11 First-Time Homebuyer Programs and Grants

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Buying a house for the first time can be intimidating if you’re unfamiliar with the process. Fortunately, there are several first-time homebuyer programs and grants available to help you reach your homeownership goal with more ease and less money out of your own pocket.

We’ve compiled a list of 11 first-time homebuyer programs that should be on your radar.

1. Fannie Mae Standard 97% LTV loan
2. Fannie Mae HomeReady loan
3. Freddie Mac Home One loan
4. Freddie Mac Home Possible loan
5. FHA loan
6. HUD’s Good Neighbor Next Door program
7. VA loan
8. USDA loan
9. HomePath Ready Buyer program
10. HUD’s Dollar Homes program
11. Local first-time homebuyer programs and grants

1. Fannie Mae Standard 97% LTV loan

Fannie Mae, one of the two largest agencies that buy and sell mortgages, offers a conventional homebuying program called the Standard 97% LTV loan through approved lenders. LTV is short for loan-to-value ratio, which is the percentage of a home’s purchase price being financed by a mortgage. A maximum 97% LTV ratio is allowed under this program, which means you’d only need a 3% down payment to cover the rest.

You may be eligible if:

  • You or a co-borrower are a first-time homebuyer (meaning you haven’t owned a home in the past three years)
  • One borrower has completed a homeownership education course (if all borrowers are first-timers)
  • All borrowers have a minimum 620-720 credit score, depending on your debt-to-income (DTI) ratio and down payment contribution

2. Fannie Mae HomeReady loan

Another Fannie Mae loan that caters to both repeat and first-time homebuyers is the HomeReady® mortgage. The program is geared toward lower-income buyers, and the minimum required down payment is 3%, which can come from gifts, grants and eligible second mortgages. Unlike the Standard 97% LTV program, there are income limits.

You may be eligible if:

  • You’re either a first-time or repeat homebuyer
  • You have a minimum 620 credit score
  • You earn a maximum 80% of your local area median income (AMI)

3. Freddie Mac HomeOne loan

Freddie Mac, the other major agency that buys and sells home loans, offers the HomeOne℠ first-time homebuyer program through approved conventional lenders. There are no income limits, but there is a homebuyer education requirement when all borrowers on the loan are first-timers.

You may be eligible if:

  • You or a co-borrower are a first-time homebuyer
  • You have a minimum 3% down payment
  • You have a minimum 620 credit score

4. Freddie Mac Home Possible loan

Freddie Mac’s Home Possible® loan is another first-time homebuyer program with the incentive of a low down payment. Repeat homebuyers are also eligible for this mortgage. Still, no matter which type of buyer you are, you must meet income limits.

You may be eligible if:

  • You have a minimum 660 credit score
  • You’re a first-time or repeat homebuyer
  • You earn an income equal to or less than 80% of your AMI

If you qualify for either a Fannie or Freddie loan program, you’ll pay for private mortgage insurance if you make less than a 20% down payment. PMI is cancelable after you’ve reached 20% equity in your home.

5. FHA loan

A home loan backed by the Federal Housing Administration (FHA) could be a great fit for first-time homebuyers (and repeat buyers) with less-than-stellar credit and little cash savings. The borrowing requirements for FHA loans aren’t as stringent as those for conventional loans — you just need a minimum 500 credit score to qualify. The downside: You’re required to pay mortgage insurance premiums for the life of your loan unless you put down at least 10%, in which case you can cancel MIP after 11 years.

You may be eligible if:

  • You have a 500-579 credit score and a 10% down payment
  • You have a 580 credit score and a 3.5% down payment
  • You’re buying a one- to four-unit property as your primary residence

6. HUD’s Good Neighbor Next Door program

Though it’s not strictly limited to first-time homebuyers, the Good Neighbor Next Door program from the Department of Housing and Urban Development (HUD) can help you save up to 50% off the list price of a home. Borrowers are required to make a home purchase in an area designated for revitalization to boost specific communities.

You may be eligible if:

  • You’re an educator, emergency medical technician, firefighter or law enforcement officer
  • You commit to living in the property for at least three years
  • You agree to borrow a silent second mortgage for the amount of the home price discount

7. VA loan

Active-duty service members, veterans and their eligible spouses may qualify for a loan insured by the U.S. Department of Veterans Affairs. The advantage here is that you won’t need to make a down payment to qualify for a VA loan. VA borrowers also don’t have to pay mortgage insurance premiums.

On top of that, the VA also offers adapted housing grants. These can help you purchase an adapted home or make a home more accessible to accommodate a service-related disability.

You may be eligible if:

  • You’re a military service member, veteran or eligible spouse
  • You have a Certificate of Eligibility from the VA
  • You have a minimum 620 credit score typically required by VA-approved lenders

8. USDA loan

The U.S. Department of Agriculture also insures 0% down payment loans. The catch is you must buy a home in a rural area and meet certain income requirements. Carefully consider what’s important to you in a home and a location. If you want something walkable in a more urban setting, a USDA loan probably isn’t right for you.

You may be eligible if:

  • You have a 640 credit score, though you may qualify with a lower score
  • You meet local income eligibility requirements
  • The home you’re buying is in a USDA-designated rural area

9. HomePath Ready Buyer program

The HomePath Ready Buyer™ program from Fannie Mae is for first-time homebuyers and provides homebuying assistance for borrowers with their closing costs — covering up to 3% of the home’s purchase price.

You may be eligible if:

  • You’re a first-time homebuyer
  • You complete the HomePath Ready Buyer education course
  • You buy a Fannie Mae-owned, foreclosed property from HomePath.com

10. HUD’s Dollar Homes program

The HUD Dollar Homes program helps low- to moderate-income buyers purchase a foreclosed home for just $1, plus closing costs. HUD partners with local governments and nonprofits to operate the program.

You may be eligible if:

  • You identify a local housing agency that participates in the program
  • You find an eligible home on the HUD Homestore website
  • You have financing to cover home rehab costs

11. Local first-time buyer programs and grants

There are several first-time homebuyer programs at the state and local levels. Check with your county’s housing authority and your state’s housing finance agency for more information. Another resource is HUD’s directory of state-by-state homebuying programs.

Pay attention to program requirements, which may include income limits as well as stringent DTI ratio and credit score guidelines. Some programs may also require you to repay the assistance if you live in the home for a short period of time. Another consideration is tax recapture. This means if you sell your home prematurely and make a profit, some of the proceeds may be subject to taxes to make up for the homebuying assistance you originally received.

Miranda Marquit contributed to this report.