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What Is A First Time Home Buyer Program? Everything You Need to Know!

Couple Standing on steps on new Home with moving cardboard boxes

When buying your first home, it’s normal to need financial assistance from a bank. However, many programs in the United States assist first-time home buyers, all of which can help make your goal of owning a home come to fruition. There are several types of first-time home buyer programs, from down payment assistance (DPA) loans to closing assistance programs and government-backed loans. All these programs are made available with one goal: to make it easier for first-time buyers to get into their first home. Read on to find out more, including how first-time home buyer programs work, their advantages and disadvantages, and answers to some of the most frequently asked questions.

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 How Does It Work?

Whichever first-time home buyer program you qualify for, it will provide you with some financial advantage and incentive that makes buying your first home easier. The way the various programs work and how much they can save you varies from program to program, sometimes significantly.

The HomePath program from Fannie Mae is an excellent example of a first-time buyer program. It allows first-time home buyers to purchase a foreclosed home with as little as 3% down. There are also down payment assistance (DPA) loans available from many lenders, which could save you thousands over the life of your home loan by giving you the loan at 0% interest.

Most states also have several state and federal first-time home buyer programs that, for example, help you lower your tax bill or get credits on other bills. Even local governments have programs to help you save money when buying your first home. The biggest question is which programs are available where you live and which you qualify for, which a competent real estate agent can help you answer.

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Image By: fizkes, Shutterstock

What Are the Different Types of First-Time Home Buyer Programs?

There are several types of first-time home buyer programs, some of which will likely be available where you live. Some of the most popular first-time home buyer programs are below.

Down Payment Assistance (DPA) Loans

A DPA provides financial help with your down payment, usually in the form of a low-or-no-interest loan.

Down Payment Assistance (DPA) Grants

These are exactly the same as DPA loans, except you don’t have to pay them back.

Closing Assistance Programs

Just as there are programs to help you pay your down payment, there are programs to help pay your closing costs.

Government-Backed Home Loans

FHA, USDA, and VA loans are the three types of government-backed loans you can get on a first-time home purchase. Each of the three programs has different qualifications and regulations, but all three can significantly lower your home-buying costs if it is your first home.

The Good Neighbor Next Door program

The Department of Housing and Urban Development (HUD) has a Good Neighbor Next Door program that gives 50% off of HUD properties to teachers, firefighters, EMTs, and law officers.

The HomePath Ready Buyer program

This program from the federal agency Fannie Mae allows first-time home buyers to put as little as 3% down on their first home and get back up to 3% of their closing costs also.

Where Is It Used?

Thousands of Americans use first-time home buyer programs throughout the United States every year. The IRS defines a first-time home buyer as someone who has not owned a home in the last three years, so if you have owned a home in the past, you might still qualify if you haven’t owned one recently.

Most of the people who apply for and get accepted into first-time home buyer programs are those with a lower income level, especially younger couples with little or no credit history. However, your age makes no difference in whether you can qualify for a first-time home buyer program.

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Image By: Prostock-studio, Shutterstock

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Advantages of First-Time Home Buyer Programs

First-time home buyer programs have many advantages and few disadvantages. Below are the advantages they offer, most of which are financial.

  • They help you buy your first home faster
  • They can lower your monthly mortgage substantially
  • They can help you with down payment and closing fees
  • They can lower the amount you need to pay as a down payment
  • They can lower your taxes
  • They allow you to buy with a low credit score
  • They lower your interest rates

Disadvantages of First-Time Home Buyer Programs

Although they have many advantages, first-time home buyer programs also have a handful of disadvantages.

  • Your loan amount might be lower
  • You may need mortgage insurance
  • Many programs have income limits
  • You’ll have little equity for the first few years

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Frequently Asked Questions (FAQs)

Who Qualifies as a First-Time Home Buyer?

A person who has not owned a home in 3 years (36 months) or more can qualify as a first-time home buyer.

Do All Lenders Have the Same First-Time Buyer Programs?

While the rates may be similar, lenders have different programs for first-time buyers. Some are better than others, so do your due diligence and shop around.

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Image Credit: Dragana Gordic, Shutterstock

Can a Person Qualify for a First-Time Home Buyer Program With Bad Credit?

Several federal mortgage programs may be available if you have bad credit.

Do All First-Time Home Buyer Loans Need to Be Repaid?

Some first-time home buyer loans, called grants, do not have to be repaid. Check with your financial advisor or real estate agent to see if you qualify, and remember that qualifying isn’t easy.

Are There State and Federal First-Time Home Buyer Programs?

The US government and all 50 states have first-time home buyer programs that you can apply to if you’re a first-time home buyer.

Do All First-Time Home Buyer Programs Save You Money on Your Mortgage?

Not all programs lower your mortgage costs. For example, one program will let you purchase your first home for 3% down. That won’t save you money, but if you can’t afford a large down payment, it could get you into your first house a lot more quickly.

Whom Should I Ask About First-Time Home Buyer Programs?

An experienced real estate agent or a seasoned financial advisor are the two best people to ask about first-time home buyers’ programs.

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Final Thoughts

First-time home buyer programs are designed to help American families purchase their first home. Some programs help lower your mortgage rate, others your interest rate, but all of them make it financially easier for you to qualify for and purchase your first home. We hope the information provided today has been of great help. If you’re buying your first home soon, best of luck finding all the financial assistance you can get!

See also: Can You Be a First-Time Home Buyer Twice? The Surprising Answer!


Featured Image Credit: UfaBizPhoto, Shutterstock


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