First-Time Home Buyer Programs: Grants vs. Loans You Repay

Fewer than 1 in 10 homebuyer assistance programs in the U.S. is a true grant, and the federal government gives individuals no grant to buy a home. Today, open the homebuyer pages of your state housing finance agency and your city or county, and write down whether each option is a grant, forgivable, deferred or repayable. Your mortgage, whether FHA, USDA, VA or a 3%-down conventional loan, is repaid every month. More than half of assistance programs are second mortgages: forgiven after you stay a set time, due in one payment when you sell or refinance, or repaid monthly.

Who counts as a first-time buyer

You count if you and your spouse have owned no home in the 3 years before this purchase. HOME-funded city, county and state programs that limit help to first-time buyers use this federal definition, and it keeps two groups in: a single parent whose only ownership was with a spouse while married, and a displaced homemaker whose only ownership was with a spouse. A past home with no permanent foundation, or one that could not be brought up to code for less than the cost of building new, is ignored.

Bond-financed state mortgages and mortgage credit certificates use the tax-code version: no ownership interest in your main home at any time in the 3 years before you sign the mortgage. That test is waived for homes in designated targeted areas, and once for veterans.

Sort down payment help by what you owe back

Cities and counties run more homebuyer assistance programs than state housing finance agencies (HFAs) do, 39% of the national count against 18%, and one agency can offer several types at once, as Florida Housing does. The type decides what you owe later:

Type	What you repay	Real example (terms posted November 2026)
Grant	Nothing	Virginia Housing's Down Payment Assistance Grant, which you never repay. It comes only with a Virginia Housing bond-financed FHA or conventional loan, for first-time buyers or for repeat buyers in Areas of Economic Opportunity.
Forgivable second mortgage	Nothing if you keep the home through the forgiveness term	Florida Housing's PLUS second mortgage, with its conventional first mortgage only: 3%, 4% or 5% of the loan amount, forgiven 20% a year over 5 years.
Deferred second mortgage	The full amount in one payment when you sell, refinance, pay off the first mortgage or move out	Florida Assist: up to $10,000 at 0%, never forgiven.
Repayable second mortgage	A monthly payment on top of your mortgage, plus the balance if you sell or refinance	Florida's HLP Second Mortgage: $12,500 at 3% over 30 years.

Florida Housing pairs every option with its own first mortgage through approved lenders, and it requires a 640 credit score, an approved homebuyer education course, and income and purchase price under your county's limits.

The mortgage itself: loans you repay monthly

FHA. With a credit score of 580 or higher you put down 3.5%; from 500 to 579 you put down 10%; below 500, FHA will not insure the loan. On a 30-year loan of up to $726,200 with the minimum down payment, mortgage insurance at the rates in effect since March 20, 2023 costs 1.75% of the loan up front plus 0.55% a year for the life of the loan. You apply through an FHA-approved lender.

USDA. The Section 502 guaranteed loan, made by approved lenders, finances 100% of the price for households earning up to 115% of the area median who buy in an eligible rural area. The Section 502 direct loan comes from USDA itself for low- and very-low-income buyers: 6.25% as of November 1, 2026, cut to as low as 1% by payment assistance, over up to 33 years (38 for very low incomes). You repay all or part of that payment assistance when you sell or stop living in the home. Our USDA direct loan guide walks through the application. Section 504 money only repairs a home you already own.

VA. Veterans, service members and surviving spouses use the VA home loan, covered in our VA purchase loan guide.

HomeReady and Home Possible. These are conventional loans under Fannie Mae and Freddie Mac rules, with no government insurance or guarantee behind them. Both start at 3% down and cap qualifying income at 80% of the area median. HomeReady takes first-time and repeat buyers, requires one borrower to finish a homeownership course when every buyer who will live in the home is a first-time buyer, and carries a $2,500 credit toward the down payment or closing costs for very low-income first-time buyers on loans Fannie Mae buys through February 2027.

