If you're staring at a 20% down payment and wondering how anyone affords that, here's some good news: you probably don't need it. Most first-time buyers put down far less, thanks to a mix of federal loan programs and state or local grants built specifically for people buying their first home.
The hard part isn't finding a program — it's figuring out which ones you actually qualify for. Income limits, credit score minimums, and location rules vary widely, and they overlap in confusing ways.
By the end of this article, you'll know the major federal programs, how state and local down payment assistance works, and the exact steps to find programs that match your income, credit, and location.
What Counts as a "First-Time" Home Buyer
Most programs use a broader definition than you'd expect. You typically qualify as a first-time buyer if you haven't owned a home in the past three years — even if you owned one before that.
This matters because it opens the door to people who sold a home years ago, went through a divorce, or are re-entering the housing market after renting for a while. Some state programs go further and only require that you don't currently own a home.
Always check the specific program's definition before assuming you don't qualify. It's often more generous than "first home ever."
Federal First-Time Home Buyer Programs
These are the loan programs available nationwide, backed by the federal government. They don't hand you cash, but they lower the barrier to qualifying for a mortgage.
FHA Loans
FHA loans, insured by the Federal Housing Administration, let you buy with as little as 3.5% down if your credit score is 580 or higher. With a score between 500 and 579, you can still qualify with 10% down.
FHA loans are popular with first-time buyers because they're more forgiving on credit history than conventional loans. The tradeoff: you'll pay mortgage insurance for the life of the loan in most cases.
VA Loans
If you're a veteran, active-duty service member, or eligible surviving spouse, a VA loan lets you buy with 0% down and no monthly mortgage insurance. Rates are often lower than conventional loans, too.
This is backed by the U.S. Department of Veterans Affairs and is one of the most valuable benefits available to military families buying their first home.
USDA Loans
The USDA Rural Development loan program offers 0% down financing for homes in eligible rural and suburban areas. Income limits apply — typically you need to earn at or below 115% of the area median income.
More areas qualify as "rural" than you'd think, including many small towns and outer suburbs. Check the USDA's eligibility map before ruling this out.
Conventional 97
Backed by Fannie Mae and Freddie Mac, Conventional 97 loans let you put down just 3%. You'll need a credit score of at least 620, and mortgage insurance is required until you reach 20% equity — but it can be cancelled later, unlike most FHA insurance.
State and Local Down Payment Assistance Programs
On top of federal loan programs, nearly every state runs its own down payment assistance (DPA) program. These typically come in two forms: forgivable grants and low-interest second loans.
A grant doesn't need to be repaid if you meet the program's terms — usually staying in the home for a set number of years. A second loan is either deferred (paid when you sell or refinance) or repaid alongside your mortgage at a low or 0% interest rate.
Typical DPA grants range from $5,000 to $15,000, though some cover 3–5% of the home price. Most have income limits between 80% and 120% of your area's median income, and many require a homebuyer education course.
Examples include CalHFA in California, the Texas State Affordable Housing Corporation, and Ohio's Your Choice! Down Payment Assistance program. Your state's housing finance agency website is the best place to check current limits and funding availability, since some programs run out of funds partway through the year.
How to Know Which Programs You Qualify For
Here's a practical way to work through it, step by step.
- Check your income against local limits. Search "[your state] housing finance agency income limits" to see if you fall under the threshold for DPA programs.
- Pull your credit score. This determines whether FHA, VA, or Conventional 97 is realistic for you right now.
- Confirm your first-time buyer status. Remember, not owning a home in the past three years usually counts.
- Check location eligibility for USDA loans, even if you don't think of your area as rural.
- Talk to a lender who works with state DPA programs. Not every lender participates, so ask directly.
Here's a worked example. Say your household income is $75,000 and you're eyeing a $300,000 home. A 3% down payment is $9,000. If you qualify for a $8,000 state DPA grant, you'd only need to bring $1,000 out of pocket, plus closing costs.
Before you commit to a price range, run your numbers through Figures.Finance's affordability calculator to see what monthly payment fits your income — combining a low down payment program with a payment you can actually sustain is what makes homeownership work long term.
Frequently Asked Questions
Do I have to be a first-time buyer to use an FHA loan? No. FHA loans are open to any qualified buyer. The "first-time buyer" label mostly applies to down payment assistance and certain state programs, not FHA itself.
Can I combine a down payment assistance grant with an FHA loan? Yes. Many state DPA programs are specifically designed to pair with FHA, VA, or Conventional 97 loans to cover the down payment or closing costs.
What credit score do I need for first-time home buyer programs? It varies. FHA allows scores as low as 500 with 10% down, or 580 with 3.5% down. Conventional 97 typically requires 620 or higher. VA and USDA loans don't set a hard minimum, but lenders often look for 620+.
Do first-time home buyer programs exist outside the US? Yes. Canada offers the First Home Savings Account and land transfer tax rebates. The UK has First Homes and Lifetime ISAs. Australia offers the First Home Guarantee. Rules and benefits differ by country, so check your local government's housing site.
Is a homebuyer education course really required? For many DPA programs, yes. It's usually a short online course, often free, and it's a small requirement for thousands of dollars in assistance.
The Bottom Line
First-time home buyer programs can meaningfully cut what you need upfront — sometimes down to almost nothing. The key is matching the right federal loan with the right state or local grant based on your income, credit, and location.
Before you fall in love with a listing, check what monthly payment actually fits your budget using our affordability calculator.
This article is for informational purposes only and does not constitute financial advice. Always consult a qualified financial advisor before making major financial decisions.