For most first-time buyers with a credit score of 620 or higher, the best loan is a conventional mortgage with 3% down, such as Fannie Mae HomeReady or Freddie Mac Home Possible. The private mortgage insurance on it can be cancelled once you reach 20% equity. FHA mortgage insurance stays for the life of the loan unless you put at least 10% down. Each of the other three loans wins in its own case. FHA is the right pick if your score is between 580 and 619. VA is the right pick if you have military service history, because it needs 0% down and has no monthly mortgage insurance. USDA is the right pick if you are buying in an eligible rural or suburban area and your income is under the local limit, because its fees are lower than FHA's. Those requirements come from The Mortgage Reports' 2026 loan guide and Amerisave's FHA and USDA comparison.
This page is for you if you are a few months to a year away from buying and want to know which loan, and which local assistance, fits your credit, your cash and your ZIP code. Many buyers treat "first-time buyer loan" as one product. It is not. There are two separate decisions. The first is the mortgage itself, which is one of four federal or conventional types. The second is the state or local down payment assistance you put on top of it. There are between 2,000 and 2,500 of those programs nationwide, according to The Mortgage Reports' 2026 down payment assistance guide. The best match is a pair: one loan plus the assistance your state lets you attach to it.
The four loans, side by side
Every first-time buyer program sits on top of one of four mortgage types. Three things decide between them: your credit score, how much cash you have, and where the house is. Military service history decides the rest. The 2026 limits and minimums below are the ones lenders are working to this year.
One point first, because it widens the field. You count as a first-time buyer if you have never owned a home or have not owned a primary residence in the past three years, according to The Mortgage Reports' January 2026 explainer. If you owned a condo years ago, you may still qualify.
| Conventional | FHA | VA | USDA | |
|---|---|---|---|---|
| Minimum down payment (The Mortgage Reports, 2026) | 3% | 3.5% (10% with a 500 to 579 score) | 0% | 0% |
| Minimum credit score (The Mortgage Reports, 2026) | 620 (Home Possible typically 660) | 580 (500 with 10% down) | Typically 580 to 620, set by lender | 640 |
| Mortgage insurance (Amerisave, 2026) | PMI, cancellable at 20% equity | 1.75% upfront plus 0.55% a year; lasts the life of the loan unless 10%+ down | No monthly mortgage insurance | 1% upfront guarantee fee plus 0.35% a year |
| 2026 loan limit, one unit (HUD ML 2025-23; FHFA baseline) | $832,750 baseline | $541,287 floor to $1,249,125 ceiling, by county | No set maximum | Not a dollar cap; limited by area income and location |
| Who it is wrong for (The Mortgage Reports; Amerisave, 2026) | Scores under 620 | Buyers who qualify for conventional and plan to keep the loan for years | Anyone without military service history | City buyers and higher earners above the local income limit |
How the FHA limit in your county is set. HUD's Mortgagee Letter 2025-23 sets 2026 FHA limits for all case numbers assigned on or after January 1, 2026. The floor is 65% of the $832,750 national conforming limit, which gives $541,287. The ceiling is 150%, which gives $1,249,125. A county between the two gets 115% of its local median home price. Alaska, Hawaii, Guam and the U.S. Virgin Islands have a special limit of $1,873,625. If you are buying in a high-cost metro, FHA can stretch much further than the national figure suggests.
Why conventional usually wins once you clear 620. The difference is how long the mortgage insurance lasts. On an FHA loan with less than 10% down you pay the annual premium until you refinance or sell. On a conventional loan, PMI can come off at 20% equity. If you are torn between the two, the FHA versus conventional trade-off is worth working through with your own numbers before you apply.
Jumbo loans are for amounts above the conforming limit. They typically need 10% to 20% down and a 680 to 700+ score, per The Mortgage Reports. Few first-time buyers outside the most expensive metros will need one.
Matching a loan and assistance to your situation, in order
Work through these in order. Each step narrows the choice, so by step five you are comparing two or three real options, not two thousand. The sources do not publish typical timelines for each stage. Where a cost is known it is given, and where it is not, this page says so.
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Your credit score from at least one bureau
This decides which of the four loans you can use and what rate you are offered.
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Your monthly debt payments and gross monthly income
Needed to work out your debt-to-income ratio. Lenders generally prefer 43% or lower.
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Two years of employment history
Generally preferred by lenders, per The Mortgage Reports.
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Your last three years of housing history
Confirms whether you meet the three-year first-time buyer definition.
