First-time buyer guide
Little-to-no-money-down paths, A to Z
Fourteen real ways to buy a home — or buy land and build — with little or no down payment. For each one: what it actually is, who qualifies, what it costs, exactly how to apply, what trips people up, and where to verify it on the official site.
Start here: the 8-step order of operations
Do these in order. Most buyers who lose assistance money did the right things in the wrong sequence.
1. Know your three numbers
Credit score, gross monthly income, and total monthly debt payments. Everything else in this process is decided by those three numbers.
Financial readiness2. Find your true budget before you shop
Run the affordability and debt-to-income calculators. Shop a payment you are comfortable with, not the maximum a lender approves.
Run the calculators3. Match yourself to programs
Check USDA area and income eligibility, VA entitlement if you served, and your state and city assistance programs. Most buyers qualify for more than one and they stack.
50-state directory4. Take the free homebuyer education course
HUD-approved education is required by nearly every assistance program and is free. Take it early so it never delays your closing.
Academy5. Get pre-approved by two or three lenders
Compare official Loan Estimates side by side. Credit pulls inside a 45-day window count as one inquiry, so shopping does not hurt your score.
Compare lenders6. Reserve your assistance money
The lender must reserve DPA funds when you go under contract. Ask for written confirmation the reservation was made — this is the most common point of failure.
7. Write the offer to cover your cash
Ask for seller-paid closing costs up to your loan's limit. Between a gift, DPA, and seller credit, many buyers close with only their earnest money and inspection fees out of pocket.
8. Protect the file until closing
No new credit, no job changes, no large unexplained deposits. Underwriting re-verifies everything days before closing.
Closing checklist
Compare every path at a glance
Tap any program to jump to the full breakdown.
USDA Guaranteed loan (Section 502 Guaranteed)
0% down in eligible rural and many suburban-edge areas, through an approved lender.
USDA Section 502 Direct loan
0% down, loaned directly by USDA with payment subsidy for low and very-low income households.
USDA single-close construction-to-permanent
One closing that buys the land and builds the home with no down payment, where lenders offer it.
VA loan
0% down with no monthly mortgage insurance for eligible service members, veterans, and some spouses.
FHA 3.5% down (with gift or assistance)
Not zero down by itself — but the 3.5% can be a gift or a DPA grant, making it effectively no cash.
Conventional 3% down (HomeReady / Home Possible)
3% down first-time-buyer conventional loans with reduced mortgage insurance and cancelable PMI.
State down payment assistance (DPA)
Grants and second mortgages from your state housing finance agency that cover the down payment.
City and county grants
Local HOME/CDBG-funded grants, often the most generous money available and the least advertised.
Forgivable second loans
A silent second mortgage with no payment that disappears if you stay in the home long enough.
Employer-assisted housing
Grants or forgivable loans from hospitals, universities, school districts, and large employers.
Habitat for Humanity
Sweat equity in place of a down payment, with an affordable mortgage held by the affiliate.
Community Land Trusts
Buy the house at a reduced price and lease the land — a permanent affordability model.
Seller contributions (concessions)
The seller pays your closing costs or buys down your rate, so your cash to close drops toward zero.
Builder incentives
New-construction builders often pay closing costs or buy down the rate through their lender.
Full breakdowns
A mortgage made by a regular bank or mortgage company and backed by the U.S. Department of Agriculture. Because USDA guarantees part of the loan, lenders can finance 100% of the appraised value — no down payment — at 30-year fixed rates that are often competitive with conventional loans.
Who qualifies
- The property address must be in a USDA-eligible area (check the map — many outer suburbs qualify).
- Total household income (everyone living there, not just borrowers) must be at or under the county limit, generally 115% of area median income.
- Property must be your primary residence, modest in size and design, and structurally sound.
- Most lenders look for a 640+ credit score for automated approval; manual underwriting is possible below that with strong compensating factors.
- Stable, documented income for roughly two years and a debt-to-income ratio typically near 41% (higher with strong files).
What it costs
- • Upfront guarantee fee (financed into the loan, not paid in cash).
- • Annual fee collected monthly — usually smaller than FHA mortgage insurance.
- • Normal closing costs: appraisal, title, recording, prepaid taxes and insurance. Seller credits and gifts can cover these.
How to apply, step by step
- 1.Check the address on the USDA eligibility map and the household income limit for your county.
- 2.Pull your credit and clean up balances 60–90 days before applying.
- 3.Gather two years of W-2s/tax returns, 30 days of pay stubs, and two months of bank statements for every household earner.
- 4.Get pre-approved with a lender that actively closes USDA loans (ask how many they closed last year — not all do).
