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Guide to First-Time Homebuyer Programs

First-time homebuyer program qualifications don’t always require 20% down. Understanding these first-time homebuyer programs could help you buy a house sooner.

March 10, 2022

The process of buying a house is complicated, especially for first-time buyers. Between saving 20% for a down payment and wading through contracts, the many steps to buying a house are enough to keep a person from starting the process. 

However, being a first-time homebuyer has benefits. You may qualify for special federal first-time homebuyer programs or a special mortgage from your local lender. These first-time homebuyer loans may include closing cost assistance, lower interest rates or waiving private mortgage insurance, or PMI (meaning you can put less than 20% down without incurring an additional charge on your monthly payment).  

This brief guide to first-time homebuyer programs will cover: 

  • Federal first-time homebuyer programs

  • Local first-time homebuyer programs

  • first-time homebuyer qualifications

Keep reading and you may discover buying a home is more attainable than you think. 

Federal first-time homebuyer programs

Depending on where you live, what home you want to buy and your qualifications, there are many opportunities to purchase a home using a federal first-time homebuyer program. 

Federal home buying programs offer more generous interest rates, credit score qualifications and lower down payments to qualifying buyers. Banks are willing to approve the terms because the mortgages are backed by federal organizations, even if they don’t fit the mold of a conventional mortgage.  

FHA loan

FHA (Federal Housing Administration) loans are offered by the U.S. Department of Housing and Urban Development. Because the federal government backs these mortgages, FHA loans can offer favorable terms to qualifying buyers. 


  • Lower down payments (as low as 3.5%), without PMI

  • Forgiving credit qualifications 


VA loan

If you’re an active service member or veteran, you may qualify for a VA loan from the Veterans Benefits Administration. 


  • No down payment required by the VA

  • Low-interest rates

  • Subsidized closing costs

  • No PMI

  • VA loans can be used throughout a veteran’s lifetime, and not just a first-time home purchase 


  • Requires a Certificate of Eligibility from the VA, which verifies service and duty status

  • Proof of employment and income

  • Credit check

USDA loan

The U.S. Department of Agriculture offers benefits for first-time homebuyers in rural areas. 


  • Minimum to no down payment required

  • Lower mortgage insurance rates

  • Forgiving credit qualifications


  • The property must be considered “rural” under the USDA’s guidelines

  • The home is your primary residence

  • Proof of income and employment

  • Credit score of at least 640, with no late or missed payments in the past 12 months

  • Household income must be no more than 115% of the area’s median income

Fannie Mae & Freddie Mac

While the names sound like distant relatives, Fannie Mae and Freddie Mac are large companies that guarantee most of the mortgages in the U.S. These large companies operated outside of the government until 2008 and the financial crisis. That’s when the government took operational control of them. Neither a federal institution nor a private company, Fannie Mae and Freddie Mac are classified as government-sponsored enterprises (GSEs). 

With this special status, both companies offer several first-time homebuyer loans with favorable terms, including: 

  • Fannie Mae HomePath (for foreclosed homes)

  • Fannie Mae HomeReady (first-time homebuyer specific)

  • Freddie Mac HomeOne (first-time homebuyer specific)

  • Freddie Mac Home Possible (low-income homebuyer program)


  • Down payments as low as 3%

  • Flexible financing for most programs (down payment could come from gifts, family assistance, employer assistance or even sweat equity)

  • Opportunity to use a co-borrower for some of the programs


  • Credit score of 620 or more

  • Proof of employment and income

  • For some programs, your income may not be more than 80% of the median income in your area

Local programs

The first-time homebuyer program you’re seeking might be just outside your door. As a first-time homebuyer, your city or state may have down payment assistance programs or grants that you qualify for. Additionally, when you’re exploring financing a home, you may encounter specialty programs at your local bank branch. Don’t be afraid to ask about deals and discounts that apply to first-time buyers — you may be surprised by the financial assistance you receive. 

Down payment assistance and loans by state

First-time buyer programs can vary state by state, city by city and even neighborhood by neighborhood. Depending on where you choose to buy, you could receive closing cost assistance, more favorable interest rates or even federal tax credit. 

As you begin the process of buying a house, it can be helpful to work with a local real estate agent who’s familiar with the area you want to buy in, as they may be able to direct you toward a state or local first-time homebuyer program.

For example, in Pennsylvania, the Pennsylvania Housing Finance Agency (PHFA) offers programs for first-time homebuyers. In the case of PHFA, buyers work with a traditional bank to secure a mortgage and can take advantage of:

  • Financial assistance with down payment and closing costs

  • Lower down payment (as little as 3% in some cases)

  • Tax credits

  • Employer assistance (if applicable)

Down payment assistance and first-time homebuyer loans vary by location, so consider working with a mortgage professional in your area to understand the qualifications. 

Programs offered by bank branches

If you choose to secure a mortgage from a privately-owned bank instead of through a federal program, you may still have the opportunity to qualify for a first-time homebuyers program. As you begin the process, ask your lender if they have a first-time homebuyer loan and if you are eligible. 

For example, U.S. Bank offers the American Dream program, which assists low-income buyers in purchasing properties in lower-income areas. While the specifics vary from bank to bank, it’s worth asking lenders, as you could end up making a lower down payment or even saving money on closing costs. 

Purchasing homes comes with a hefty price tag, so any slight discount or credit could help in the long run.  

First-time homebuyer qualifications

Here’s the trick to some first-time homebuyer programs — you don’t need to be buying your first home to qualify for them. When reviewing each program, look at how the organization defines first-time homebuyer qualifications. 

Some banks and federal programs categorize buyers as “first-time” buyers if they haven’t purchased a home in the past three years. Others may have different time parameters or only honor true first-time homebuyers. Read the fine print as you research first-time homebuyer programs that you might qualify for, and consider consulting with a real estate agent who has expertise in first-time purchases. 

Dreaming of your first home? Time to tackle debt

If credit card debt keeps you from saving a down payment, consider Tally​†. Tally is a credit card debt repayment tool that organizes your credit card debt all in one place, helping you pay down debt quickly and efficiently with a lower-interest line of credit. With the help of Tally, buying your first home might not be so far away. 

​​†To get the benefits of a Tally line of credit, you must qualify for and accept a Tally line of credit. The APR (which is the same as your interest rate) will be between 7.90% and 29.99% per year and will be based on your credit history. The APR will vary with the market based on the Prime Rate. Annual fees range from $0 - $300.