If you’ve never owned a home before, or if you haven’t owned property in the past three years, you could qualify as a first-time homebuyer. Many lenders offer special programs or home loans geared toward helping people buy property — provided they meet a lender’s first-time homebuyer qualifications.

Eligibility and program benefits vary based on the mortgage lender and type of home loan. If you qualify, you could receive assistance with things like your down payment or closing fees. Some lenders also have more relaxed requirements, such as a lower credit score or income, for first-time buyers.

If you’re hoping to buy your first home ever — or your first home in a while, here’s some loan information that could help.

You should always take time to shop around for a mortgage. Credible makes it easy to compare mortgage rates from multiple lenders.

What is a first-time homebuyer?

The phrase “first-time homebuyer” is a bit misleading as it doesn’t necessarily mean you’ve never owned property before. In fact, you could qualify for a first-time homebuyer program even if you did own a home previously — as long as it was more than three years ago.

Even if this is, technically, your first time buying property, it doesn’t mean you’re automatically eligible for one of these loan programs, though. Common first-time homebuyer qualifications include:

  • Down payment (3% to 20%)
  • Minimum credit score (e.g., 500 for FHA loans or 620 for conventional mortgage loans)
  • Proof of income (based on the loan amount)
  • Two or more years of employment history
  • Maximum debt-to-income (DTI) ratio (usually no more than 43%)

Some loan programs have additional eligibility requirements or are only available in certain states, so be sure to check what’s available in your area before applying.

Types of first-time homebuyer programs

Mortgage lenders don’t always openly advertise their first-time homebuyer programs, but that doesn’t mean they don’t exist. In fact, you have a lot of options to choose from if you’re looking for help financing your first property. Down payment grants, help with closing fees, low-interest home loans, tax credits and other assistance can be available.

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Being informed about the possibilities can help you avoid some of the common mistakes many first-time homebuyers make. It can also ensure you get the most benefits based on your circumstances.

With that in mind, here are the best first-time homebuyer programs, their benefits, and what you need to qualify.

Federal loan programs for first-time buyers

The federal government backs certain home loans for first-time buyers, as well as for people who aren’t otherwise eligible for a mortgage. Common government-backed programs include:

  • FHA loans: Insured by the Federal Housing Administration, FHA loans typically have lower qualification requirements than conventional mortgage loans. This makes them easier to get for first-time homebuyers or people with limited or poor credit history.
  • USDA loans: These federally-backed home loans are ideal for anyone interested in buying property in specific rural areas. There’s no minimum credit score requirement, but they do come with certain income and location requirements. These requirements typically depend on the county, household size and home loan amount.
  • VA loans: Backed by the U.S. Department of Veterans Affairs, a VA loan is a mortgage loan offered by a VA-approved private lender. These loans often come with lower interest rates than conventional mortgages and are exempt from private mortgage insurance (PMI). They also rarely require a down payment. To qualify, you must be on active duty, a veteran or a surviving spouse.

Down payment assistance programs

Down payment assistance programs (DPAs) include loans and grants that can help with upfront and closing costs. They’re primarily geared toward first-time homebuyers.

You’ll find thousands of DPAs throughout the country, most of which are run by state or not-for-profit organizations. Some private lenders also offer them, though.

Eligibility for a DPA varies by state. In most cases, you’ll need to be a first-time homebuyer, meet certain income requirements, and use the property as your primary residence. You may also need to go through a certain type of mortgage lender or home loan program. Many programs also require a minimum credit score of 620.

DPAs come in several forms, including:

  • Cash grants
  • Forgivable or deferred loans
  • Lender credits
  • Low-interest loans

State programs for first-time homebuyers

As a first-time homebuyer, you have access to many state-wide programs, resources and incentives. This includes state housing finance agency programs like:

  • California Housing Finance Agency (CalHFA): This agency mainly helps first-time buyers in California with their down payment and closing costs.
  • North Carolina Housing Finance Agency (NCHFA): The NCHFA offers down payment assistance, fixed-rate mortgage loans and tax credits to first-time buyers in North Carolina.

The National Council of State Housing Agencies has a list of every state’s agency, as well as its first-time homebuyer qualifications and benefits. The most common benefits include tax credits, down payment and closing fee assistance, and low-interest mortgage loans. Keep in mind that each agency has its own requirements for income, credit score, DTI and other criteria.

If you need additional financial assistance or are looking for help navigating the homebuying process, check with your state’s Housing and Urban Development department for resources.

Charitable programs

Thousands of charitable programs exist to help people buy their first home. For example, the Neighborhood Assistance Corporation of America (NACA) helps low- and moderate-income individuals who don’t currently own their home buy property in rural or urban areas. To be eligible, you must plan to use the home as your primary residence.

Another charitable program is the Piedmont Housing Alliance. This nonprofit organization is dedicated to making housing more affordable through down payment and closing cost assistance, as well as financial education.

For more nonprofit homeowner assistance programs, check out the National Tax Lien Association.

Educational programs

Certain educational programs, such as the Fannie Mae HomeView course, can help first-time homebuyers understand the process of buying and owning real estate. These programs can also teach you about the different types of loan programs, so you can determine the best one for you.

In addition to being a free course, another benefit of Fannie Mae HomeView, specifically, is that it can help reduce the closing costs on certain HomePath properties by as much as 3%.

If you’re going through a financial assistance program or getting a first-time home loan, you may be required to take a specific homebuyer course first. 

By Terri Williams on behalf of Credible
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