Buying your first home is a big step, and the loan you choose shapes your down payment, monthly cost, and how much cash you need at closing. Lending Buddy isn't a mortgage lender, but our Home Loans service can connect you with licensed mortgage partners that offer first-time homebuyer loans, including FHA, conventional fixed-rate, and first-time buyer programs. One free request, no obligation, and each partner sets its own rates and terms.
This guide compares the main first-time homebuyer loan options side by side, shows what down payments look like on a real price point, explains down payment assistance and homebuyer education, and walks you through every step from preapproval to closing day.
First-Time Homebuyer Loan Options Through Our Partners
Here's how the most common programs compare. Each lender adds its own requirements on top of program rules, sometimes called overlays.
| Loan type | Minimum down payment | Who it often fits | Mortgage insurance |
|---|---|---|---|
| FHA | 3.5% with a 580+ score; 10% with 500–579 | Buyers with modest savings or lower credit scores | Upfront and annual FHA mortgage insurance premiums |
| Conventional 3% down | 3% through eligible programs | Buyers with steady income and good credit | PMI until you reach enough equity to cancel it |
| VA | Often no down payment | Eligible veterans, service members, and some surviving spouses | No monthly mortgage insurance; a funding fee usually applies |
| USDA | Often no down payment | Moderate-income buyers in eligible rural and suburban areas | Upfront and annual guarantee fees |
FHA loans
FHA loans are insured by the Federal Housing Administration and are popular with first-time buyers because of their flexible credit standards. With a credit score of 580 or higher, the minimum down payment is 3.5%; with a score between 500 and 579, it's 10%. FHA loans carry an upfront mortgage insurance premium, typically 1.75% of the base loan, plus an annual premium paid monthly. For a deeper dive, read our FHA guide for first-time buyers.
Conventional loans with 3% down
Conventional loans aren't government-insured, but several programs allow just 3% down, including Fannie Mae's HomeReady and Freddie Mac's Home Possible (which have income limits) and standard 97% loan-to-value options for first-time buyers. With less than 20% down you'll pay private mortgage insurance (PMI), but unlike FHA insurance on most loans, PMI can be removed once you build enough equity. Our FHA vs. conventional comparison helps you weigh the two.
VA and USDA loans
VA loans, backed by the Department of Veterans Affairs, often require no down payment and no monthly mortgage insurance for eligible borrowers. USDA loans from the Department of Agriculture also often allow zero down for buyers who meet income limits and purchase in eligible areas, which include many small towns and outer suburbs. If you might qualify for either, ask a partner to check, since they can significantly lower the cash you need upfront.
What You'd Need Down on a $300,000 Home
Using a $300,000 purchase price as an example, here's the minimum down payment under each option. Closing costs, commonly around 2% to 5% of the price, are on top of the down payment.
| Scenario | Down payment | Estimated closing costs (2%–5%) |
|---|---|---|
| Conventional, 3% down | $9,000 | $6,000–$15,000 |
| FHA, 3.5% down (580+ score) | $10,500 | $6,000–$15,000 |
| FHA, 10% down (500–579 score) | $30,000 | $6,000–$15,000 |
| Conventional, 20% down (no PMI) | $60,000 | $6,000–$15,000 |
| VA or USDA, if eligible | Often $0 | $6,000–$15,000 |
On the FHA 3.5% example, the base loan would be $289,500, and the 1.75% upfront mortgage insurance premium would add about $5,066, which most buyers finance into the loan. Sellers can sometimes contribute toward closing costs, which can reduce your cash to close. To see what monthly payment you can carry, use a quick rule of thumb: many lenders like housing costs at or below 28% of gross income and total debts at or below 36%. On a $6,000 monthly gross income, that's about $1,680 for housing and $2,160 for all debts, though FHA and other programs can allow higher ratios. Our home affordability guide goes further.
