First-Time Buyer Mortgages in the US 2026

Start with the thing that wastes the most time. There is no federal first-time buyer tax credit for a 2026 purchase. The credit everybody half-remembers was Internal Revenue Code section 36, and it terminated by its own terms. It applied to homes purchased on or after 9 April 2008 and before 1 May 2010, with narrow extensions to 1 October 2010 and 1 May 2011. That is the whole life of it. The only live Internal Revenue Service content today is repayment guidance for people who claimed the 2008 version and are still paying it back. Bills to create a new credit have been introduced repeatedly. None has been enacted. If a page tells you to claim a federal credit on your 2026 return, it is describing a law that does not exist.

The second error is subtler and costs more. Down payment assistance is real, widely available, and not federal. It is run by state and local Housing Finance Agencies and by municipalities, funded largely through federal block grants and agency bond proceeds, and the federal role is to permit it — FHA and the government-sponsored enterprises allow that money to sit behind the first mortgage as secondary financing. That is an eligibility rule, not a handout, and you do not apply for it in Washington.

What follows separates the three categories of number you will be quoted: programme rules set by statute, a federal agency or a GSE, identical everywhere; lender overlays, which are commercial policy and vary enormously; and industry averages, which are private data. Every figure below is labelled.

Who this guide is for

• Anyone who owned a home more than three years ago and assumes that disqualifies them
• Buyers searching for a federal tax credit that no longer exists
• People told that down payment assistance is a federal programme they apply to directly
• Borrowers weighing FHA against conventional at a low down payment
• Anyone quoted a 620 or 640 credit score as a hard conventional minimum
• Single parents and displaced homemakers who owned a home only with a former spouse
• Anyone who has budgeted the down payment and nothing else

Quick answer

A first-time buyer in federal terms is someone who has not owned a home for three years, not someone who has never owned one — the HUD statutory test at 42 U.S.C. §12704(14), which Fannie Mae's definition matches, with carve-outs for displaced homemakers and for single parents whose only ownership was jointly with a spouse. There is no federal first-time buyer tax credit in 2026: IRC §36 expired by its own terms in 2010 and nothing has replaced it. Down payment assistance comes from state and local Housing Finance Agencies, funded largely by HOME and CDBG block grants and bond proceeds, and FHA and the GSEs permit it as secondary financing. The low-down-payment routes are FHA at 3.5% with a score of 580 or above, conventional at 3% on the 97% loan-to-value products, and VA at zero for the service-eligible. FHA charges 1.75% upfront mortgage insurance plus an annual premium that is not cancellable by request above 90% loan-to-value. The 2026 conforming baseline is US$832,750, ceiling US$1,249,125. Fannie Mae no longer applies a minimum credit score to Desktop Underwriter casefiles.

What "first-time buyer" actually means in law

The HUD statutory test

The federal definition that most assistance programmes inherit sits in 42 U.S.C. §12704(14). It defines a first-time homebuyer as an individual, and that individual's spouse, who have not owned a home during the three-year period prior to the purchase. This is a programme rule, written into statute.

The operative word is three. The test is not whether you have ever owned, but whether you have owned in the last three years. Sell a house, rent for three years, and you are a first-time buyer again in the eyes of the statute and of every programme that adopts it. People who bought in their twenties, sold in a divorce and have rented since routinely assume the door is closed. It is not.

The spouse clause cuts the other way: because the test covers the individual and that individual's spouse, a buyer who has never owned anything can be disqualified by a spouse who sold eighteen months ago.

The carve-outs

• Displaced homemakers. A person within that category is treated as a first-time buyer even where the three-year test would not be met on its own terms.
• Single parents who owned only jointly with a spouse. If your only ownership interest was held jointly with a spouse, and you are now a single parent, the carve-out applies.
• Certain non-permanent structures. Ownership of a dwelling not permanently affixed to a permanent foundation does not count as ownership for the test.

Each is a programme rule, not a discretionary favour. If one applies, say so on the application rather than waiting to be asked.

Fannie Mae's version

Fannie Mae's definition runs in parallel: no ownership interest, sole or joint, in a residential property during the three years preceding the purchase, and the property bought must be occupied as a principal residence. The window is identical; the occupancy condition is what differs in emphasis, and buying through an entity or as an investment takes you out of the category entirely.

The tax credit that does not exist

The chronology is worth spelling out, because the confusion is durable and the search results feeding it are a decade and a half old.

IRC §36 created a refundable credit for first-time buyers. It applied only to homes purchased on or after 9 April 2008 and before 1 May 2010, with narrow extensions carrying certain purchasers to 1 October 2010 and, in limited circumstances, 1 May 2011. Then it was gone — not repealed in a political fight, simply terminated by the sunset written into the section itself.

