First-time buying isn't a single program — it's six different paths, each with its own math. The biggest mistake first-time buyers make: assuming they need 20% down. You don't. Most of our first-time buyers close with 0–5% down, and many add state down-payment assistance on top. Here's how to find your path.
Each of these programs serves a different first-time buyer profile. The right answer depends on your credit, income, savings, and where you're buying. You don't have to figure this out alone — that's what an LO call is for.
Down-payment assistance is the most underused first-time-buyer tool. Most state programs offer $5,000 to $25,000+ to qualified buyers, structured one of four ways. Each has different repayment rules. Here's the honest version.
Four DPA structures · Same goal, different terms
Free money? Sometimes. Not always.
Read the fine print before falling in love with a "free $15,000 grant" headline. Some DPA needs to be repaid when you sell. Some is forgiven over time. Some is a true gift. Here's how each structure plays out.
FORGIVABLE GRANT
True money, conditions apply
StructureForgivable loan
Typical amount$5K-$15K
Forgiveness period5-10 years
If you sell earlyPro-rated repayment
Monthly payment$0
Best forLong-term plans
DEFERRED 2ND
Owed when you sell
Structure2nd mortgage, no payment
Typical amount$10K-$25K
Interest0% or low
Repaid whenSell, refi, or end of term
Monthly payment$0
Best forCash-tight buyers
REPAYABLE 2ND
Real loan, real payment
Structure2nd mortgage
Typical amount$5K-$15K
Interest~3-5%
Term10-30 years
Monthly payment$50-$200/mo
Best forBuilding equity
MCC TAX CREDIT
Annual federal tax credit
StructureTax credit certificate
Typical credit10-50% mortgage interest
Annual cap$2,000
DurationLife of loan
Stacks withMost DPA + first mortgage
Best forLong-term owners
The big advantage of working with LHFS: we're a master servicer for multiple state HFA programs. We know which DPA structures stack with which first mortgages.
First-time buyers usually ask the wrong question. Not "what's my monthly payment?" — but "how much cash do I actually need at closing?" The answer depends heavily on your loan program and whether you stack DPA. This calculator estimates your minimum cash-to-close.
With $15,000 saved and ~$3,500 needed at closing, you have $11,500 left as a reserve. That's healthy — you should keep 3-6 months of mortgage payments as cushion after closing. You're in good shape.
First-time buyer files have a few extra steps when DPA is involved — the state HFA reviews the file alongside the lender. Typical close: 35–50 days. A bit longer than a straight FHA loan, but the savings are worth it.
i. Apply
Tell us your situation
60 seconds. We learn your credit, income, target area, and savings. No SSN at this stage.The LO call within 1 hour focuses on which path fits — FHA? Conv 97? VA? — before any commitment.
Time: ~60 seconds
ii. Education + Pre-approval
HFA homebuyer course
Most state DPA programs require a HUD-approved homebuyer education course (online, ~6 hours, free or low-cost). We pull your credit, run program comparisons, and issue your pre-approval letter once the course is complete.
Time: ~3-7 days
iii. Find a home
House hunt with limits
House-hunt within your program's limits — DPA programs often have purchase price caps by county. We share the limits with your agent so you don't fall in love with a house that's out of program range.
Time: varies
iv. Underwriting
Lender + HFA review
Standard lender underwriting + state HFA file review (DPA layer). Adds about 3-7 days versus a non-DPA file. We've done thousands of these — the workflow is smooth.
Time: ~28-35 days
v. Close
Sign & get keys
Final walk-through. Sign at the title company. Your DPA shows up as a credit on the closing disclosure. Walk out with keys. If your DPA is a forgivable grant, the forgiveness clock starts on closing day.
What's great about being a first-time buyer. What's the catch.
First-time-buyer status unlocks programs unavailable to repeat buyers. There are also some real friction points. Here's the honest version.
+ What's Great
Multiple zero-down options.VA (if you served) or USDA (if your area qualifies) → $0 down. Two real paths to first home with no savings depleted.
3% down via Conventional 97.Beats most lender minimums for first-time buyers. PMI cancels at 80% LTV — better long-term than FHA.
