First-time home buyer benefits in 2024: Programs and perks

The perks of being a first-time home buyer

First-time home buyers enjoy certain benefits that repeat buyers can’t always access.

Many down payment assistance programs and low-cost home loans are reserved for first-time buyers. You might have access to special tax breaks. And there are non-financial perks, too, like free online homeowner education courses.

If you want to buy a home but don’t know whether you can afford it, take a look at these first-time home buyer benefits. They might give you the boost you need to put homeownership within reach.

In this article (Skip to...)

• First-time buyer benefits
• Who qualifies?
• How to get started

First-time home buyer benefits in 2024

1. Low down payments

Being able to buy a house with little or no money down is one of the most important first-time home buyer benefits. It gets you on the housing ladder quicker and lets you put more of your savings toward other essentials, like closing costs and moving expenses.

Of course, low down payments aren’t restricted to first-time buyers. But they’re a huge help when you’re currently renting and can’t sell an existing home to help pay for your new one.

Nearly all first-time buyers can get a mortgage with a down payment of just 3% using a conventional loan or 3.5% using an FHA loan. Some can even buy with no down payment at all.

If you’re a veteran or still in the military, you can buy a house with $0 down using the VA loan program. And many home buyers in rural or semi-rural areas can get mortgages backed by the U.S. Department of Agriculture (USDA loans), which also require no down payment.

Talk to a mortgage lender about your options. You might be surprised how little you need saved to afford the home you want.

2. Down payment and closing cost assistance

First-time buyers often don’t realize they could get help with their down payment and upfront costs. But home buyer assistance programs are actually really common.

There are thousands of down payment assistance (DPA) programs across the country. And at least one will cover the place where you want to buy a home.

You might be offered a grant, a forgivable loan with no monthly payments, or a repayable loan with a low interest rate. Many programs help only those with low-to-average incomes and decent credit scores, but some are open to wider groups.

Each DPA program gets to set its own rules and eligibility criteria. So, we can’t tell you whether you’ll qualify or what you may be offered. But we can point you in the right direction to learn more; see down payment assistance programs in every state to get started.

It’s important to also keep in mind that most of these programs do require at least one borrower to complete a homebuyer education course before the loan closes. Be sure to do so in a timely manner to avoid any delays in your closing.

3. Reduced PMI costs

Homeowners tend to hate their private mortgage insurance (PMI) premiums because this type of coverage protects the lender, not the borrower. Many home buyers end up paying for mortgage insurance because it’s typically required when you put less than 20% down.

But, if you’re a first-time buyer with modest income, you may be able to get a loan with reduced PMI premiums and lower monthly payments.

The HomeReady and Home Possible mortgages offer discounted PMI rates compared to a standard conventional loan — even if you put only 3% down. And you can stop paying PMI as soon your mortgage balance dips below 80% of your home’s value.

Veterans and service members can easily avoid PMI, too, since the VA loan program doesn’t charge it.

If you’ve heard horror stories and you’re hoping to avoid PMI at all costs, talk to a lender about these options. You might qualify for a lower-cost PMI loan or one with no mortgage insurance whatsoever.

4. Home buyer education

If you use a down payment assistance program or get your mortgage through the state government, you’ll likely have to take a mandatory home buyer education course. But these classes can be a great idea even when they’re not required by your mortgage lender.

Buying your first home is complicated. And most find it a bit scary. The more knowledge you acquire on the subject, the better equipped and the more confident you’ll become. You could also save money by learning how to shop for your mortgage rate, homeowners insurance, and other expenses.

Homeowner education courses are typically free or cheap. And many can be completed online in just a few hours. Your mortgage lender can fill you in on the details and point you toward the right class for your needs.

5. First-time home buyer tax breaks

Those who apply for a state-run DPA or mortgage program may also qualify for a mortgage credit certificate (MCC). These let you make deductions from your federal tax return of up to $2,000 annually for as long as the certificate is valid. And the savings apply even if you don’t itemize your deductions.

Don’t miss out if you’re offered one! Most first-time buyers need all the help they can get.

The Mortgage Reports is not a tax site. This information is for general guidance only. Consult with a tax professional about your specific situation.

6. Building home equity

The ability to build wealth through equity is one of the biggest benefits for any homeowner. But if you’re a first-time home buyer, this is a brand-new perk.

You’re already aware that when you rent, you never see a return on investment. Those monthly payments just line your landlord’s pockets. But when you own a home, part of each monthly mortgage payment adds to your own assets in the form of additional home equity.

Some first-time buyers waver between buying early with a low down payment — and likely paying PMI — or saving for 20% down. As you weigh the pros and cons, keep in mind that PMI is usually only a temporary cost, unless you are buying a home using an FHA mortgage. But the wealth you build as a homeowner is permanent, and should continue to grow year after year.

For many, it’s worth it to buy sooner rather than later and stop paying rent for good.

Who qualifies for first-time home buyer benefits?

You might think the meaning of “first-time home buyer” is obvious. Doesn’t it mean someone buying their own home for the first time?

Well, no. Not always. Almost every lender and public authority defines a “first-time buyer” as someone who hasn’t owned (or had an ownership interest in) a home over the previous three years. And some make exceptions for the newly divorced. That means you might qualify for first-time home buyer loans and grants even if you’ve owned property in the past.

Keep in mind that there are other requirements, too, depending on which home-buying programs you use.

If you want down payment assistance, you likely need to meet income limits and purchase price limits. Some of these restrictions could potentially limit your purchase power. These vary by program and region, though you’ll probably have to be at or below your area median income (AMI). Some programs require you to have an income below 80% of the AMI; others might permit 100% or even 120% or more.

Not sure what the AMI is where you wish to buy? Fannie Mae has an AMI lookup tool on its website that you can use to find out.

First-time home buyers also need to meet minimum credit score requirements (usually 580-620) and make the required down payment for their home loan program.

Again, these rules vary by loan type and lender. So reach out to a mortgage company when you’re ready to get started. Your loan officer will check which home loans you qualify for and help you choose the best option for your situation.

Where to find first-time home buyer benefits

If you’re looking for home buyer assistance, your first port of call should be your state’s housing finance agency (HFA).

Your local HFA may offer down payment assistance, closing cost assistance, first-time home buyer loan programs, and/or home buyer education. And it will connect you with a lender that can offer these programs.

You can also do a web search to find additional home buyer resources. Key in the name of your city or county plus “down payment assistance” or “home buyer education.” Also, check for nationwide home-buying programs and job-specific ones. Often, first responders, teachers, medical workers, and those in other highly valued occupations can get special help.

Some lenders also offer private down payment assistance. And Fannie Mae’s Community Seconds and Freddie Mac’s Affordable Seconds can provide especially attractive first-time home buyer benefits.

How to get started as a first-time home buyer

Studies consistently show that saving for a down payment is the top obstacle to homeownership for first-time buyers. But many don’t know about the low down payments that are open to them — nor about the DPA programs that can make home buying much more affordable.

But you do. So get started by choosing the type of mortgage that suits you best. And research local DPA programs that might be open to you. Who knows? You could be moving into your own home sooner than you dreamed possible.