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First-time Home Buyer Programs & Eligibility Requirements

Purchasing a home and finding the right loan to finance it can be a very exciting time for a first-time home buyer. You’re shopping around for your dream home, after all! Along with that excitement, however, can come a whirl of emotion and uncertainty — but don’t worry — we’ve got your back. Understanding how to qualify for first-time home buying programs is all about knowing the details of your credit report and reading up on how these programs operate. 

To help make your process of finding the best first-time home buyer loans a little easier, we put together a list of first-time home buyer programs to refer to throughout your home buying journey. We’ll also dive deeper into defining homebuyer programs, the best programs available and how first-time homebuyers can qualify. So, let’s talk a little bit about first-time home buying programs and what they are.

What Are First-time Home Buyer Loan Programs?

Home buying, while exciting, can also be stressful and expensive, which is exactly why many of these programs exist. First-time home owners loans hope to alleviate the stresses of buying a home by offering aid to first-time buyers and other qualifying borrowers.

First-time home buyer programs are typically designed to provide special incentives to new homebuyers — along with those who have not owned a home in the past three years. These programs are designed to help people with moderate-to-lower incomes manage the costs of buying a home by providing grants, closing cost fee payment assistance, interest savings and more.

What separates them from each other are the incentives each program provides. From lower first-time home buyer down payments to affordable closing costs, these programs have been created to meet the needs of a variety home buyers.

What Are First Home Buyer Loan Requirements?

First-time home buyer loan requirements vary, based on the program you’re looking at. And each program will have unique basic qualifications. Let’s explore how to get a first-time home buyers loan from a few examples — accompanied by their qualifications — to get a better understanding.

Requirements & Qualifications
  • FICO score of at least 500
  • A variable down payment, based on FICO score, of 3.5% or 10%
  • Mortgage insurance
  • A debt-to-income ratio lower than 43%
  • A minimum credit score of 620
  • Required homeownership education courses
  • Your income must be below 80% of your county’s area median income (AMI). Consult the Fannie Mae AMI lookup tool for more details
  • Minimum credit score of 620
  • Required homeownership education courses for first-time buyers
  • Income must be below 80% of your county’s AMI
  • Borrower can own additional residential properties and still qualify
  • No federally required minimum credit score; however, private lenders that issue VA loans may usually require 580-660.
  • No down payment
  • No mortgage insurance
  • Must be a veteran, active duty service member or spouse of a veteran
  • Minimum credit score of 640
  • Income less than, or equal to, 115% of your county’s AMI
  • U.S. citizen or legal permanent resident
  • Property is located in a qualified rural area

What First Home Buyer Loans Are Available?

There are quite a few first home buyer programs available, as you’ll see below, including programs for buying a home with bad credit. We’ve chosen a few of the most popular to review:  

FHA Loan

These loans have been insured by the Federal Housing Administration and favor those with lower credit scores and tighter budgets, when it comes to a down payment. This type of loan can net a new home with a 10% down payment for a person whose credit score meets a minimum of 500. Those with a minimum credit score of 580 can expect to pay as little as 3.5% down.

Fannie Mae HomeReady or Freddie Mac Home Possible Loans

Both programs offer financial aid aid in the form of lower down payments to borrowers applying for a home loan with a minimum credit score of 620. Requiring only 3% down, these are very popular loan programs with homebuyers.

VA Home Loan

VA home loans apply to active-duty, veterans and their spouses and provide several cost-saving benefits for borrowers, including no down payment. Buying a home with this type of loan can provide lower interest rates comparatively, require no minimum credit score and free you of private mortgage insurance (PMI) obligations.

USDA loan

This is a loan program is guaranteed by the U.S. Department of Agriculture and applies to lower-to-moderate income rural borrowers. With this first-time homeowner program, the USDA provides up to 100% financing in eligible rural areas. Borrowers will usually need a credit score of 640 or higher to qualify.

Good Neighbor Next Door

A program sponsored by the U.S. Department of Housing and Urban Development (HUD), this loan provides incentives to law enforcement officers, pre-Kindergarten through 12th grade teachers, firefighters and emergency medical technicians by offering a discount of up to 50% off the list price of a home in communities seeking revitalization.

Through the Good Neighbor Next Door sales program, buyers can purchase exclusively listed qualifying properties rotated every seven days.

Energy-efficient mortgage (EEM)

Energy Efficient Mortgage is a Federal Housing Administration (FHA) program that allows families to make energy efficient improvements with their mortgage funds. This is a solid option for those who are saving for a house and want to make energy efficient upgrades without the cash in hand to do so. This loan frontloads the cost of improvements onto your mortgage without the need for a bigger down payment.

203(k) Rehab Mortgage Insurance

A program best for the fixer-upper type of property, the 203(k) Rehab Mortgage Insurance will allow you borrow the funds necessary to make home improvements and fold the costs into one loan. There are two kinds of loans in this program — a limited 203(k) where repairs total $35,000 or less, and a standard 203(k) where improvements cost $35k or more. Either program must total more than $5,000 in home rehabilitation and you’ll need at least a 3.5% down payment with a credit score of 580 to qualify.

Native American Direct Loan

Another loan backed by the U.S. Department of Veterans Affairs is the Native American Direct Loan. This loan applies to Native American veterans, or non-Native American veterans married to a Native American person enrolled with a qualifying American Indian tribe or Alaskan Native village. This program provides low closing cost financing to buy or build a home on federal trust land and has no down payment or private mortgage insurance (PMI) requirements.

Not all states may be eligible, however.

Take the Next Step Toward Buying Your First Home

Your home is an investment of everything you are — your time, your money and your energy. That’s why it’s so important to make sure you’re getting the homeowners protection your home deserves. Whether you’re trying to find the best first-time home buyer programs or a comprehensive guide for first-time home buyers, we’re in this together. Our friendly agents have your homeowners needs in mind at every step of the journey.


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