Quick Guide to the Best First-Time Home Buyer Loans in 2025

Buying your first home is an exciting milestone but can also seem daunting when it comes to financing it. Fortunately, there are several loan programs designed to help first-time buyers make their home ownership dreams a reality.

These programs offer benefits like low down payments, competitive rates, and flexible credit requirements. Here's a look at the top first-time home buyer loans:
 

1. FHA Loan

 

• Minimum Down Payment: 3.5%
• Minimum Credit Score: 580
• Mortgage Insurance: Yes

The FHA loan is backed by the Federal Housing Administration and offers one of the lowest down payment requirements. It's a great option if you're not able to save a big down payment. Keep in mind, it includes mortgage insurance which adds to your monthly payment.
 

2. Conventional 97 Loan

 

• Minimum Down Payment: 3%
• Minimum Credit Score: 620
• Mortgage Insurance: Yes if down payment is less than 20%

This loan requires just a touch less than the FHA loan at 3% down. It’s beneficial because you can cancel the mortgage insurance after building enough equity in your home, unlike some FHA loans where mortgage insurance might stick with you unless you refinance.
 

3. HomeReady/Home Possible

 

• Minimum Down Payment: 3%
• Minimum Credit Score: 620
• Mortgage Insurance: Cancellable

These options from Fannie Mae and Freddie Mac are ideal if you have a lower income but can afford a home with a small down payment. You’ll also have the benefit of canceling mortgage insurance in the future.
 

4. USDA Loan

 

• Minimum Down Payment: 0%
• Minimum Credit Score: 640
• Mortgage Insurance: Yes, but typically less expensive

Perfect if you’re looking to live in a rural area, the USDA loan does not require any down payment and has lower mortgage insurance costs compared to other loans. The catch is you must buy a home in an eligible area.
 

5. VA Loan

 

• Minimum Down Payment: 0%
• Minimum Credit Score: Usually 620
• Mortgage Insurance: No

For veterans and active military members, the VA loan is arguably the most generous. No down payment is required, and there’s no need for mortgage insurance. It also offers good interest rates and lower closing costs.
 

6. Good Neighbor Next Door

 

• Minimum Down Payment: $100
• Minimum Credit Score: 580
• Mortgage Insurance: Yes

This HUD program offers a 50% discount on the home’s purchase price in revitalization areas for teachers, firefighters, law enforcement, and EMTs. You must live in the property for 36 months.
 

Additional Assistance

There are other programs available to first-time buyers such as down payment assistance, closing cost aid, and the option to use down payment gifts or get a co-borrower to increase your purchasing power.

Read about potential grants for first-time home buyers here:

• Proposed $25,000 Grant for First-Time Home Buyers Remains Under Congressional Review
• New First-Time Home Buyer Tax Credit Proposal Aims to Help Prospective Homeowners

 

Conclusion

Your best choice for a home loan as a first-time buyer will depend on your personal situation. Evaluate your finances, consider how much you can afford for a down payment, and explore these programs to find the right fit.

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Find out if you're eligible for more housing support here!