First-Time Homebuyer Financial Assistance 101

As of the third quarter of 2025, a record 2,624 down payment assistance programs were available across the country, offering an average of about $18,000 in help, according to Down Payment Resource.

Buying your first home can feel overwhelming. Finding the right home, saving a down payment, and getting approved for a mortgage add up to a lot of work, and the financial burden grows quickly. The good news is that first-time buyers have special programs designed just for them, and today there are more of them than ever. We'll explain how to qualify and where to look, and you can compare mortgage lenders as you weigh your options.

One thing to know up front: no federal first-time homebuyer tax credit is currently law. Even so, thousands of state and local programs can still help with your down payment, closing costs, and mortgage rate.

First-time buyers can qualify for several kinds of help, from cash grants to low-down-payment loans and tax breaks. The funds can go toward a down payment, help pay closing costs, or even reduce the overall cost of a mortgage.

The most sought-after form is a true grant, because it doesn't need to be repaid. There are no financial strings to worry about down the road, which makes grants a strong option for those who qualify.

Other assistance is repayable. Forgivable loans, deferred loans, and low-interest down payment loans can all lower your upfront cost, but you may owe the money back later. We break down each type below so you can see the difference before you apply.

Qualifying depends on the specific program, because there is no single first-time homebuyer benefit. The federal government does not give housing grants directly to individuals. The funds are given to states and certain municipalities, which in turn distribute them to residents.

As the name suggests, these programs are typically available only to first-time buyers. Many define a first-time buyer as someone who has not owned a principal residence in the past three years, so past owners can sometimes requalify. It's worth checking the fine print even if you've owned a home before.

Beyond the first-time rule, most programs set financial requirements. Common eligibility factors include:

• Credit score: often about 620 for conventional programs, or 580 for many FHA loans.

• Income: limits are frequently tied to the area median income where you're buying.

• Debt-to-income ratio: generally capped around 43%, though some programs allow more.

To understand how lenders weigh your debts against your income, see how your debt-to-income ratio affects your mortgage. Some programs are especially generous for specific buyers. If you are a veteran, or you're buying a home in a rural or economically distressed area, or you earn well below the local median income, you may qualify for extra help.

First-time homebuyer programs take several forms, and many start with a loan that requires little or no money down. The table below compares the four most common low-down and zero-down loan options.

How Do Low-Down and 100% Financing Programs Work?

Low-down and 100% financing programs let first-time buyers purchase a home without putting 20% down. That matters, because saving a large down payment is one of the biggest hurdles to buying — first-time buyers recently fell to a historic low of 24% of home purchases, according to the National Association of Realtors. A lower down payment, or none at all, can make homeownership reachable years sooner.

Many low-down-payment loans, such as an FHA loan, let buyers with fair credit or better put down as little as 3.5% (or 10% with a credit score of 500 to 579). There are also several low-down options through the federal Fannie Mae and Freddie Mac lending programs, including HomeReady, Home Possible, and Conventional 97, which allow 3% down.

Loans that require no down payment let buyers purchase a home without paying anything upfront, and in most cases closing costs can be financed too. Our guide to zero-down-payment home loans covers these in depth. Popular 100% financing options include USDA mortgages, which support home purchases in rural areas, and VA mortgages, which support purchases by U.S. military veterans. To see how the veterans' benefit works, read our explainer on how a VA loan works.

How Do Mortgage Rate Discount Programs Work?

Mortgage rate discount programs lower the interest rate on your loan rather than reduce your upfront costs. Some state and local programs may reduce a buyer's rate, though the exact savings vary by program and lender, so confirm the terms before you count on a specific number.

Even a modest rate cut can save a meaningful amount over a 30-year loan and raise the price you can afford. These programs are typically reserved for lower-income buyers. Buyers may also lower their rate by improving their credit score before they apply.

How Do Down Payment Assistance Programs Work?

Down payment assistance programs help you cover the down payment, usually through a second loan or a grant. They generally come in four forms: grants that never need repayment, forgivable loans, deferred loans, and matched-savings programs. One advantage of these loans is that they often carry very low interest rates, and some charge no interest at all.

Some assistance loans are forgiven over time. For example, New York City's HomeFirst program offers a forgivable loan of up to $100,000 toward a down payment or closing costs — the lesser of 20% of the purchase price or $100,000. You won't have to repay the loan as long as you meet the program's conditions, such as keeping the home as your primary residence.

How Does Closing Cost Assistance Work?

Closing cost assistance programs help cover much of the closing costs on your mortgage — costs such as mortgage fees, transfer taxes, and title fees. Some programs are dedicated to closing costs, while others let you apply broader assistance toward them.

New York City's HomeFirst funds, for example, can go toward closing costs as well as the down payment, though buyers are expected to contribute some of their own money. Closing cost awards aren't always as large as down payment programs, but they're often easier to qualify for and can cut the cash you need upfront by thousands of dollars.

What Is the Good Neighbor Next Door Program?

The Good Neighbor Next Door Program, run by HUD, offers eligible buyers homes at half their list price. That single discount reduces your down payment, closing costs, and mortgage interest costs.

The program is available only to teachers and workers in law enforcement or emergency services. You must buy a home in the same community where you work, and it must sit in a designated revitalization area.

Are There First-Time Homebuyer Tax Credits?

