helps first-time buyers can explain each step, from offer to closing. A lender who knows local assistance programs can match you with the right one.
Get pre-approved early
A mortgage pre-approval sets a realistic budget and shows sellers you are serious, which can give you an edge when you make an offer.
- 1Set a budgetKnow your comfortable payment
- 2Check your creditFix errors before you apply
- 3Find programsFederal, state and local
- 4Get pre-approvedShow sellers you are ready
- 5Shop and offerCompare homes and terms
- 6Inspect and closeVerify condition first
Questions to ask before you commit
Clear answers now prevent surprises later:
Look beyond the listings. Competition for listed starter homes can be intense. Some buyers also explore off-market homes, properties sold directly by owners who need to move quickly because of a financial change or a death in the family.
ForeclosuresDaily.com hosts monthly webinars with agents and investors such as Carolynn Castillo, who share practical advice on buying and selling homes.
Antonio Stringfield
Probate investor · Los Angeles
Watch Antonio Stringfield share their experience using ForeclosuresDaily.com.
First-time home buyer programs FAQ
Short answers to the most common questions. Tap a question to open it.
QWho qualifies as a first-time home buyer?
Usually anyone who has not owned a home in the past three years, though each program sets its own definition.
QAre these programs only for low-income buyers?No
No. Many are open to a broad range of incomes and credit scores, though some do have limits.
QDo grants have to be repaid?No
Generally no. Grants are gifts. Down payment assistance loans, however, may need to be repaid or forgiven over time.
QCan I combine programs?Yes
Often yes. Many buyers pair a low-down-payment loan with a state or local grant. Check each program’s rules.
QDo I need a homebuyer education course?
Many programs require one. They are usually short, often online, and cover budgeting, mortgages and the buying process.
QWhere do I find programs?
Your state housing finance agency, city or county housing office, HUD-approved housing counselors, nonprofits and participating lenders.
Interested in off-market homes? Tell us the area you want to buy in and we will explain how off-market leads work.
Take the first step toward owning your home
First time home buyer programs and loans provide financial help, education and support so you can buy with confidence. Understand the benefits, the types of help, the eligibility rules and the application process, then compare programs to find the best fit.
Research the resources available, ask professionals for guidance and keep your paperwork organized. With the right information and support, you can open the door to your first home and start building a brighter future.