What remains on the Internal Revenue Service site is repayment guidance. Topic no. 611 deals with people who claimed the 2008 credit and still owe instalments, or who disposed of the home and triggered accelerated repayment. That is the entire live federal footprint.

Since 2010 there have been repeated proposals to create a new credit. None is enacted law. A proposal is not a programme. Treat any site discussing a first-time homebuyer tax credit in the present tense as unreliable on everything else too.

How down payment assistance really works

There is no single federal down payment assistance programme. Assistance is delivered by state and local Housing Finance Agencies and by city and county governments. The money comes largely from federal block grants — the HOME Investment Partnerships Program and the Community Development Block Grant program — and from bond proceeds state HFAs raise themselves. The programmes take four shapes: outright grants, forgivable loans that disappear after a set occupancy period, deferred-payment second mortgages due on sale or refinance, and ordinary repayable seconds.

The federal part of the arrangement is permission. FHA and the government-sponsored enterprises allow assistance from governmental entities and HFAs to sit behind the first mortgage as secondary financing — on the conventional side, the Community Seconds structure. That is an eligibility rule about acceptable sources of funds and subordinate liens. It is not a federal agency giving you money.

HUD's own homebuying page does list a few specific federal routes: Good Neighbor Next Door, public-housing homeownership, and the Section 184 Indian Home Loan Guarantee Program. Beyond those it directs buyers to state programmes. Search your state HFA first, then your city or county housing department.

Because assistance is local, the eligibility tests are local too — income caps, price caps, education requirements, occupancy periods and recapture provisions all differ. None is a federal rule, and none is a lender overlay. They are the terms of that agency's product.

The low-down-payment routes compared

Three routes exist for a buyer without a large deposit. The minimums below are programme rules.

FHA at 3.5%

The FHA tiers have been in place since 4 October 2010 and are programme rules: a credit score of 580 or above gets maximum financing at 96.5% loan-to-value, meaning 3.5% down. A score of 500 to 579 is limited to 90% loan-to-value, meaning 10% down. Below 500 is not eligible.

The widely quoted 620 or 640 "FHA minimum" is a lender overlay. FHA does not set it. Most lenders will not go beneath 580 and very few touch the 500 to 579 band — a commercial reality rather than a rule, and the reason to ask several lenders.

The cost of FHA is the insurance. Upfront mortgage insurance is 1.75% of the base loan amount. The annual premium then runs for a duration fixed at origination by the original loan-to-value: at or below 90%, eleven years; above 90%, the full mortgage term. A 3.5%-down purchase sits at 96.5%, so annual mortgage insurance runs for the life of the loan, with refinancing out of FHA or paying off as the only exits.

Conventional at 3%

The conventional low-down-payment products reach 97% loan-to-value, so 3% down. Private mortgage insurance is required above 80% loan-to-value at origination — but under the Homeowners Protection Act it is cancellable, at 80% on borrower request and automatically at 78%, measured against the original value. That is the structural advantage of conventional over FHA for a buyer who expects to stay put.

The credit position changed recently. Fannie Mae's Selling Guide B3-5.1-01 now states that a minimum credit score is not required for Desktop Underwriter loan casefiles. The old 620 minimum was removed for new DU casefiles created on or after 16 November 2025 under Announcement SEL-2025-09. It survives as a programme rule in three narrower places: manually underwritten fixed-rate loans at 620, manually underwritten ARMs at 640, and government loans delivered to Fannie Mae at 620. Lenders must still deliver the representative score, because it drives loan-level price adjustments — your score affects your rate even where it no longer affects eligibility.

"Conventional loans require a 620 credit score" is now wrong as a blanket statement. Freddie Mac publishes no single minimum; its Minimum Indicator Score requirements apply only to certain mortgage types listed in Guide Exhibit 25, and no Freddie number is stated here because that exhibit's current contents could not be verified.

VA at zero

If you are eligible through service, the VA route is almost always the cheapest: no down payment, no monthly mortgage insurance, and a one-off funding fee of 2.15% on a first-use purchase with less than 5% down. The VA sets no minimum credit score — every floor advertised as a VA requirement is a lender overlay.

The 2026 conforming loan limits

The Federal Housing Finance Agency announced the 2026 limits on 25 November 2025. These are programme figures and they set the boundary between a conforming loan and a jumbo.

The baseline rose by US$26,250, tracking a 3.26% rise in house prices from the third quarter of 2024 to the third quarter of 2025. The ceiling is 150% of the baseline, and your county's actual limit sits between the two.

What the down payment is not

The deposit is the figure everyone saves towards and it is not the figure you need on the day.

No federal agency publishes an average closing cost figure. Any percentage presented as typical is a commercial estimate from a lender, a title company or a comparison site, not an official statistic. We will not give you one, because there is no verified number to give.

