First-Time Home Buyer Programs 2021

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In addition to the first-time home buyer programs offered by your state, the federal government offers its own programs through different federally-backed agencies. These agencies were all created with the purpose of providing affordable housing to their respective target groups. Your state will usually offer more general programs that you could be eligible for but federal-backed loans provide unique benefits nationally. Each program has specific eligibility requirements and different benefits, so you should make sure you research all of your options offered by both state and federal agencies before making a decision.

Federal Programs
NoProgramTypeAgency
1HomeReady ProgramLow-CreditFannie Mae
2HomePossible ProgramLow and Moderate Income EarnersFreddie Mac
3FHA LoanLow and Moderate Income EarnersFederal Housing Administration
4USDA LoanRural AreasU.S. Department of Agriculture
5VA LoanRestricted Eligibility to Certified VeteransU.S. Department of Veterans Affairs
6Good Neighbor Next Door ProgramRestricted Eligibility to Certain CareersU.S. Department Housing and Urban Development
7Dollar Homes ProgramSupplementary Program for Local GovernmentsU.S. Department Housing and Urban Development

The agencies that offer these mortgages do not issue mortgages themselves. Instead, they have programs that provide insurance on or supplement eligible mortgages issued by approved lenders. The programs make conventional mortgages cheaper and more accessible.

1. HomeReady Program

The Federal National Mortgage Association (Fannie Mae) is a government-sponsored association that provides funding for mortgages by buying them from mortgage lenders. By doing this, Fannie Mae is able to reduce both the requirements and the cost of a conventional mortgage. When a conventional loan is insured by a Federally-backed agency, it has to be within the conforming loan limits set by that agency. Conforming loans like the ones offered by Fannie Mae typically have lower mortgage insurance premiums and competitive mortgage rates.

Requirements:

For more information about the benefits and additional resources, visit Fannie Mae’s official website.

2. HomePossible Program

The Federal Home Loan Mortgage Corporation (Freddie Mac) is a government-sponsored association that provides liquidity, stability, and affordability to housing markets. Like Fannie Mae, Freddie Mac purchases mortgages from external mortgage lenders and sponsors conforming loans. These loans also have lower mortgage insurance premiums and competitive mortgage rates. Freddie Mac differs from Fannie Mae because Freddie Mac typically buys their mortgages from much smaller lenders. Their primary mortgage program, the HomePossible Program also has slightly different guidelines.

Requirements:

For more information about the HomePossible Programs, HomePossible updates, and eligibility details, visit Freddie Mac’s official website.

3. FHA Loan

The Federal Housing Administration (FHA) is a federal U.S. government agency that insures mortgages issued by FHA-approved lenders. These mortgages are targeted toward low-income earners and can have minimum down payment requirements of as low as 3.5%. FHA Mortgage Insurance Premiums are also lower than most private mortgage insurance premiums. FHA mortgage rates are very competitive and the latest rates can be found on our FHA loan rates page. These loans only have mortgage terms of 15 or 30 years but you can choose whether you want a fixed or adjustable-rate mortgage.

Requirements:

For more information, visit the FHA Loans page.

4. USDA Loan

The United States Department of Agriculture (USDA) is a federal U.S. government agency that insures mortgages issued by USDA-approved lenders. These mortgages are targeted towards home buyers that purchase property within designated rural areas. There are significant benefits to getting a USDA Loan, which include lower eligibility requirements, lower mortgage insurance premiums, and multiple USDA Loan programs. Like FHA Loans, USDA Loans have mortgage terms of only 15 or 30 years but you can choose between a fixed or adjustable-rate mortgage.

Requirements:

For more information, visit the USDA Loans page.

5. VA Loan

The United States Department of Veterans Affairs (VA) is a federal U.S. government agency that insures mortgages issued to certified veterans by VA-approved lenders. VA also offers other programs that can assist you even if you already have a mortgage. VA loans have low VA mortgage rates, no minimum down payment requirement, and no mortgage insurance premiums. VA Loans are one of the best loans you can get because even if you have good credit, they still provide benefits that reduce your monthly mortgage payments.

Requirements:

  • Obtain a Certificate of Eligibility (COE) through a lender, online application, or mail application
  • There is no official minimum credit score requirement but most lenders will look for a score of at least 620
  • You must make an upfront payment equal to the amount that the price of your home exceeds its market value

For more information on the VA Loan program and how to apply for a COE, visit the VA Loans page.

6. Good Neighbor Next Door Program

The United States Department of Housing and Urban Development (HUD) is a government agency that provides a number of federal programs to help make housing more affordable. Like VA Loans, the Good Neighbor Next Door Program is restricted to home buyers with certain careers. These careers include law enforcement officials, teachers, firefighters, and emergency medical technicians (EMTs). Mortgages provided by this program offer several benefits that make them one of your best choices if you qualify. In revitalization areas, homes are listed exclusively through this program for 7 days. You can receive up to a 50% discount on homes in HUD’s inventory.

Requirements:

  • Credit score of at least 500 with a 10% minimum down payment ($100 down payment for credit scores above 580)
  • Agree to live in this house for at least 3 years

For more information about the Good Neighbor Next Door Program and for additional eligibility requirements, read this guide written by HUD.

7. Dollar Homes Program

The important thing to note about the Dollars Home Program is that these homes are not sold to home buyers at $1, but they eventually become the homes that HUD sells to home buyers.

The HUD Dollar Homes Program provides housing opportunities through local governments. As the name implies, unappealing homes are sold for only $1 each to local FHA agencies. These homes typically require several repairs and modifications to make them habitable. The local agency uses the community and non-profit organizations to repair the house and then resells it to low to moderate-income home buyers. These homes are then sold through HUD at a significant discount compared to regular homes.