First-Time Home Buyer Grants (and How to Qualify)

Written by Katy ByromSeptember 22nd, 202213 minute read

How to qualify | Programs by type | Non-profit programs | State and local programs | Lender programs | More ways to save

Affordability is a growing concern among first-time home buyers, who cite "saving for down payment" as one of the greatest barriers to homeownership.

If you're thinking about buying a house β€” but aren't sure how you'll afford the initial costs β€” help is available.

The U.S. is home to more than 2,500 first-time homebuyer grants and loan programs offering down payment assistance and other benefits, including:

While many first-time home buyer programs are funded through federal agencies like the U.S. Department of Housing and Urban Development (HUD), they're typically run by state and local agencies. To qualify for assistance, you'll need to meet specific eligibility requirements and work with a participating lender.

Read on to learn about general qualification criteria and the different grants and programs in your state that can help you save on your first home purchase.

πŸ’° More ways to save on your first house

  • Find your realtor through a free service like Clever Real Estate, which offers built-in savings for qualifying buyers (0.5% cash back) as an added perk.
  • Ask the seller to cover some of your closing costs. There are limits to how much a seller can legally pay back to the buyer so ask your agent how it works.
  • Compare lenders β€” and not just interest rates. You'll also want to look at fees, points, appraisal costs, and credits tacked onto your loan.

How to qualify for first-time home buyer grants

Most first-time home buyer grants are administered through state Housing Finance Agencies (HFAs) and local community development departments, which receive federal funds to meet the affordable housing needs of their residents.

Certain nonprofits and lending institutions also offer grants and forgivable loans for first-time home buyers.

While eligibility requirements vary somewhat by program, there are usually some common steps to apply.

  1. Verify funding availability. Grant funding for first-time home buyers is usually offered on a first-come, first-served basis. If program money runs out, you may need to hold off on applying until the funds are replenished.
  2. Meet the definition of a first-time home buyer. You're generally considered a first-time home buyer if you haven't owned a home in the past three years. So even if this isn't technically your first home, you could still qualify.
  3. Qualify for a mortgage. Before a first-time home buyer program will grant you funds, you'll have to be approved for a mortgage with a participating lender. They'll look at your finances to verify that you're not taking on more debt than you can reasonably afford.
  4. Meet financial requirements. While specifics vary by program, most have minimum credit score and maximum income requirements. And you may need to contribute at least SOME of your own money β€” usually no more than 1% of the purchase price.
  5. Find a qualifying property. First-time home buyer grants and loans can be used to purchase a primary residence ONLY β€” so vacation and investment properties are off limits, with a possible exception for a multi-unit property you also plan to live in.
  6. Complete home buyer education. Most first-time home buyer programs require you to complete a class or get counseling on homeownership before you close on your house.

Some affordable home loan and down payment assistance programs are available regardless of first-time home buyer status. So be sure to check with your state's HFA and HUD resource pages to see what's available in your area.

First-time home buyer programs by type

First-time home buyer programs range from down payments assistance to discounts on foreclosed properties for teachers and first-responders.

Below are some of the most common programs for first-time home buyers.

Low down payment loans

While not a grant, a low down payment mortgage loan provides an opportunity to purchase a home with little or no money down β€” though you'll usually need to pay private mortgage insurance (PMI) β“˜ in exchange for a down payment of less than 20%.

Many low down payment mortgages are offered as federally-insured loans through the Federal Housing Administration (FHA), U.S. Department of Agriculture (USDA), and U.S. Department of Veterans Affairs (VA) β€” but some conventional loans also offer down payment options as low as 3%. Fannie Mae and Freddie Mac have also introduced low-down payment loans.

You can apply for these loans directly through your lender β€” just double-check that they offer the loan type you're interested in. You may also be able to bundle a low-down payment loan with additional down payment assistance to further ease your upfront costs.

To qualify, you'll need to meet program eligibility requirements and any additional underwriting standards set by your lender. Lenders typically look for a minimum 620 credit score, but you can get an FHA loan with a credit score as low as 500.

Low down payment mortgage loan requirements

Loan type
Eligibility
Minimum down payment
Minimum credit score of 500 and DTI no higher than 43%; upfront PMI payment of 1.75%
3.5% (10% with a credit score below 580)
Active duty service members and veterans or their surviving spouses; additional underwriting requirements set by lender*
0%
Buying in a rural area; income <115% of area median; additional underwriting requirements set by lender*
0%
Underwriting requirements set by lender*
3%
Income <80% of area median; DTI no higher than 45%; additional underwriting requirements set by lender*
3%
Freddie Mac Home Possible
Income <80% of area median; DTI no higher than 45%; additional underwriting requirements set by lender*
3%
*Most lenders require a FICO credit score of at least 620 and a DTI below 36%

Down payment assistance programs

Down payment assistance (DPA) programs are designed to help first-time buyers with the large initial expense of purchasing a home. They can generally be used to cover your down payment, closing costs (such a title, lender, and appraisal fees), or both.

