First-time buyer programs

The main forms help takes

Assistance usually arrives in one of a few shapes. A grant does not have to be repaid, though it may come with conditions. A forgivable loan is a second mortgage that is reduced over a set number of years as long as you keep living in the home. A deferred loan charges no payment until you sell, refinance or pay off the first mortgage. A repayable second mortgage has a monthly payment of its own. Some programs instead offer a first mortgage with a below-market rate or with closing costs covered, and some states offer a mortgage credit certificate that reduces federal income tax.

Each form changes your monthly payment, your ability to move, and what happens when you sell. A deferred loan with no payment can still take a share of the sale proceeds years later.

Who qualifies

Programs commonly limit income, purchase price, or both, and many require the home to be your primary residence. Many use a first-time buyer definition that includes people who have not owned a home in the last three years, which can include previous owners. Homebuyer education is often required before closing. Eligibility details differ by program and change, so treat any summary, including ours, as a reason to read the program's own guidelines.

Where to look

Your state housing finance agency is the best first stop. The National Council of State Housing Agencies keeps a directory of agencies by state. HUD's state pages list local homebuying resources, and HUD-approved housing counseling agencies, which you can find through HUD's search tool, often know which city and county programs currently have funds. Lenders that participate in a program can also tell you how its money is delivered at closing.

Be wary of anyone who charges a fee to find grants for you or who promises approval. Official programs publish their rules, and counseling from HUD-approved agencies is often free or low cost.

Questions to ask before you accept

Ask whether the help is a grant or a loan, whether there is a monthly payment, how long you must live in the home, what triggers repayment, and whether the program limits the price, the lender or the loan type. Ask how the program affects your closing timeline, because some require approvals that add days. Finally, ask the lender to show the Loan Estimate with and without the assistance, so you can see whether a below-market rate or a larger down payment saves more over the time you expect to stay.

Check the fine print first

Assistance is only helpful if its terms fit your plans. Before you build a budget around a program, find out whether the money is a grant or a loan, whether it is forgiven over time, and what you would owe if you sell or refinance early. Check the income and price limits, whether you must be a first-time buyer under the program's own definition, and whether a homebuyer course is required. Ask how long approval takes, because your purchase contract deadlines will not wait for program paperwork. The guides on types of assistance and on who counts as a first-time buyer help you ask the right questions.

A counselor before the program

Some assistance programs require homebuyer education, and a HUD-certified housing counselor is one of the most useful ways to meet that requirement and more. HUD defines a certified counselor as someone who has passed its certification exam and works for a HUD participating agency, which is a qualified nonprofit or government agency. Agencies cannot require you to use any product or service as a condition of counseling.

HUD says foreclosure, eviction and homeless counseling are always free. Prepurchase counseling and workshops may carry a nominal, reasonable fee, which must be disclosed before counseling starts and waived if you cannot afford it. A counselor can review your budget and credit, explain local programs and help you compare a grant against a deferred second loan. Use HUD's agency search, call two or three agencies, and ask which local assistance programs their clients use most.

How to use this file

Start with the guide to first-time buyer programs. It lays out a step-by-step search, a comparison table you can copy, and the warning signs of offers that are not what they seem. Then use the guides on education courses, forgivable seconds and housing counselors as your plan takes shape.