State DPA stacks.$5K–$25K in down-payment assistance from state HFAs, layered on top of your first mortgage.
"First-time" includes returning buyers.If you haven't owned a primary in 3+ years, you usually qualify as first-time again. Many programs use this rule.
MCC tax credits.Mortgage Credit Certificates can give you 10–50% of mortgage interest back as a federal tax credit, every year for the life of the loan.
Seller concessions.In balanced markets, sellers often pay 1-3% of purchase price toward closing — combined with DPA, you can close with very little out of pocket.
− The Trade-Offs
Required homebuyer education.Most DPA requires a HUD-approved course (online, ~6 hours, free or low-cost). Worth it, but adds a week to timeline.
Income limits on most programs.HomeReady, USDA, most state DPA: hard income caps. FHA and Conv 97 have no income limits — but no DPA.
Purchase price caps.State DPA programs often have county-level price ceilings. Buying above the cap = no DPA stacking.
Slower close on DPA files.State HFA review adds 3-7 days vs. straight first mortgages. Plan for 35-50 day timelines.
DPA can complicate refinancing.Some second mortgages need to be paid off or subordinated when you refi. Not impossible, but a step.
Occupancy required.All these programs require primary residence and 12+ months occupancy. No flipping, no immediate rental.
No. 06 · Real Scenarios
Three first-time buyers, three paths.
Made-up names, real numbers. These illustrate three different first-time-buyer profiles — and the program that fit each best.
IScenario · N° 01FHA + DPA - Rebuilding Credit
Crystal H. — first home after a divorce.
35, single mom, two kids, $58K salary, 645 FICO (rebuilding from divorce-era debt). $7,500 saved. Buying $245K starter home. FHA + state DPA got her to closing with under $2,000 out of pocket.
Cash at closing
$1,820
The deal
Home price
$245,000
FHA 3.5% down
$8,575
DPA grant (state HFA)
$10,000
Closing costs
$7,350
Seller concessions
$3,100
IIScenario · N° 02VA First Use - No Cash, No Problem
Marcus W. — Army discharge, first house ever.
26, honorably discharged after 5 years, $52K civilian salary, 690 FICO, $4,200 saved. 20% disability rating → funding fee waived. Buying $215K home outside Charlotte.
31, single, $72K nonprofit job, 745 FICO, $22K saved. Income at 78% of Phoenix AMI — HomeReady eligible with reduced PMI. Added Arizona DPA + MCC tax credit. Buying $385K condo.
Cash at closing
$8,940
The deal
Home price
$385,000
HomeReady 3% down
$11,550
DPA forgivable grant
$8,000
Closing costs
$11,550
MCC annual credit
~$1,800/yr
Disclosures: Names changed. Numbers reflect typical closing parameters but are illustrative — your file will price differently based on credit, lock timing, county, and current state HFA program terms.
No marketing copy. The biggest first-time-buyer mistakes are misunderstandings about who qualifies for what, how DPA actually works, and how much cash you really need. Let's clear those up.
Most programs define it as not having owned a primary residence in the past 3 years. So if you owned a home, sold it 4+ years ago, and have been renting since — you're a first-time buyer again for most program purposes.
Some specific programs (Fannie Mae's Conventional 97 in particular) require at least one borrower to be first-time, even if a co-borrower has owned before. VA has no first-time requirement at all — every eligible veteran can use it. USDA doesn't require first-time-buyer status either.
The honest answer depends on three things: (1) program down-payment minimum, (2) closing costs, and (3) how much DPA / seller concessions you can stack.
Realistic minimums: VA / USDA with seller concessions: $2,000–$5,000. FHA + DPA + concessions: $3,000–$8,000. Conventional 97 without DPA: $12,000–$20,000+.
Reserves matter too. Most lenders want to see 3–6 months of mortgage payments in the bank after closing. Don't drain your savings to maximize your purchase price.
Sometimes. Not always. Four common DPA structures, each with different terms:
Forgivable grants are real money — but typically only fully forgiven if you stay in the home 5–10 years. Sell early, pro-rated repayment.
Deferred second mortgages require no monthly payment, but the principal is owed when you sell, refinance, or hit the term end.
