The 411 on First-Time Homebuyer Programs


At Finance Opinion first time homebuying is a topic that comes up a lot. It’s probably because – let’s face it – buying a home is expensive, daunting, and complicated. From a down payment to closing costs, the average home buyer spends upwards of $15,000 before even moving into their new home, so it makes sense that less and less homeowners are making this major life purchase.

But don’t let your dreams of owning a home die out quite yet. If you’re a first-time homebuyer, there are government assistance options and programs available to help you save some serious cash. Read on to see how they can help make your homeownership dream a reality. 

What is a first-time homebuyer program?

First-time homebuyer programs are specialized grants and loans designed to help first-time buyers get a little boost to jump over the financial hurdle of purchasing a home. The specifics of these programs vary by state, but generally help lower the upfront cash needed to buy a home, including down payment and closing cost assistance, along with the potential for lower interest rates.

Three Types of First-Time Homebuyer Programs

FHA Loans

FHA loans are “guaranteed” by the Federal Housing Administration, meaning the FHA guarantees to reimburse your mortgage lender if you were to default on your mortgage loan. This added protection lowers the barrier to entry for first time borrowers, since the risk you pose to a bank or mortgage lender is protected by the FHA. 

The Pros:

FHA loans not only have flexible income requirements, meaning you don’t need to make a lot of money to qualify for them, but also offer down payment assistance in the form of 3.5% (significantly lower than the standard 20% down payment requirement!). 

The Cons:

Because FHA loans only require a 3.5% down payment, borrowers are usually required to get PMI (private mortgage insurance), which, on top of a monthly payment, also requires an upfront fee at closing. While the average monthly price for PMI is about $50, you’ll want to budget for this in advance to ensure you’ll be able to keep up with monthly payments on top of your mortgage, utilities, and standard homeowner fees. 


If you’re looking to put 0% down on your home, and are okay living in a rural area, a USDA loan, funded by the U.S. Department of Agriculture, could be the perfect fit for you! 

These loans were designed to assist lower-income buyers, and can even come with a significant amount of land for farming, along with an affordable, low barrier to entry into a home you can call your own. 

The Pros:

USDA loans enable first time buyers to own a home with 0% down, and typically come with low interest rates on your monthly mortgage payments.  

The Cons:

USDA loans were designed to help grow homeownership in less populated regions, so, in order to qualify for a USDA loan, your home needs to be in a rural area or smaller town. To see a full list of USDA-eligible locations, check out the USDA’s eligibility map tool

Fannie Mae and Freddie Mac

Fannie Mae (yes – the same fannie mae known for student loans!) and Freddie Mac partner with local mortgage lenders to bring first time homebuyers a range of mortgage options, including some with very low down payments.

With many loans designed for lower-income borrowers, a 3% down payment option can be especially appealing. 

The Pros:

If you have a credit score of 620 or higher, you can expect to put just 3% down on your new home, and can even apply funds, gifts, grants or other personal loans toward your down payment and closing costs.

The Cons:

Like a FHA loan, you will be required to pay for private mortgage insurance since your down payment with a Fannie Mae or Freddie Mac loan will be under 20%. Additionally, if your credit score is under 620, you may not qualify. 

If you’re ready to purchase your first home but aren’t sure where to start, consider consulting a professional realtor or mortgage lender who can help you compare and understand your options, especially those unique to your state. With all of the programs and resources available, you’ll be calling a home your “own” in no time!


The opinions expressed in this post are for informational purposes only. To determine the best financing for your personal circumstances and goals, we advise you to consult with a licensed advisor.

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