First-time buyer? You probably need less than you think.
The 20% down myth keeps people renting for years longer than they need to. Conventional loans accept 3% down. FHA accepts 3.5% with a 580 FICO. VA and USDA can be zero down. Add state down payment assistance and the entry point drops further. Here is the full menu.
First-time buyer snapshot
Updated todayThe four loan types every first-timer should know.
Conventional 3% down
Most commonFannie Mae HomeReady and Freddie Mac Home Possible accept 3% down for income-qualified buyers (typically under 80% area median income). PMI required until 80% LTV, then drops at 78% automatically. Best rate of the low-down options if your FICO is 700+.
FHA
Lowest credit floorThe Federal Housing Administration insures these loans. A 580+ FICO gets 3.5% down. A 500 to 579 FICO needs 10% down. Mortgage insurance premiums (MIP) are required for the life of the loan unless you put 10%+ down or refinance into conventional later. Best for credit recovery situations.
VA
0% downFor active-duty military, veterans, and qualified surviving spouses. No down payment required, no PMI, and rates run roughly 0.25 points below conventional at the same credit score. The funding fee (1.4% to 3.6% of the loan, financeable) replaces traditional mortgage insurance and is waived for service-connected disabilities.
USDA
0% down, ruralThe USDA Rural Development guaranteed loan program offers 0% down for buyers in eligible non-metro areas. Income caps apply (typically 115% of area median). The guarantee fee is 1% upfront and 0.35% annual, both lower than FHA MIP. Check property eligibility at the USDA online map before you offer.
Free or low-cost help for first-timers.
Most states run at least one DPA program. Some give grants. Others provide silent seconds with deferred payments. Stack these with conventional 3% or FHA loans to lower your true out-of-pocket cost.
State housing finance agencies
Every state has a Housing Finance Agency (HFA) that runs first-time buyer programs. California's CalHFA, Texas's TSAHC, New York's SONYMA, and Florida Housing all offer down payment grants or silent seconds. Income caps usually run 80% to 140% of area median income. Most require completion of a homebuyer education course.
Forgivable grants vs silent seconds
Forgivable grants are written off after you live in the home for a set period (usually 5 to 10 years). If you sell before then, you repay a prorated amount. Silent seconds are loans with no monthly payment, due when you sell or refinance. Both reduce your true out-of-pocket cost, but the forgivable grant is the better deal if you plan to stay long-term.
Lender DPA programs
Several major lenders offer their own DPA grants in eligible neighborhoods, layered on top of state programs. Chase's $5,500 Homebuyer Grant, Bank of America's $7,500 grant, and Rocket's ONE+ program are examples. Eligibility usually depends on the property being in a designated tract or the buyer being under an income cap.
Where to find programs
HUD's online lookup at hud.gov has links to every state and local DPA program. The CFPB also maintains a buyer education resource hub. Your lender's loan officer should know the major options in your state, but verify against the official HFA site before relying on them.
Five lenders we recommend for first-time buyers.
Ranked by approval rate, transparency on fees, and DPA program access for buyers under 100% area median income.
Rocket Mortgage
Best online experienceRocket walks first-time buyers through every step in-app, explains every fee, and closes in 21 to 28 days for clean files. The ONE+ program offers 1% down for income-qualified buyers, with Rocket covering the other 2%.
Best for: First-time buyers who want a clean app, transparent pricing, and a fast close.
Better.com
Lowest closing costBetter's flat-fee model removes percentage-based origination charges, which matters most on smaller loans where 1% origination is real money. The online flow is friendly to first-timers.
Best for: W-2 buyers who want a flat $1,995 lender fee and an online process.
Chase Home Lending
Best DPA programChase's DreaMaker program targets buyers under 80% area median income with 3% down and reduced PMI. The $5,500 Homebuyer Grant covers closing costs in eligible neighborhoods.
Best for: Income-eligible buyers who can stack Chase's $5,500 grant with state DPA.
loanDepot
Best for FHAloanDepot's FHA program approves down to 580 FICO and accepts gift funds for the full down payment. Approval rate on lower-credit files is meaningfully better than online competitors.
Best for: Buyers with credit scores in the 580 to 660 range who need FHA underwriting.
PNC Bank
Best community lendingPNC's Community Loan offers up to 3% down with no PMI for income-qualified buyers in eligible markets. The bank also offers up to $5,000 in closing cost grants in select tracts.
Best for: Buyers in PNC's footprint who qualify for the bank's Community Loan or grant programs.
Run the numbers, then keep going.
Common questions for first-time buyers.
How much down payment do you really need?
Less than people think. Conventional loans accept 3% down through Fannie Mae HomeReady or Freddie Mac Home Possible. FHA requires 3.5% with a 580+ FICO. VA and USDA loans require 0% down for qualified borrowers. The headline 20% figure avoids PMI but is rarely a hard requirement.
What is PMI and when does it go away?
Private mortgage insurance protects the lender if you default. On a conventional loan, PMI runs 0.3% to 1.5% of the loan amount per year. It drops automatically when your loan-to-value reaches 78% per the federal Homeowners Protection Act. You can request removal at 80% with an appraisal. FHA mortgage insurance is harder to drop and may require a refinance.
Conventional 3% vs FHA 3.5%: which is better?
Conventional 3% wins if your FICO is 700+ because PMI is cheaper and drops sooner. FHA 3.5% wins if your FICO is below 680 because the rate and qualification are more forgiving. Run quotes on both. The right answer depends on your specific score and down payment.
What is down payment assistance (DPA)?
DPA is a state, county, or city program that gives or lends first-time buyers money for the down payment and closing costs. Most states have at least one program. Amounts range from $5,000 to $50,000+. Some are forgivable grants. Others are silent second mortgages with deferred payments. The Department of Housing and Urban Development maintains a state-by-state list.
Do you have to be a true first-time buyer for these programs?
Not always. Most programs define first-time buyer as someone who has not owned a primary residence in the last three years. So if you owned a home in 2018, sold it, and have rented since, you usually qualify again. Income limits typically range from 80% to 140% of area median income.
How much should you save before buying?
Plan for 5% to 8% of the home price for down payment, closing costs, and a small post-close emergency cushion. On a $400,000 home that is $20,000 to $32,000. With a 3% down conventional loan plus closing cost help, the entry point can be lower. Use our mortgage calculator to model your specific number.
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