First-time buyer means anyone who hasn't owned a primary residence in the last 3 years — not just never-owned. That opens up dozens of federal, state, and local programs most buyers don't know about. This checklist helps you stack them: DPA grants that cover down payment, MCCs that convert mortgage interest to tax credits, seller concessions that cut cash at closing, and gift funds. Done right, you can close on a $400K home with under $10K out of pocket.
12-point readiness check
- Credit score 620+ (640 for smooth FHA, 680+ for conventional)
- Two years of W-2 or two-year tax history for self-employed
- Debt-to-income under 43% including the new mortgage
- Down payment + closing costs + 2 months reserves saved
- Savings "seasoned" 60+ days (not a recent transfer)
- No new credit accounts in last 6 months
- Stable employment in same field 2+ years
- On-time rent history for last 12 months
- Plan to stay in home 5+ years
- Emergency fund intact after down payment and closing
- Understand full PITI, not just P&I
- Pre-approved (not just pre-qualified) from 2+ lenders
Down Payment Assistance (DPA) programs
Almost every state has a Housing Finance Agency (HFA) that offers DPA — grants or forgivable second loans covering 3-5% of purchase price. Some programs:
- CalHFA (California) — MyHome up to 3.5%, plus ZIP code and income limits
- TSAHC (Texas) — 5% grants for teachers, first responders, veterans
- SONYMA (New York) — Achieving the Dream, 3% DPA
- Virginia HDA — Closing Cost Assistance up to $2,500, Plus Second Mortgage up to 5%
- Local programs — many cities run their own (Seattle, Austin, Denver, Minneapolis, etc.)
Search "[your state] housing finance agency" and "[your city] DPA first-time buyer."
Mortgage Credit Certificate (MCC)
An MCC converts up to 20-30% of your annual mortgage interest into a direct federal tax credit (not deduction). On a $300K loan at 7% paying $21K interest year one, a 20% MCC = $4,200 tax credit. Available in most states through HFAs. Income and price limits apply. Credit continues every year you own the home.
Gift funds and family assistance
Gift letter required. Must come from a family member, fiancé, or domestic partner. Bank statements from the gift-giver required to source the funds. Seasoned gifts (60+ days in borrower's account) don't need sourcing. On FHA and VA, 100% of down payment can be gifted.
Employer-assisted housing
Growing trend. Universities, hospital systems, and large corporations offer forgivable loans or grants for employees buying in specific areas. Ask HR — most employees don't know the benefit exists.