Most down payment assistance programs are offered through federally-funded state FHAs and local housing and community development offices. However, some nonprofits and lending institutions also offer down payment assistance.

The type and amount of assistance available varies widely by locality.

For example, low-income home buyers in San Diego County can access down payment assistance in the form of a deferred-payment loan of up to 17% of their home's purchase price ($85,000 on a $500,000 home), plus up to $10,000 for closing costs.

Indiana's Housing Development Authority (IHDA) offers as much as $10,000 in down payment assistance as either a grant or repayable second mortgage. They also offer a 3:1 savings match of up to $4,500 when you put money into an Individual Development Account (IDA) to save for a home.

Types of down payment assistance

  • Grant: Transferred to your mortgage provider at closing and doesn't need to be repaid
  • Forgivable loan: Canceled after you've lived in the house for a certain number of years or have made a certain number of mortgage payments
  • Deferred-payment loan: Needs to be repaid only when you sell, move, refinance or pay off your original mortgage loan
  • Repayable second mortgage: Repaid alongside your mortgage; usually comes in the form of a no- or low- interest loan with a shorter timeline for repayment, often 10 years
  • Individual development account (IDA): Provides a savings match for every dollar you contribute, up to a certain amount β€” often $1,000–$5,000, depending on the program.

When applying for down payment assistance, you'll likely be required to use a mortgage product offered by the agency or lending institution providing the funds.

First-time home buyer tax credits

Some (but not all) state FHAs issue mortgage credit certificates (MCCs) for low-to-moderate income first-time home buyers. MCCs lower your federal taxes based on the amount of mortgage interest you've paid over the year.

Depending on how your state sets up its program, MCCs could erase 10–50% of your paid mortgage interest from your tax bill β€” up to $2,000 each year.

To qualify, you'll need to meet local income requirements and work with an approved MCC lender listed with your state's FHA. You'll apply for the tax credits when you apply for your mortgage.

At the federal level, the Biden administration and members of Congress have proposed up to $25,000 in refundable tax credits for first-time home buyers β€” but the bill, known as the Downpayment Toward Equity Act of 2021, has not yet been signed into law.

Assistance purchasing a foreclosed home

HUD and Fannie Mae offer individual home buyers a "first look" on their stock of foreclosed homes ahead of investors who generally purchase these types of properties.

They also offer mortgage and down payment assistance options for certain populations, including first-time home buyers and first responders.

The lack of competition from investors, coupled with a more affordable mortgage, could land you a bargain on a move-in ready home.

Good Neighbor Next Door

HUD's Good Neighbor Next Door program offers a 50% off certain HUD-owned foreclosures to first-time and repeat home buyers in the following occupations:

  • Law enforcement officer
  • Firefighter
  • Emergency medical technician
  • Pre-K–12 teacher

Homes eligible for purchase through the Good Neighbor Next Door program are located in HUD-designated revitalization areas β€” which typically have lower median household incomes, low rates of homeownership, or higher rates of foreclosure than other nearby areas.

To qualify for the 50% discount, you'll need to live in the property for at least 3 years. So be sure you're comfortable with the area before you buy.

The only way to purchase a HUD home is to work with a HUD-approved real estate broker to submit a bid on your behalf. HUD only sets aside these listings for seven days before they're opened up to investors. So if you find a home you like, you'll need to act fast.

🏑 Need a realtor? Clever Real Estate's free agent-matching service can put you in touch with a HUD-approved agent and help you save additional money through its cash back program for home buyers.

Fannie Mae HomePath Ready Buyer Program

Fannie Mae's HomePath program offers first-time home buyers the chance to purchase a foreclosed property owned by Fannie Mae to use as their primary residence.

You can buy a Fannie Mae home for as little as 3% down using a conventional mortgage β€” or 0% down using a VA or USDA loan. Buyers earning less than the median income for their purchase area can also apply for 3% in closing cost assistance.

To take advantage of the HomePath program, you'll need to qualify for a mortgage and work with a Fannie Mae-approved real estate agent to submit an offer on your behalf.

Fannie Mae offers multiple affordable mortgage loans that can be used in combination with the home purchase program β€” including mortgages that can help with repairs, since Fannie Mae properties are sold "as is."

To qualify for a HomeReady or HomeStyle mortgage, you'll need a credit score of at least 620 and a maximum DTI of 36% (or 45% with a credit score of 680 or above). You'll also need to complete 4–6 hours of homebuyer education through Fannie Mae.

Nonprofit-backed first-time home buyer programs

Habitat for Humanity

Habitat for Humanity is a global nonprofit that provides safe, decent housing for people in need.

