Top 5 Loan Options for First-Time Homebuyers in 2025

Looking for your first home is thrilling, but figuring out how to pay for it can be a bit scary. Good news, though—there are special loans made just for first-time buyers.

These loans are great because they ask for smaller down payments, have nice interest rates, and are okay with you not having a perfect credit score.


Let's dive into five amazing loan options that could help you get the keys to your first home:
 

1. FHA Loan

The FHA loan is backed by the government, which means if you have trouble paying back the loan, the government helps out. This makes lenders more willing to work with you, even if you're not rolling in cash.
 

• Down Payment: As low as 3.5%
• Credit Score Needed: 580 or higher
• Special Features: You can have a lower credit score or not a lot of money and still get a good deal. However, you will need to pay for mortgage insurance, which is an extra fee to keep in mind.

 

2. Conventional 97 Loan

This is a simple loan that lets first-timers put down just 3%. It’s a good pick if you have a little bit of money saved and decent credit.
 

• Down Payment: Just 3%
• Credit Score Needed: 620 or more
• Special Features: You can stop paying for mortgage insurance once you own enough of your home. No upfront insurance fees either!

 

3. HomeReady/Home Possible

These are two similar types of loans that need just 3% down. They're perfect if you're not making a ton of money but still dream of owning a home.
 

• Down Payment: 3%
• Credit Score Needed: 620 or higher
• Special Features: You can use money from others (like gifts) for your down payment. You might need to take a class about buying homes, but you can drop mortgage insurance after a while.

 

4. USDA Loan

If you're eyeing a home in the countryside or a less crowded town, the USDA loan could be your ticket. It's aimed at helping folks in rural areas become homeowners.
 

• Down Payment: None required
• Credit Score Needed: 640 or higher
• Special Features: No need to put any money down, plus you get lower mortgage insurance costs. But, your new home needs to be in an area the USDA approves.

 

5. VA Loan

For those who have served in the military or are currently serving, the VA loan is a fantastic deal. It comes with loads of benefits to make buying a home easier.
 

• Down Payment: None required
• Credit Score Needed: Often 620 or higher
• Special Features: No down payment needed, no ongoing mortgage insurance, and generally lower fees. Plus, lower credit scores might be okay.

 

Bonus: Good Neighbor Next Door Program

This special program is for teachers, firefighters, police officers, and emergency medical technicians. It offers up to 50% off the price of a home in certain areas if you agree to live there for at least 36 months.
 

Other Helpful Tips

Don't have much saved up? No worries. There are lots of programs out there to help with your down payment or closing costs. Some options might not even need to be paid back.

Also, having someone else like a family member help out by gifting you money for your down payment or co-borrowing with you can make things easier.
 

Choosing the Best Loan

The best loan for you depends on your situation—how much you've saved, your credit score, and even where you want to buy.

For many first-timers, an FHA loan is the easiest to get because it's more forgiving on credit scores and how much debt you have. But if you're a veteran or buying in a rural area, you might have even better options.

Read about potential grants for first-time home buyers here:

• Proposed $25,000 Grant for First-Time Home Buyers Remains Under Congressional Review
• New First-Time Home Buyer Tax Credit Proposal Aims to Help Prospective Homeowners

Before you decide, talk to a loan officer about what might work best for you. And don't forget, shopping around for the right lender can save you a lot of money in the long run.

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