First-Time Homebuyer Programs: 2025 Edition

Many Americans dream of owning a home, but buying a home for the first time can feel overwhelming. Fortunately, there are many first-time homebuyer programs, including those supported by HUD Housing, designed to help new buyers enter the housing market with confidence and support.

What Is a First-Time Homebuyer?

A first-time homebuyer is someone purchasing a home for the first time. However, you may still qualify as a first-time buyer if:

• You haven’t owned a home in the last three years.

• You don’t currently own residential property.

• You’re applying for a home loan for the first time.

For example, if you owned a home five years ago but have been renting since, you may still be eligible for assistance programs. However, specific criteria can differ depending on the state or program. Always check the eligibility requirements directly with the program you’re interested in to ensure you qualify.

First-Time Homebuyer Loans

Buying your first home involves exploring several loan options, each tailored to different financial situations and needs. Understanding the best mortgages for first-time buyers can help you make an informed decision. Let’s break down the main types to help you decide which might work best for you.

Conventional Loans

Conventional loans are a popular option for first-time buyers. These loans aren’t backed by the government but adhere to guidelines set by Fannie Mae and Freddie Mac. 

• Credit Score: At least 620 is required.

• Debt-to-Income Ratio: Ideally below 36%, though some lenders allow up to 43%.

• Down Payment: As low as 3%, such as with the Conventional 97 loan program.

A commonly held myth is that most financial institutions still require a 20% down payment to approve a mortgage. However, this is no longer true. With options like Conventional 97 loans, you can make a down payment as low as 3%. It’s important to remember, though, that any down payment below 20% of the purchase price will typically require Private Mortgage Insurance until your loan-to-value ratio reaches 80%. 

What Is Private Mortgage Insurance?

Private Mortgage Insurance (PMI) is a type of insurance coverage that intends to protect lenders, not homeowners. Essentially, this insurance guarantees that, even if a homeowner goes bankrupt, financial institutions that hold mortgages will not be shortchanged. PMIs are usually required when a home is purchased with a down payment under 20% of the purchase price.

FHA Loans

FHA loans are insured by the Federal Housing Administration and cater to buyers with less savings or lower credit scores. 

• Minimum Credit Score: 580 for a 3.5% down payment; 500 for a 10% down payment.

• Down Payment Assistance: Programs available by state.

• Mortgage Insurance: Required for all FHA loans, regardless of down payment size.

These loans can be used for single-family homes, multifamily units, and even certain manufactured homes. For example, buying a duplex with an FHA loan allows you to live in one unit and rent the other to offset your mortgage.

USDA Loans

The United States Department of Agriculture (USDA) offers the Single Family Housing Guaranteed Program. This program is specially designed to encourage people to purchase homes in rural areas. As incentives, the USDA offers first-time home buyer loans to those with lower incomes and may even grant you a loan with no down payment.

• No Down Payment: Perfect for buyers with limited savings.

• Low Interest Rates: Often more affordable than other loan types.

• Eligibility Requirements: Income limits (115% of area median income) and property location restrictions apply.

Finding a HUD-Approved Lender

The United States Department of Housing and Urban Development (HUD) offers a helpful tool on its website called the Lender Search. This easy-to-use resource lets you find HUD-approved lenders in your area, giving you confidence that they are authorized to provide HUD-backed loans, such as FHA and USDA loans. 

Grants for First-Time Homebuyers

Not all financial assistance for a first home needs to come in the form of debt. Various grant programs function to help individuals and families purchase their first house.

Bank of America Grant Programs

Bank of America’s Community Homeownership Commitment program supports several different grant initiatives for homebuyers. They aim to make homeownership more affordable for modest-income and first-time buyers through affordable mortgages, grant programs, and tailored resources. 

• America’s Home Grant® Program: Provides up to $7,500 for nonrecurring closing costs, such as title insurance and recording fees. This grant does not require repayment.

• Down Payment Grant Program: Offers up to $10,000 or 3% of the purchase price (whichever is less) for a down payment. Like the closing cost grant, this assistance does not need to be repaid.

• Additional Resources: Bank of America’s Down Payment Center helps users find other state and local assistance programs to combine with these grants. For example, pairing these grants with a 3% down payment mortgage, such as their Affordable Loan Solution® mortgage, can significantly reduce upfront costs.

These resources are available in English and Spanish to ensure accessibility for all buyers. 

Wells Fargo Grant Programs

Wells Fargo offers various forms of financial assistance to help first-time homebuyers manage upfront costs and secure affordable financing. 