- 5.Write your offer with the seller paying part of the closing costs so you can arrive at the table with little cash.
- 6.Complete the appraisal, underwriting, and USDA's own commitment step — this final agency review adds a few days.
What trips people up
- • Household income counts adult occupants who are not on the loan.
- • Eligible maps get redrawn — verify the exact address, not the town.
- • Properties with in-ground pools, income-producing acreage, or major repair needs can be rejected.
USDA is the lender itself. Interest can be subsidized down to as low as 1% for the years you qualify, which dramatically lowers the payment. Terms can run 33 or 38 years. The subsidy is partly recaptured if you sell with gain.
Who qualifies
- Household income at or below the low or very-low income limit for the county (stricter than the Guaranteed program).
- Currently without decent, safe, sanitary housing and unable to get a loan on reasonable terms elsewhere.
- Property must be modest — under the area loan limit, no in-ground pool, not designed for income production.
- Willing and able to repay; no set minimum score but credit history is reviewed.
What it costs
- • No mortgage insurance and no down payment.
- • Closing costs can often be rolled in when the appraisal supports it.
- • Payment subsidy is subject to recapture when you sell or transfer.
How to apply, step by step
- 1.Use the USDA single family housing self-assessment tool to pre-screen.
- 2.Contact your state USDA Rural Development office — applications go through them, not a bank.
- 3.Submit Form RD 410-4 with income, asset, and debt documentation for the whole household.
- 4.Expect a waiting list in some states; keep documents current while you wait.
- 5.Complete the required homebuyer education if your state office asks for it.
What trips people up
- • Processing is slower than a bank loan — plan months, not weeks.
- • Funding is appropriated annually and can pause.
- • Subsidy recapture reduces your profit at resale.
A combination construction loan and permanent mortgage closed one time. The loan pays for the lot, site work, and the build, then converts to a normal 30-year USDA mortgage when the home is finished — no second closing, no requalification.
Who qualifies
- Same USDA income, area, and credit standards as the Guaranteed loan (many lenders want 640–680).
- Licensed, insured, approved builder with an acceptable track record and a fixed-price contract.
- Complete plans, specs, and a builder's risk policy before closing.
- The finished appraised value must support the total loan.
What it costs
- • Interest during construction is typically handled by the program structure rather than out of pocket — confirm with your lender.
- • Upfront and annual guarantee fees like a standard USDA loan.
- • Contingency reserve is usually required for overages.
How to apply, step by step
- 1.Find a lender that actually offers USDA single-close (a short list — ask before you shop land).
- 2.Get the land under contract with a contingency for loan and site feasibility.
- 3.Order perc/soil testing, well and septic quotes, and utility connection estimates.
- 4.Have the builder produce a fixed-price contract with a full spec sheet and draw schedule.
- 5.Close once; the lender inspects and releases draws as the home is built.
What trips people up
- • Very few lenders offer it — start the search before falling in love with a parcel.
- • Site development costs (driveway, well, septic, power) are the biggest budget surprise.
- • Change orders during the build can break the fixed budget.
A loan guaranteed by the Department of Veterans Affairs. No down payment, no monthly mortgage insurance, limits on what fees you can be charged, and a strong appraisal protection (the Notice of Value with escape clause).
Who qualifies
- Service requirement met — obtain your Certificate of Eligibility (COE) online in minutes.
- Primary residence occupancy, generally within 60 days of closing.
- Lenders commonly want 580–620+, though VA itself sets no minimum score.
- Residual income test must be met (VA's unique affordability standard).
What it costs
- • One-time VA funding fee, financeable; waived for veterans receiving service-connected disability compensation.
- • No monthly mortgage insurance — this is often the largest lifetime saving.
- • Seller can pay all your closing costs plus up to 4% in concessions.
How to apply, step by step
- 1.Request your COE at VA.gov or have the lender pull it.
- 2.Pre-approve with a lender experienced in VA (ask about residual income).
- 3.Shop with an agent who knows VA appraisals and Minimum Property Requirements.
- 4.Negotiate seller-paid closing costs so you close with near-zero cash.
- 5.Complete the VA appraisal; if value comes in low, use the escape clause to renegotiate or exit.
What trips people up
- • Entitlement can be partially used by a prior VA loan — check remaining entitlement.
- • The property must meet VA Minimum Property Requirements (safety, sanitation, structure).
- • Beware anyone pushing you to refinance repeatedly ('churning').
A government-insured loan with flexible credit standards. The entire minimum investment can come from an acceptable gift (family, employer, nonprofit) or a down payment assistance program, so many buyers pay nothing out of pocket.
