Nationwide first-time homebuyer programs

To qualify for a “conventional” mortgage secured through the private market, you’ll often need a credit score of about 620 and a down payment of at least 5% of the total home price. And if you’re offering anything under 20% for the down payment, you’ll have to pay extra for private mortgage insurance.

More: Use these savings accounts to build up your down payment.

That’s the most common route to homeownership, but the federal government offers a number of nonconventional mortgages that may be better suited to first-time buyers.

FHA loans

The Federal Housing Administration (FHA) is a division of the Department of Housing and Urban Development. In 1934, the government introduced FHA loans to encourage homeownership across the country.

Compared to conventional mortgages, the terms of an FHA mortgage are less strict. You’ll only need a credit score of 580, but if you have enough money for a larger deposit, your score could be as low as 500. The minimum down payment with an FHA loan is 3.5%, but if it’s less than 10%, you’ll have to pay a mortgage insurance premium (MIP) as well.

These loans put the dream of homeownership within reach for more Americans, but you do have to keep an eye on the fees involved because they tend to add up quickly.

The FHA's Loan Requirements Explained.

A walkthrough of how to meet the FHA's requirements.

See Guide

VA loans

In 1944, Congress passed an act to reward eligible veterans with cheaper and easier home loans.

The U.S. Department of Veterans Affairs (VA) will guarantee mortgages issued to active service members, veterans and some surviving military spouses. These loans don’t require a down payment or mortgage insurance; however, borrowers will have to pay a funding fee. At time of writing, that’s between 1.4% and 3.6%.

USDA loans

The United States Department of Agriculture can guarantee loans for rural and suburban homeowners. USDA loans don’t require a down payment or private mortgage insurance.

As with VA loans, you’ll have to pay an upfront fee. Here, it amounts to 1% of the loan amount and an annual fee of 0.35%. Note that these costs are generally more affordable than paying for mortgage insurance.

Also keep in mind that these loans are specifically for lower-income households. You won’t be able to take out a USDA loan if your household earns too much.

The current income limits in most parts of the U.S. are $86,850 for one- to four-member households and $114,650 for five- to eight-member households, but the thresholds may be higher if you live in a county with a steeper-than-average cost of living.

You can find out whether your household qualifies through the USDA’s website.

Simply add Capital One Shopping to your browser, and shop like normal. This free tool does the work for you.

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What is a CHFA loan for Coloradans, and how do I qualify?

Infographic on programs for first-time home-buyers in Colorado

The CHFA was created to make homeownership more accessible to residents of Colorado who might not otherwise be able to afford quality housing. Its programs work with conventional loans, FHA loans, VA loans and USDA loans.

You can ask the CHFA to either give or lend you money you can put toward a down payment or closing costs, so long as you work with one of the organization's participating lenders.

The qualifications for a CHFA loan for first-time homebuyers include:

  • A credit score of 620 or higher.
  • An income that does not exceed CHFA’s limits.
  • Attendance of a CHFA-approved homebuyer education class (in person or online) prior to loan closing.
  • A minimum financial contribution of at least $1,000 toward the purchase of the home. Gifts from family members or others can count toward this sum.

In addition to meeting the CHFA’s requirements, borrowers must pass the underwriting guidelines determined by one of CHFA’s participating lenders.

More: Get a free credit score and credit monitoring from Credit Sesame.

How much assistance will I get?

Once you meet the eligibility requirements for a CHFA loan, you’ll be directed to a participating mortgage lender. Your lender will look at a variety of factors including your monthly income, credit history and debt level to determine how much you’ll qualify for.

Homebuyers who qualify for a CHFA assistance grant can get up to 3% of the purchase price of their first mortgage, with no repayment required. Even if you’re able to contribute your own down payment, you can still make use of this offer.

On a second mortgage loan, applicants can qualify for up to 4% of the value of their first mortgage, provided it was a 30-year, fixed-rate loan. You will have to repay this loan, but not until you pay off your first mortgage or you sell or refinance your home.

More: Calculate how much house I can afford

The Best Lenders for First-Time Homebuyers

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Next steps

Whichever mortgage option you choose, your first steps will probably look the same.

Find out where your credit stands. You can use Credit Sesame to get a free credit check, and if your score needs a little boost, Self credit repair can improve your standing.

Next, you’ll need to gather a bunch of documents to show proof of funds and stable income.

Once you have everything you need, getting pre-approved for a mortgage is a logical next step.

First-Time Homebuyer Programs by State
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
Florida
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Massachusetts
Michigan
Minnesota
Missouri
Montana
Nebraska
Nevada
New Mexico
New York
North Carolina
Ohio
Oklahoma
Oregon
Pennsylvania
South Dakota
Tennessee
Texas
Utah
Virginia
Washington
Wisconsin
Wyoming

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About the Author

Sigrid Forberg

Sigrid Forberg

Reporter

Sigrid is a reporter with MoneyWise. Before joining the team, she worked for a B2B publication in the hardware and home improvement industry and ran an internal employee magazine for the federal government. As a graduate of the Carleton University Journalism program, she takes pride in telling informative, engaging and compelling stories.

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