First-Time Home Buyer Programs in the US: What's Available and How to Qualify

There's real money set aside for first-time buyers in the US - federal, state, and local programs that can cover your down payment, reduce your interest rate, or cut your tax bill for years. Many buyers never find most of it. This guide covers what exists, who actually qualifies, and how to combine programs so you're not leaving anything on the table.

According to the NAR 2025 Profile of Home Buyers and Sellers, first-time buyers now make up just 21% of all home purchases - the lowest share since NAR began tracking in 1981 - in part because the path to qualifying feels harder than it actually is. The programs described here exist precisely for that moment: when you're ready but the numbers feel just out of reach.

Most buyers assume this term means exactly what it says: you've never owned a home in your life. That's not how most programs define it.

Under HUD's standard definition - used by the majority of federal and state programs - a first-time homebuyer is anyone who has not owned a primary residence in the past three years. That means if you owned a home, sold it, rented for a few years, and are now buying again, you likely qualify as a first-time buyer under most programs. Divorced homeowners who have not independently owned property in three years often qualify too.

It also means if you own investment property but have not personally owned your primary residence in the past three years, you may still be eligible.

The three-year rule resets the clock. Check it before you assume you don't qualify - the answer may surprise you.

The federal government offers several loan programs specifically designed to make homeownership accessible for buyers with moderate incomes, limited savings, or qualifying military service. None of these are reAlpha products - they're government programs available through licensed lenders, including reAlpha Mortgage. Here's what each one is and who it's for.

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The Federal Housing Administration loan is the most widely used first-time buyer program in the US. It's not a direct loan from the government - it's a mortgage backed by the FHA, which lets approved lenders offer more flexible qualification terms.

Key eligibility basics:

• Minimum credit score of 580 for the 3.5% down payment option (per HUD guidelines - individual lenders often set their own floor at 620-640, so verify with your lender)

• Minimum credit score of 500 with a 10% down payment

• Income limits vary by location; FHA does not set a national income cap

• Property must be your primary residence

• Mortgage insurance premium (MIP) is required for the life of the loan if your down payment is below 10%

FHA loans are available on single-family homes, condos (FHA-approved), and 2-4 unit properties if you occupy one unit.

The US Department of Agriculture's Single Family Housing Guaranteed Loan Program offers 100% financing - meaning no down payment - for buyers purchasing in eligible rural and some suburban areas.

Key eligibility basics:

• Property must be in a USDA-eligible area (check at the USDA eligibility map)

• Household income must be at or below 115% of the area median income

• Must be a US citizen or eligible non-citizen

• Property must be your primary residence

USDA loans often get overlooked because buyers assume "rural" means remote. Many properties just outside mid-sized cities qualify. If you're flexible on location, it's worth checking before assuming you're out.

The VA loan program is a benefit of military service, available to Veterans, active-duty service members, and eligible surviving spouses. The VA loan program offers $0 down payment and no private mortgage insurance - these are features of the VA program, not reAlpha products.

Key eligibility basics:

• Must meet VA service requirements (vary by length and type of service - see the VA eligibility page)

• No minimum credit score set by the VA, though lenders set their own floors (typically 580-620)

• No income limit, but standard debt-to-income guidelines apply

• Certificate of Eligibility (COE) required before closing

• VA funding fee applies (can be financed into the loan; waived for Veterans with qualifying service-connected disabilities)

Eligible Veterans can access VA loans through reAlpha Mortgage, where loan officers have dedicated VA loan experience across first-time use, subsequent use, and IRRRL refinances.

A Mortgage Credit Certificate is not a loan program - it's a federal tax credit issued by state and local housing agencies to eligible first-time buyers. Once issued, it allows you to claim a portion of your annual mortgage interest as a direct credit against your federal tax liability, for as long as you live in the home.

Key eligibility basics:

• Issued through your state's housing finance agency, not directly through a lender

• Subject to income and purchase price limits set by each agency

• Must be a first-time buyer (or purchasing in a targeted area)

• MCC percentage varies by state (typically 20-40% of annual mortgage interest)

The MCC compounds in value over time. A buyer who claims it for 10 years at 25% of a $12,000 annual interest payment saves $3,000 per year in federal taxes - $30,000 over a decade. This is one of the most underused programs in the first-time buyer toolkit - and the one that compounds the longest.

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Federal programs get more attention, but state and local programs frequently offer larger down payment grants, deeper rate reductions, and more flexible eligibility criteria than anything at the federal level. They're also the most likely to go unclaimed, simply because buyers don't know where to look.

Down payment assistance programs come in two primary structures:

Grants are funds that do not have to be repaid, provided you remain in the home for a set period (typically 3-5 years). If you sell or refinance before that period ends, a prorated portion may be recaptured. If you stay, the grant converts to a full gift.

Forgivable second mortgages work similarly - a second loan sits behind your primary mortgage, accrues no interest, and is forgiven after you occupy the home for the required period. These show up on your closing disclosure but don't require monthly payments.

