In a Nutshell
Buying your first home is a big financial commitment, but there are programs that may help make it more affordable. We've rounded up our top picks of the best first-time home buyer loans with features such as low down payments, reduced fees, down payment assistance and closing cost credits.Buying a home for the first time is exciting, but it can also be overwhelming and affect your finances for years.
Loans designed for first-time home buyers can help make the process more manageable by reducing the amount of cash you have to come up with upfront, providing credits for one-time expenses and reducing fees.
We’ve rounded up our top picks of the best first-time home buyer loans to help you find one that may meet your needs.
- Best for no lender fees: Ally Bank
- Best for access to grants: Bank of America
- Best for flexible credit guidelines: Chase
- Best for multiple loan types: New American Funding
- Best for no PMI: PNC Bank
- How to apply for a first-time home buyer loan
- What kind of credit scores do I need to get a house for the first time?
- Which loan is harder to get: FHA or conventional?
- Our methodology: How we picked these home loans
Best for no lender fees: Ally Bank
Here’s why: Ally Bank doesn’t charge application, origination, processing or underwriting fees on its mortgages. The company offers Fannie Mae’s HomeReady® mortgage — which requires a down payment of as little as 3% of the home’s purchase price and credit scores as low as 620.
You also can quickly see if you prequalify with no impact to your credit scores. Just keep in mind that if you apply, you’ll get a hard inquiry, which typically has a small impact.
Ally Bank mortgages at a glance
| Availability | Nationwide |
| Credit requirements | Conventional: 620; FHA: 500 or 580 depending on down payment percent; HomeReady: 620 |
| Notable feature | The website provides a home cost checklist of the expenses you can expect to pay during the application process along with mortgage calculators. |
Read more about Ally Bank mortgage loans.
Best for access to grants: Bank of America
Here’s why: Bank of America offers two types of grants to first-time home buyers. Qualified applicants may receive a credit of up to $7,500 for closing costs or up to $10,000 in down payment assistance in certain markets. And you can use the bank’s real estate center to help you find a home that’s eligible for grants.
Bank of America also has an Affordable Loan Solution® mortgage that requires down payments as low as 3%.
| Availability | Nationwide |
| Credit requirements | Not disclosed |
| Notable feature | First-time homebuyer educational series that provides information about qualifying for a mortgage, down payments, grants and steps needed to buy a home. |
Read more about Bank of America’s mortgage loans.
Best for flexible credit guidelines: Chase
Here’s why: Chase’s DreaMaker℠ Mortgage and FHA loans have flexible credit guidelines and low down payment requirements of 3% and 3.5%, respectively. When you get a Chase DreaMaker Mortgage, you can receive $500 to use for closing costs after completing a home buying education course.
The bank also offers grants of up to $7,500 that you can use for points, closing costs and/or down payment assistance on eligible homes.
Chase at a glance
| Availability | Nationwide |
| Credit requirements | Not disclosed |
| Notable feature | Homebuyer assistance finder tool so you can find out if there’s financial aid available in your area. |
Read more about Chase mortgage loans.
Best for multiple loan types: New American Funding
Here’s why: New American Funding offers multiple loan types that may be ideal for first-time home buyers, including FHA, VA, USDA, conventional and I CAN loans.
Qualified applicants can put as little as 0% to 3.5% down — depending on the loan type — and may be able to get a lower interest rate during the first one, two or three years of the loan term to help offset the cost of homeownership.
New American Funding at a glance
| Availability | Nationwide |
| Credit requirements | Conventional: 620; FHA: 500 to 580 depending on down payment; I CAN mortgage: 620; jumbo: 680; USDA: 580 |
| Notable feature | Information about first-time home buyer grant programs, mortgage calculators and housing market updates on website |
Read more about New American Funding mortgage loans.
Best for no PMI: PNC Bank
Here’s why: With a PNC community loan, you don’t need private mortgage insurance (PMI) even if you don’t put down 20%. You may only have to put 3% down and you can use gift funds for part of your down payment.
The bank offers homeownership grants of up to $5,000, and its Home Insight® planner tool can help you find a house that fits your budget.
PNC at a glance
| Availability | Nationwide |
| Credit requirements | Not disclosed |
| Types of loans | Mortgage calculators can help you make budgeting decisions and determine which loan is right for you |
Read more about PNC mortgage loans.
How to apply for a first-time home buyer loan
Applying for a mortgage can be overwhelming if you don’t know what to expect. Here’s what you need to know to prepare.
- Check your credit. It’s important to review your credit reports and resolve any errors before submitting your application. Minimum credit scores vary by lender, but some may accept scores as low as 500 if you meet certain criteria. The higher your scores, the easier it will be to qualify and get a lower rate — people with scores in the mid-700s or higher typically receive the lowest available rates. If you have less than stellar credit, you may want to improve it before applying for a loan.
- Decide what you can afford. A general rule of thumb is that your monthly mortgage payments should not exceed 28% of your gross monthly income. The amount you can afford depends on your other living expenses as well. Check out our home affordability calculator.
- Pay down debt. Your debt-to-income ratio (DTI) is one of the factors lenders use to determine whether you can afford your monthly loan payments. You typically need a DTI ratio of 43% or less, however you may be able to qualify with a higher DTI ratio if you meet certain criteria.
- Set aside your down payment. Loans for first-time home buyers typically require down payments of 0% to 3.5%. You may be able to use gift funds for part or all of your down payment as long as it meets the lender’s requirements and you write a mortgage gift letter explaining where the money came from.
- Save for closing costs. You also need to have money to cover closing costs, which are generally 2% to 5% of the home’s purchase price. As a first-time home buyer, you may be eligible for financial assistance that can help cover these expenses.
- Gather the necessary documents. Applying for a mortgage requires a lot of paperwork. In general, your lender will need the following mortgage documents to process your application: tax returns, proof of income, bank and investment statements, gift letters, photo ID and your renting history (if applicable).
What kind of credit scores do I need to get a house for the first time?
The credit scores you need to buy a house depend on the lender and type of loan you get. The U.S. Department of Veterans Affairs and U.S. Department of Agriculture don’t have minimum credit score requirements for VA loans and USDA loans. However, lenders may require applicants to meet certain credit criteria.
Federal Housing Administration guidelines allow borrowers with credit scores of 580 and above to get an FHA loan with a down payment as low as 3.5%. You may qualify for an FHA loan with credit scores as low as 500 if you have a down payment of 10% or higher. If you opt for a conventional loan, you’ll likely need scores of 620 or higher.
Which loan is harder to get: FHA or conventional?
Because FHA loans are backed by the government, they typically have less stringent credit and income requirements and are easier to qualify for than conventional loans.
Our methodology: How we picked these home loans
We reviewed more than a dozen mortgage lenders to come up with our top picks. We considered factors such as credit requirements, down payment and closing cost assistance, the availability of planning tools, PMI requirements and other features designed to help first-time home buyers.