Best First-Time Home Buyer Loans 2027: Key Numbers
Six main low-down-payment loans for first-time buyers in 2027: VA (0% down, no monthly mortgage insurance), USDA (0% down, income up to 115% of area median), FHA (3.5% down with 580+ credit), and HomeReady, Home Possible and Conventional 97 (3% down). On October 17, 2026, FHA averaged 5.38% (6.11% APR), VA 6.88% and conventional 7.19%. FHA adds FICO 10T and VantageScore 4.0 from January 1, 2027. Mortgage insurance premiums are tax deductible again for tax year 2026, phasing out between $100,000 and $109,000 AGI.
Best First-Time Home Buyer Loans 2027: 6 Low-Down-Payment Loans Ranked
You do not need 20% down. These six loans let first-time buyers in 2027 put down 0% to 3.5% — here is which one costs least for your credit, income and location, using real October 2026 rates.
The 6 Best First-Time Buyer Loans for 2027
| # | Loan | Min down | Credit | Mortgage insurance | Best for |
|---|---|---|---|---|---|
| 1 | VA loan | 0% | Lender-set (often 620) | No monthly MI; funding fee 2.15% first use (<5% down) | Veterans & service members |
| 2 | FHA loan | 3.5% (580+) | 580 (500 with 10% down) | 1.75% upfront + 0.55%/yr (most loans) | Scores 580-700 |
| 3 | USDA loan | 0% | Lender-set | 1% upfront + 0.35%/yr | Eligible areas, income ≤115% AMI |
| 4 | Fannie Mae HomeReady | 3% | 620+ | PMI, cancellable at 80% LTV | Income ≤80% AMI |
| 5 | Freddie Mac Home Possible | 3% | Lender-set (often 620+) | PMI, cancellable at 80% LTV | Income ≤80% AMI |
| 6 | Conventional 97 | 3% | 620+ | PMI, cancellable at 80% LTV | Strong credit, no income limit |
Program minimums; lenders may set higher requirements. AMI = area median income.
Cash Needed on a $350,000 Home
Down payment only — closing costs are extra, though down payment assistance programs can cover part of both.
Today's Rates by Loan Type (October 17, 2026)
Source: NerdWallet daily averages. Details: FHA rates today. Check your FHA rate → · Check VA eligibility → · Check USDA eligibility →
What Changes for First-Time Buyers in 2027
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FAQ: First-Time Buyer Loans 2027
What is the best first-time home buyer loan for 2027?
It depends on your profile. Eligible veterans usually do best with a VA loan (0% down, no monthly mortgage insurance). Buyers in eligible rural or suburban areas under the income limit can use USDA (0% down). Credit scores of 580-700 often favor FHA, which averaged 5.38% on October 17, 2026. Buyers with stronger credit and income at or below 80% of area median income should price HomeReady or Home Possible at 3% down. Find the best loan for your profile →
What is the minimum down payment for a first-time buyer in 2027?
VA and USDA loans allow 0% down for eligible borrowers. Conventional 97, HomeReady and Home Possible allow 3% down — $10,500 on a $350,000 home. FHA requires 3.5% down with a 580+ credit score, or $12,250 on a $350,000 home, and 10% down with scores from 500 to 579. See how little you need down →
What changes for first-time buyers in 2027?
From January 1, 2027, FHA lenders may use FICO Score 10T and VantageScore 4.0 in addition to Classic FICO. From January 15, 2027, Fannie Mae will use the Desktop Underwriter casefile creation date to determine area-median-income eligibility for loan-level price adjustment waivers on HomeReady, first-time homebuyer and Duty to Serve loans. Fannie Mae also forecasts 30-year rates averaging 7.5% in 2027. Lock in before 2027 changes →
Is mortgage insurance tax deductible again?
Yes, for tax year 2026 (returns filed in 2027). The One Big Beautiful Bill Act reinstated the itemized deduction for qualified mortgage insurance premiums, including PMI, FHA mortgage insurance, the VA funding fee and the USDA guarantee fee. The deduction phases out above $100,000 of AGI and disappears above $109,000 ($50,000 and $54,500 if married filing separately). Pair your loan with down payment help →
Is FHA or conventional cheaper for first-time buyers?
At October 2026 averages, FHA (5.38% rate, 6.11% APR) was cheaper than conventional (7.19% rate, 7.21% APR) for many borrowers, even after FHA mortgage insurance. Conventional can win for high credit scores because PMI can be cancelled at 80% loan-to-value, while FHA annual MIP usually lasts the life of the loan with less than 10% down. Compare FHA and conventional quotes →
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