First-time home buyer loans: your real options, ranked by cost
You do not need 20% down to buy your first home — several programs open the door with 3–3.5%, and some with nothing at all. The trick is matching the program to your credit and cash, because the cheapest option depends entirely on your numbers.
A "first-time buyer" to most programs means anyone who has not owned a home in the past three years — so it is broader than it sounds. The label unlocks low-down-payment conventional loans (as little as 3% down via Fannie Mae's HomeReady or Freddie Mac's Home Possible), FHA loans at 3.5%, and, for those who qualify, zero-down VA and USDA loans.
The right choice turns on credit and cash. With a 700+ score, a conventional 3%-down loan usually beats FHA because its mortgage insurance is cancellable at 20% equity and often cheaper. Below 660, FHA's easier approval wins even with its lifetime insurance. If you qualify for a VA loan, it beats everything.
Beyond the loan itself, most states run down-payment assistance programs — grants or low-interest second loans that cover part of your down payment and closing costs. They are underused because buyers do not know they exist. Before you commit, check your state housing finance agency, and run the payment on each path through the mortgage calculator.
Questions people ask
How much do I really need to put down on a first home?
As little as 3% on a conventional first-time-buyer loan, 3.5% on FHA, or nothing on VA and USDA if you qualify. The 20% figure only matters for avoiding mortgage insurance — it has never been a requirement to buy.
What counts as a first-time home buyer?
Most programs define it as not having owned a principal residence in the previous three years — so past homeowners can requalify. Some assistance programs add income limits tied to your area's median.
Are there programs to help with the down payment?
Yes. Nearly every state offers down-payment assistance through its housing finance agency — grants or deferred second loans covering part of your down payment and closing costs. Eligibility usually depends on income and sometimes on completing a homebuyer course.
FHA or conventional for a first home?
Strong credit (700+) with a little cash: conventional 3%-down, because its insurance cancels at 20% equity. Lower credit: FHA, because it approves more easily. The decision is driven by your score, not by first-time status.