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While there are many different home loan options, not all of them are affordable for first-time homebuyers. The large down payments and high interest rates of conventional loans make it difficult for aspiring homeowners to secure a house. But with the help of different programs that accommodate imperfect credit and low down payment capabilities, homeownership becomes more possible. This article lists the different home loan options and programs for first-time home buyers.
Don’t have much saved for a 20% down payment? The Federal Housing Administration (FHA) can help you. With an FHA loan, you can put down a 3.5% down payment and lower closing costs. While there aren’t specific FHA loans for first-time buyers, they can be helpful for those with a less-than-average credit score or who struggle to pay upfront.
To qualify for a 3.5% down payment, you need a credit score of at least 580 and a debt-to-income ratio (DTI) of less than 43%.
2. USDA Program
If you’re open to a home in rural or suburban areas, the US Department of Agriculture (USDA) program can help you get one. What’s even better is you can get one with no down payment at all. This is one of the popular home loan options, as it also offers great interest rates, affordable 30-year terms, and can even cover closing costs.
To qualify, you need a credit score of 620. Families of 1-4 members also have a household income limit of about $114,550.
3. Down payment assistance programs
Sometimes, the monthly mortgage payments feel more manageable than the upfront payments. Down payment assistance programs can lighten the load. Different lenders have different first-time homebuyer loan options—some provide grants that don’t need to be paid back at all, under certain conditions. There are also other home loan options with different terms:
- Forgivable Loan: A loan that can be ‘forgiven’ or doesn’t need to be paid back after living in the home for a set number of years.
- Deferred Loan: Works like a second mortgage that only needs to be paid after your first mortgage or when you sell the home.
- Low-Interest Loan: Monthly payments with little to no interest rate made along with your mortgage payments.
While there are different qualifications for down payment home loan options, they generally have income limits, require a credit score of at least 620, and the completion of a homebuyer education course.
4. Good Neighbor Next Door
Working as a teacher, police officer, firefighter, or EMT can be a tough job, and the U.S. Department of Housing and Urban Development (HUD) recognizes that. To these workers, they offer the Good Neighbor Next Door program, which provides a 50% discount on homes in revitalization areas. These areas are designated by HUD, and generally have below-average household incomes, low homeownership, and high foreclosure rates. Through these programs, the HUD aims to support economic growth and stability in the area.
If you’re a first-time homebuyer working in public service jobs that qualify for this program, this is one of the home loan options to consider.
5. HomePath ReadyBuyer
Closing costs can also be an unexpected fee that hurts pockets. The Federal National Mortgage Association offers 3% in closing cost assistance to first-time buyers. This can really help lower your costs, since closing fees often cost more than first-time homebuyers would expect.
Taking a homebuyer education course is a requirement to qualify. While this program assists in payments, there are limited home options, as it only offers foreclosed homes for a set period of time.
Fast pre-approvals, tailored loans, and trusted advice—that’s what you can expect with Nclusive Financial. We have a variety of first-time homebuyer loan options, such as FHA loans for first-time buyers, USDA loans, and down payment assistance programs. Whether buying your first home, investing in property, or looking for the right loan, we’re here to help you make it happen. Let’s turn your next move into a reality.
Key Takeaways
- First-time homebuyers can struggle with making upfront payments, and making use of assistance programs can greatly help in making their homeownership dreams come true.
- FHA loans, USDA, and down-payment assistance are programs that significantly lower costs for qualified applicants.
- Other programs, such as Good Neighbor Next Door and HomePath ReadyBuyer, offer designated houses in certain areas at a more affordable cost.
References
- Chen, J. (2025, February 7). First-Time Homebuyer: Definition and Assistance Programs. Investopedia. https://www.investopedia.com/terms/f/firsttimehomebuyer.asp.
- Dehan, A. (2025, June 2). Guide to first-time homebuyer loans and programs. Bankrate. https://www.bankrate.com/mortgages/first-time-homebuyer-loans-and-programs/#federal-programs.
- Gerson, E.S. (2025, April 30). Down Payment Assistance Programs: How They Work. Experian. https://www.experian.com/blogs/ask-experian/down-payment-assistance-programs/.
- USDA loans for California residents. (n.d.) USDA Loans.
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