Key Takeaways
- Buyers may qualify for a mortgage with just 3% down.
- FHA loans require a minimum credit score of 580.
- VA loans offer zero down payment for military members.
- USDA loans provide 0% down for rural properties.
Government-backed mortgage programs can make homeownership more accessible for first-time home buyers. Mortgages may offer some or all of the following benefits not available to the general public:
- Automatic mortgage rate discounts
- Low-down payment mortgage options
- Reduced mortgage insurance premiums
This article highlights seven popular loan programs for first-time home buyers to help you choose which first-time buyer mortgage may be best for your American Dream of homeownership. Once you understand your options, compare mortgage lenders to find the best rates and terms.
1. Conventional 97 Mortgage
Popular with: Home buyers with above-average income and credit scores
Conventional 97 is a low-down payment loan backed by Fannie Mae, allowing first-time buyers to make a 3% down payment on a single-family home. Buyers must meet eligibility standards for loan size, credit score, and debt-to-income ratio, and attend a HUD-approved homeownership education course before closing.
2. HomeReady Loan
Popular with: Home buyers with low- to moderate-income who prefer 30-year fixed-rate mortgages
HomeReady is a 3% down payment mortgage backed by Fannie Mae, designed for buyers with low- to moderate-income. It offers discounted mortgage rates and reduced private mortgage insurance (PMI) premiums. Use our income limits calculator to see if you qualify for this program in your area. Buyers must complete a homeownership education class before closing.
3. Home Possible Loan
Popular with: Buyers with low- to moderate-income and good credit
Home Possible is a low-down payment mortgage backed by Freddie Mac, similar to Fannie Mae's HomeReady program. It offers a 3% down payment option and discounted mortgage rates and PMI for eligible buyers.
4. FHA Mortgage
Popular with: Buyers with lower credit scores and moderate-to-high income
FHA mortgages are government-backed loans with a 3.5% down payment option, offering flexibility for lower credit scores and non-traditional income sources. FHA loans require mortgage insurance premiums for the life of the loan.
5. USDA Mortgage
Popular with: Buyers in suburban and rural areas
USDA mortgages offer 100% financing and no down payment for buyers in rural and suburban areas. Reduced mortgage insurance premiums and lower interest rates make USDA loans a popular choice for eligible buyers.
6. VA Loan
Popular with: Buyers with military experience
VA mortgages offer no down payment and no mortgage insurance for eligible military members, veterans, and surviving spouses. VA loans often feature lower interest rates than conventional loans due to government backing.
7. Fannie Mae HomePath Ready Buyer Mortgage
Popular with: Buyers looking to purchase discounted homes as-is
The HomePath Ready Buyer mortgage allows buyers to purchase foreclosed homes at a discount. Buyers can finance the purchase with a 3% down payment and may qualify for closing cost assistance. Homes are sold as-is, so some may require repairs.
Common Questions About First-Time Home Buyer Mortgages
Who qualifies as a first-time home buyer?
A first-time home buyer generally has not owned a home in the last three years. Exceptions are made for displaced homemakers and single parents.
What is the easiest house loan to get?
FHA loans typically have the most flexible requirements regarding credit score and down payment, making them easier to qualify for compared to other loan types.
How do I get pre-approved for a loan?
Home buyers can get pre-approved by visiting a lender or applying online. The process takes minutes and verifies basic income, employment, and credit information.
Can I buy a house with no down payment?
Yes. VA and USDA loans offer no-down-payment options, and down payment assistance programs may also reduce or eliminate the need for a down payment.
