Quick answer
First-time buyer help usually stacks in three layers: a low-down-payment loan — FHA at 3.5%, VA and USDA at 0%, or Fannie Mae HomeReady and Freddie Mac Home Possible at 3% for incomes up to 80% of area median — plus down-payment assistance from a state housing finance agency or city, plus sometimes a mortgage credit certificate. Teachers, police, firefighters and EMTs can also look at HUD’s Good Neighbor Next Door, which takes 50% off the list price in designated areas.
Key facts
105%
Combined LTV allowed with a Community Seconds loan
Fannie Mae Selling Guide B5-5.1-02 · May 3, 2023
5%
TDHCA down-payment help in Texas, up to
Texas Department of Housing and Community Affairs · Program matrix Aug 17, 2026
How first-time buyer programs fit together
There is no single federal “first-time buyer program.” Instead, help comes from three places, and you can often use more than one:
- The mortgage itself. Government-backed loans (FHA, VA, USDA) and low-down-payment conventional loans from Fannie Mae and Freddie Mac cut the cash you need up front.
- Assistance on top of the loan. State housing finance agencies, cities, counties and nonprofits offer grants or second loans for the down payment and closing costs. See down-payment grants for how each type is repaid.
- Tax help. Some agencies issue a mortgage credit certificate, which turns part of your mortgage interest into a tax credit each year.
Most of the loan programs are open to repeat buyers too. The layers that usually do require first-time status — bond-funded agency loans and mortgage credit certificates — use a three-year test explained in who counts as a first-time buyer.
National loan programs compared
| Program | Minimum down | Income limit | Mortgage insurance or fee | Who it suits |
|---|---|---|---|---|
| FHA | 3.5% with a 580+ score | None | 1.75% upfront plus annual MIP | Lower scores, higher debts |
| VA | 0% | None | Funding fee (2.15% first use, under 5% down); no monthly MI | Eligible service members and veterans |
| USDA guaranteed | 0% | 115% of area median | 1% upfront, 0.35% a year | Buyers in eligible rural areas |
| Fannie Mae HomeReady | 3% | 80% of area median | PMI, cancellable | Low- to moderate-income buyers |
| Freddie Mac Home Possible | 3% | 80% of area median | PMI, cancellable | Low- to moderate-income buyers |
HomeReady and Home Possible are conventional loans with a maximum loan-to-value of 97%. Neither requires you to be a first-time buyer, but both require a homebuyer education course when every occupying borrower is buying for the first time.
Down-payment assistance on top of the loan
Assistance is usually a second loan recorded behind your mortgage. Fannie Mae calls an eligible one a Community Seconds loan and allows a combined loan-to-value of up to 105%; Freddie Mac’s Affordable Seconds allow up to 105% with a fixed-rate first mortgage. That headroom above 100% is what lets assistance cover closing costs as well as the down payment.
How much room a Community Seconds loan leaves on a $360,000 home
| Amount | |
|---|---|
| First mortgage at 97% loan-to-value (3% down) | $349,200 |
| Most total debt allowed at 105% combined LTV | $378,000 |
| Largest possible second loan | $28,800 |
| Down payment it would replace | $10,800 |
| Left over toward closing costs | $18,000 |
Closing costs on this home run about $7,200–$18,000 at the CFPB’s 2%–5% range, so a second loan this size could cover nearly all the cash due at closing. Real programs set their own, often smaller, maximums.
State housing finance agencies
Every state, plus DC, Puerto Rico and the US Virgin Islands, has a housing finance agency (HFA). Most work through participating lenders rather than lending to you directly, and they typically offer some mix of:
- Below-market first mortgages funded by mortgage revenue bonds, usually limited to first-time buyers.
- Down-payment and closing-cost assistance as a grant, a forgivable loan or a deferred loan.
- Mortgage credit certificates for buyers who meet federal income and price limits.
Expect income and purchase-price limits, a minimum credit score, a homebuyer education requirement and funding that can run out. To find yours, use the National Council of State Housing Agencies member directory (listed in the sources below), call HUD’s housing counseling line at 800-569-4287 for a counselor who knows local programs, or ask lenders whether they participate in your state’s HFA programs. Cities, counties and nonprofits run separate programs, so ask the counselor about those as well.
HUD Good Neighbor Next Door
Good Neighbor Next Door sells HUD-owned homes in designated revitalization areas to law enforcement officers, pre-kindergarten through 12th-grade teachers, firefighters and emergency medical technicians at a 50% discount off the list price. You must live in the home as your principal residence for 36 months, and you sign a second mortgage and note for the discount amount; no interest or payments are due on it if you meet the occupancy term.
On a home listed at $200,000, the discount is $100,000, so you finance or pay $100,000. Eligible homes are listed by state on HUD’s HUD Home Store site, and when more than one eligible buyer bids on the same home, HUD picks the winner by random lottery.
