First-Time Homebuyer Programs: 2024 Edition

For many Americans, owning their own home is nothing short of a dream. However, the process of purchasing a house for the first time can be daunting. Numerous first-time homebuyer programs are currently available in order to help those newly on the housing market get a good start.

What is a First-Time Homebuyer?

The vast majority of programs for first-time homebuyers require you to be just that — a first-time homebuyer. However, those with extensive rental histories or complicated housing backgrounds may wonder whether or not that title applies to them. While each homebuyer program holds its own definition of a first-time buyer, there are a few common criteria that applicants must often meet. For instance, those who receive first-time homebuyer assistance might be someone who:

• Is applying for a home loan for the very first time

• In some cases, has not owned a home in over three years

• Does not currently own any other residential property

First-Time Homebuyer Loans

Whether you’re prepared to pay for the majority of your home up-front or worried about making that first down payment, there are plenty of first-time homebuyer loans available.

Conventional Loans

While it may come as a surprise, some of the best mortgages for first-time buyers come in the form of conventional loans. Simply put, these loans are not backed by any federal institution. Although these loans are privately held, qualifications for these loans typically conform to the criteria for Government Sponsored Enterprises (GSEs) like Freddie Mac and Fannie Mae loans. These criteria often include:

• A FICO credit score of 620 or higher

• A debt-to-income ratio below 43%

• Proof of stable employment and reliable income

A commonly held myth is that most financial institutions still require a 20% down payment in order to even consider granting you a mortgage. However, this is no longer the case. With Conventional 97 loans, you can put down as low as 3% in your initial payment. No matter where you’re seeking a mortgage, however, it’s important to remember that any down payment lower than 20% of the purchase price will call for Private Mortgage Insurance until your loan-to-value ratio hits 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

The Federal Housing Association offers first-time homebuyer loans at special rates that may be particularly appealing to prospective homeowners with little savings. With an FHA-backed mortgage, you can put down as little as 3.5% and may hold a credit score as low as 500 when applying. 

Even with a lower bar to entry, the FHA recognizes that not everyone can afford 3.5% of the purchase price of a home. For this reason, they compiled a list of down-payment assistance programs available in each state. These programs intend to make the starting costs for homeownership a little more affordable.

USDA Loans

The United States Department of Agriculture 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 loans to those with lower incomes and may even grant you a loan with no down payment.

Finding a HUD-Approved Lender

In such a complex housing market, it can be difficult to determine who to trust. The United States Department of Housing and Urban Development (HUD) supports a Lender Search on their website. This search engine allows users to find HUD-approved lenders in their local areas. These lenders are permitted to offer any loans backed by the HUD, including 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

The Bank of America Community Homeownership Commitment Program supports several different grant initiatives for homebuyers. Depending on which state you plan on residing in and your specific financial situation, Bank of America can offer up to $7,000 in closing cost help or up to $10,000 in down payment assistance. Each program has its own set of qualification criteria, including maximum income levels and current debt-to-income ratios.

Wells Fargo Grant Programs

Wells Fargo also offers various forms of financial assistance to prospective buyers. For those in certain locations making less than 120% of the area median income, Wells Fargo offers up to $10,000 towards a down payment. For those with lower incomes in select regions, they also offer up to $5,000 in support of closing costs. All applicants to their down payment assistance programs need to demonstrate the appropriate level of financial need.

Chase Homebuyer Grant

At Chase, homebuyers in select areas may qualify for up to $7,500 in funds primarily used to help lower your interest rate. As with most other grant programs, applicants will need to demonstrate sufficient financial need. Special consideration is given to applicants and co-borrowers who work in law enforcement, education, firefighting, and healthcare.

Occasionally, Chase will also guarantee on-time closing in a short period of time. If the specific closing date is not met, they will offer $20,000 in additional financial assistance. This program is rare, though, so it is important to check their website often.

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.

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. Once you purchase a home, you can deduct property taxes up to a certain level, depending on what state you live in, on your federal taxes.

• IRA withdrawal. If you currently invest in a Roth or traditional IRA, you can withdraw up to $10,000 without paying the typical 10% penalty for early withdrawal.

• Mortgage Interest Deduction. Any interest on your mortgage paid to your lender may qualify for a federal tax deduction. You can find out exactly how much interest you have paid each year by reading the 1098 form provided by your lender within the first few months of each year.

Applying for First-Time Homebuyer Programs

As mentioned before, 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 buyer 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 to buy a house can be the start of a fantastic journey. Plenty of first-time homebuyer programs exist in order to help get you started on the right foot. If you’re concerned about your current housing situation, or are seeking additional resources, take a look through our full list of Housing Guides.