Best First-time Home Buyer Loan Options 2026

Choosing among mortgages can be daunting, especially for first-time buyers.

There are so many mortgage lenders, and the differences between lenders and loan programs aren’t always clear.
The right home loan for you will depend on your personal finances and your plans for the home. Other factors, like your location and work history, could impact your decision, too.

Let’s get to work finding the best first-time home buyer loan for you.

Check your home buying eligibility. Start here (Nov 2nd, 2026)

How mortgages for first-time buyers differ from other loans

First-time home buyer loans exist to make financing more accessible for borrowers who are buying their first home.

Most home buyers have gotten loans before: personal loans, credit cards, auto loans, and student loans, for example. A mortgage loan is similar. The lender provides upfront cash, and you pay the money back over time.

But mortgages are different from other types of loans, too. For example, mortgage lenders are more thorough. They’ll ask you to prove your income rather than simply state it. In addition, lenders want to know about your monthly bills. They’ll even want to see your bank account to ensure you have a down payment saved up.

Lenders need information about your financial life because they’re taking a risk by loaning you hundreds of thousands of dollars. They need to make sure you can afford the loan payments.

First-time home buyer programs are often even more careful about checking and double-checking your borrowing credentials.

Types of mortgages for first-time buyers

Mortgage loans for first-time buyers fall into two broad categories: government-backed loans and conventional loans. Neither type is limited to first-time home buyers, but both include programs that work well for them.

Government-backed mortgage loans

First-time home buyers often think government-backed loans, such as FHA and VA loans, come directly from the federal government. This isn’t true. The mortgage still comes from a private lender. The government only insures or guarantees the loan.

With this government backing, lenders can be more flexible about which borrowers they approve. This means many first-time borrowers can qualify, without having to pay huge down payments or high-interest rates.

Government-backed mortgages are a great choice for many first-time buyers, even though most government programs charge upfront fees. We’ll explore the major government-backed home purchase loans below.

Conventional loans

Conventional loans do not have the direct backing of the federal government. Without federal insurance, lenders rely more on the borrower’s own credentials. In most cases, conventional borrowers with excellent credit and large down payments get below-average mortgage rates.

Several conventional mortgages, such as Fannie Mae’s HomeReady and Freddie Mac’s Home Possible, can offer great deals to first-time buyers who have low down payments. In most cases, these loans require borrowers to pay for private mortgage insurance, or PMI, each month.

To use these programs, buyers must use the new home as a primary residence, and the loan amount must fall within the conventional loan limit. The baseline conforming loan limit is $832,750 for most single-family properties. With 3% down, both programs require a fixed-rate mortgage. Adjustable-rate mortgages (ARMs) need a larger down payment.

We’ll take a look at those specific conventional programs next.

Low down payment conventional loans

Years ago, first-time home buyers who didn’t have large down payments needed government-backed loans.

Now, conventional loans also include a suite of mortgages that work well for first-time buyers. Most conventional lenders around the nation offer the following loan options:

Conventional 97

Conventional 97 loans require a minimum down payment of only 3%, well below the 20% many borrowers think they’d need for a conventional loan. This minimum even beats an FHA loan’s minimum down payment of 3.5%.
Unlike FHA loans, a standard Conventional 97 purchase loan needs at least one first-time buyer on the loan. That includes anyone who hasn’t owned a home in the past three years. Fannie Mae no longer sets a minimum credit score for loans approved through its automated system, but lenders set their own minimums and many still use 620. Ask your lender what it requires.

HomeReady

Fannie Mae’s HomeReady is another 3% down conventional loan program. It’s designed for repeat or first-time home buyers with low-to-moderate income levels. You’d need to earn 80% or less of your area’s median income to qualify.

If you’re eligible to use this program, you may be able to document income from a boarder or roommate to increase your loan size. HomeReady can also offer reduced private mortgage insurance premiums.

Lenders set their own minimum credit scores for HomeReady, and many use 620. If everyone on the application is a first-time homeowner, at least one borrower will need to take a homebuyer education course.

Check to see if you qualify to buy a home with the HomeReady Mortgage. Start here (Nov 2nd, 2026)

Home Possible

The Home Possible loan from Freddie Mac resembles Fannie Mae’s HomeReady. Repeat and first-time buyers who earn 80% or less of their area’s median income can qualify, and the loan requires a minimum down payment of only 3%.

