A Zillow research found that only 37% of first-time buyers could afford the conventional 20% down payment. That may come as a surprise, but it's not surprising when you consider the staggering levels of credit card debt and student loan debt that Americans are carrying.

Those without a sizable savings cushion can take heart since mortgages are available just for them. What's more, you may qualify for a first-time buyer grant or program, which can provide the funds you need to make the down payment and complete the deal.

Knowing what resources are available and how to use them might increase your chances of being accepted into a housing program.

What Kinds of Loans, Programs, And Grants Are Available?

Several options are available from the federal government, individual states, and nonprofit groups to assist first-time homeowners in securing a mortgage. A handful of instances are as follows:

Conventional Mortgages

The term "conventional loan" refers to mortgages not guaranteed by the federal government. Fannie Mae and Freddie Mac-backed mortgages need as little as a 3% down payment.

Loans with Government Backing

Such financing is provided by the Federal Housing Administration and carries the agency's guarantee. Administration (FHA), with a down payment requirement of at least 3.5%. A down payment is not required for federally backed loans like those offered by the VA or USDA.

Secondary Loans

Several states provide a secondary loan to purchasers to aid with the initial expenditures of buying a property, such as the down payment and the closing costs. MyHome Assistance in California and Great Choice Plus in Tennessee are two such initiatives.

Who Qualifies For The First-Time Buyer Program?

The state, county, or municipal program determines the specific rules that must be followed. Here are some general principles:

Past Owners Can Be First-Timers.

As a rule of thumb, a house buyer is considered a first-time buyer if they have not owned a property in the last three years.

Buyers Can Use Some Applications.

Down Payment Resource tracks around 2,400 different mortgage help programs. DPR estimates that 40% of the available programs are not limited to first-time homebuyers.

Perfect Credit Is Not Required

For first-time homebuyer aid, a credit score of 640 or above is usually all that's required. The possible range of a FICO® Score is 300–850. A typical mortgage lender would likely want a credit score of 680 or better. Please refer to "What Is a Good Credit Score?"

Tips For Locating Potentially Applicable Programs

Start Your Web Browser

Try searching the web in a few different ways. The first step is to enter your state's name, followed by the keywords "first-time homebuyer program" and "homebuyer program." Your state's Housing Finance Agency should appear in the results and links to the appropriate pages.

Meet With A First-Time Buyer Loan Specialist

Particular banks can only make loans backed by the Federal Housing Administration (FHA). The 3% down payment requirement for traditional mortgages might be confusing, and not all lenders know it.

What You Need to Know To Get Approved For A Home Loan

You will still need to qualify for a mortgage regardless of whether or not you use a first-time homebuyer program to purchase your new home. Taking the following preventative measures will help:

Check Credit Scores And Reports

It's recommended to start this process at least three months beforehand to allow for any unforeseen problems to be resolved. The Experian credit report is available at no cost.

Check Debt-To-Income Ratio.

You may find out if taking on a new loan would be too much of a financial strain by calculating your debt-to-income ratio (DTI), the number of monthly debt payments as a percentage of your monthly gross income. There are two main guidelines that mortgage companies employ when calculating your DTI.

The Mortgage Preapproval Process

It's a good idea to be preapproved for a mortgage before you go house searching. This will demonstrate to the sellers that you mean business and that your offer is likely to be accepted. These are the actions you should take before requesting preapproval.

Preapproval vs. Prequalification

You may get a rough idea of how much you'd be able to borrow with a mortgage prequalification, but no hard inquiries or extensive paperwork are necessary. However, getting preapproved requires a comprehensive mortgage application, accompanying documentation, and a rigorous credit draw. Prequalification helps estimate costs, but it doesn't have nearly the same weight as preapproval when applying for financing.

Gather Paperwork

Mortgages are long-term financial commitments that affect both you and the lender. As a result, you may anticipate submitting far more paperwork than you would for other sorts of loans.