What counts as a first-time homebuyer?
First-time homebuyers are generally defined as someone who has not owned a primary residence in the past three years. Under that definition, you’re considered a first-time homebuyer both if you’ve never bought a home before or if you’ve previously purchased a home, sold it and have been renting for the past three or more years.
Also, some programs might consider you as a first-time homebuyer if you are recently divorced. For example, if you owned a home with your spouse and divorced, you would be considered a first-time homebuyer since you have not owned a home by yourself in the past three years.
Benefits of being a first-time homebuyer
Many states and counties offer first-time homebuyer programs, which may include loans or grants to help cover a down payment or closing costs. Some banks, credit unions, nonprofit organizations or employers also offer first-time homebuyer benefits, so it’s worth looking into all of the programs that might be available to you.
Some of the benefits of first-time homebuyer programs include:
Down payment or closing costs assistance
You might be eligible for down payment assistance or closing costs assistance that can help make a home purchase more affordable. This type of assistance is generally offered as either a grant or a loan. With these types of programs, you may be able to qualify for a set dollar amount of assistance or else a low down payment or no down payment.
The qualifications for these programs vary. For example, you may need a certain minimum credit score or debt-to-income (DTI) ratio to qualify. You’ll also typically be subject to a maximum home loan amount and an income cap.
Tax credits
Some states or local agencies issue mortgage credit certificates (MCCs) to first-time homebuyers, which allow you to claim a federal tax credit for mortgage interest you pay. An MCC allows you to get credit for up to 20% or 40% of the mortgage interest that you pay each year, up to a maximum of $2,000.
You’ll need to apply (and get approved) for a loan through an MCC-approved lender, but once you do, you can generally claim the tax credit every year for the life of the loan (for up to 30 years). You’ll also typically need to meet specific requirements for MCC programs, such as income limits and maximum property prices.
What is the best loan for first-time homebuyers?
There are many types of home loans first-time homebuyers can choose from, such as conventional loans or government-backed loans, including Federal Housing Administration (FHA), U.S. Department of Veterans Affairs (VA) and U.S. Department of Agriculture (USDA) loans. All of them have different requirements.
“In general, most lenders require a credit score of 620 or higher, but you may find some options as low as 580,” said Scott Lindner, national sales director at TD Bank. “However, credit score requirements vary for different loan types and for different lenders. It’s a common misconception that borrowers must have a high credit score to buy a home.”
Conventional loans
Conventional mortgages are offered by private lenders, like banks and credit unions. This type of loan tends to have stricter credit and DTI ratio requirements, though you may be able to put as little as 3% down.
FHA loans
FHA loans are offered by FHA-approved lenders and backed by the federal government. The FHA offers a number of loan programs, and it tends to have lower down payment and credit score requirements than conventional loans.
VA loans
VA loans are available to military members, veterans and their eligible family members. As with other government-backed loans, you can apply for a VA loan through a VA-approved lender.
USDA loans
USDA loans are available for purchasing or refinancing properties in qualifying rural areas. Similar to FHA and VA loans, you can get USDA loans from USDA-approved lenders.
» READ MORE: First-time homebuyer loans and programs
FAQ
What credit score is needed for first-time homebuyers?
For the best rates and terms, you’ll generally need a good to excellent credit score (or a FICO score of 670 to 850) as a first-time homebuyer. However, you may be able to qualify for a loan with a lower credit score depending on the program. For example, for an FHA loan, you can qualify with a credit score as low as 500.
» LEARN MORE: 9 ways to improve your credit score
What federal tax benefits are available for first-time homebuyers?
There currently aren’t any federal tax benefits available for first-time homebuyers, though you may be able to qualify for an MCC from a local or state program.
What are some downsides of first-time homebuyer programs?
The main downsides of first-time homebuyer programs include strict eligibility criteria. You’ll generally need to make under a certain income to qualify for a program, and any home(s) that you’re interested in will need to be under a maximum home price. You may also need to have a certain credit score or meet other criteria.
Bottom line
If you’re a first-time homebuyer, look into state and local first-time homebuyer programs. You may be able to qualify for help with a down payment or closing costs, or even tax credits. Also, government-backed loans like FHA and USDA loans tend to cater to first-time buyers since they usually have less stringent requirements than conventional loans. When comparing loan options, make sure to evaluate the overall cost of the loan to find the best option for you.
Article sources
ConsumerAffairs writers primarily rely on government data, industry experts and original research from other reputable publications to inform their work. Specific sources for this article include:
- Internal Revenue Service, “About Form 8396, Mortgage Interest Credit.” Accessed Nov. 30, 2025.
- U.S. Department of Agriculture, “Single Family Housing Programs.” Accessed Nov. 30, 2025.
- U.S. Department of Housing and Urban Development, “FHA Single Family Housing Policy Handbook.” Accessed Nov. 30, 2025.
- U.S. Department of Veterans Affairs, “Purchase Loan.” Accessed Nov. 30, 2025.
