First-time homebuyer programs can make the difference between renting indefinitely and actually owning a home. But these programs have rules, limits, and terms that many buyers don't fully understand before applying. Here is a clear overview of what is available in Illinois, Indiana, Tennessee, and Alabama.
Who Counts as a First-Time Homebuyer?
Many buyers assume they do not qualify as a first-time buyer because they owned a home years ago. That is often not accurate. Many first-time homebuyer programs define "first-time buyer" as someone who has not owned a primary residence in the past three years.
This matters: If you owned a home and sold it three or more years ago, you may qualify as a first-time buyer under many program definitions. Do not count yourself out before checking.
Some programs also waive the first-time buyer requirement entirely for buyers in certain designated areas or for Veterans. The definition can vary by program, so it is worth reviewing each program individually.
Loan Programs Designed for First-Time Buyers
These loan programs are popular with first-time buyers because of their flexibility:
FHA Loan — Federal Housing Administration
FHA loans are one of the most common choices for first-time buyers. They offer more flexible credit guidelines and lower down payment options than many conventional loans. FHA is not a "beginner loan" — it is a strategic tool that works well for buyers with moderate credit or limited down payment funds.
- Lower minimum down payment for eligible buyers
- More flexible credit score guidelines
- Gift funds allowed for down payment
- May be paired with state DPA programs
- Upfront MIP (1.75% added to loan) + monthly MIP applies
Conventional First-Time Buyer Programs
Conventional loans are not just for buyers with 20% down. Several first-time buyer conventional programs exist that allow lower down payments with competitive terms. These can be especially attractive for buyers with stronger credit who want the option to remove PMI later.
- Lower down payment options available for first-time buyers
- PMI can be removed at 20% equity (unlike FHA)
- May pair with certain state DPA programs
- Typically requires stronger credit than FHA
State First-Time Buyer Programs
Illinois Housing Development Authority Programs
IHDA offers programs that may provide eligible Illinois first-time buyers with assistance toward down payment and closing costs. Programs vary by availability and funding. Common requirements include income limits, purchase price limits, credit minimums, homebuyer education, and occupancy as a primary residence.
Available throughout Illinois including Chicago suburbs, Will County, Kendall County, Grundy County, and statewide. Learn more about IHDA programs →
Indiana Housing & Community Development Authority Programs
IHCDA programs may help eligible Indiana first-time buyers with down payment assistance paired with qualifying mortgage loans. Income and purchase price limits vary by county. Available statewide including Indianapolis, Fort Wayne, Carmel, and surrounding areas.
Tennessee Housing Development Agency — Great Choice
THDA's Great Choice program may help eligible Tennessee first-time buyers with down payment assistance through a second mortgage structure. Homebuyer education is required. Available statewide including Nashville, Memphis, Knoxville, and Chattanooga.
Alabama Housing Finance Authority — Step Up
AHFA's Step Up program may help eligible Alabama buyers — including some repeat buyers — with down payment assistance through a second mortgage at a low interest rate. Available statewide including Birmingham, Huntsville, and Montgomery.
What First-Time Buyers Need to Know Before Applying
- Start early. Many first-time buyer programs require homebuyer education, which takes time to complete.
- Know your household income. Some programs count all household income, not just the borrower's income.
- Understand the repayment terms. Not all assistance is forgiven. Some must be repaid when you sell or refinance.
- Check the purchase price limits. Programs have maximum home prices. Know the limit for your area before you shop.
- Work with an approved lender. State programs require lenders who are approved for and experienced with the program.
- Do not make major financial changes. New debt, job changes, or large deposits can affect approval during the process.
The biggest mistake first-time buyers make: Starting to shop before getting fully reviewed. Know your price range, cash needed, and which programs you qualify for before you fall in love with a house. A solid plan now prevents a lot of stress later.
Let's Build Your First-Time Buyer Plan
Buying your first home in Illinois, Indiana, Tennessee, or Alabama? Let's review your credit, income, down payment, and program options so you know exactly where you stand before you start shopping.
Educational Disclaimer: This content is for informational purposes only. Program availability, income limits, purchase price limits, credit requirements, and guidelines are subject to change. Contact Kim Dobyns directly for a personalized review. Kim Dobyns, NMLS #204859 · Union Home Mortgage Corp., NMLS #2229 · Licensed in IL · IN · TN · AL · Equal Housing Lender.