What Is an Hfa Loan? (2026)

HFA loans explained

An HFA loan is designed to help homebuyers with low to moderate income and a minimum 620 credit score apply for a home loan. If you can’t afford a down payment but are otherwise qualified for a conventional mortgage, an HFA loan might be worth considering.

HFA loans are characterized by:

• Allowing down payments as low as 3%
• Offering financial assistance with your closing costs
• Offering discounted private mortgage insurance (PMI)
• Requiring borrowers to take a homebuyer education course to qualify

“The educational portion of the HFA loan isn’t discussed on a regular basis,” said Jonathan Harris, a mortgage advisor at Pinnacle Financial Partners. “It’s a pretty standard requirement across state lines.”

For context, Fannie Mae states that its proprietary homebuyer education course, HomeView, takes approximately three to four hours to complete and covers topics such as saving for a home, working with a real estate agent, and preparing to close.

HFA Preferred vs. HFA Advantage

HFA loans are available thanks to a partnership between Fannie Mae or Freddie Mac (companies created by Congress to provide affordable mortgage loans) and your state’s HFA.

Fannie Mae’s HFA loan is called HFA Preferred, while Freddie Mac’s is HFA Advantage. There are subtle differences, but for most borrowers, the two programs will appear and function identically. They’re both fixed-rate mortgages with 3% minimum down payments.

HFA loan requirements

Many first-time homebuyers and low- to moderate-income borrowers may be eligible for HFA loans. Each state agency has different requirements that change regularly, so you’ll want to check your state’s housing agency website. You can also use your state’s HFA site to search for mortgage lenders that offer HFA loans in your area.

In general, you’ll typically need to meet these qualifications:

• Credit score: 620-plus
• Debt-to-income (DTI) ratio: 45% or lower
• Income limits: Can vary between 30% and 80% of the area’s median income
• Home sale price limit: Typically at or below the median sale price for the area

For example, to qualify for the Georgia Dream program, you must not have owned a home in the past three years, have a household income below $86,500 ($99,500 for three-plus-person households) and be looking at homes with a sale price below $350,000 (among other qualifications).

If you plan to use an HFA loan to purchase a home, the home must be used as your primary residence and your loan-to-value (LTV) ratio must be no higher than 97%, which is why you’ll need to offer a down payment of at least 3%.

If you can’t afford a 3% down payment, many HFAs offer closing cost and down payment assistance programs. They may also allow gifts from family and friends to reduce out-of-pocket expenses, according to Jennifer Ashley, a former mortgage loan officer at ConsumerAffairs.

State-specific eligibility

Each state’s housing finance agency sets its own rules for HFA loan eligibility, so the details can vary widely. For instance, some states focus their programs on first-time homebuyers, while others extend eligibility to repeat buyers purchasing in specific target areas. Income and home price limits also differ based on local median income and housing costs.

For example, California’s CalHFA program offers higher income caps in expensive counties, while Texas’ Homes for Texas Heroes program provides added benefits for teachers, veterans and first responders. Always check your state’s HFA website for the most current requirements.

How to apply for an HFA loan

Applying for an HFA loan is similar to getting a standard mortgage, but with a few extra state-specific steps. Here’s what to do:

1. Check your eligibility: Visit your state’s housing finance agency (HFA) website to review income, credit score and property requirements. You can also find a complete list of agencies on the National Council of State Housing Agencies (NCSHA) website.
2. Choose a participating lender: Each state partners with approved lenders. Use your state’s HFA site to find one and reach out for prequalification.
3. Gather your documents: Be prepared to provide proof of identity, income (such as W-2s or pay stubs), employment verification, bank statements, and tax returns.
4. Submit your loan application: Your lender will guide you through the HFA-specific forms and confirm which programs or down payment assistance options you qualify for.
5. Complete underwriting and closing: Once approved, your loan will go through underwriting before closing, just like a traditional mortgage.

Tips for getting approved

Here’s how to increase your odds of an HFA loan approval:

• Improve your credit score before applying. Most HFAs require at least a 620 score.
• Maintain a low debt-to-income ratio by paying down existing loans or credit card balances.
• Get preapproved early so you can act quickly when you find a home that meets your qualifications.
• Ask about down payment or closing cost assistance to boost affordability.
• Work with an experienced HFA lender who understands state-specific requirements and can help streamline the process.

» MORE: How to get a mortgage

HFA loan pros and cons

Compared with other 3% loan types, the most significant advantage of the HFA loan is the additional financial assistance available to help with closing costs.

Subjectively, the biggest drawback might be the long list of state-specific eligibility requirements that could disqualify you or your co-signer from the loan.

HFA vs. FHA loan

While they’re easy to mix up at a glance, HFA and FHA loans are two separate types of mortgage loans.

The Federal Housing Administration insures FHA loans and, like HFA loans, permits a low down payment (generally 10%, but as low as 3.5%, depending on your credit). Unlike HFA loans, which require a credit score of 620 or higher, FHA loans are specifically designed for borrowers with low credit scores.

“The biggest advertisement for an HFA loan is the 3% minimum down payment, whereas FHA loans are more for credit-challenged borrowers who actually have a down payment ready,” explained Harris.

“While the FHA will technically allow a 500 credit score, I’ve never seen a loan approved at that rate,” said Harris. “[In the] real world, there aren’t too many companies that will go down to 500.”

A more realistic minimum credit score for an FHA loan is 580, Harris explained.

» COMPARE: Best FHA loan lenders

Other low-down-payment mortgage programs

If you’re exploring affordable home loan options, it helps to understand how HFA loans compare to other popular low-down-payment programs. While HFA loans are offered through state housing agencies, several federal and conventional programs also help borrowers qualify with little to no money down:

• VA and USDA loans are government-backed and designed to expand access to homeownership.
• HomeReady, Home Possible, and Conventional 97 are conventional loans backed by Fannie Mae or Freddie Mac, often offering flexible requirements for first-time buyers.

These programs differ in terms of down payment requirements, credit score minimums, and eligibility, but all aim to make buying a home more accessible for those who don’t have a 20% down payment.