Eligibility for a Habitat home is determined at a local level by each office's "family selection committee." Unfortunately, there are usually far more applicants than homes available.

Habitat for Humanity eligibility requirements:

  • Demonstrate your need for safe, affordable housing
  • Complete homeownership classes and service hours
  • Be able to repay an affordable, no-interest mortgage covering the cost of your home

Additional eligibility requirements related to debt, credit score, and income vary by location.

You can apply for Habitat for Humanity's homeownership program through your local Habitat office.

Neighborhood Assistance Corporation of America (NACA)

NACA is a nonprofit affordable homeownership program for low-to-moderate income first-time home buyers.

NACA's "Best in America Mortgage" comes with some impressive perks you won't find anywhere else.

Key benefits of NACA:

  • Below-market interest rates
  • No minimum credit score
  • No down payment requirement
  • Zero fees or closing costs

To qualify for a NACA home loan, you'll need to make less than 100% of the median income for the area β€” or buy in a neighborhood where household incomes are below the area median.

NACA also requires that you participate in comprehensive counseling to ensure your financial readiness to purchase a home. The qualification process can take some time β€” especially if you need help to lower your debts or improve your credit β€” so it's best to start early.

NACA purchase program eligibility requirements:

  • Steady employment and income
  • History of on-time payments
  • No unpaid liens, judgements, or delinquent debts
  • Proof of minimum funds, including earnest money, inspection fees, homeowner's insurance, property taxes, and 1–6 months of cash reserves

You can start the application process by attending a NACA workshop in your area.

National Homebuyer Fund

The National Homebuyer Fund is a nonprofit program that offers up to 5% in down payment and closing cost assistance for low-to-moderate-income borrowers. First-time and repeat home buyers are welcome to apply.

Assistance is available as either a grant or deferred payment loan, which is forgiven after three years β€” as long as you live in the house and make your mortgage payments.

National Homebuyer Fund eligibility requirements:

  • Credit score of 640 or above
  • DTI ratio lower than 45%
  • Income not exceeding 115% of the area median

Access to down payment assistance from the National Homebuyers Fund is through a participating lender. You can find one by asking your real estate agent or calling the National Homebuyer Fund hotline at (866) 643-4968.

πŸ€“ Need an expert on first-time home buying? Clever Real Estate's free agent-matching service can help. Get connected to the top local agents in your area. Plus, qualify for 0.5% cash back on your new home. Interview as many agents as you like, with no obligation to commit.

State and local first-time home buyer programs

Residents in every U.S. state can access first-time home buyer assistance programs through their state's Housing Finance Agencies (HFAs) and other publicly and privately funded programs.

HFAs are federally funded agencies that help meet their state's housing needs through affordable housing and community development programs. The types of assistance offered vary, but may include:

  • Home purchase loan programs offering lower interest rates and low down payments to credit-worthy low-to-moderate income borrowers
  • Grants and deferred-payment loans for down payment or closing cost assistance
  • Mortgage credit certificates (MCCs) providing up to $2,000 off your tax bill for mortgage interest paid over the year

Additional sources of funding for first-time home buyers can be found through your local government and area nonprofits, so be sure to research your options.

Below are the HUD and HFA resource pages where you can learn about the homeownership assistance programs in your state and local community.

First-time buyer resources by state

State
HUD Resources
HFA Resources
Alabama
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
Florida
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin
Wyoming
Washington DC

Lender-based first-time home buyer programs

While first-time home buyer programs are often associated with state and local government, some private lenders also offer assistance for first-time home buyers. Below are a few notable examples.

Federal Home Loan Bank affordable housing programs

First-time home buyers can apply for down payment and closing costs assistance through approximately 6,600 banks belonging to the Federal Home Loan Bank system (FHLB).

The FHLB is made up of 11 regional banks, which provide member institutions with billions of dollars in low-cost funding to support local housing and community development needs β€” including access to first-time homeownership.

Each regional bank governs first-time home buyer programs for the members in their multi-state district β€” so the type and amount of assistance you qualify for depends on where you live.

For example, residents of Pennsylvania, Delaware, and West Virginia can get a matching down payment grant of up to $5,000 through the First Front Door Program overseen by FHLB Pittsburgh.

First-time home buyers in Arizona, California, and Nevada may be eligible for up to $22,000 in matched savings through two different programs offered through FHLB San Francisco.

To qualify for FHLB grants, buyers must:

  • Fall within a certain income limit for the area (usually 80% of the median)
  • Qualify for a mortgage with a participating FHLB bank
  • Complete an approved homebuyer education class
  • Use the home as their primary residence
  • Contribute at least some of their own funds toward the home purchase

To find out about FHLB grants available in your area, contact your regional bank. Each regional FHLB lists their affordable housing programs and keeps a directory of participating members.

