Buying your first home doesn’t have to mean coming up with 20% down and paying full closing costs out of pocket. There are dozens of programs — federal, state, and local — designed specifically to help first-time buyers get into a home with less money upfront. Here’s what’s available.
FHA loans — the most common first-time buyer loan
FHA loans are backed by the Federal Housing Administration and require only 3.5% down with a credit score of 580 or above (10% down if your score is 500–579). They’re more forgiving on debt-to-income ratios than conventional loans and available from most lenders. The trade-off: FHA loans require mortgage insurance premium (MIP) for the life of the loan if you put less than 10% down, which adds to your monthly payment. Still, for buyers with limited savings or imperfect credit, FHA is often the most accessible path to homeownership.
Conventional 97 and HomeReady/Home Possible
Conventional loans backed by Fannie Mae and Freddie Mac offer 3% down options with no lifetime mortgage insurance requirement — PMI cancels once you reach 20% equity. HomeReady (Fannie Mae) and Home Possible (Freddie Mac) are targeted at low-to-moderate income buyers and offer reduced PMI costs and flexible income qualification rules.
USDA loans — zero down in eligible areas
USDA loans require no down payment and offer competitive interest rates for buyers purchasing in eligible rural and suburban areas. Income limits apply (typically 115% of the area median income). Check the USDA eligibility map — more areas qualify than most people expect, including many suburbs of mid-sized cities.
VA loans — zero down for veterans and service members
VA loans require no down payment, no PMI, and offer competitive rates for eligible veterans, active-duty service members, and surviving spouses. There’s a VA funding fee (typically 1.4–3.6% of the loan amount, waivable for those with service-related disabilities) but no ongoing mortgage insurance. VA loans are consistently one of the best mortgage products available to those who qualify.
State and local down payment assistance
Nearly every state has a housing finance agency (HFA) that offers down payment assistance programs — often as low-interest second mortgages or outright grants for first-time buyers who meet income and purchase price limits. Some programs offer $5,000–$25,000+ in assistance. Search “[your state] housing finance agency” or “[your city] down payment assistance” to find local programs. Many are underutilized simply because buyers don’t know they exist.
HUD-approved housing counseling
Before using many assistance programs, you’ll need to complete a HUD-approved homebuyer education course. These courses cover the buying process, budgeting, and loan options — and are genuinely useful, not just a checkbox. Many are available online for free or a small fee. Find approved counselors at hud.gov.