First-Time Home Buyer Programs: Help With Your Down Payment and More
First-time buyers can get help from state and local down payment assistance, low-down-payment loans, tax credits and special programs for some professions. Here's who counts as a first-time buyer, the main types of help, the catches to watch for and how to find programs where you live.
By Pond.com editors Updated 3 min read
Quick answer
- You may count as a first-time buyer even if you've owned before, as long as you haven't owned a main home in the last three years.
- State housing finance agencies offer down payment and closing cost help, often as grants or forgivable loans.
- Low-down-payment loans include FHA (3.5%), conventional programs (3%), VA and USDA (0%).
- Some help must be repaid if you sell or refinance within a set number of years, so read the terms.
- Many programs require a short homebuyer education course and have income and price limits.
Saving enough for a down payment and closing costs is often the biggest hurdle to buying a first home. Many buyers don't realize how much help is available from state and local programs, lenders and the federal government.
This article is general information, not financial advice. Programs, limits and funding change often, so check current details with each program.
Who counts as a first-time buyer?
Most programs use the federal definition: you haven't owned a main home in the past three years. So you may qualify even if you've owned before. Some programs also include single parents who only owned with a former spouse, and some don't require first-time status at all.
Down payment assistance
Every state has a housing finance agency that helps first-time and moderate-income buyers, and many cities and counties have their own programs. Help usually comes as:
| Type | How it works |
|---|---|
| Grant | Free money that doesn't have to be repaid |
| Forgivable loan | A second loan that's written off if you stay in the home for a set number of years |
| Deferred loan | No payments; repaid when you sell, refinance or pay off the mortgage |
| Low-interest second loan | Repaid in monthly payments alongside your mortgage |
| Below-market first mortgage | A lower rate on the main loan, sometimes combined with the help above |
Low-down-payment loans
- Conventional 3% down programs, including Fannie Mae's HomeReady and Freddie Mac's Home Possible, for buyers earning up to 80% of the area's median income, plus other 3% down loans for first-time buyers.
- FHA loans: 3.5% down with a credit score of 580 or higher.
- VA loans: no down payment for eligible service members and veterans.
- USDA loans: no down payment in eligible rural and suburban areas.
See types of mortgages for how they compare.
Tax credits and other help
- Mortgage credit certificates: offered by some state and local agencies, they give you a federal tax credit for part of the mortgage interest you pay each year.
- Good Neighbor Next Door: a HUD program offering 50% off the list price of certain HUD-owned homes in revitalization areas to law enforcement officers, pre-K to 12th grade teachers, firefighters and emergency medical technicians, who must live in the home for three years.
- Employer programs: some employers, hospitals and universities help staff buy homes nearby.
- IRA withdrawals: up to $10,000 for a first home without the 10% early withdrawal penalty.
Catches to watch for
- Repayment if you move: forgivable or deferred loans may have to be repaid if you sell or refinance early.
- Income and price limits that can rule out some homes.
- Approved lenders only, which may not offer the best rate. Compare the full cost.
- Longer closings while the assistance is approved.
How to find programs
- Search for your state's housing finance agency and look at its homebuyer programs and approved lenders.
- Check your city or county housing department.
- Talk to a HUD-approved housing counselor, who can help for free or at low cost.
- Ask lenders which programs they work with.
- Take a homebuyer education course, often required and sometimes free.
Common questions
Many do. State and local assistance is often limited to buyers earning up to a certain percentage of the area's median income, and the home's price may be capped too. Limits vary by county, so check the program's current figures for your area.
Usually only with lenders approved by the program. Your state housing finance agency lists participating lenders on its website. Ask early, since applying for assistance can add time to your closing.
You can withdraw up to $10,000 over your lifetime from an IRA for a first home without the usual 10% early withdrawal penalty. With a traditional IRA, you'll still owe income tax on the withdrawal, and money you take out stops growing for retirement.