• Homebuyer Access Grant: Provides $10,000 in down payment assistance for borrowers earning up to 120% of the area median income. This grant is available in select locations and can be combined with other assistance programs.

• Dream. Plan. Home. Closing Cost Credit: Offers up to $5,000 to eligible buyers earning up to 80% of the area median income. These funds help cover one-time closing costs and are available in select markets.

• Dream. Plan. Home. Mortgage: Is a fixed-rate mortgage that allows buyers to put down as little as 3%, provided they meet income requirements (up to 80% of the area median income). While this program requires mortgage insurance, it can be combined with other assistance programs to reduce overall costs

Applicants must show they meet the program’s income and financial requirements to qualify for down payment assistance.

Chase Homebuyer Grant

Chase offers the Homebuyer Grant to make homeownership more affordable by providing financial assistance and ensuring a smoother buying process. 

• Grant Amount: Up to $7,500, which can be applied to lower the interest rate first, then toward Chase fees or other closing costs. Any remaining funds may go toward the down payment on eligible loans.

• Eligibility Criteria: Available for properties in select census tracts across the country. The grant applies to primary residence purchases using loan options like DreaMaker, FHA, VA, or Standard Agency mortgages.

Chase also offers a Guaranteed On-Time Closing for eligible products. If they fail to meet the promised closing date, qualified buyers can receive $5,000 as compensation. Buyers are encouraged to use the Chase Homebuyer Assistance Finder to explore additional benefits and consult a home lending advisor for tailored support and guidance.

Grant Programs in Your State

While many national programs exist to help support first-time home buyers, our list is by no means exhaustive. Reach out to your local banks or financial institutions to see what benefits or assistance may be available at the state and city levels. Depending on where you live, you may be eligible for additional assistance.

For first-time homebuyers, exploring HUD-approved housing counseling agencies is a good starting point. These agencies can connect individuals with available grants, resources, and other support options in their area.

Tax Benefits for First-Time Homebuyers

Moving into your first home is an expensive process. Fortunately, it also qualifies you for certain tax-related benefits.

• Property Tax Deduction: Homeowners can reduce their taxable income by deducting up to $10,000 annually in property taxes. This deduction can make a significant impact, especially for buyers in high-tax areas.

• IRA Withdrawal. If you're a first-time homebuyer, you can withdraw up to $10,000 from your IRA without facing the usual 10% early withdrawal penalty. This can be a great way to supplement your down payment.

• Mortgage Interest Deduction. You can deduct the interest paid on a mortgage of up to $750,000, which reduces your taxable income. For example, if you pay $15,000 in mortgage interest annually on a $300,000 home, you could see substantial tax savings.

These tax benefits make owning a home an appealing option for many first-time buyers by offsetting some of the ongoing costs of homeownership.

Applying for First-Time Homebuyer Programs

No two programs for first-time homebuyers are the same. However, there are similar steps you should take, no matter which grant or loan you may be applying for.

• Check Your Eligibility. Each grant and loan program has its own set of criteria for qualified applicants. Be sure to read through all of the application materials carefully so you can confidently submit your application.

• Do Your Homework. Very few first-time homebuyer programs require one-and-done applications. Many will ask for proof of income, your current home address, information on which to run a credit check, and more. You may also be asked to provide a fixed-rate pre-approval mortgage for first-time buyers, depending on what programs you are applying for. This can help convince lenders that you are a reliable person to lend to.

• Go Back to Class. Some programs request that you complete a particular homebuyer’s course prior to submitting an application. Topics covered in these courses can range from mortgage education to the main benefits of homeownership. These classes can take time, so it’s important to budget the necessary hours prior to submitting an application for a program.

• Turn in Your Application. Once you’re certain you have obtained all proper documentation, send in your application. Look out for any deadlines so you can receive funding as soon as possible.

• Be Patient and Ask Questions. Application reviews take time. Often, approved funds are paid directly to a closing agent who will apply them to the appropriate costs. If you’re curious about the status of your application, reach out to your agent or a representative from the organization to which you applied.

Choosing stable housing is an important milestone and can set you on a path toward greater security and peace of mind. Whether you’re exploring first-time homebuyer programs, considering homeownership, or looking for affordable rental options, HUD offers a range of programs to support your journey. From Housing Choice Vouchers to public housing, there are solutions designed to meet diverse needs. If you’re ready to take the next step, visit our Open Waiting Lists for HUD Housing to find a place to call home.