A guide to first-time homebuyer programs

Eager to make the leap from browsing listings to buying your first home? While many first-time buyers feel ready, financing a home purchase is a big step. In many mortgage programs, you may still qualify as a first-time homebuyer even if you’ve owned a home before, as long as you haven’t owned one in the past 3 years.

However, homeownership is closer than you might think—especially if you know what resources are out there and how to access them. Government-backed loans, state-level programs and down payment assistance can make buying a home more accessible than you might expect.

Together, these programs can help in a few key ways, including reducing upfront costs like down payments and closing costs, lowering monthly payments and expanding eligibility for buyers with limited credit or savings.

Qualifying for a home loan

Mortgage lenders look at a handful of important data points to get a clear picture of your financial health as a borrower. Knowing where you stand can help you narrow down which programs you qualify for:

• Credit score. Your credit score is influenced by several factors—often referred to as the 5 Cs of credit—which include your payment history, amounts owed and overall credit use. The higher your score, the better your chances of qualifying for mortgage loans with favorable terms. Some government-backed programs accept scores as low as 580 (or even lower in certain cases). With a score of at least 620, you may qualify for a conventional mortgage loan—a loan that isn’t backed by a government agency.
• Down payment. Conventional loans typically require a down payment between 3% and 20%. Many first-time buyer programs are designed to lower that amount even further, with some requiring little to nothing down.
• Debt-to-income ratio (DTI). Your DTI is the percentage of your monthly income that goes toward debt payments. If you apply with a co-borrower, lenders may consider both incomes and debts. Most lenders prefer a DTI of 43% or lower, though some programs allow higher ratios depending on other factors in your application.
• Employment and income history. Lenders want to see stable, consistent income. Most look for at least 2 years of employment history in the same field, whether you’re salaried or self-employed.

Government-backed loans for first-time homebuyers

Government-backed loans—not to be confused with government-sponsored programs such as those supported by Fannie Mae and Freddie Mac—are a popular starting point for first-time buyers, and for good reason. Because a federal agency guarantees these loans, lenders can offer more flexible requirements. In some cases, that can mean more competitive rates than those offered by a conventional loan. Here’s a look at the 3 main programs.

1. Department of Veterans Affairs (VA) Home Loan Guarantee Program

If you’re an Active Duty Servicemember, Veteran or eligible surviving spouse, a VA loan is one of the most valuable benefits available. Backed by the Department of Veterans Affairs, VA loans have a no-down-payment option^{Footnote [1]} and require no private mortgage insurance (PMI)—2 of the biggest cost barriers for first-time buyers. These loans are typically used to purchase or refinance a single-family primary residence.

Credit requirements are also more flexible than most conventional loans. To apply, you’ll need a Certificate of Eligibility (COE), which confirms your military service and can be obtained through the VA or your lender.

2. Federal Housing Administration (FHA) loan programs

Backed by the Federal Housing Administration, FHA loans are designed for buyers with limited savings or developing credit histories. You may qualify with a credit score as low as 580 and a down payment of just 3.5%. If your score falls between 500 and 579, you may still be eligible with a 10% down payment. 

Keep in mind that FHA loans require mortgage insurance premiums (MIP), which can add to your monthly payment and housing costs.

3. U.S. Department of Agriculture (USDA) rural housing loans

If you’re open to buying in a rural or suburban area, a USDA loan may be worth exploring. Backed by the U.S. Department of Agriculture, these loans offer 100% financing—meaning no down payment required—for eligible homebuyers in qualifying locations. Income limits apply and are often based on area median income, making these programs a strong option for low- to moderate-income buyers. You can check eligibility using the USDA’s online tool.

Other programs for first-time homebuyers

Government-backed loans aren’t the only federal resources available to qualified first-time homebuyers. A handful of specialized programs offer additional support depending on your situation. These programs are typically accessed through participating lenders or partner organizations.

