This guide provides everything you need to know about buying your first home in a volatile market. The type of loans, programs, and grants available to first-time homebuyers plus tips to get the best deal on your house and loan.

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First-Time Homebuyer Programs by State

First-time homebuyers may be eligible to receive financial assistance to help with the down payment and closing costs on a new home purchase. Click on your state below for details about every program available.

Alabama
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
District of Columbia
Florida
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Puerto Rico/U.S. Virgin Islands
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin
Wyoming

First-Time Homebuyer Home Loan Programs

There are several types of first-time homebuyer loan programs that require little to no money down. It’s important you know which type of home loan is the best fit for your situation.

FHA Loans

FHA home loans are a type of government home loan that is guaranteed by the Federal Housing Administration. They have low down payment and credit score requirements making them a favorite with first-time homebuyers. If you have a 580 credit score, you can qualify with just a 3.5% down payment. Borrowers with a 500 credit score, you could qualify with a 10% down payment.

  • Minimum 580 credit score
  • 3.5% down payment

VA Loans

One of the greatest benefits of being a veteran of the U.S. military is the VA home loan program guaranteed by the U.S. Department of Veteran’s Affairs. Eligible veterans don’t need a down payment, and mortgage insurance is not required.

USDA Loans

The U.S. Department of Agriculture guarantees USDA loans. To be eligible, you must buy a home in an eligible rural location and meet the USDA income requirements. A USDA mortgage finances 100% of the purchase price. USDA mortgage loans are also one of the cheapest loan programs available because the USDA mortgage insurance premium is the lowest of any government home loan at just 0.35%.

  • 620 credit score
  • 100% financing

HomeReady and Home Possible Loans

Fannie Mae created the HomeReady loan program for low-income first-time homebuyers. To be eligible you must be a first-time homebuyer, meet the income limits, have a 620 credit score, and have a 3% down payment. The Home Possible Loan Program is Freddie Mac’s version of the HomeReady loan. First-time homebuyers whose income is below 100% of the area median income are eligible.

  • 3% down payment
  • PMI is not required once the LTV ratio reaches 78%

Conventional Loans

A conventional loan is not backed by the government but by private mortgage insurance (PMI) companies. They require a 620 credit score with a 5% to 20% down payment. PMI is not required if you have a 20% down payment.

  • Minimum 620 credit score
  • 5%-20% down payment

Nationwide First-Time Homebuyer Programs

There are many great first time home buyer grants and programs available. HUD offers first-time homebuyer grants and programs depending on the state you are buying the property in.

  • Good Neighbor Nextdoor – The Good Neighbor Next Door Program sells HUD homes to eligible teachers, police officers, and EMTs for 50% off the price listed on the HUD website.
  • HUD Homes – You can search for foreclosures on the Hud Homestore website. HUD homes are properties that have been foreclosed on by borrowers who had a government-backed loan.
  • Dollar Home Program – The HUD dollar home program offers homes to local governments that can be sold to low-income families and address specific community needs by offering them the opportunity to purchase qualified HUD-owned homes for $1 each.

Minimum Requirements for a Mortgage

  • Debt-to-Income – Your debt-to-income ratio is the amount of your monthly income to go towards your monthly debt obligations. The maximum DTI ratio for most types of home loans is 43%. Some government home loans, such as FHA and USDA loans, allow for higher DTI ratios as high as 50%.
  • Down Payment – Unless you qualify for a USDA or VA loan, you will need at least a 3% down payment. This money must come from your own funds and cannot be a loan. You may also have the down payment gifted to you from a friend or family member.
  • Credit – Your credit rating is the biggest factor in determining whether or not you qualify for a mortgage. Most lenders require at least a 620 credit score to be eligible, but some lenders accept a 580 credit score.
  • Income and Employment – You need to have at least two years of steady employment to qualify. If you are a commission-based employee, the average of your last two years’ tax returns will be used for your income.

How to qualify as a first-time homebuyer

Tips for First-Time Homebuyers

 

Check your credit report

Before you start the home buying process, you need to know your credit scores. Credit is the most important factor a lender looks at when determining if they will approve a mortgage. You can get a free copy of your credit report once a year at www.annualcreditreport.com.

Improve your score before applying

The higher your credit score is, the better chance you will get approved, and the lower your interest rate will be. Here are some things to make sure you’re maximizing your credit scores.

  • Dispute errors on your credit report
  • Pay down the balances on your credit cards
  • Have someone add you as an authorized user
  • Negotiate a pay for delete with any accounts in collections

Get Pre-Approved First

Before you start looking at homes with a real estate agent, you will need to get a pre-approval letter from a mortgage lender. A pre-approval means a lender has pulled your credit report, verified your income and down payment, and you meet the requirements for a loan up to a certain amount. Once you have your pre-approval letter, it’s time to start looking for homes.

Work with a Real Estate Agent

It would be best if you worked with a knowledgeable real estate agent in your area. This is especially true for first-time homebuyers. The cost for agents is already figured into the cost of a home. A Realtor’s commission is not paid out of your pocket; the seller pays the fee to their agent, as well as yours. Some people think they can cut out the realtor and negotiate a lower purchase price, but this is not true. It will often end up costing you more money if you choose to go through a real estate transaction on your own.

Where to Get Started

There are several websites out there that allow you to search for available homes, Trulia and Zillow, to name a few. You can view some of the top-rated real estate websites on Consumer Affairs has ranked the top real estate websites.

You will also need to speak with a mortgage lender to get pre-approved.

Are you ready to buy your first home?

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