Neither program has a single fixed minimum credit score on automated approvals (Fannie Mae removed its minimum for these loans on November 16, 2025). Manually underwritten Home Possible loans need a score of 660 on a 1-unit fixed-rate purchase. Lenders set their own minimums. Home Possible can also be more credit flexible. For example, lenders can use rental history to help qualify borrowers when they have a “thin” credit history (meaning they haven’t borrowed or used credit cards much in the past).

Note, though, that borrowers who rely on rental history will need to make a 5% down payment, more than the typical 3% down on these loans.

HomeOne

HomeOne is Freddie Mac’s 3% down loan program for first-time home buyers. At least one borrower on a purchase loan must be a first-time buyer. In most cases this means a buyer who hasn’t owned a home in the past three years.

Unlike Home Possible and HomeReady, HomeOne has no income limits. First-time buyers at any income level can use the program.

Lenders set their own minimum credit scores for HomeOne, and at least one borrower must have a usable credit score.

Low down payment government loans

Conventional mortgages offer great options for first-time buyers, but many buyers still choose government-backed loans, and for good reason. Some of these mortgage programs work with no money down. Others open the home buying process to buyers with below-600 credit.

FHA loans

The FHA loan program isn’t strictly a first-time home buyer program. It’s designed to make homeownership more accessible for anyone who wants to buy a primary home. Mortgage insurance from the Federal Housing Administration helps accomplish this goal.

With the FHA’s backing, buyers with credit scores as low as 580 can buy a house with as little as 3.5% down. That’s a big help for many first mortgage seekers.

Borrowers help pay for the FHA’s backing in the form of upfront and monthly mortgage insurance premiums. For borrowers who wouldn’t qualify for a mortgage otherwise, these premiums are money well spent.
Even some first-time buyers who qualify for conventional loans can find lower interest rates through the FHA.

Check your FHA eligibility. Start here (Nov 2nd, 2026)

VA loans

Veterans and active duty military service members can buy homes with no money down (and no monthly mortgage insurance premiums) through the VA loan program.

If you qualify for a VA loan, it’ll be hard to find a better deal with another type of mortgage. Along with zero down and no PMI, VA loans typically have lower interest rates than other home loans.

Private lenders underwrite these loans, but they’re guaranteed by the U.S. Department of Veterans Affairs.

Borrowers will need to pay an upfront fee, called the VA Funding Fee. This one-time charge is 2.15% of the loan amount the first time you use the benefit with less than 5% down. It drops to 1.5% with 5% or more down and 1.25% with 10% or more down. Using the benefit again costs 3.3% with less than 5% down. And, it can be rolled into the loan amount to avoid paying in cash at closing.

Check your VA home loan eligibility. Start here (Nov 2nd, 2026)

USDA Guaranteed loans

Like VA loans, USDA loans don’t require a down payment. But not just anybody can apply for a USDA loan.

This loan product is guaranteed by the U.S. Department of Agriculture for the purpose of rural development. Only buyers who live in rural areas, as defined by the USDA, can apply.

USDA sets no minimum credit score. A score of 640 or higher is the usual threshold for automated approval, and lower scores get a manual review. Buyers also need annual income below 115% of their area’s median income. The standard limits are 29% of income for housing costs and 41% for total debt, though exceptions are possible.

Like FHA loans, USDA Guaranteed loans require an upfront and an ongoing guarantee fee: 1% upfront and 0.35% a year. The USDA’s fee is lower than the FHA’s for most borrowers.

When lenders offer USDA loans, they’re participating in the USDA Guaranteed Loan program. The USDA also runs a Direct Loan program for low-income buyers in rural areas. The USDA itself lends money to buyers through the Direct Loan program.

Check your eligibility for a USDA loan. Start here (Nov 2nd, 2026)

Good Neighbor Next Door program

Teachers (pre-K through 12th grade), firefighters, emergency medical technicians, and law enforcement officers may be able to buy homes for half price through the Good Neighbor Next Door program. The U.S. Department of Housing and Urban Development (HUD) operates this program.

Only certain homes in certain areas are eligible. The neighborhood must be an area in need of revitalization, as defined by HUD. The home must also be a foreclosure that had been financed with an FHA loan.

Still, if things line up right, these homes sell at half price. That leaves a lot of room in the budget for improvements.

HUD keeps a database of eligible homes here.

HomePath Ready Buyer program

If you’re thinking about buying a foreclosure to save money, check out Fannie Mae’s HomePath Ready Buyer program. This program applies to homes in Fannie Mae’s HomePath database of foreclosed homes.

Fannie Mae, a government-sponsored enterprise that buys conventional loans from lenders, runs the program.