Good Neighbor Next Door 

The U.S. Department of Housing and Urban Development (HUD)’s Good Neighbor Next Door program offers eligible law enforcement officers, teachers, firefighters and emergency medical technicians a 50% discount on the list price of qualifying homes in designated revitalization areas. In exchange, you commit to living in the home as your primary residence for at least 36 months. Available properties are listed on the HUD website weekly.

HomePath Ready Buyer

Offered through Fannie Mae, the HomePath Ready Buyer^TM program provides first-time buyers with up to 3% in closing cost assistance on eligible HomePath properties: homes that Fannie Mae owns and sells directly. To qualify, you’ll need to complete a mandatory homebuyer education class before submitting your offer.

Energy-efficient mortgage (EEM)

An energy-efficient mortgage lets you roll some of the cost of energy-efficient upgrades into your home loan—subject to program limits and eligible improvements—so you can make improvements without a separate loan or extra cash upfront—especially helpful if you’re purchasing a fixer-upper. EEMs are commonly available through FHA and VA loan programs, making them a helpful option for a wide range of buyers.

Native American Direct Loan (NADL)

The NADL program provides direct home loans to eligible Native American Veterans and their spouses for purchasing, constructing or improving homes on federal trust land. Like VA loans, NADLs require no down payment and come without PMI. Eligibility requirements mirror those of the VA loan program.

You can find more details about eligibility and application steps for each program on their official websites.

Where to find state programs for first-time homebuyers

Federal programs are a great starting point, but they’re only part of the picture. Most states offer their own first-time homebuyer programs through a state housing finance authority (HFA). These organizations are local and often offer:

• Below-market mortgage rates for eligible buyers
• Down payment and closing cost assistance
• Tax credits that may reduce your federal income tax bill^{Footnote [2]}
• Homebuyer education and counseling resources

Every HFA has its own set of programs, income limits and eligibility requirements. The National Council of State Housing Agencies (NCSHA) maintains a directory of state HFA. It’s a good place to start if you want to see what’s available where you live.

A few things to keep in mind as you explore state options:

• Income and purchase price limits often apply, so check the specifics for your state.
• Some programs are reserved for buyers in targeted areas or specific professions.
• It may be possible to combine state programs with federal loan programs.

If you’re a Servicemember or Veteran, some states also offer additional benefits on top of federal VA loan eligibility—including extra down payment assistance or reduced fees. It’s worth checking with your state HFA to see what’s available to you specifically.

Access down payment assistance programs

Even with a government-backed loan, coming up with a down payment can feel like a major undertaking. Down payment assistance (DPA) programs are designed to help—and they’re more widely available than most eligible first-time buyers realize. DPA programs typically come in a few forms, as shown in the table below.

Grants	Money that doesn’t need to be repaid, often offered through state or local housing agencies.
Forgivable loans	A loan that’s forgiven after you meet certain conditions, such as living in the home for a set number of years.
Deferred loans	A loan with generally no monthly payments, repaid only when you sell, refinance or pay off your primary mortgage.
Low-interest loans	A secondary loan with a reduced interest rate that helps cover your down payment or closing costs.

Where to find DPA programs

Down payment assistance is offered at the federal, state and local levels. Your state HFA is a good first stop, but city and county programs exist, too. Some employers and nonprofits also offer their own assistance for eligible buyers. You can also use tools like Fannie Mae’s down payment assistance search tool to find programs available in your area.

How to qualify

Eligibility varies by program, but most first-time homebuyer programs consider household income, family size and income limits. It’s worth understanding where you fit before you apply. Most DPA programs also look at purchase price limits, ZIP Code and whether the home will be your primary home. Many also require completion of a homebuyer education class, which can be helpful even if it’s not required.

Buying a home with Navy Federal Credit Union

As a Navy Federal member, you have access to mortgage options and resources designed for the military community. From VA loans to the Homebuyers Choice program,^{Footnote [3]} we’ll help you find an option that fits your needs.

Ready to take the next step? Our First-Time Home Buyer Guide is a great place to start. Then, when you’re ready to compare numbers, make sure to check out current mortgage rates and options. If you have questions, we’re always here to help!