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Proof of savings and any gift money
Includes retirement or investment accounts you plan to draw on.
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DD-214 or proof of service, if applicable
Opens VA loans and military grants such as Iowa's $5,000.
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The county and rough price range you are targeting
Income limits, price caps and USDA eligibility are all set by location.
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Sort yourself by credit score
Use the score bands from The Mortgage Reports' 2026 guide:
- Under 580 means FHA with 10% down.
- 580 to 619 means FHA.
- 620 and up opens conventional.
- 640 and up opens USDA and most state assistance.
- 660 to 680 and up is where CalHFA's programs start.
Score also moves your rate. NAR reported in September 2026 an average of 6.24% for scores of 760+ against 7.83% for scores of 639 or below. You know this step worked when you can name the loans you are eligible for and the ones you are not.
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Check the three cases that override the default
Before defaulting to conventional or FHA, rule these in or out:
- Military service history. If yes, price a VA loan first.
- USDA area. Eligible areas cover about 97% of U.S. landmass, so check even if you do not think of the area as rural. Your household income must also be at or below the local limit.
- Public-service job. Teachers, firefighters, police officers and EMTs can get up to 50% off the price of a home through HUD's Good Neighbor Next Door program, per The Mortgage Reports.
You know this step worked when you have either a reason to use VA, USDA or Good Neighbor Next Door, or a confirmed reason you cannot.
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Find your state housing finance agency's programs
Your state's housing finance agency runs the assistance that pairs with your loan. Most state programs give $6,000 to $20,000, per The Mortgage Reports. The common bar to clear is:
- A score around 640.
- Income within area limits.
- A primary residence.
- A homebuyer education course.
- An approved lender and loan type.
Write down four things for each program: the assistance amount, the structure (grant, deferred loan, forgivable loan or repayable second), the income limit, and the purchase price limit.
You know this step worked when you have a short list of programs whose income and price limits you fall under.
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Look below the state level, and at lenders and builders
City, county, employer and lender programs can stack with state help or fill the gap where none exists. Here are some examples from NAR's September 2026 report:
- Bank of America offered a 3% down grant of up to $10,000 plus a homeownership grant of up to $7,500.
- Chase offered a Homebuyer Grant of up to $5,000.
- About two-thirds of builders offered incentives such as rate buydowns.
City programs can be large. New York City's HomeFirst offers up to $100,000. The local grants most buyers miss are usually found through your city or county housing office.
You know this step worked when you know whether anything local stacks on top of the state program.
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Take the homebuyer education course early
Most assistance programs require it, including every CalHFA program and Dream For All. If you take it before you apply, it cannot hold up your closing. The sources do not list a standard fee or length for these courses. Ask the program which courses it accepts before you sign up.
You know this step worked when you have a completion certificate in hand.
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Get quotes from at least three participating lenders
State assistance only works through approved lenders. Ask each lender which state and local programs it participates in. Then ask for a quote on the same loan type with the same assistance attached, so the numbers are comparable.
NAR reported in September 2026 that shopping at least three lenders saves an average of about $80,000 over a 30-year mortgage.
You know this step worked when you hold three Loan Estimates for the same loan and assistance, and can see the difference in rate and fees.
Where buyers pick the wrong match
Ruling yourself out because you owned before. If you have not owned a primary residence in the past three years, you count as a first-time buyer for most programs. You can recognize this mistake if you skipped assistance programs because of a home you sold years ago. Check each program's own definition, because a few use different wording.
Taking FHA when you clear the conventional bar. FHA's 3.5% down and 580 minimum make it feel like the first-timer loan. But with less than 10% down its 0.55% annual premium never cancels. If your score is 620 or higher, get a conventional quote alongside the FHA one before choosing.
Treating a shared appreciation loan as free money. California's Dream For All is repaid when you sell, transfer or pay off the first mortgage. You repay the original amount plus a share of the home's appreciation: 20% for moderate-income borrowers, or 15% for those at or below 80% of area median income. In a rising market that can cost more than a conventional second loan. Run the numbers on the home gaining value before you accept.
Picking the wrong option in a grant-or-loan program. Iowa's FirstHome gives you a $2,500 grant or a second loan of up to 5% of the price. You cannot have both. On most homes the loan is the larger amount, but it is a debt and the grant is not. The worked example in the next section shows the gap.
Shopping for a house above the program's price cap. Assistance programs cap the purchase price as well as your income. In Iowa, FirstHome caps the price at $566,000 in 2026, or $692,000 in targeted areas. Find a home above that and the assistance is gone. Set your home search filter at the cap before you start looking.
