First-Time Home Buyer Loans and Programs

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Becoming a homeowner can be a financially intimidating process, but there are several options from lenders and government sources designed to smooth the way. Qualified home buyers can secure loans with low down-payment minimums and participate in local buyer assistance programs.

While a larger down payment (or even an all-cash offer) can make you a more competitive buyer, the conventional advice of saving 20% of the home’s value for a down payment is not a hard-and-fast rule.

This is especially true if you qualify for a government-backed loan, meaning that you may be closer to a sufficient down payment than you think.

First-Time Home Buyer Loans and Programs List

FHA loans

Loans backed by the Federal Housing Administration require just 3.5% down, making them a popular choice among first-time home buyers. According to the most recent federal data, nearly 73% of FHA borrowers put down less than 10% for loans originated in October and November 2021.

However, if your credit score is under 580, you would be required to put 10% down. Loan limits will vary depending on where you live, with maximums ranging from $420,860 to $970,800 for 2022.

READ: Things You Need To Know Before Applying For Mortgage

While you can technically qualify for an FHA loan with a credit score in the 500s, approved borrowers tend to have much higher scores. From January to November 2021, the average FHA borrower had a credit score of 678, according to data from ICE Mortgage Technology.

Low-down payment government loans

Government loans are mortgages backed by a government agency, either the Federal Housing Administration, Department of Veterans Affairs or Department of Agriculture.

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They aren’t created or funded by these organizations, however; they’re offered by approved mortgage lenders throughout the U.S. Some lenders even specialize in certain types.

FHA, VA and USDA loans

FHA loan – Insured by the Federal Housing Administration, FHA loans allow borrowers to buy a home with a minimum credit score of 580 and as little as 3.5 percent down, or a credit score as low as 500 with at least 10 percent down.

If you put down less than 20 percent, however, you’ll have to pay FHA mortgage insurance, which includes a 1.75 percent upfront fee and annual premiums. FHA also insures FHA 203(k) loans, which allow borrowers to buy and fix up a home with the same low credit and down payment flexibilities.

VA loan

VA loan – Qualified U.S. military members (active duty, veterans and eligible family members) can apply for loans backed by the U.S. Department of Veterans Affairs (VA). VA loans come with lower interest rates compared to other loan types, and don’t require a down payment. Borrowers, however, will need to pay a funding fee, but it can be rolled into your monthly loan costs. Some servicemembers might be exempt from paying this fee, as well.

USDA loan

USDA loan – The U.S. Department of Agriculture (USDA) guarantees loans for some rural homes for up to 100-percent financing (in other words, there’s no down payment requirement). This doesn’t mean you have to buy a farm or shack up with livestock, but you do have to buy a home in a USDA-eligible area. There are also fees for this type of loan.

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First-Time Home Buyer Loans and Programs


Down payment savings match programs help grow the amount a borrower puts down for a home by matching the borrower’s savings. These programs are structured over a specific amount of time and provide matched funds up to a certain amount, which can only be used for the down payment and closing costs.

For example, some state-level housing finance agencies offer Individual Development Accounts (IDAs), which might contribute three dollars for every one dollar the borrower saves. Those who qualify work with an assigned counselor to deposit funds into an IDA over a specified period of time. If the borrower follows the plan and saves the required amount, they’ll receive the match at closing.