What you need to know about first-time homebuyer programs

Young man standing in kitchen reading about first time home purchasing.Image: Young man standing in kitchen reading about first time home purchasing.

In a Nutshell

First-time homebuyer programs can make it easier for you to buy your first home, but eligibility requirements vary from state to state.
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Homeownership is an American dream.

But it can be difficult to get to that point, especially if you don’t have much extra cash on hand. The good news is there are first-time homebuyer programs designed to make homeownership more affordable and attainable. Here’s what you need to know about them.

How first-time homebuyer programs work

First-time homebuyer programs are usually administered by state housing authorities. While programs vary from state to state, they’re designed to make it easier for first-time homebuyers to purchase a home. For information about programs offered, you can visit the housing authority website in your state. You can also use the Department of Housing and Urban Development’s list of state-based first-time homebuyer resources.

According to the U.S. Department of Housing and Urban Development, or HUD, a first-time homebuyer is someone who hasn’t owned a primary home in the past three years. So even if you’ve owned a home before, you may qualify for some first-time homebuyer programs.

First-time homebuyer programs typically offer help with conventional loans and government-backed options like FHA, USDA and VA loans. While programs may change at any time, many of them require that borrowers complete a homebuyer education class and make a minimum cash contribution. Some ask for minimum credit scores or certain debt-to-income ratios.

Programs may also have purchase price and income limits, meaning you can’t use them if the house you’d like to buy or your income exceeds the limits. In Iowa, for example, one program states that your household income must not exceed $139,580, and the house you’re buying cannot cost more than $381,000.

Examples of first-time homebuyer programs

Let’s take a look at a couple of the benefits of first-time homebuyer programs in different states so you can get an idea of what to expect.

  • Kansas Housing First-Time Homebuyer Program: Administered by Kansas Housing, this first-time homebuyer program provides a 0% interest loan for 15% to 20% of the home’s purchase price. You can use the loan to cover your down payment. The loan will be forgiven if you live in the home for at least 10 years.
  • Idaho Housing Second Mortgage Program: This program offers a 10-year 5% fixed-rate loan for your down payment and closing costs. You can borrow up to 5% of the lesser of the purchase price or appraised value of your home.

Repeat homebuyer programs

If you’ve purchased a home within the past three years and want to move to another one, take a look at repeat homebuyer programs.

A repeat homebuyer program can make it easier to pay for your next home with perks like low interest rates, down payment and closing cost assistance, reduced mortgage insurance, and less paperwork.

Examples of repeat homebuyer programs

Here are a couple of examples of the benefits of repeat homebuyer programs.

  • Minnesota Housing Finance Agency Step Up: Available to repeat homebuyers, Step Up comes with affordable mortgages with fixed interest rates and a down payment requirement of as little as 3%. You may also get down payment and closing cost assistance of up to $17,000.
  • Illinois Housing Development Authority Access Forgivable: This is a 30-year, fixed-rate mortgage for new or repeat homebuyers featuring down payment and closing cost assistance of up to $6,000. The loan is forgiven monthly over 10 years.

Mortgage certificate programs

 Mortgage credit certificate programs can help lower-income homeowners save money on their federal tax bill. As long as you meet state-specific criteria, you can get a tax credit of up to $2,000 per year.

The tax credit depends on a number of factors, including mortgage amount, interest rate and the MCC percentage advertised by the state agency — anywhere between 10% and 50%. Not all states offer an MCC but Idaho, Louisiana and Ohio are several examples of states that do.

You have to be a first-time homebuyer to receive this tax credit unless you’re purchasing a home in a targeted area. You must also meet income and purchase price limits, which are based on your state.

Next steps

If you’re in the market for your first home, first-time homebuyer programs can be very useful. Compare mortgage rates, ask a lender or visit the state housing authority in your state to learn more. Before you apply for a program, make sure you understand the requirements and can meet them.

Want to learn more? Check out some of our top mortgage lenders for first-time homebuyers.

  • Homebridge Mortgage: Homebridge offers resources that specifically cater to first-time homebuyers.
  • Rocket Mortgage: Consider Rocket Mortgage if you’d prefer an online-first experience.
  • PennyMac Mortgage: PennyMac offers a wide variety of home loans and shares current rates on its site, which can be helpful for people looking to buy their first home.
  • USAA Mortgage: USAA is a good option for military members and their families. 

About the author: Anna Baluch is a freelance personal finance writer from Cleveland, Ohio. You can find her work on sites like The Balance, Freedom Debt Relief, LendingTree and RateGenius. Anna has an MBA in marketing from Roosevelt Un… Read more.