Deferred second mortgages are interest-free loans that only come due when you sell, refinance, or pay off the primary mortgage. They don't add to your monthly payment but do reduce your proceeds at sale.

Most DPA programs are offered through state Housing Finance Agencies (HFAs) and require buyers to use a participating lender, complete a homebuyer education course, and meet income and purchase price limits. Limits are set locally and updated regularly - what's accurate this month may change.

Every state has a housing finance agency. Most offer DPA, below-market-rate mortgage programs, and MCCs. HUD maintains a state HFA directory - this is the most current list of state-level programs.

When you reach out to your state HFA, ask specifically about:

• Down payment assistance programs currently accepting applications

• Whether DPA can be combined with FHA, VA, or USDA loans

• Homebuyer education course requirements (most are online, free, and take 4-8 hours)

• Income and purchase price limits for your target area

The education requirement is worth mentioning because it's often the one thing that slows buyers down. Most state programs require a HUD-approved homebuyer education course before issuing DPA. Budget a few hours for it - it's straightforward, and the programs it unlocks are worth it.

This is the piece most buyers miss. Federal loan programs and state/local DPA programs are generally designed to work together. Stacking them - combining multiple programs in a single transaction - is allowed, common, and often the difference between being able to buy and waiting another year.

A buyer in Georgia earning $72,000 per year qualifies for an FHA loan (3.5% down) and a Georgia Dream DPA grant of up to $10,000 . On a $300,000 home, the required FHA down payment is $10,500. The DPA grant covers the majority of that - reducing the buyer's out-of-pocket contribution at closing to approximately $500 plus closing costs. The buyer used two programs simultaneously, with one lender handling the coordination.

An eligible Veteran in Texas purchases a $350,000 home using a VA loan - zero down payment, no PMI. They also apply for a Texas MCC, which allows them to claim 15% of their annual mortgage interest as a federal tax credit every year they own the home. Both programs run simultaneously through a single closing. The Veteran pays no mortgage insurance and receives an annual tax credit on top.

The rule of thumb: if you qualify for a federal program (FHA, VA, USDA), check your state HFA for DPA and MCC availability. Ask your loan officer explicitly whether both can be used together in a single transaction - most of the time the answer is yes, and the coordination is their job, not yours.

Three assumptions stop buyers from even researching the programs above. All three are wrong more often than not.

Income limits on most state DPA programs are higher than buyers expect. Many are set at 80-120% of the area median income, which for a two-person household in a mid-sized city often lands between $80,000 and $130,000. FHA loans have no national income cap at all. USDA sets a ceiling at 115% of the area median income. Before assuming you're over the limit, check the actual figure for your county - it's posted on your state HFA's website and updated annually.

The FHA program's minimum credit score per HUD is 580 for the standard 3.5% down option. That is not 720. That is not 680. It's 580 - and many buyers who have been turned away by one lender qualify under FHA guidelines with a different lender. Individual lenders set overlays (their own minimums above HUD's floor, often 620-640), which is why working with a lender who has access to a wide network matters. One lender's "no" is not the program's "no."

The 20% figure exists because reaching it eliminates private mortgage insurance (PMI) on conventional loans. It is not a program requirement. FHA requires 3.5% down for eligible borrowers. VA and USDA require zero. Many conventional loan programs allow 3-5% down with PMI. And if DPA grant funds are available in your market, your effective out-of-pocket contribution may be less than any of those percentages. The 20% threshold is a cost-optimization target, not a qualification floor.

The programs above exist. Getting to them - and combining them correctly - involves coordinating between your state HFA, a participating lender, a homebuyer education provider, and often a real estate agent who understands how DPA affects your offer. Most buyers piece this together by calling multiple agencies and asking different questions over several weeks.

reAlpha puts your homebuying team - a real estate agent, a loan officer, and Claire, your AI - in one platform so that coordination doesn't fall on you.

Claire, reAlpha's AI, can help you identify which programs may apply to your situation before you talk to anyone. Ask Claire directly: "What first-time buyer programs might I qualify for in (your state)?" and you'll get a starting point based on your location, income range, and loan type - without navigating six different agency websites. It's not a guarantee of eligibility, and your loan officer verifies everything, but it gets you oriented fast.

reAlpha Mortgage loan officers work across FHA, VA, USDA, and conventional programs every day. They know which DPA programs are currently accepting applications in your state, whether your situation qualifies, and how to structure a transaction that uses a federal loan program and a state grant simultaneously.

Your loan application, document checklist, team contacts, and next steps all live in the reAlpha Homebuying Hub. Search, real estate, mortgage, title, and closing are connected in one platform - so when you're running a federal loan and a state DPA grant at the same time, your documents are in one place instead of scattered across email threads to three separate parties.

For buyers who bundle real estate and mortgage services through reAlpha, the platform's efficiency also translates to cash back at closing - reAlpha homebuyers save an average of $10,000. That's on top of whatever DPA funds or tax credits you access through the programs in this guide.

The programs are out there. The question is whether you find them early enough to use them.

Talk to Claire - find programs that fit your situation →