First-time buyers who complete Fannie Mae’s HomeView course may receive up to 3% in closing cost assistance. This lowers another barrier to homeownership.

Native American Direct Loan (NADL)

Military veterans who are also Native Americans (or whose spouses are Native American) might qualify for a Native American Direct Loan.

The Department of Veterans Affairs, which guarantees VA loans, offers Native American Direct Loans to veterans who qualify. Veterans can use the loan to finance a home on federal trust land.

These loans require no down payment and have low closing costs. Like VA loans, they also offer competitive interest rates.

State first-time buyer programs

Almost every state operates a Housing Finance Agency, or HFA, that exists to help first-time buyers achieve the goal of homeownership.

These agencies help connect first-time buyers with mortgage programs, including down payment assistance programs that provide grants and loans.

Other helpful first-time buyer resources

Help is available to first-time buyers who feel overwhelmed by the home-buying process. This help can come from a variety of places, including:

• A real estate agent: A local agent can help guide you through the entire home-buying process, from finding the right home to negotiating a contract.
• Mortgage preapproval: A preapproval from a mortgage lender is a rehearsal for the real mortgage application process. Borrowers who get preapproved will know how much they can borrow, and they’ll get an estimate of their monthly mortgage payments.
• Down payment assistance: Local governments and non-profit organizations can help you meet your loan’s down payment requirement, Some programs give out grants you’d never have to repay; most offer loans. Some loans are forgivable.
• Closing cost assistance: Closing costs add to the cash you need at closing. Organizations that offer down payment assistance usually offer closing cost assistance, too.
• Down payment gifts: Other people (friends and family members, for example) can help you make your down payment. Make sure your loan officer knows you’ll be using gifted money.
• Co-borrowers: If you have a low credit score, you may need a co-borrower to boost your eligibility. Co-borrowers take responsibility for the loan if you don’t repay it.
• Homeownership education: Many lenders offer home buyer education courses (they may even be mandatory as part of your loan), that can walk you through the process of buying a home.

Why buying a first home can be worth the effort

Becoming a homeowner is a big deal, and a lot of first-time borrowers need help completing the process.

The effort can be worthwhile. Along with the pride of ownership, owning a home means building home equity which can help create a more stable financial life in the future.

“We see homeownership as an exciting and still powerful tool for building wealth and increasing family stability. That’s why homeownership is a good thing,” said Daniele Samalin, vice president of Housing Partners Network and president of HPN’s Framework, the mobile-friendly homebuyer education course.

Best mortgages for first-time buyers FAQs

What is the best loan for a first-time home buyer?

There’s no single best mortgage for all first-time home buyers because each buyer faces unique challenges. Conventional mortgage programs like HomeReady and Home Possible can help income-challenged buyers, while FHA loans are great for credit-challenged buyers. If you’re a veteran or service member, a VA loan is often a good fit.

What credit score is needed for first-time buyers?

Technically, the lowest possible credit score needed for first-time buyers is 500. But in reality, it would be hard to get approved with a score that low. You’d need to make a 10% down payment on an FHA loan, and you’d need to find a lender that will agree to work with you. A score of 580 makes buying with 3.5% down possible. Higher credit scores create more mortgage options. A score of 620 is a common lender minimum for conventional mortgages, not a Fannie Mae requirement for loans approved through its automated system.

What is the minimum down payment for a house?

Minimum down payment amounts vary by loan type. USDA and VA loans, for example, require no money down. Conventional mortgages can go as low as 3% for first-time buyers. FHA loans require at least 3.5% down.

Who is considered a first-time home buyer?

Naturally, borrowers who have never owned a home qualify as first-time home buyers. But even if you’ve owned a home before, you can use many first-time buyer programs, as long as you haven’t owned property in the past three years.

Who qualifies for first-time home buyer programs?

Most programs limit their benefits to people who have never owned a home or to previous homeowners who haven’t owned a home in the past three years. A few programs also have income limits. If you earn too much, you won’t have eligibility to borrow. You also need to meet minimum credit score requirements for your lender and loan program; typically a score of 580-620 or higher is needed.

Which is the easiest first-time home buyer loan to get?

FHA loans feature relaxed credit qualifying rules. Scores as low as 580 can still qualify for a 3.5%-down loan. On a manually underwritten FHA loan, the debt-to-income ratio (DTI) can go as high as 50% with compensating factors. FHA loans work for anyone who wants to buy a primary residence, not just first-time home buyers.

Check your home buying eligibility. Start here (Nov 2nd, 2026)