First-Time Homebuyer Programs: FHA, VA, USDA, Low-Down Conventional and State Help

If saving a large down payment feels out of reach, you're not alone, and you may have more options than you think. Federal agencies, Fannie Mae and Freddie Mac, and every state's housing finance agency run programs aimed at first-time and moderate-income buyers. Some lower the down payment. Some help pay it. A few do both.

This guide walks through the major programs, who they're for, and how to find what's available where you want to buy.

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What counts as a "first-time" buyer?

Definitions vary by program, but many use a broad definition: someone who hasn't owned a principal residence in the past three years. That means a past homeowner may qualify again. Always check the specific program's definition.

FHA loans

FHA loans are insured by the Federal Housing Administration, part of HUD. They're popular with first-time buyers because they're more flexible about credit.

• Down payment: 3.5% with a credit score of 580 or higher; buyers with scores from 500 to 579 typically need 10%.
• Mortgage insurance: an upfront premium plus an annual premium paid monthly. With less than 10% down, the annual premium usually lasts for the life of the loan.
• Good fit for: buyers with lower credit scores or limited savings.

See HUD's loans page for current details.

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VA loans

Backed by the Department of Veterans Affairs for eligible service members, veterans and some surviving spouses.

• Down payment: often none required.
• Mortgage insurance: none, but most borrowers pay a one-time VA funding fee, which can be financed. Some borrowers, such as those receiving VA disability compensation, are exempt.
• Good fit for: anyone who's eligible. VA loans are often among the most affordable options.

See VA home loans.

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USDA loans

The U.S. Department of Agriculture's guaranteed loan program serves eligible rural and some suburban areas.

• Down payment: often none required.
• Requirements: the property must be in an eligible area, and household income must be within the program's limits for the area.
• Fees: an upfront guarantee fee and an annual fee.

See the USDA guaranteed loan program.

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Low-down-payment conventional loans

Fannie Mae's HomeReady and Freddie Mac's Home Possible allow as little as 3% down for eligible borrowers, generally with income limits based on the area. They can come with reduced mortgage insurance costs, and the PMI can be canceled once you reach enough equity, unlike most FHA insurance. Homeownership education is usually required for at least one borrower. See HomeReady and Home Possible.

State and local down payment assistance

Every state has a housing finance agency (HFA), and many cities and counties run their own programs. Common types of help include:

• Grants that don't need to be repaid.
• Forgivable second loans that are forgiven if you stay in the home for a set number of years.
• Deferred second loans with no payments until you sell or refinance.
• Low-interest second loans repaid alongside your mortgage.
• Mortgage credit certificates, which can provide a federal tax credit for part of the mortgage interest you pay, where offered.

Programs usually have income and purchase price limits and often require a homebuyer education course. Each of our state pages links directly to that state's housing finance agency, and the National Council of State Housing Agencies keeps a directory.

Worked example: what lower down payments mean in cash

Using the U.S. median sales price of $410,700 (Q2 2026):

Remember that closing costs come on top, and that a smaller down payment means a bigger loan. At this week's 30-year average of 7.40% (October 15, 2026), each extra $10,000 borrowed adds about $69 a month in principal and interest. Prices vary a lot by place: the typical home value is $296,424 in Texas and $245,982 in Ohio, for example, according to Zillow's home value index.

How to choose

1. Check VA eligibility first if you or a spouse served. It's often the best deal available.
2. See whether you're in a USDA-eligible area if you're buying outside a major city.
3. Compare FHA with a 3%–5% conventional loan. With a stronger credit score, conventional is often cheaper over time because PMI can be removed. With a lower score, FHA may come out ahead.
4. Layer on state or local assistance if you qualify. Ask lenders that participate in your HFA's programs.
5. Take a homebuyer education course. Many programs require it, and HUD-approved housing counseling agencies offer help for free or at low cost; find one through HUD's counseling page.

A practical companion while you shop programs

Program rules change, so always confirm details with the lender or housing agency. For a plain-language overview of the buying steps alongside those programs, a recent first-time home buyer guide book can help.

first-time home buyer guide books on Amazon (Affiliate link. We may earn a commission.)

Walkthrough and moving gear (flashlight, outlet tester, detectors, boxes) lives in our first-home checklist.

Common questions

Can I combine programs? Often, yes. Many buyers pair an FHA or conventional loan with a state down payment assistance second loan. The lender must participate in the assistance program, so ask your housing finance agency for a list of approved lenders.

Do assistance programs have catches? Some do. Forgivable loans may need to be repaid if you sell or refinance within a set period, and some programs have income and price limits or require you to live in the home. Read the terms carefully, especially the repayment triggers.

Is homebuyer education worth it if it isn't required? Many buyers find it useful. HUD-approved counselors can review your budget, credit and loan options at little or no cost, and they don't earn more if you borrow more.

Practical takeaways

• "First-time buyer" often means no ownership in the past three years.
• VA and USDA can allow zero down; FHA allows 3.5%; HomeReady and Home Possible allow 3%.
• State and local programs can cover part of the down payment or closing costs. Start from your state page.
• Compare total monthly cost, including mortgage insurance, across programs using the mortgage calculator.
• Start saving for closing costs and reserves even if your down payment is covered; track it in the tracker.

Sources

• HUD: Loans (FHA)
• VA: Home loans
• USDA: Guaranteed loan program
• Fannie Mae: HomeReady
• Freddie Mac: Home Possible
• NCSHA: Housing help
• HUD: Housing counseling

Program rules, rates and prices change; figures are as of the dates noted. Confirm details with the program and a lender. This article is for education only and is not financial advice.