Most first-time homebuyers don’t realize how many loan programs exist to help them get into a home with a smaller down payment and lower rates. FHA, VA, USDA, and conventional loans each target a different buyer profile. Here’s what you need to qualify for each one.
Overview: Which Loan Is Right for You?
| Loan Type | Min Down Payment | Min Credit Score | Income Limit | Who It’s For |
|---|---|---|---|---|
| FHA | 3.5% | 580 (3.5% down) / 500 (10% down) | None | Buyers with lower credit scores |
| VA | 0% | 620 (most lenders) | None | Veterans, active military, surviving spouses |
| USDA | 0% | 640 | 115% of area median income | Buyers in rural/suburban areas |
| Conventional (3% down) | 3% | 620 | 80% of area median income (some programs) | Buyers with good credit |
FHA Loans: Best for Lower Credit Scores
FHA loans are insured by the Federal Housing Administration and designed for buyers who don’t qualify for conventional financing. Key features:
- 3.5% down payment with a 580+ credit score. 10% down accepted with scores as low as 500.
- Mortgage insurance required: an upfront premium of 1.75% of the loan amount, plus monthly MIP (0.55%–1.05% of loan annually).
- Available for primary residences only.
- Loan limits vary by county — in 2026, the FHA loan limit is $524,225 in most areas, up to $1,209,750 in high-cost markets.
The catch: FHA mortgage insurance stays for the life of the loan if you put down less than 10%. Conventional loans let you remove PMI once you hit 20% equity.
VA Loans: Best Deal for Eligible Veterans
VA loans, backed by the Department of Veterans Affairs, offer the best terms of any government loan program:
- Zero down payment required
- No private mortgage insurance
- Competitive rates (typically below conventional rates)
- No loan limits for eligible borrowers with full entitlement
You’ll pay a one-time VA funding fee (1.25%–3.30% of loan amount depending on service record and down payment) unless you have a service-connected disability. Even with the funding fee, VA loans are usually the cheapest option for eligible borrowers.
Eligibility: 90 consecutive days of active wartime service, 181 days peacetime service, 6 years in the National Guard/Reserves, or surviving spouse of a veteran who died in service.
USDA Loans: Zero Down for Rural Buyers
USDA loans are administered by the US Department of Agriculture and target rural and suburban buyers. Despite the name, “rural” includes many suburban areas and small towns near cities.
- Zero down payment
- Income limit: 115% of area median income (roughly $110,000–$150,000 for a family of four in most areas)
- Property must be in an eligible area — check the USDA eligibility map
- Guarantee fee: 1% upfront + 0.35% annual fee (much lower than FHA MIP)
USDA loans are frequently overlooked but offer excellent terms for buyers who qualify on both income and location.
Conventional 97 and HomeReady/HomePossible
Conventional loans with just 3% down exist through Fannie Mae’s HomeReady and Freddie Mac’s HomePossible programs:
- HomeReady (Fannie Mae): 3% down, income limit at 80% of area median income, allows rental income and co-borrower income from non-residents
- HomePossible (Freddie Mac): 3% down, similar income limits, flexible source of funds for down payment
- Conventional 97: 3% down, no income limits, but mortgage insurance until 20% equity
Conventional loans have PMI that cancels automatically at 78% LTV (or you can request removal at 80%), unlike FHA mortgage insurance which can be permanent.
Down Payment Assistance Programs
Beyond loan programs, most states and many counties offer down payment assistance (DPA) grants or low-interest second loans. These can cover 2%–5% of the purchase price — sometimes more. Search “[your state] first-time homebuyer assistance” or check HUD’s directory of state housing finance agencies.
Understanding your down payment options is critical before applying. See our guide on how much down payment you need to understand the tradeoffs between different amounts.
Which Loan Should You Apply For?
- You’re a veteran: VA loan, no question. It’s almost always the best deal.
- You’re buying in a rural or suburban area with moderate income: Check USDA eligibility first.
- Your credit is below 620: FHA is likely your only conventional option.
- Your credit is 620+ and income is below area median: HomeReady or HomePossible for lower PMI costs.
- Strong credit, income above limits: Conventional 97 or put 5%–10% down for better rate.
Getting Pre-Approved
Get pre-approved before house hunting. Pre-approval requires a hard credit pull, pay stubs, tax returns, and bank statements. It tells sellers you’re a serious buyer and tells you exactly what you can borrow. Apply with 2–3 lenders to compare rates — multiple mortgage inquiries within a 45-day window count as a single credit inquiry for scoring purposes.