Is there a first-time homebuyer loan?

In short, no. There is not one uniform first-time homebuyer loan. But there are several options designed to benefit first-time buyers:

• Conventional Loans: The most frequently chosen loan type across all buyers. You can put as low as 3% down with this loan product, but it has stricter requirements than an FHA.
• FHA Loans: Low down payments (as little as 3.5%) and flexible credit requirements.
• VA Loans: For eligible veterans, active-duty service members, and some surviving spouses, often with no down payment.
• USDA Loans: Zero down payment for eligible buyers in rural areas.
• Conventional 97 Loans: Fannie Mae and Freddie Mac offer 3% down payments with a minimum credit score of 620.

What type of loan do most first-time homebuyers choose?

FHA loans are often earmarked as a first-time homebuyer loan. And while many first-time buyers may opt for FHA due to more lax restrictions, the majority of buyers (both first-time and repeat) actually go for conventional loans. According to HMDA data, 79% of all loans in 2023 were conventional, 12% were FHA, and 8% were VA.

How to pick what loan makes sense as a first-time buyer?

Here’s a quick guide:

• FHA Loan: Ideal if you have a lower credit score or can’t make a large down payment (as low as 3.5%).
• Conventional Loan: Great if you have good credit and can put down at least 3%, with fewer restrictions on the property.
• VA Loan: Best for veterans or active military members, often with no down payment required.
• USDA Loan: Perfect if you’re looking in a rural area and want a zero down payment option.

What’s the minimum down payment I need as a first-time homebuyer?

For most Americans, the minimum down payment will be 3-3.5% of the home’s price. A few exceptions apply if you qualify for a VA loan or a USDA loan, which offer zero down.

How do I qualify for a first-time homebuyer grant or assistance program?

If you’re hunting for down payment assistance, a good starting point is your state’s Housing Finance Agency (HFA) or local government—they often offer grants or loans that can really help. Nonprofits are also in the game, especially if you’re a first-time buyer.

For federal resources, HUD’s website lists local programs available by state. You can also use tools like DownPaymentResource.com to find and check your eligibility for assistance. Fannie Mae also has a great tool to help homebuyers find help with down payments.

Some state and city-specific examples of down payment assistance programs include:

If you’re seeking down payment assistance, begin by exploring your state’s Housing Finance Agency (HFA) or local government programs, as they often provide grants or loans to support homebuyers. Nonprofit organizations also offer resources, particularly for first-time buyers.

The U.S. Department of Housing and Urban Development (HUD) maintains a directory of local programs by state. Additionally, tools like DownPaymentResource.com can help you identify and assess your eligibility for various assistance options. Fannie Mae offers resources to assist homebuyers in locating down payment support.

Here are some city-specific down payment assistance programs:

Denver, Colorado:

• metroDPA Program: Provides down payment assistance as a zero-interest, 30-year deferred second mortgage. Eligible buyers can receive assistance up to a percentage of their home loan amount, based on the loan product (FHA, VA, USDA, or conventional). For instance, with a loan amount of $300,000 using an FHA loan product and 4% assistance, a borrower would receive $12,000 for down payment and closing costs. Metro DPA

Here are some city-specific down payment assistance programs

Seattle, Washington:

• Home Advantage Downpayment Assistance Program: Offers up to 4% of the first mortgage loan amount for borrowers using Home Advantage government or conventional loan programs. This assistance comes as a second mortgage with payments deferred for 30 years, or until the home is sold or refinanced.

Austin, Texas:

• Texas State Affordable Housing Corporation (TSAHC): Provides down payment assistance grants of up to 5% of the loan amount for eligible homebuyers. These grants do not require repayment and can be used in conjunction with TSAHC’s fixed-rate mortgage loan options.

Atlanta, Georgia:

• Atlanta Housing Down Payment Assistance Program: Offers up to $25,000 in down payment assistance for eligible homebuyers purchasing within the city limits. This assistance is provided as a deferred payment loan, forgivable after living in the home for a certain period.

Washington, D.C.:

• DC Open Doors Program: Provides down payment assistance loans of up to 3% of the purchase price for eligible borrowers. These loans are deferred and forgiven after five years, provided the borrower remains in the home.

Sacramento, California:

• CalHFA MyHome Assistance Program: Offers a deferred-payment junior loan of up to 3.5% of the purchase price or appraised value, whichever is less, to assist with down payment and/or closing costs.

Can I buy a home with student debt as a first-time homebuyer?

Yes, you can! Having student debt doesn’t stop you from buying a home, but lenders will look at your debt-to-income (DTI) ratio. This compares your monthly debt payments (including student loans) to your income. Most lenders prefer a DTI below 43%, but some loan options, like FHA loans, allow for higher DTIs (up to 50%). Even if your DTI exceeds the usual limits, strong compensating factors like a higher down payment or substantial cash reserves might help you qualify. The key is to ensure your overall debt load is manageable and that you have enough income to comfortably cover your mortgage and other expenses.

Can I buy a home as a first-time homebuyer with no credit?

Yes, it’s possible, but it can be more challenging. Without a credit history, most traditional lenders won’t have enough information to assess your ability to repay a mortgage. However, some loan programs like FHA loans are more lenient and may accept alternative credit data (like rental history or utility payments). You might also consider finding a co-signer or looking into programs designed for buyers with no credit, but expect higher interest rates or stricter terms. Building some credit first can make the process smoother. Additionally, remember that first-time homebuyers can always refinance later if they improve their credit, allowing them to secure better loan terms down the road.

If you’re ready to start your journey to homeownership, get pre approved with Tomo Mortgage today.