Texas as a worked example
Texas shows how state programs layer on top of national loans. Two agencies run them through participating lenders:
| Program | First-time rule | Help available | Paired with |
|---|---|---|---|
| TDHCA My First Texas Home | No owned-and-occupied home in the last 3 years; veterans and targeted areas exempt | 2%–5% of the loan | FHA, VA or USDA loan; minimum score 620 |
| TSAHC Homes for Texas Heroes and Home Sweet Texas | Not required for the assistance | Up to 5% of the loan | Grant, forgivable or repayable second lien |
TDHCA help on the median Texas home ($313,200) with an FHA loan
The 3.5% down payment is $10,962. With the upfront FHA premium financed, the loan is about $307,527, so TDHCA’s 2%–5% works out to $6,151–$15,376 — at the top of the range, more than the whole down payment, with the rest going toward closing costs.
Both agencies also offer mortgage credit certificates. The Texas guide covers property taxes, insurance and closing costs that shape the rest of the budget.
How to choose between programs
Start with the loan that fits your credit and down payment, then check what your state and city add. Ask each lender for a Loan Estimate with the assistance and one without: program loans can carry different rates and fees, and assistance that must be repaid when you sell or refinance is a debt, not free money. Run both payments through the affordability calculator before you commit.
Open calculatorFrequently asked questions
What is the best program for first-time home buyers?
It depends on your credit, income and location. FHA suits lower credit scores, VA needs no down payment or monthly mortgage insurance for eligible veterans, USDA offers 0% down in eligible areas, and HomeReady or Home Possible suit moderate incomes with good credit. Then add whatever your state housing finance agency offers.
Do I have to be a first-time buyer to use these programs?
Not for FHA, VA, USDA, HomeReady or Home Possible. State bond-funded loans and mortgage credit certificates usually do require it, generally meaning no ownership of a principal residence in the past 3 years, with exceptions for veterans and targeted areas.
How do I find my state’s first-time buyer program?
Look up your state housing finance agency in the National Council of State Housing Agencies member directory, or call HUD’s housing counseling line at 800-569-4287 to reach a counselor who knows local programs. Lenders that participate in your state’s programs can also check eligibility.
Can I combine down-payment assistance with an FHA or conventional loan?
Yes. Many programs are built to sit behind an FHA, VA, USDA or conventional loan. Fannie Mae allows a combined loan-to-value up to 105% with an eligible Community Seconds loan.
Who qualifies for Good Neighbor Next Door?
Law enforcement officers, pre-kindergarten through 12th-grade teachers, firefighters and emergency medical technicians buying a HUD-listed home in a revitalization area. You must live there for 36 months to keep the 50% discount.
What does Texas offer first-time buyers?
TDHCA’s My First Texas Home pairs an FHA, VA or USDA loan with 2%–5% of the loan in assistance, and TSAHC offers up to 5% without a first-time requirement for the assistance itself.
Sources
- US Census Bureau, American Community Survey 2024 1-year — Median value of owner-occupied homes (2024 ACS 1-year)
- CFPB — Minimum down payment on some conventional loans; Typical closing costs, low end (share of purchase price); Typical closing costs, high end (share of purchase price) (Oct 28, 2026)
- Fannie Mae Selling Guide B5-5.1-02 — Fannie Mae Community Seconds maximum combined LTV (May 3, 2023)
- US Census Bureau, American Community Survey 2024 1-year — Median value of owner-occupied homes (2024 ACS 1-year)
- HUD Mortgagee Letter 2023-05 — FHA upfront mortgage insurance premium (Feb 22, 2023)
- Texas Department of Housing and Community Affairs — TDHCA My First Texas Home assistance, low end (share of loan); TDHCA My First Texas Home assistance, high end (share of loan); TDHCA first-time buyer test: no owned and occupied home in the last (Program matrix Aug 17, 2026)
- HUD — HUD Good Neighbor Next Door discount off list price; Good Neighbor Next Door required owner-occupancy (Oct 28, 2026)
- U.S. Department of Veterans Affairs — VA purchase loan down payment (price at or below appraised value) (Jan 7, 2026)
- Fannie Mae Selling Guide B5-6-01 — Fannie Mae HomeReady income limit (share of area median income) (Jun 4, 2025)
- HUD Mortgagee Letter 2026-11 — FHA minimum score for maximum financing (Oct 8, 2026)
- U.S. Department of Veterans Affairs — VA funding fee, first use, less than 5% down (Apr 7, 2023)
- USDA Rural Development — USDA guaranteed loan down payment; USDA guaranteed loan income limit (share of area median income) (Oct 28, 2026)
- USDA Rural Development — USDA guaranteed loan upfront guarantee fee; USDA guaranteed loan annual fee (FY2026)
- Freddie Mac Home Possible fact sheet — Freddie Mac Home Possible income limit (share of area median income); Freddie Mac Home Possible maximum TLTV with Affordable Seconds (Feb 1, 2026)
- Fannie Mae Eligibility Matrix — Fannie Mae maximum LTV, one-unit principal residence purchase (Apr 1, 2026)
- HUD — HUD housing counseling referral line (Oct 28, 2026)
- Texas State Affordable Housing Corporation — TSAHC down payment assistance, up to (share of loan) (Oct 28, 2026)
- 26 U.S.C. 143(d) — MCC and mortgage revenue bond loans: no ownership interest in a principal residence in the past (Oct 28, 2026)
- National Council of State Housing Agencies: member HFA directory
- CFPB: Where can I find information on programs for first-time home buyers?
Last reviewed Figures are checked against the sources above. Read our editorial policy. This page is general information, not financial advice — see the disclaimer.