Buying your first home is one of the biggest financial decisions you will ever make. The good news: there are loan programs built specifically for first-time buyers that make it easier to qualify and require less money down. Here are the best options in 2026.
What Counts as a “First-Time Homebuyer”?
For most programs, a first-time homebuyer is someone who has not owned a home in the past 3 years. Even if you owned a home before, you may qualify if enough time has passed. Some programs have no prior ownership requirement at all.
FHA Loans: Best for Lower Credit Scores
FHA loans are backed by the Federal Housing Administration and are one of the most popular options for first-time buyers.
- Minimum down payment: 3.5% with a credit score of 580 or higher. 10% if your score is 500 to 579.
- Credit score minimum: 500 (though most lenders prefer 580+).
- Mortgage insurance: Required. You pay an upfront premium (1.75% of the loan amount) plus an annual premium (0.15% to 0.75% depending on the loan) for the life of the loan if you put less than 10% down.
- Best for: Buyers with credit scores under 700 who cannot qualify for conventional loans.
Conventional 97 and HomeReady: Best for Buyers With Good Credit
These conventional loan programs allow down payments as low as 3% with better terms than FHA if your credit is solid.
- Conventional 97: Available from Fannie Mae and Freddie Mac. Requires a 620+ credit score and 3% down. No income limit.
- Fannie Mae HomeReady: Designed for moderate-income buyers. Requires a 620+ score and 3% down. Income must be at or below 80% of the area median income. Allows income from a roommate or non-borrower household member to help you qualify.
- Freddie Mac Home Possible: Similar to HomeReady. 3% down, 660+ credit score, income limits apply.
- Mortgage insurance: Required until you reach 20% equity — but it can be canceled, unlike FHA mortgage insurance.
VA Loans: Best for Veterans and Service Members
VA loans are backed by the Department of Veterans Affairs and are the best mortgage deal available — if you qualify.
- Down payment: $0 required. You can buy with nothing down.
- Mortgage insurance: None. You pay a one-time VA funding fee (1.25% to 3.3% of the loan, depending on down payment and whether it is your first VA loan). This can be financed into the loan.
- Credit score: VA sets no minimum, but most lenders require 620+.
- Eligibility: Active-duty service members, veterans who served the required time, National Guard and Reserve members (with qualifying service), and surviving spouses of veterans.
- Best for: Any eligible veteran or service member — it is almost always the best loan available to those who qualify.
USDA Loans: Best for Rural Buyers
USDA loans are backed by the US Department of Agriculture and are for buyers in eligible rural and suburban areas.
- Down payment: $0 required.
- Mortgage insurance: A 1% upfront guarantee fee and 0.35% annual fee — much lower than FHA mortgage insurance.
- Income limits: Household income must be at or below 115% of the area median income.
- Location requirement: The property must be in a USDA-eligible area. Many suburban and rural areas qualify — check the USDA eligibility map at usda.gov.
- Credit score: 640+ is typical for streamlined underwriting.
- Best for: Low-to-moderate income buyers purchasing in eligible areas who want to buy with no down payment.
State and Local Down Payment Assistance Programs
Most states offer first-time homebuyer programs that provide grants or forgivable loans to help cover the down payment and closing costs. These programs vary widely by state and can provide $3,000 to $25,000 or more in assistance.
Search for your state’s housing finance agency (HFA) to find programs you may qualify for. Many require a homebuyer education course to participate.
How to Choose the Right Loan
- Military background? Apply for a VA loan first. It is almost always the best deal.
- Buying in a rural area with lower income? Look at USDA loans.
- Lower credit score (below 700)? FHA is usually your best option.
- Good credit (700+) and buying in a higher-cost area? A conventional loan with 3% to 5% down may offer better total cost than FHA.
Bottom Line
First-time homebuyers have more options than most people realize. Get pre-approved with at least three lenders, compare loan types, and check your state’s down payment assistance programs before you commit. The right loan can save you tens of thousands of dollars over the life of your mortgage.