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.

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.

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.

Support for new homebuyers in other states

Arizona Department of Housing (ADOH) Read More
Arkansas Development Finance Authority (ADFA) Read More
California Housing Finance Agency (CalHFA) Read More
Colorado Housing and Finance Agency (CHFA) Read More
Connecticut Housing Finance Authority (CHFA) Read More
Delaware State Housing Authority (DSHA) Read More
Florida Housing Finance Corp. (Florida Housing) Read More
Georgia Dream Read More
Hawaii Housing and Finance Development Corporation (HHFDC) Read More
Idaho Housing and Finance Association Read More
Illinois Housing Development Authority (IHDA) Read More
Indiana Housing and Community Development Authority (IHCDA) Read More
Iowa Finance Authority (IFA) Read More
Kansas Housing Resources Corporation Read More
Kentucky Housing Corporation (KHC) Read More
Louisiana Housing Corporation (LHC) Read More
MassHousing (Massachusetts) Read More
Michigan State Housing Development Authority (MSHDA) Read More
Minnesota Housing Read More
Missouri Housing Development Commission (MHDC) Read More
Montana Board of Housing (MBOH) Read More
Nebraska Investment Finance Authority (NIFA) Read More
Nevada Housing Division Read More
New Mexico Mortgage Finance Authority (MFA) Read More
State of New York Mortgage Agency (SONYMA) Read More
North Carolina Housing Finance Agency (NCHFA) Read More
Ohio Housing Finance Agency (OHFA) Read More
Oklahoma Housing Finance Agency (OHFA) Read More
Oregon Housing and Community Services (OHCS) Read More
Pennsylvania Housing Finance Agency (PHFA) Read More
South Dakota Housing Development Authority (SDHDA) Read More
Tennessee Housing Development Authority (THDA) Read More
Texas Department of Housing and Community Affairs (TDHCA) Read More
Utah Housing Corp Read More
Virginia Housing Read More
Washington State Housing Finance Commission (WSHFC) Read More
Wisconsin Housing and Economic Development Authority (WHEDA) Read More
Wyoming Community Development Authority (WCDA) Read More

About the Author

Sigrid Forberg

Sigrid Forberg

Staff Writer

Sigrid is a staff writer with MoneyWise. A graduate of Carleton University's journalism program, she spent the better part of the last six years writing about business and retail. In her spare time, she enjoys reading, baking and riding her bicycle.

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