Using one lender without comparing. Your rate is set by the lender, not the program. The NAR figure above, about $80,000 over 30 years, is the cost of skipping this step.
Confusing eligibility with readiness. Thomas Brock, CFA, CPA, put it this way in The Mortgage Reports: "Qualifying for a first-time buyer program and being financially positioned for homeownership are two different things." Before you take the lowest possible down payment, check that you can carry the monthly payment, the mortgage insurance and any second loan.
Where your state changes the answer
The four loan types work the same everywhere. The assistance on top does not. The sources here cover a handful of states and cities in detail, which is not the whole map. If your state is not listed, use step three above to find its housing finance agency and compare against these examples.
Iowa
The Iowa Finance Authority runs two programs in 2026.
FirstHome - You get a $2,500 grant or a second loan of up to 5% of the sale price or appraised value. The second loan has no monthly payments. - You must be a first-time buyer, a military member, or buying in a targeted area. - Income limits run from $102,100 to $171,360 depending on county.
Homes for Iowans - This is a second loan only, also up to 5% of the price. - The income limit is $171,360 and the price limit is $692,000.
Rules for both programs - Minimum credit score of 640. - Maximum debt-to-income ratio of 50%, or 45% if underwritten manually. - You must move in within 60 days of closing. - Eligible service members and veterans can stack a $5,000 Military Homeownership Assistance grant on either program.
Coming change: a new 3% second mortgage option takes effect November 2, 2026. If you are closing around that date, ask your lender which option you will be offered.
California
Dream For All provides up to 20% of the home price, capped at $150,000, toward the down payment or closing costs. To qualify: - At least one borrower must be a first-generation homebuyer. - At least one borrower must be a current California resident. - All borrowers must be first-time buyers. - Household income must fall within CalHFA's county limits.
Vouchers are awarded by random selection, not first come first served. The last application round closed March 16, 2026, and CalHFA has since released a new round of vouchers.
If you do not get a voucher, CalHFA's other options, per The Mortgage Reports' California guide, are: - MyHome Assistance: up to 3.5%, deferred, with no monthly payments. - Forgivable Equity Builder Loan: up to 10% of the price, forgiven after five years of living in the home. - Pathway to Homeownership: up to $10,000 as a grant, for underserved communities.
CalHFA programs need a score of 660 to 680. California's median price was $854,000 in March 2026, so a 3% down payment at the median came to $25,620. In this state the size of the assistance matters more than the loan type.
Louisiana and New York City
Louisiana's Resilience Soft Second offers up to $55,000, plus $5,000 toward closing costs. New York City's HomeFirst offers up to $100,000. Both figures are from The Mortgage Reports' 2026 guide. Both are well above the $6,000 to $20,000 most state programs give, so if you are buying in either place, check them before anything else.
What each choice costs
Upfront and first-year insurance costs: FHA vs USDA
Say you are borrowing $250,000 and qualify for both FHA and USDA. The fee rates below are Amerisave's 2026 figures. The annual cost is shown roughly, on the starting balance.
| FHA upfront premium (1.75%) | $4,375 |
|---|---|
| FHA annual premium, year one (0.55%) | about $1,375 |
| USDA upfront guarantee fee (1%) | $2,500 |
| USDA annual fee, year one (0.35%) | about $875 |
USDA comes out $1,875 cheaper at closing and about $500 cheaper in the first year. If the property and your income qualify, that gap is the reason to choose USDA over FHA.
Iowa FirstHome: grant or second loan
Say you are buying a $300,000 home in Iowa through FirstHome. You must choose one option.
| Grant option | $2,500, never repaid |
|---|---|
| Second loan option (5% of $300,000) | $15,000, no monthly payments |
The loan gives you $12,500 more at closing, but it is debt you will owe later. Take the grant if $2,500 covers your gap. Take the loan if you need the extra cash to close.
What it is worth to act sooner. NAR estimated in September 2026 that waiting from age 30 to 40 to buy a starter home can cost about $150,000 in lost equity. The average first-time buyer is now 40. That is a national average, not a prediction for your market. It is the reason a low-down-payment loan with assistance can beat saving for years toward 20% down.
What it costs to start with a low score. The 1.59-point rate gap above usually costs more than any choice between programs. If your score is near a threshold such as 620, 640 or 680, raising it before you apply may help you more than any assistance program. If you are considering FHA, the exact bar FHA lenders set shows where you stand.
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