Who qualifies
- 580+ score for 3.5% down; 500–579 requires 10% down.
- Debt-to-income often allowed into the mid-50s with automated approval.
- Primary residence; property must pass FHA appraisal standards.
- Two years since Chapter 7 discharge, one year of on-time Chapter 13 payments (with court approval).
What it costs
- • Upfront mortgage insurance premium (financed) plus an annual premium paid monthly.
- • Annual MIP generally lasts the life of the loan when you put less than 10% down — plan to refinance later.
- • Seller may contribute up to 6% toward closing costs.
How to apply, step by step
- 1.Get pre-approved and ask the lender to run it through FHA's automated underwriting.
- 2.Line up your gift letter or DPA reservation early — sourcing rules are strict.
- 3.Document the gift's transfer with bank statements from both sides.
- 4.Complete any homebuyer education the DPA requires before you go under contract.
What trips people up
- • Cash gifts deposited without a paper trail get rejected in underwriting.
- • Life-of-loan MIP makes a future refinance part of the plan, not an afterthought.
Fannie Mae HomeReady and Freddie Mac Home Possible allow 3% down with discounted private mortgage insurance. Unlike FHA, PMI drops off once you reach 20% equity — a large long-run savings.
Who qualifies
- Typically 620+ credit score.
- Qualifying income at or below 80% of area median income for most versions.
- Homebuyer education course required when all borrowers are first-time buyers.
- Boarder income or an accessory unit's rent may count toward qualifying.
What it costs
- • Reduced-coverage PMI, cancelable at 20% equity.
- • No upfront insurance premium (unlike FHA/USDA).
- • Seller concessions up to 3% at this down payment level.
How to apply, step by step
- 1.Ask your lender to compare HomeReady/Home Possible against FHA side by side — total monthly cost, not just rate.
- 2.Complete the free online homeownership course and keep the certificate.
- 3.Stack a state DPA on top to cover the 3% and closing costs.
What trips people up
- • Income limits are by census tract — an address a mile away may change eligibility.
- • PMI pricing swings hard with credit score; 20 points can change your payment meaningfully.
Every state runs a Housing Finance Agency offering first mortgages bundled with a down payment assistance second loan or grant. Assistance may be forgivable after a set number of years, deferred until sale, or repayable at low interest.
Who qualifies
- First-time buyer (usually defined as no ownership in the past three years) — many programs waive this for veterans or targeted areas.
- Income under the program limit and purchase price under the program cap.
- Minimum credit score, commonly 620–640.
- Required homebuyer education from a HUD-approved provider.
- Occupancy for a minimum period, or the assistance is repaid.
What it costs
- • Assistance is frequently 0% interest and forgiven over 5–10 years.
- • The paired first mortgage rate may be slightly above market — compare total cost.
- • Small program or origination fees are common.
How to apply, step by step
- 1.Find your state Housing Finance Agency and read the current program sheet (funds change quarterly).
- 2.Pick a lender from the agency's approved participating lender list — only they can originate it.
- 3.Complete the required homebuyer education course and save the certificate.
- 4.Have the lender reserve funds the day you go under contract; popular programs run out.
- 5.Keep your income, job, and credit stable through closing — eligibility is re-verified.
What trips people up
- • Assistance is reserved per transaction; a lender who forgets to reserve costs you the money.
- • Selling or refinancing early can trigger repayment of a forgivable loan.
Cities and counties receive federal HOME and CDBG dollars and re-lend them as down payment and closing cost grants, usually as a forgivable lien recorded behind your mortgage.
Who qualifies
- Income at or below 80% of area median income in most cases.
- Property inside the specific jurisdiction — sometimes specific neighborhoods.
- Owner-occupancy for 5–15 years depending on the amount.
- Home must pass a local housing quality inspection.
What it costs
- • Usually 0% interest, no payment, forgiven over the affordability period.
- • Recorded as a subordinate lien — expect extra title work.
How to apply, step by step
- 1.Search '[your city] down payment assistance' plus '[your county] housing department'.
- 2.Call the housing or community development department directly and ask what is currently funded.
- 3.Ask for the current program guide, income limits, and inspection requirements.
- 4.Get on the list early — most run first-come, first-served each fiscal year.
What trips people up
- • The extra inspection can kill deals on older homes needing repairs.
- • Closing timelines stretch by 2–4 weeks; write that into your contract.
A zero-interest, no-payment second lien. A share is forgiven each year you occupy the home; after the full term nothing is owed. Sell or move out early and the unforgiven portion is due at closing.
Who qualifies
- Same income and education requirements as the sponsoring DPA program.
- Primary residence only.
