May 27, 2024

The Best First-Time Homebuyer Loans With Affordable Mortgage Features

Our experts answer readers’ home-buying questions and write unbiased product reviews (here’s how we assess mortgages). In some cases, we receive a commission from our partners; however, our opinions are our own.

If you’re a first-time homebuyer who’s struggling with the credit and down payment requirements that traditionally come with getting a mortgage, these home loans for first-time buyers can help you overcome those hurdles and finally get the keys to your very own home.

Compare the Best First-Time Homebuyer Loans

The mortgages listed here all have features that make them affordable for first-time homebuyers and other cash-strapped buyers. All allow low or no down payments, and many don’t require private mortgage insurance (PMI).

PMI is typically required on mortgages with less than 20% down. PMI is a cost added to your monthly mortgage payment to help compensate for the risk the lender takes in allowing a low down payment. 

Many of these mortgages also have flexible credit requirements, such as allowing borrowers to use non-traditional credit to qualify. Keep in mind that some lenders will only let you do this if you don’t have a traditional credit score. If you have a low score, you may still need to work on improving it before you’ll be able to qualify for a mortgage.

First-Time Homebuyer Frequently Asked Questions

First-time homebuyers often gravitate toward government-backed mortgages like FHA loans thanks to their less stringent credit requirements and low down payment amounts.

However, many conventional loans offer down payments as low as 3%. If you have a good score, you might be able to get a better rate with a conventional loan. But it’s a good idea to explore all your loan options when you’re going through the approval process.

Your state or local housing authority may offer some form of down payment assistance, and many non-profits have programs to help buyers put money down. You can search online or reach out to your state’s housing authority to see what’s available in your area.

Down payment assistance often comes in the form of either a grant or a loan. Loans may need to be repaid, or they might be forgiven if you fulfill certain terms (such as remaining in the home for a specified amount of time).

Apply for preapproval with three or four lenders to get an idea of the loan amounts, terms, and rates that are available to you. Once you’re preapproved, reach out to a real estate agent to start looking for houses. You may also decide to reach out to an agent first and get recommendations from them for good lenders in your area.

The professionals you work with will help guide you through the process. If you’re buying for the first time, be sure not to stretch your mortgage budget too far — many first-time homeowners are surprised at how much things like regular maintenance and repairs cost.

The old fashioned answer is 20%, but many people don’t put down this much. Conventional mortgages allow down payments as low as 3%, while FHA borrowers will need at least 3.5%. If you qualify for a USDA or VA mortgage, you won’t need to make a down payment.

Don’t forget to factor in closing costs. These can cost between 3% and 6% of the loan amount, and you’ll owe them along with your down payment at closing.

What credit score is needed for first-time buyers?

It depends on the type of loan you’re getting and your lender’s requirements. First-time homebuyers won’t be subject to different credit score guidelines just because they’re a first-timer, but certain programs geared specifically to these borrowers may come with different requirements. A score of at least 620 is good if you’re trying to get a mortgage, though you may qualify down to 580 or even 500.

Bank of America: Community Affordable Loan Solution

Minimum down payment: 0% (plus no closing costs)

Requires PMI? No

Flexible credit requirements: No minimum credit score; uses rent, utility, phone, or auto insurance payments to establish a history of on-time payments. Income limits apply.

This mortgage is available only in “designated markets,” according to the bank’s press release, including some historically Black and Hispanic neighborhoods in Charlotte, Dallas, Detroit, Los Angeles, and Miami. To qualify, you’ll need to meet income limits and complete a homebuyer certification course. 

U.S. Bank: American Dream Loan

Minimum down payment: 3%

Requires PMI? No

Flexible credit requirements: Accepts non-traditional credit if you have no score. If you have a credit score, it needs to be at least 640 to qualify. Requires a debt-to-income ratio below 43%. Income limits apply.

This mortgage is available in 25 states. If your student loans have prevented you from qualifying in the past, you may have some luck with this loan program; U.S. Bank says it will work with borrowers who are on an income-driven repayment plan.

This loan also comes with up to $10,000 in assistance that can be used toward your down payment, closing costs, or other expenses related to your home purchase. But you’ll still need to contribute at least $1,000 of your own funds at closing.

PNC Bank: PNC Community Mortgage

Minimum down payment: 3%

Requires PMI? No

Flexible credit requirements: PNC Bank says this loan has “relaxed” requirements and that many borrowers have an easier time qualifying for a PNC Community Mortgage compared to a traditional one. Income limits apply.

In addition to a low down, no-PMI mortgage, PNC Bank offers a $5,000 closing cost grant to borrowers who meet income limits or live in a low- to moderate-income area. 

Minimum down payment: 0%

Requires PMI? No

Flexible credit requirements: Specific credit requirements for this loan aren’t listed, but Navy Federal has noted online that it considers both your credit score and your banking history with this credit union.

You’ll need to be a Navy Federal Credit Union member to get a mortgage with this lender. Membership is only available to veterans, those affiliated with the armed forces, Department of Defense, or National Guard, or those who have an immediate family member with a membership.

Wells Fargo: Dream. Plan. Home. Mortgage

Minimum down payment: 3%

Requires PMI? Yes

Flexible credit requirements: Accepts borrowers with limited credit histories and low scores. Income limits apply.

Unlike most of the mortgages on this list, this mortgage does require PMI, potentially making it a little pricier than some of your other first-time homebuyer loan options.

This mortgage can be combined with Wells Fargo’s Dream. Plan. Home. Closing Cost Credit. With this credit, borrowers can get up to $5,000 to use toward closing costs. The credit is only available in certain areas.