Repayable seconds are real loans with monthly payments — usually low-interest, but they affect your DTI.
MCC tax credits aren't DPA exactly — they reduce your federal tax bill annually for the life of the loan.
We'll explain exactly what your specific DPA program looks like before you commit.
The cleanest decision tree:
Did you serve in the military? → VA. Almost always wins.
Is your target area USDA-eligible AND household income under cap? → USDA usually beats FHA.
700+ FICO and ≤80% AMI? → HomeReady or Home Possible (reduced PMI).
700+ FICO and above 80% AMI? → Conventional 97 (no income limit, PMI cancels).
580–699 FICO or rebuilding credit? → FHA + DPA stack.
The LO call sorts this out in 10 minutes. Don't agonize over it alone.
Most state DPA programs require a HUD-approved homebuyer education course. It's typically online, takes about 6 hours, and costs $0–$99. You can't access most state DPA without completing it.
Beyond DPA requirements, the course is genuinely useful — it covers escrow, taxes, insurance, what to expect at closing, and the realities of owning vs. renting. Most first-time buyers learn at least 2–3 things that save them money down the road.
Your LO will recommend specific approved providers in your state. Start the course early — it can be the slowest step in the timeline if you wait until the last minute.
Mortgage Credit Certificate (MCC) — a state-issued certificate that converts a portion of your mortgage interest into a direct federal tax credit (not deduction — credit). Typical credit: 10–50% of annual mortgage interest, capped at $2,000/year.
Worth it? Almost always, if you qualify. The credit applies every year for the life of the loan, as long as you keep the home as your primary residence. On a $300K loan over 30 years, that's potentially $40,000–$60,000 in tax savings.
MCCs have one-time issuance fees ($500–$1,500), and they layer on top of most first-mortgage programs. They're not available in every state and have income/purchase-price limits. Your LO will tell you whether your state offers MCC and whether you qualify.
Yes — and gift funds are one of the most underused first-time buyer tools. Most programs allow 100% of your down payment to come from gift funds, as long as the source is documented (typically a family member, fiancé, or employer).
Required: a gift letter stating the funds are a gift (not a loan), signed by the giver. Lenders usually want a paper trail showing the funds came from the giver's account.
FHA allows 100% gift funds.Conv 97 / HomeReady allow 100% gift funds for primary residence.VA allows it. If you have family willing to help, your LO will walk you through structuring it correctly.
Probably not. Math usually says: don't wait.
The cost of waiting is real. Home prices typically rise 3–5% per year. Rents rise too. The savings goal moves with the market. Meanwhile, you're paying full rent and missing equity-building.
The case for waiting: if your DTI is genuinely too high, your credit is below 580, or you have zero emergency fund. Otherwise, buying with 3–5% down + DPA + reasonable PMI is often financially better than renting for two more years to save 20%.
This isn't a sales pitch — your LO will run both scenarios on the call and tell you which math wins. If waiting is genuinely better, we'll say that.
No. 08 · Go Deeper
Pick the path. Read the page.
Each loan program has its own page with detailed math, scenarios, and FAQ. Start with the one that fits your situation; we'll cross-link if you need to switch paths.
NMLS #1796·Lending in 50 states·Equal Housing Lender
Disclosures. All numbers, scenarios, and rates on this page are illustrative and intended to help you understand first-time buyer program mechanics. Your actual cash-to-close, monthly payment, DPA eligibility, and qualification depend on credit, market conditions, lock timing, county-specific income/price limits, and current state HFA program terms — which vary significantly and change frequently. "First-time buyer" generally defined as not having owned a primary residence in the past 3 years; specific definitions vary by program. State down-payment-assistance programs are administered by state housing finance agencies (HFAs) and have their own income limits, purchase-price caps, repayment terms, and homebuyer-education requirements. Mortgage Credit Certificates (MCCs) are issued by states and have separate eligibility rules. The cash-to-close calculator on this page is an estimate; closing costs vary materially by state, county, lender, title company, and loan size, and seller concessions are subject to program-specific caps. Scenarios use changed names and illustrative numbers. Land Home Financial Services, Inc. NMLS #1796. Equal Housing Lender. Licensed in 50 states. Information current as of 2026.