What you can price precisely are the programme charges. FHA upfront mortgage insurance is 1.75% of the base loan amount. The VA funding fee is 2.15% on a first-use purchase below 5% down, 1.5% at 5% down and 1.25% at 10% down. On a VA loan, the funding fee is the only fee that can be financed — every other cost is paid at closing from your own funds, a seller concession or a lender credit.

Beyond that come prepaid items, escrow, title work, recording and transfer charges, and the appraisal. Your Loan Estimate itemises them and is the only reliable source for your transaction.

The order to actually do this in

1. Test yourself against the three-year rule. Check the carve-outs if the plain test fails, and check your spouse's position.
2. Stop looking for a federal tax credit. There is none for a 2026 purchase. Redirect that time to step three.
3. Find your state Housing Finance Agency, then your city or county. Note the income cap, price cap, education requirement and recapture terms for each programme.
4. Pull your credit and work out which routes are open. FHA needs 580 for 3.5% down. Conventional DU casefiles have no minimum. VA has none at all.
5. Check your county conforming limit against the 2026 baseline of US$832,750 and the ceiling of US$1,249,125.
6. Get Loan Estimates from at least three lenders, asking each what its credit score floor, maximum debt-to-income and reserve requirement are. You are mapping overlays, not just rates.
7. Confirm your assistance programme is acceptable to your lender as secondary financing before you make an offer. The GSEs and FHA permit HFA assistance, but the lender has to be set up to close it — and reconcile your closing figures against the charges you can calculate.

Mistakes that cost money

Assuming prior ownership disqualifies you permanently. The test is three years without ownership, not never having owned.

Planning around a federal tax credit. IRC §36 expired in 2010. The only live IRS material is repayment guidance for 2008 claimants, and bills to revive the credit have never been enacted.

Looking for a federal down payment assistance programme. It does not exist as such. The money is at state and local HFA level. Searching federally wastes weeks.

Treating a 620 conventional minimum as current. Fannie Mae removed it for DU casefiles created on or after 16 November 2025. It still applies to manual files and government loans delivered to Fannie.

Accepting a 620 or 640 "FHA minimum". FHA's rule is 580 for 3.5% down and 500 for 10% down. Anything above that is one lender's overlay.

Choosing FHA for the low deposit without pricing the insurance. Above 90% original loan-to-value, FHA annual mortgage insurance runs for the life of the loan and cannot be cancelled by request. Conventional PMI cancels at 80%. Over a long hold that dwarfs the 0.5% gap in deposit.

Budgeting the down payment and nothing else. Prepaids, escrow, title and programme charges all land at closing, and only a VA funding fee can be rolled in. A spouse's recent sale also closes the first-time category, so check both sides before you rely on it.

Edge cases worth knowing

You qualify again after three years. If you sold two years and four months ago, waiting eight months may open a door that is currently closed.

Assistance that is a lien, not a gift. Deferred-payment and repayable seconds are debt, and a forgivable loan typically forgives only after a stated occupancy period. Read which of the four shapes your programme takes before accepting it.

High-cost counties and the ceiling. Above the baseline of US$832,750, your county limit may sit anywhere up to the US$1,249,125 ceiling. Crossing it moves you to a jumbo loan, where the GSE rules here stop applying and the lender's own credit box governs entirely.

Disclaimer

This guide explains the HUD statutory first-time buyer definition at 42 U.S.C. §12704(14), Fannie Mae Selling Guide provisions, FHA requirements in Mortgagee Letters 2010-29 and 2023-05, and Federal Housing Finance Agency conforming limits. Figures were checked on 12 October 2026. It is information, not mortgage, tax or legal advice. It cannot tell you what any individual lender will approve, because overlays change without notice, nor the terms of your local assistance programme, which are set agency by agency.

The short version

The legal definition of a first-time buyer is more generous than the phrase suggests: three years without ownership is the test, with carve-outs for displaced homemakers and for single parents whose only ownership was joint with a spouse. If you have been counting yourself out because you owned a home once, check the date you sold.

There is no federal first-time buyer tax credit for a 2026 purchase and there has not been one since 2010. Nor is there a federal down payment assistance programme in the sense people mean. What exists is a network of state and local Housing Finance Agency products, funded through block grants and bond proceeds, which FHA and the GSEs permit as secondary financing. Searching for the federal version is the most common way to lose a month.

On the mortgage itself the three routes are FHA at 3.5% with a 580 score, conventional at 3% with no score minimum on Desktop Underwriter casefiles, and VA at zero for the service-eligible. The deciding factor between the first two is rarely the deposit — it is the insurance, because FHA above 90% original loan-to-value runs for the life of the loan while conventional PMI comes off at 80%.