Find your regional FHLB

Regional FHLB
States and territories served
AL, DC, FL, GA, MD, NC, SC, VA
CT, ME, MA, NH, RI, VT
IL, WI
KY, TN, OH
AR, LA, MS, NM, TX
AK, AS, GU, HI, ID, IA, MN, MO, MP, MT, ND, OR, SD, UT, WA, WY
IN, MI
NY, PR, NJ, VI
DL, WV, PA
AZ, NV, CA
CO, NE, KS, OK

Bank of America Community Homeownership Commitment program

Bank of America provides modest-income and first-time home buyers with low down payment mortgage options as well as grants for down payment and closing costs.

If you qualify for a mortgage with Bank of America and meet income eligibility requirements for your area, you may be able to get:

  • An Affordable Loan Solution mortgage requiring only a 3% down payment
  • A lender credit of up to $7,500 applied to closing costs
  • A grant of up to 3% of the sale price (or $10,000) applied to your down payment

You can search for program availability in your state at the Bank of America down payment center.

Always shop around for the best rates!

Other lending institutions may offer their own homeowner assistance programs β€” it never hurts to ask before you apply. Just make sure your lender doesn't tack on extra fees or a higher interest rate in exchange for the "assistance."

The best way to ensure you're getting the best mortgage is to request a loan estimate from multiple lenders. This will show not only the interest rate, but the fees and credits you can expect to accompany your loan.

More way to save on your first home

Even if you don't qualify for a first-time home buyer program through your state or local government, you can find significant savings through alternative sources such as home buyer rebate and cash back programs, employer assistance, and more.

Home buyer rebates and cash back programs

First-time home buyers can get additional savings by finding their agent through a service like Clever Real Estate, who gives qualifying buyers cash back after closing as an added perk.

As of this writing, home buyer rebates are allowed in all but the following 8 states: Alaska, Kansas, Louisiana, Mississippi, Missouri, Oklahoma, Oregon, and Tennessee.

The cash back percentage varies by brokerage β€” but starts at a minimum of 0.2%.

The downside is that some discount brokerages require their agents to take on a higher-than-average number of clients, so you might not get the kind of hands-on guidance you want while trying to navigate your first home purchase.

If you're looking for savings, but don't want to sacrifice service, Clever Real Estate is a good option.

Through Clever's free agent-matching service, you'll get your pick of top local agents from well-known brands like Re/MAX and Keller Williams. You'll also get 0.5% back on your home purchase. On a $400,000 home purchase, that's $2,000 back in your pocket!

Β» SAVE: Buy with a top local agent, get thousands back after closing!

Seller-paid closing costs

Sometimes a seller will agree to pay a portion of the buyer's closing costs in order to help a home purchase move forward, also known as seller's assist.

Often, these seller concessions are negotiated following a home inspection β€” though, your agent may recommend asking for certain items directly in your offer.

πŸ’° Common seller concessions

  • Appraisal fees
  • Inspection fees
  • Attorney fees
  • Loan origination fees
  • Title insurance fees
  • Mortgage points (money paid upfront to lower your monthly interest rate)

Mortgage regulators place limits (ranging from 2–9%) on the amount of money a seller can contribute to a buyer's closing costs, so be sure to verify any concessions with your lender.

Generally, the more of your own money you contribute to a down payment, the more you can legally accept from a seller β€” but the total amount can never exceed your actual closing costs.

Employer assisted housing programs

Some employers and labor unions offer incentives to help their employees cover down payment and closing costs on a home.

This type of perk may come in the form of a grant or possibly a loan that's forgiven after you've been with the company for a certain amount of time. It depends on the employer.

Assistance may be offered in the form of a You can ask your HR department about any housing assistance that might be offered by your employer.

πŸ‘‹ Next step: Talk to an expert!

If you’re serious about buying, connecting with a good local agent (or even a few) is a good first step. They can help you determine your budget and target neighborhoods, refer you to trusted local lenders so you can get pre-approved, and help you find homes in your budget.

First-time home buyer grant FAQs

Some first-time home buyer grants offer as much as $100,000 in assistance, while others provide as little as $500. The amount of grant money you qualify for depends on the programs available in your state as well as qualifying factors like income and where you plan to buy.

Eligibility requirements for first-time home buyer grants vary somewhat from program to program, but you can generally expect to have to meet certain income and credit requirements, complete a homebuyer education course, agree to use the home as your primary residence, apply for a mortgage with a program-approved lender, and use at least some of your own funds toward a home purchase.

First-time home buyer grants include cash and forgivable or deferred-payment loans to help with down payments and closing costs. First-time home buyers can also access low down payment mortgage loans and homebuyer education through grant programs for first-time buyers.

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