First-time home buyer programs are designed to help people who have never owned a home or haven't owned one in the last few years purchase a home. These programs can offer: 

• Financial assistance: Grants, loans, and other financial help with down payments, closing costs, and education 
• Favorable terms: Mortgages with lower down payment requirements and more flexible requirements 
• Tax credits: Tax credits that can be used on federal tax returns 
• Professional assistance: Housing counselors who can coach buyers through the home-buying process 

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Here are a few of our favorite ones:

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Federal first-time homebuyer programs

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Did you know that the Federal Government can assist you in becoming a homeowner? Well, it can! 

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the U.S. government also helps home loan borrowers by backing various mortgage programs. These include:

Government-backed mortgage loans

The Federal Housing Administration (FHA), Department of Veterans Affairs (VA) and Department of Agriculture (USDA) back mortgage programs that are often an option for first-time homebuyers. These loans aren’t created or funded by these agencies, however; they’re offered through approved mortgage lenders throughout the U.S. Some lenders even specialize in certain types. Here’s an overview:

• FHA loan: Insured by the Federal Housing Administration, FHA loans allow you 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, you’ll pay FHA mortgage insurance premiums (MIP), similar to the insurance you’d pay for a low-down payment conventional loan. The difference, though: You can’t stop paying FHA MIP unless you refinance out of an FHA loan entirely.
• VA loan: The VA guarantees home loans for eligible U.S. military members (active duty, veterans and surviving spouses). These don’t require a down payment, though there is a funding fee.
• USDA loan: USDA loans don’t require a down payment, but you’ll need to purchase in a designated rural area and all under area-specific income limits to qualify.

Good Neighbor Next Door

The Good Neighbor Next Door program, overseen by the U.S. Department of Housing and Urban Development (HUD), is geared toward law enforcement officers, firefighters, emergency medical technicians and pre-kindergarten through 12th-grade teachers. If you work in one of these professions, you could buy a home in a “revitalization area” for 50 percent off, provided you then live in the home for at least three years. You can search for properties available in your state on the program’s website.

HomePath Ready Buyer Program

Fannie Mae’s HomePath ReadyBuyer program is geared toward first-time buyers interested in a foreclosed home. After taking a required online homebuyer education course, you can receive up to 3 percent in closing cost assistance toward the purchase of a property that’s been foreclosed and is now owned by Fannie Mae. This program isn’t for everyone, however: Not only are you limited in your choice of properties, but the options (like many foreclosed homes) might need lots of repairs.

Energy-efficient mortgage (EEM)

Making green upgrades can be costly, but you can get an energy-efficient mortgage (EEM) — either a conventional loan or one backed by the FHA or VA — to help finance them. This type of mortgage allows you to tack the cost of energy-efficient upgrades (think new insulation, a more efficient HVAC system or double-pane windows) onto your primary loan, without requiring a larger down payment.

However, EEMs come with larger mortgage payments (since you’re borrowing more), and there are certain requirements, including an energy assessment. Those larger payments might be worth it, though, as you could save on your utility bills in the long run.

Native American Direct Loan (NADL) and Section 184 program

The Native American Direct Loan (NADL), guaranteed by the VA, and Section 184 loan, guaranteed by HUD, provide financing to eligible Native American homebuyers. A Section 184 loan requires just 2.25 percent down. The NADL program has no down payment requirement, but is only for Native American veterans and their spouses.

Down payment grants

A down payment or first-time homebuyer grant is free money to help you cover your down payment or closing costs. The grants are usually awarded to low- or moderate-income borrowers, typically defined as those earning no more than 80 percent of the median income in their area. They might have other requirements, too, like a minimum credit score and maximum home purchase price.

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First-generation homebuyer help

Some states have earmarked funds specifically to assist first-generation first-time homebuyers — those who meet the definition of a first-time homebuyer and whose parents haven’t owned a home. In Rhode Island, for example, the state’s housing finance agency is piloting a program that provides a $25,000 forgivable assistance loan to eligible borrowers. Minnesota offers a similar program that provides loans of up to $35,000.

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Remember that programs vary by state, but you can find programs you qualify for through: 

• HUD's website
• State housing authorities
• Charities, nonprofits, and employer programs

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