Down Payment Assistance Programs
Down payment assistance (DPA) can close the gap when savings fall short. Programs are usually run by state housing finance agencies, cities, counties, and some nonprofits. They commonly come in three forms:
- Grants that don't need to be repaid.
- Forgivable second loans that are forgiven if you stay in the home for a set number of years.
- Deferred or low-interest second loans repaid when you sell, refinance, or pay off the first mortgage.
Most DPA programs have income limits, purchase price caps, and a requirement to use an approved lender and complete homebuyer education. Ask any mortgage partner which local programs they work with, and check your state housing finance agency's website directly.
Homebuyer Education
Many first-time buyer and DPA programs require a homebuyer education course, and it's worth taking even when it isn't required. Courses cover budgeting, credit, the mortgage process, and life as a homeowner. Options include online courses such as Fannie Mae's HomeView and Freddie Mac's CreditSmart, and in-person or one-on-one sessions through HUD-approved housing counseling agencies, many of which are free or low-cost. Keep your completion certificate; lenders and DPA programs will ask for it.
Steps From Preapproval to Closing With Lending Buddy
- Check your credit and budget. Review your free credit reports, pay down card balances if you can, and set a comfortable monthly payment.
- Connect with a licensed partner. Submit a request through the Lending Buddy Home Loans service, and verify the partner at NMLS Consumer Access.
- Get preapproved. The lender reviews your income, assets, and credit and issues a preapproval letter showing how much you may borrow. See our preapproval guide.
- Shop for a home and make an offer. Your agent submits the offer with your preapproval letter and an earnest money deposit.
- Apply and lock your rate. You'll receive a Loan Estimate within three business days of a complete application. Compare it with other offers before you lock.
- Inspection and appraisal. A home inspection checks condition; the lender's appraisal confirms value.
- Underwriting. Respond quickly to document requests, and avoid new credit or large purchases until closing.
- Review your Closing Disclosure. You'll receive it at least three business days before closing. Compare it line by line with your Loan Estimate.
- Close and get your keys. Sign the documents, bring your cash to close by wire or cashier's check, and the home is yours.
Start Your First-Time Homebuyer Journey
The right first-time homebuyer loan depends on your savings, credit, service history, and where you want to live. Lending Buddy can connect you with licensed mortgage partners through one free, no-obligation request, so you can compare options with confidence. When you're ready, Apply Now.
Frequently Asked Questions
Does Lending Buddy offer first-time homebuyer loans directly?
No. Lending Buddy isn't a mortgage lender. Our Home Loans service can connect you with licensed mortgage partners that offer FHA, conventional fixed-rate, and first-time buyer programs. Those partners set the rates and terms and make lending decisions. Verify any partner at NMLS Consumer Access before sharing financial documents.
What is the minimum down payment for a first-time homebuyer?
It depends on the loan. FHA loans require 3.5% down with a credit score of 580 or higher, or 10% with a score of 500 to 579. Several conventional programs allow 3% down. VA and USDA loans often require no down payment for eligible borrowers. Closing costs, commonly 2% to 5% of the price, are additional.
Can Lending Buddy help me find down payment assistance?
Lending Buddy doesn't run assistance programs, but licensed mortgage partners you connect with may work with state and local down payment assistance. These programs offer grants or second loans, often with income limits and homebuyer education requirements. You can also check your state housing finance agency's website to see what's available where you plan to buy.
Do I have to take a homebuyer education course?
Many first-time buyer and down payment assistance programs require one, including some 3% down conventional options. Even when it isn't required, a course helps you understand budgeting, credit, and the mortgage process. Online courses and HUD-approved housing counseling agencies offer options, many free or low-cost. Save your completion certificate for your lender.
How long does it take to go from preapproval to closing?
Timelines vary with your home search, but once you're under contract, closing often takes about 30 to 45 days. Underwriting, appraisal, and title work all happen in that window. Responding quickly to document requests and avoiding new debt can help keep your closing on schedule.