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Who is a first-time homebuyer?

A first-time homebuyer is anyone purchasing a home for the first time, or someone who has not owned a home in the last three years.

What are first-time homebuyer programs?

First-time homebuyer programs are loans, grants, and credits that lower the costs of home-buying, often by helping pay for your down payment or closing costs. Most are designed for people who have trouble affording a home due to their income or credit score. There are also programs for people who buy in a certain area, work in certain professions, or plan to renovate the home. Overall, they have one thing in common: to break down barriers to homeownership for new buyers.

First-time homebuyer loans

First-time homebuyer loans and second mortgages can assist you with your down payment and closing costs. These can be deferred-payment loans, meaning you don’t pay them back until you sell your home, or they can be completely or partially forgiven after a period of time, usually after 5–15 years of owning the home. One thing to keep an eye on is the interest rate, which varies greatly by program. There are many programs out there with a 0% interest rate.

First-time homebuyer grants

A first-time homebuyer grant is typically money you don't have to pay back, though you usually have to meet specific criteria to qualify for the grant or have it forgiven—for example, living in the home for 5 years. Some homebuyer programs begin as loans and turn into grants after a period of time, once all criteria are met. Others offer partial grants, where part of the down payment assistance is forgiven and the rest has to be repaid.

First-time homebuyer credits

Often referred to as mortgage credit certificates, these are a way to reduce what you pay in federal taxes by reducing how much you pay in interest on your mortgage loan. Typically, this can be applied each year for as long as you have the home loan.

Common terms to understand

You'll probably run across a few unfamiliar terms when exploring down payment assistance programs. Here are some of the more common ones.

• Grants: money that you do not have to pay back
• Loan: money that you have to pay back with interest, unless otherwise specified
• Primary or first mortgage: this is the home loan you use to buy a house
• Second mortgage: a second loan that's usually applied toward your down payment or closing costs as part of a homebuyer program
• Forgivable second mortgages and loans: loans that are partially or completely forgiven if all criteria are met
• Deferred second mortgages and loans: loans you don't have to pay on each month and typically come due when you sell your home
• Partial grant: usually part of a loan or second mortgage where part of the loan is forgiven or considered a grant after a given period of time
• Tax credit: a credit that reduces the amount you pay into federal taxes by reducing your mortgage interest
• Subsidy: helps reduce your monthly mortgage payment to a more affordable level
• Rent to own: a program that allows you to lease a home with the option to purchase it
• Matching grant: a grant that will match what you save, such as dollar-for-dollar or sometimes more; usually has a cap
• Interest rate: the amount your lender charges for loaning you money; this varies by program, but some of the best programs have low or no interest rates