Someone you know just bought a house with only $1,500 out of pocket and you think that sounds impossible, right? But they cashed in on something others don’t bother to research: first-time homebuyer programs. These programs can dramatically reduce the money you need upfront to buy a home. Here’s another surprising part: a buyer could actually have owned a house before and still qualify. But under federal guidelines, a person still qualifies as a “first-time” buyer if they haven’t owned a home in the past three years.

Conventional wisdom has always been that you need a 20% down payment to buy a house. This advice has become incredibly outdated with major changes in lending over the past decade. Meanwhile, potential buyers keep renting month after month, watching home prices rise while they try to save an increasingly impossible amount. What they don’t realize is that dozens of programs exist specifically to help people get into homes with little money down.

What Makes You a “First-Time” Homebuyer?

You don’t have to be buying your very first home to qualify as a “first-time” buyer. The U.S. Department of Housing and Urban Development considers you “first-time” if you haven’t owned and lived in a home as your primary residence for the past three years. But that’s just the beginning. You might also be eligible if you fall into any of these categories:

Single Parents and Displaced Homemakers

If you previously owned a home only with a spouse during marriage, you may qualify as a first-time buyer regardless of when that ownership ended. This applies whether you’re now single due to divorce, separation, or becoming widowed.

This provision recognizes that joint ownership during marriage is different from individual homeownership. Someone who just finalized their divorce last year and co-owned a house with their ex-spouse can immediately qualify for first-time buyer programs, even though they technically owned a home within the past three years.

The “displaced homemaker” category specifically covers people who worked primarily in the home providing unpaid services for family members. If you were a stay-at-home parent whose name was on the deed only because you were married, but you never had sole decision-making authority over the property, many programs treat you as a first-time buyer when purchasing independently.

Previous Property Issues

You might be eligible if you’ve only owned property that wasn’t up to building codes and couldn’t be brought into compliance for less than it would cost to build new. Or if you only owned a mobile home or other residence that wasn’t permanently affixed to a foundation.

Joint Ownership Situations

If you lived in a home with a spouse or partner but your name wasn’t on the mortgage—or was only on it as a joint owner with no sole ownership—many programs will still consider you a first-time buyer.

The Big Three Federal Programs

Before diving into state and local options, let’s examine the three major federal programs that form the backbone of most first-time homebuyer assistance.

FHA Loans: The Most Popular Choice

The Federal Housing Administration loan remains the go-to option for most first-time buyers. You only need 3.5% down, and credit scores as low as 580 can work with that minimum down payment. If your credit score is between 500-579, you’ll need 10% down, but you can still get approved.

FHA loans work for homes up to $524,225 in most areas, though this limit varies by county. You can check your local FHA limit online to see what’s available in your area.

VA Loans: Unbeatable for Those Who Have Served

If you’re a veteran, active-duty service member, or eligible surviving spouse, VA loans offer the best terms available. No down payment required, no monthly mortgage insurance, and competitive interest rates make this program incredibly valuable.

VA loans have generous limits—up to $766,550 in most areas—and can be used multiple times throughout your life.

USDA Rural Housing Loans: Hidden Gem for Suburban Areas

Don’t let the “rural” designation fool you. USDA loans cover way more areas than you’d expect. Over 90% of U.S. land is eligible, including many suburban communities outside major cities.

These loans require no down payment and are available to households earning up to 115% of the median income for their area. In many locations, this means families earning $119,850 or less are eligible. The catch? Your household income includes everyone living in the home, not just the applicants on the loan.

State and Local Down Payment Assistance Programs

This is where things get really interesting. Nearly every state offers some form of down payment assistance, and many local governments have their own programs too. These can often be combined with federal loan programs for maximum savings.

How Much Help Can You Get?

The amount varies widely by location and program:

• California’s MyHome Assistance: Provides deferred-payment loans to help with down payment and closing costs
• Florida Assist: Up to $10,000 as a 0% deferred second mortgage
• Massachusetts: Up to $30,000 in down payment assistance available statewide

Some programs are incredibly generous. San Francisco’s DALP program provides up to $500,000 in down payment assistance, though you need to meet strict income requirements and the program is highly competitive.

Income and Credit Requirements

Most programs target moderate-income buyers. Common requirements include:

• Income limits: Usually 80-120% of your area’s median income
• Credit scores: Typically 620-640 minimum, though some programs accept lower scores
• Debt-to-income ratio: Generally 43-45% maximum

How to Find Programs in Your Area

Start your search at these three levels:

State Level: Visit your state housing finance agency’s website. Every state has one, and they’re usually the best starting point for comprehensive program information.

County/City Level: Many local governments offer additional assistance. Check your county and city websites for housing or community development departments.

Employer Programs: Some large employers, school districts, and government agencies offer homebuyer assistance to their employees. It’s worth asking your HR department.

The Application Process: What to Expect

Most programs follow a similar pattern:

Pre-Qualification

You’ll need to gather income documentation, credit reports, and bank statements. Many programs require pre-approval from an approved lender before you can even apply for assistance.

Homebuyer Education

Nearly every program requires completion of a HUD-approved homebuyer education course. These are typically 8 hours and cover budgeting, the home buying process, and maintaining your home. Some are available online, others require in-person attendance.

Application and Approval

Applications often require detailed financial information and can take several weeks to process. Popular programs may have waiting lists or operate on a first-come, first-served basis.

Home Search and Purchase

Once approved, you’ll typically have 6-12 months to find and purchase a home. The property must meet program requirements and serve as your primary residence.

Combining Programs for Maximum Savings

Here’s where strategic thinking pays off. Many programs can be “stacked” to minimize your out-of-pocket costs:

• Use a VA or USDA loan for zero down payment
• Add state down payment assistance for closing costs
• Include local grants for additional support

Common Restrictions and Requirements

Most programs come with strings attached. Here are the typical requirements you’ll encounter:

Occupancy Requirements: You must live in the home as your primary residence, typically for 3-10 years

Income Recapture: Some programs require repayment if you sell within a certain timeframe or if your income increases significantly

Purchase Price Limits: Many programs cap the price of homes you can buy

Property Condition: The home must meet certain safety and condition standards

Getting Started: Your Action Plan

Ready to explore your options? Here’s your step-by-step approach:

1. Check Your Credit: Know your score before you start. If it’s below 620, focus on improvement first
   
2. Calculate Your Income: Gather recent pay stubs and tax returns to determine if you meet income limits
   
3. Review Your Homeownership History: Look at the past three years of where you’ve lived and whether you had ownership interest
   
4. Research Local Programs: Start with your state housing agency and work down to local programs
   
5. Get Pre-Approved: Choose a lender familiar with first-time buyer programs
   
6. Complete Education Requirements: Don’t wait—many courses have limited availability
   

The housing market can be competitive, but having your financing lined up and knowing exactly what assistance you can access puts you in a strong position to act quickly when you find the right home.

Don’t assume you need a massive down payment to buy a home. And don’t assume that previous homeownership disqualifies you from valuable assistance programs. With the right combination of programs, homeownership might be much more achievable than you think. The key is doing your research and understanding what’s available in your specific area, and more importantly, understanding the surprisingly broad definition of who can access help.