Northpointe Bank: Northpointe 100%

Minimum down payment: 0%

Requires PMI? Yes

Flexible credit requirements: Requires a minimum credit score of 680. No income restrictions.

This mortgage is available in 23 states.

Northpointe has one other specialty 0% down product, called the EquityBuilder. With this loan, you use the money you have saved for a down payment and instead put it toward a lower rate or shorter loan term. 

Citibank: HomeRun Mortgage

Minimum down payment: 3%

Requires PMI? No

Flexible credit requirements: Accepts non-traditional credit, but you’ll need a 5% down payment if you go this route. Income limits apply.

This mortgage is only available in areas where Citibank has branch locations and accepts deposits, and in majority Black or Hispanic neighborhoods in Atlanta, Austin, Cambridge, Dallas, Denver, Houston, and Philadelphia.

Borrowers may also qualify for lender paid closing cost assistance up to $7,500.

Truist: Community Homeownership Incentive Program

Minimum down payment: 0% in certain areas, 3% everywhere else

Requires PMI? No

Flexible credit requirements: Specific credit requirements for this loan aren’t listed, but Truist does accept non-traditional credit in some circumstances from borrowers who don’t have a credit score. Income limits may apply.

To qualify for a Community Homeownership Incentive Program mortgage, you’ll need to contribute at least $500 of your own funds at closing. The remainder of your down payment can come from other acceptable sources, such as a gift from a family member.

Alliant Credit Union: Alliant Advantage Mortgage

Minimum down payment: 0%

Requires PMI? No

Flexible credit requirements: Specific credit requirements for this loan aren’t listed. To get a conventional loan with this lender, you’ll need a score of at least 640.

This mortgage from Alliant Credit Union comes in the form of an adjustable-rate mortgage, meaning your rate will change after a certain number of years.

Non-first-time homebuyers may also qualify for this loan, but they’ll need to put 5% down.

Chase: DreaMaker Mortgage

Minimum down payment: 3%

Requires PMI? Yes, reduced cost

Flexible credit requirements: Has less stringent credit requirements than its conventional mortgages. Income limits may apply.

Borrowers who are eligible can combine this mortgage with Chase’s Homebuyer Grant to get up to $2,500 or $5,000 in down payment or closing cost assistance. Plus, you can earn an additional $500 if you complete a homebuyer education course.

To get the $5,000 Homebuyer Grant, you’ll need to be buying a home in certain majority-Black, Hispanic, or Latino neighborhoods. Chase recently expanded this grant, making it available in more communities throughout the country.

Rocket Mortgage: ONE+ Mortgage

Minimum down payment: 1%

Requires PMI? No

Flexible credit requirements: This mortgage requires a credit score of at least 620. You’ll also need to earn 80% or less of the area median income to qualify.

This isn’t the only affordable program from this lender. Rocket recently introduced a few different programs to make homeownership more affordable to lower-income individuals. With its Purchase Plus program, you can get a credit of up to $7,500 to offset your down payment and closing costs. This program is only available in specific census tracts in Atlanta, Baltimore, Chicago, Detroit, Memphis, and Philadelphia. It also offers Freddie Mac’s BorrowSmart Access program, which provides a $3,000 down payment credit to borrowers in certain counties within the following metro areas: Atlanta; Chicago; Detroit; Memphis; Miami; Philadelphia; St. Louis; El Paso, Houston, and McAllen, Texas.

United Wholesale Mortgage: Conventional 1% Down

Minimum down payment: 1%

Requires PMI? Yes

Flexible credit requirements: UWM requires a credit score of at least 620 on its conventional mortgages. You’ll need to earn 80% or less of the area median income to qualify for this program.

United Wholesale Mortgage’s Conventional 1% Down is similar to Rocket Mortgage’s product. However, UWM is a wholesale lender, which means you’ll need to work with a mortgage broker to get a loan from this lender.

KeyBank: Key Community Mortgage

Minimum down payment: 0%

Requires PMI? No

Flexible credit requirements: Accepts non-traditional credit. Property must be located within a KeyBank Assessment Area, which generally refers to the geographical areas that the bank’s physical branches serve. You’ll need to live in a low-to-moderate income Census tract or earn less than 80% of the Federal Financial Institutions Examination Council Estimated MSA/MD Median Family Income to qualify.

KeyBank also offers a Home Buyer Credit of $5,000 to help cover your closing costs. To qualify for this credit, you must live in an eligible Census tract within Arizona, California, Colorado, Connecticut, New Jersey, New York, Pennsylvania, Utah, or Washington. 

Other Affordable Mortgage Options

If you aren’t eligible for any of the mortgages listed here, you may still be able to find an affordable mortgage to fit your needs. Some of the loans that can help first-time buyers include:

  • Low down payment conventional loans: Borrowers may qualify for a conventional loan with as little as 3% down. You’ll need at least a 620 credit score and you’ll be required to pay PMI until you reach 20% equity.
  • FHA loans: Mortgages backed by the Federal Housing Administration are typically easier to qualify for, with a minimum credit score of 580 and a down payment of at least 3.5%. With a 10% down payment, you could potentially get a mortgage with a score as low as 500.
  • VA loans: These mortgages allow 0% down, and are only available to service members and veterans who meet minimum service requirements. Minimum credit score varies by lender.
  • USDA loans: These mortgages are backed by the US Department of Agriculture and are only available to low- to moderate-income borrowers in certain rural or suburban areas. They allow 0% down payments. Minimum score varies by lender.
  • State government or housing finance agency mortgages: Your state’s housing authority or housing finance agency may offer mortgages to low-income borrowers. These loans are often combined with down payment and closing cost assistance to keep out-of-pocket costs down.

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