- Must be paired with an approved first mortgage.
What it costs
- • No monthly payment.
- • Prorated repayment on early sale, refinance, or move-out.
How to apply, step by step
- 1.Ask each DPA program whether their assistance is forgivable, deferred, or repayable — the words matter.
- 2.Get the forgiveness schedule in writing before you sign.
- 3.Note the forgiveness date in your own records so you know when you are free and clear.
What trips people up
- • Cash-out refinancing usually triggers repayment; rate-and-term refis often do not — verify first.
- • Renting the home out breaks occupancy and can accelerate repayment.
Employers fund homeownership near their campuses to reduce turnover. Benefits arrive as a grant, a forgivable loan tied to years of service, or a closing-cost credit — often stackable with state DPA.
Who qualifies
- Current employment, sometimes with a minimum tenure.
- Purchase within a defined radius of the workplace.
- Continued employment for a service period.
What it costs
- • Usually free money.
- • Some benefits are taxable income — ask HR.
How to apply, step by step
- 1.Ask HR or your benefits portal for 'employer assisted housing' or 'homeownership benefit'.
- 2.Also check union, professional association, and Good Neighbor Next Door style programs.
- 3.Get the award letter before underwriting so the funds can be counted.
What trips people up
- • Leaving the employer early can trigger repayment.
Local Habitat affiliates build or rehab homes and sell them to qualified families with an affordable mortgage, no required cash down payment, and a sweat-equity contribution of construction or volunteer hours.
Who qualifies
- Income within the affiliate's range (commonly 30–80% of area median).
- Demonstrated need for better housing.
- Ability to pay an affordable monthly mortgage.
- Willingness to complete required sweat equity hours and education.
What it costs
- • Little to no cash down.
- • Affordable payment set relative to income.
- • Hundreds of sweat-equity hours.
How to apply, step by step
- 1.Find your local Habitat affiliate and check their application window — many open only a few times a year.
- 2.Attend the information session; it is usually mandatory.
- 3.Submit income, residency, and credit documentation.
- 4.Begin sweat equity hours once selected.
What trips people up
- • Waiting lists can be long.
- • Affiliate rules vary widely by county.
A nonprofit owns the land and leases it to you for a nominal ground rent while you own the home. Removing the land from the price often cuts 25–40% off the purchase, so the down payment and mortgage shrink accordingly.
Who qualifies
- Income under the trust's limit.
- Owner-occupancy required.
- Agreement to the resale formula that keeps the home affordable for the next buyer.
What it costs
- • Small monthly ground lease fee.
- • Capped appreciation at resale.
How to apply, step by step
- 1.Search for a community land trust in your metro area.
- 2.Attend an orientation and get on the buyer list.
- 3.Use a lender familiar with ground-lease mortgages — not every lender will do them.
What trips people up
- • Your equity gain is limited by formula.
- • Refinancing options are narrower.
You offer a slightly higher price and the seller credits money back toward your closing costs, prepaid taxes and insurance, or a temporary/permanent rate buydown. Limits depend on loan type: VA up to 4%, FHA up to 6%, conventional 3% at low down payments, USDA up to 6%.
Who qualifies
- Any buyer whose loan type allows concessions and whose appraisal supports the price.
What it costs
- • None to you directly — but a higher price means a slightly higher loan balance.
How to apply, step by step
- 1.Ask your lender the exact concession cap for your loan type before writing the offer.
- 2.Have your agent request a specific dollar amount, not a percentage, in the contract.
- 3.Confirm the appraisal supports the contract price — if it comes in low, the credit can shrink.
- 4.Direct leftover credit to a rate buydown rather than losing it.
What trips people up
- • Unused credit is not refunded in cash.
- • In a hot market a large credit can weaken your offer — pair it with a clean timeline.
Builders protect their listed price by giving value elsewhere: paid closing costs, permanent rate buydowns, free upgrades, or appliance packages — usually conditioned on using their affiliated lender.
Who qualifies
- Buyers purchasing from the builder, typically using the in-house lender.
What it costs
- • Incentive may be offset by a higher base price or lender fees — always compare against an outside lender.
How to apply, step by step
- 1.Get an outside pre-approval first so you have a benchmark Loan Estimate.
- 2.Ask the sales agent for the current incentive sheet in writing.
- 3.Compare the builder lender's Loan Estimate line by line against your outside lender.
- 4.Negotiate incentives on standing inventory and at quarter-end when builders push to close.
What trips people up
- • Never skip your own independent inspection on new construction.
- • 'Free upgrades' are worth less than closing-cost dollars — value them honestly.
First-time buyer questions, answered straight
See which of these you actually qualify for
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