You're probably a first-time buyer even if you've owned
Most programs define a first-time buyer as someone who has not owned a principal residence in the previous three years. Divorced borrowers, people who sold years ago, and buyers who inherited and disposed of property frequently qualify without realizing it.
Down payment assistance, three flavors
Grants don't get repaid. They're the best outcome and usually the most competitive to obtain.
Forgivable second liens are recorded against the property and forgiven over a residency period — often five to ten years. Sell or refinance early and a prorated amount comes due.
Repayable seconds are real loans with real payments that count against your DTI (debt-to-income ratio — how a lender measures your monthly bills as a percentage of your monthly income before taxes). Still useful, but understand what you're taking on.
Assistance is administered by state housing finance agencies, counties, and cities. Income limits are often more generous than buyers assume, and some programs are tied to the property's location rather than your income.
Mortgage Credit Certificates
An MCC turns part of your annual mortgage interest into a direct federal tax credit for as long as you keep the loan and live in the home. Because it's a credit rather than a deduction, it delivers value even if you take the standard deduction — and lenders can sometimes count the benefit as income when qualifying you.
It has to be obtained through a participating lender at purchase. This is one of the most valuable programs first-time buyers miss simply because nobody mentioned it.
Loan programs built for low down payments
- Conventional 97 / HomeReady / Home Possible — 3% down, reduced PMI (private mortgage insurance — an extra monthly fee on conventional loans when you put down less than 20%; it protects the lender, not you, and can usually be removed later) for eligible incomes
- FHA (Federal Housing Administration loan — a government-backed loan built for buyers with lower credit scores or smaller down payments) — 3.5% down at 580 credit, flexible on credit history
- VA (Department of Veterans Affairs loan — a loan for eligible veterans, active-duty service members, and some surviving spouses, usually with no down payment) — zero down, no monthly mortgage insurance, for eligible service members and veterans
- USDA (U.S. Department of Agriculture loan — a no-down-payment loan for homes in eligible rural and small-town areas, with income limits) — zero down in eligible non-metro areas with income limits
The right pick depends on your score and your down payment. A 720-score buyer with 5% down usually beats FHA with a conventional option; a 600-score buyer usually doesn't.
How to find what applies to you
Start with your state housing finance agency, then check your county and city. Ask any lender you interview which HFA programs they're approved to originate — not all lenders are, and that alone can decide who you work with.
Or just describe your situation to RED and get the shortlist for your state and income in a minute rather than an afternoon.
Frequently asked questions
Can I combine DPA with an FHA loan?
Usually yes. Most state assistance programs are designed to layer on top of FHA, VA, USDA, or conventional first mortgages.
Is there a federal first-time homebuyer tax credit right now?
Proposals surface regularly, but assistance today is overwhelmingly state and local. Check your HFA rather than waiting on federal legislation.
Do assistance programs come with a higher rate?
Sometimes, modestly. Compare the total cost — a slightly higher rate can still be the better deal when it comes with thousands in down payment help.
Are there income limits?
Most programs have them, often set as a percentage of area median income, and they vary by household size and county.
Run your numbers
Take what you just learned and apply it to your file.