As of 2026, there is no federal first-time homebuyer tax credit in effect. The government offered one during the 2008 Great Recession, but it expired. A later proposal, the First-Time Homebuyer Act of 2021, would have offered a credit of up to $15,000, but it was never enacted and died in the 117th Congress.

Two 2025 bills would revive the idea, but both remain in committee and are not law. The First-Time Homebuyer Tax Credit Act of 2025 (S.2402) was referred to the Senate Finance Committee, and the Bipartisan American Homeownership Opportunity Act of 2025 (H.R.3475) proposes a refundable down-payment credit of up to $50,000.

You may still find a tax benefit at the state level. Many state housing agencies issue Mortgage Credit Certificates (MCCs), which let eligible first-time buyers claim a federal tax credit for part of the mortgage interest they pay each year.

What Are Deferred Mortgages?

A deferred mortgage lets you postpone repayment until you sell or refinance your home. If you sell for more than you paid, you can pay off the deferred mortgage right away. Keep in mind that the money does need to be repaid.

Deferred mortgages vary in size and typically won't cover the whole cost of a home. You'll still make regular payments on any conventional mortgage you take out to cover the rest.

You can find first-time homebuyer programs at the federal, state, and local levels, but there's no single database that lists every option you qualify for. Splitting your search into a few categories makes it manageable.

Numerous federal programs are available, and they're usually offered through individual mortgage lenders rather than the government directly. The agencies behind first-time buyer assistance include HUD, the VA, the USDA, and the FHA, along with Fannie Mae and Freddie Mac.

Most states run their own programs too. Search for your state Housing Finance Agency (HFA) and check with it for details on what's available and how to qualify. For a broader walkthrough of your options, see our first-time homebuyer guide.

Finally, many individual lenders offer first-time buyer programs of their own, such as down payment assistance loans or low-down-payment options. It pays to ask each lender what it offers before you commit.

The right program depends on your savings, your credit, your service history, and where you want to live. Use your situation to narrow the field:

• Little savings: look at an FHA loan paired with down payment assistance, or a 0%-down VA or USDA loan if you qualify.

• Buying in a rural or eligible area: a USDA loan can mean no money down.

• Veteran or active military: a VA loan often offers 0% down and no mortgage insurance.

• Teacher or public-safety worker: check the Good Neighbor Next Door Program.

• Strong credit and some savings: a Conventional 97 or HomeReady loan lets you keep cash in reserve.

Your next step is to match a program to your budget and get moving, because assistance funds and grant slots can run out. First-time buyer programs can lower your down payment, cover closing costs, or discount your mortgage rate, and most carry eligibility rules, so read the fine print to find the right fit.

Start with these concrete steps:

1. Look up your state Housing Finance Agency and note the programs you may qualify for.

2. Get pre-qualified so you know your budget and which loans fit.

3. Compare mortgage lenders to see rates and terms side by side.

If you're not sure where to begin, our step-by-step guide to getting a mortgage walks you through the process from start to finish.

Do first-time homebuyer grants have to be repaid?

True grants do not have to be repaid. Forgivable and deferred loans are different, and you may owe that money back if you sell or move before meeting the program's terms.

What credit score do you need for first-time homebuyer programs?

Many programs look for a credit score of about 620, though FHA loans can go as low as 580. Requirements vary by program and lender.

Is there a federal first-time homebuyer tax credit in 2026?

No. There is no federal first-time homebuyer tax credit in effect as of 2026, and the 2025 bills proposing one remain in committee.

Who counts as a first-time homebuyer?

Most programs define a first-time buyer as someone who has not owned a principal residence in the past three years. Some past owners can requalify under that rule.

How much down payment do you really need?

Depending on the program, you may put down as little as 0% to 3.5%. VA and USDA loans can require nothing down, while FHA loans start at 3.5%.

Our research for this article drew on primary and government sources, not proprietary BestMoney survey data, which does not exist on this topic. We reviewed HUD and FHA loan requirements, Fannie Mae's HomeReady product page, and the Federal Housing Finance Agency's overview of Fannie Mae and Freddie Mac.

We confirmed the status of federal tax-credit legislation directly through Congress.gov bill records, and we used Down Payment Resource for the national count of down payment assistance programs and the average benefit amount. Program details from the VA, USDA, state housing finance agencies, and New York City's HomeFirst program round out the sources. Where we relied on secondary reporting, we traced figures back to their primary origin.

• Congressional Research Service, Report R40118 (federal housing grants to states and municipalities) — linked above

• U.S. Department of Veterans Affairs, VA housing assistance and VA home loans — linked above

• U.S. Department of Agriculture, Single Family Housing Programs — linked above

• U.S. Department of Housing and Urban Development, FHA loan requirements and the Good Neighbor Next Door Program — linked above

• Federal Housing Finance Agency, Fannie Mae and Freddie Mac overview — linked above

• Fannie Mae, HomeReady mortgage product page — linked above

• National Association of Realtors, Profile of Home Buyers and Sellers (first-time buyer share at a historic-low 24%) — linked above

• Down Payment Resource, Q3 2025 Homeownership Program Index (national program count and average benefit) — linked above

• Connecticut Housing Finance Authority, Down Payment Assistance Program — linked above

• ACCESS NYC, HomeFirst Down Payment Assistance — linked above

• Congress.gov: First-Time Homebuyer Act of 2021 (H.R.2863), First-Time Homebuyer Tax Credit Act of 2025 (S.2402), and Bipartisan American Homeownership Opportunity Act of 2025 (H.R.3475) — linked above