Tax credit: the mortgage credit certificate

A mortgage credit certificate (MCC) from a state or local housing agency turns 10% to 50% of the mortgage interest you pay each year into a federal tax credit, capped at $2,000 a year when the rate is above 20%. Credit you cannot use carries forward for 3 years, the rest of your interest stays deductible, and you claim it on IRS Form 8396. An MCC cannot be paired with a bond-financed first mortgage, so you choose one or the other.

The recapture tax on bond loans and MCCs

With a bond-financed first mortgage or an MCC, you owe a recapture tax only when three things happen together: you sell within 9 years, you make a gain, and your income that year is above the limit in your recapture notice. The tax tops out at 6.25% of the original loan amount, peaks for a sale in year 5, and never exceeds half your gain; you figure it on Form 8828. Your issuer must give you a written notice at closing and, within 90 days, a statement of the subsidy amount and the income limits for each of the 9 years. Most borrowers never owe it, because those income limits rise 5% a year.

What to do today

Find your HFA through the NCSHA state housing agency directory, then your city or county housing department, and label each option on their homebuyer pages with its type from the table above.
Sign up for the homebuyer education course your HFA names. A HUD-approved housing counselor from the CFPB counselor search gives independent advice on buying a home and on whether a loan's terms fit you, often at little or no cost.
If the home is in open country or a town that is not part of a larger city's urban area, enter the address in USDA's eligibility map.
Call two lenders from the HFA's approved list with the script below, and ask each for a Loan Estimate that includes the assistance. The lender must send it within 3 business days of your application.
Before closing, find three things in the second mortgage note: the amount, what makes it due, and the forgiveness schedule.

Where it splits

If you might sell or refinance within 5 years, ask each lender what you would owe on each assistance option on that date, and pick the smallest bill.
If you work full time as a law enforcement officer, pre-K to 12 teacher, firefighter or EMT, check the Good Neighbor Next Door listings on HUD Home Store. HUD sells these homes in revitalization areas at 50% off list price to buyers whose job serves that area, with $100 down on an FHA loan. You sign a second mortgage for the discount; it shrinks by 1/36 each month you live there as your only home and reaches zero after 36 months, and if you sell or move out sooner you owe what is left. You must have owned no residential property in the year before you bid, and you bid through a participating broker.
If you hold a Housing Choice Voucher, ask your housing agency whether it runs the voucher homeownership option, which puts your voucher toward the monthly mortgage. Each agency decides whether to offer it; if someone in your household has a disability, you can ask for it as a reasonable accommodation, though an agency without a homeownership program can find the request unreasonable.
If you owned a home recently, filter for repeat-buyer programs: 1,080 of the 2,833 programs counted on October 1, 2026 have no first-time requirement.

Your leverage

CFPB complaint. If a lender misstates program terms or stalls, file at consumerfinance.gov/complaint. The CFPB sends it to the company, and most companies respond within 15 days.
Grant pitches. No government agency contacts you out of the blue about a grant or asks you to pay to get one. Report the pitch at ReportFraud.ftc.gov.
When to call a lawyer. Call legal aid or a real estate attorney if a payoff statement at your sale lists a balance on a second mortgage your note says is forgiven, or the holder refuses to release the lien after the term ends.

Call script for an HFA-approved lender

"I'm a first-time buyer using [state HFA] assistance on a home around $[price]. For each assistance option you offer: Is it a grant, forgivable, deferred or repayable? What are the amount, the rate and the monthly payment? What makes it due: sale, refinance, payoff or moving out? When is it fully forgiven? Is the first mortgage bond-financed? Do you work with a mortgage credit certificate? Which homebuyer course do you accept? Please send me a Loan Estimate that shows the assistance."

Today: open your HFA's down payment page, sign up for its homebuyer course, and make the two lender calls. Their Loan Estimates come back next, and with them you choose your assistance.