First-Time Homebuyer Eligibility

Have you owned a home in past 3 years?

IRS definition: first-time = no homeownership in past 3 years

Household annual income

Down payment saved

FICO credit score

FHA 580+, Conv 620+, USDA 640+

Household size

people

State (DPA programs)

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How to use

1 Indicate whether you've owned a primary residence in the past 3 years (IRS first-time definition).
2 Enter household income, savings, credit score, and household size.
3 Select your state to see DPA programs.
4 Click Calculate to see eligible loan programs (FHA, Conventional 97, USDA, etc.) and IRA first-time withdrawal benefit.
5 Compare programs and apply with multiple lenders to find best terms. State HFA programs (CalHFA, SONYMA, IHDA) are competitive — enroll while inventory lasts.

First-Time Homebuyer Definition (IRS)

Per IRS definition, you're a first-time homebuyer if you (and spouse if applicable) have not owned a primary residence in the past 3 years. This is broader than people think — many second-time buyers qualify, especially those who rented after divorce, military deployment, or relocation.

Major US First-Time Homebuyer Loan Programs (2026)

Program	Min FICO	Min Down	Notes
FHA Loan	580 (or 500 with 10% down)	3.5%	Open to all (not just first-time); MIP for life of loan if <10% down
Fannie Mae HomeReady	620	3%	Income ≤80% AMI; PMI auto-removed at 78% LTV
Freddie Mac Home Possible	660	3%	Similar to HomeReady; income limits
Conventional 97	620	3%	One borrower must be first-time; no income cap
VA Loan	None (lender 580+)	0%	Veterans, active duty, eligible spouses; funding fee 1.4-3.6%
USDA Rural Development	640	0%	Rural areas only; income limits ~80% AMI
HomePath (Fannie Mae)	620	3%	Fannie Mae REO foreclosure properties

State Down Payment Assistance (DPA) Programs

State	Program	Max Assistance
California	CalHFA MyHome Assistance	3.5% deferred-payment loan
Florida	Hometown Heroes	$35,000 DPA
New York	SONYMA DPA	$30,000
Texas	TSAHC My First Texas Home	5% grant
Illinois	IHDA Access Mortgage	$7,500-10,000
Ohio	OHFA	2.5-5% DPA
Pennsylvania	PHFA Keystone	Low-rate + DPA combo
Georgia	Georgia Dream	$7,500
Michigan	MSHDA MI Home Loan	$10,000
New Jersey	NJ HMFA	$15,000

All 50 states have at least one Housing Finance Agency (HFA) DPA program. Search "[your state] HFA first-time buyer" for full list.

IRA First-Time Buyer Penalty-Free Withdrawal

Per IRC §72(t)(2)(F), first-time buyers can withdraw up to $10,000 from an IRA without the 10% early withdrawal penalty (income tax still owed on Traditional IRA withdrawals; Roth contributions always penalty-free). Spouse can also withdraw $10,000, for $20,000 combined. Limit applies once per lifetime. Use within 120 days of withdrawal for home purchase.

Federal Tax Benefits for Homeowners

(1) Mortgage interest deduction — up to $750K mortgage debt (post-TCJA 2017). (2) SALT deduction — state/local property tax up to $10,000/year. (3) Section 121 capital gain exclusion — $250K/$500K on sale after 2 of 5 years occupancy. Note: most middle-class homeowners now take the standard deduction ($16,100 single / $32,200 MFJ in 2026), so itemizing benefits high-cost-area buyers most.

FAQ

Q Who qualifies as a first-time homebuyer in the US?

Per IRS, anyone who has NOT owned a primary residence in the past 3 years. Broader than most people think — many "second-time buyers" qualify after a 3-year rental gap. Some lender programs are stricter or more lenient. The 3-year IRS rule applies to IRA $10,000 penalty-free withdrawal.

Q What's the lowest down payment for a first-time buyer?

0% with VA (veterans/active duty/eligible spouses) or USDA (rural areas only). 3% with Conventional 97 / HomeReady / Home Possible (FICO 620+). 3.5% with FHA (FICO 580+). With state DPA grants, the effective down payment can sometimes be near zero. The down payment is rarely the actual barrier — closing costs and reserves matter more.

Q Can I withdraw from my IRA for a first home?

Yes — up to $10,000 lifetime from an IRA without the 10% early withdrawal penalty (IRC §72(t)(2)(F)). Income tax still owed on Traditional IRA withdrawals; Roth IRA contributions are always penalty-free. Spouse can also withdraw $10K — $20K combined. Use within 120 days for home purchase.

Q What is FHA vs. Conventional 97?

FHA: 3.5% down, FICO 580+, MIP (mortgage insurance premium) for life of loan if down <10%. Conventional 97 (Fannie Mae): 3% down, FICO 620+, PMI removable at 80% LTV. FHA easier to qualify; Conventional 97 cheaper long-term once PMI removes. Compare both for your specific situation.

Q How do state DPA (Down Payment Assistance) programs work?

Each state Housing Finance Agency offers grants or low-interest loans specifically for first-time buyers. California CalHFA: 3.5% MyHome loan. Florida Hometown Heroes: $35K. NY SONYMA: $30K. TX TSAHC: 5% grant. Income limits and homebuyer education classes typically required. Apply through approved lenders only.

Q Is a USDA Rural loan only for farms?

No — USDA Rural Development loans cover any property in eligible rural and some suburban areas (about 97% of US land area, 33% of population). Search USDA's eligibility map. Income limits ~80% AMI for area. 0% down + lower mortgage insurance than FHA. Significant program for buyers in eligible areas.

Q What credit score do I need to buy a first home?

Realistic minimums: FHA 580 (or 500 with 10% down). Conventional 97 / HomeReady 620. USDA 640. VA no minimum but most lenders 580+. To get good rates: 700+ recommended; 740+ for best rates. If under 580, focus on credit rebuilding for 6-12 months before applying — even 30 points can save thousands in interest.

Q How much should I save for closing costs?

Typically 2-5% of purchase price. On a $300K home: $6,000-$15,000 plus down payment. Includes lender fees, title insurance, escrow, prepaid taxes/insurance, attorney (NY/NJ/MA/IL), inspection, appraisal. Many state DPA programs cover closing costs in addition to down payment. Sellers can also contribute up to 3-6% of price toward closing.