How to Buy a First Home in the USA: FHA, VA and USDA Loans

Buying property is one of the clearest signs that a move abroad has turned into a life. It is also the point where US paperwork gets serious, because the mortgage market runs on credit files, tax records and immigration documents that a recent arrival may not have yet.

The good news is that the United States has an unusually deep set of small-deposit mortgage programmes. The catch, and it is a real one for immigrants, is that each programme draws its eligibility line in a different place. This guide works through them one by one, says plainly which ones a non-citizen can use, and explains the costs nobody warns you about. Rules were checked in September 2026 and they do change, so confirm the details with the official source before you commit money.

Your immigration status decides which loans you can use

Before comparing interest rates, find out which programmes will even look at your application. The federal schemes and the two big loan buyers treat status very differently.

FHA loans: the 3.5% route for citizens and green card holders

The Federal Housing Administration does not lend. It insures loans made by approved lenders, which lets them accept weaker credit and smaller deposits than they otherwise would.

HUD sets the borrower's minimum required investment at no less than 3.5% of the property's adjusted value. Credit scoring then decides whether you reach that floor at all: a score of 580 or above qualifies for maximum financing, a score between 500 and 579 is limited to 90% loan-to-value, and below 500 there is no FHA financing.

For a green card holder, the attraction is that HUD requires the same terms, conditions and requirements as for a US citizen. The mortgage file simply has to carry evidence of lawful permanent residence, and the application must record that status. HUD notes specifically that a Social Security card on its own is not proof of immigration or work status.

VA loans: nothing down for those who have served

VA-backed purchase loans are the strongest deal in American housing finance, and the narrowest. If you qualify for a Certificate of Eligibility, meet the lender's credit and income standards and intend to live in the home, you can borrow with no down payment as long as the sales price is not higher than the appraised value. There is no private mortgage insurance and no monthly mortgage insurance premium.

Instead the VA charges a one-time funding fee. On a first-use purchase loan the published rates are 2.15% with less than 5% down, 1.5% with 5% or more, and 1.25% with 10% or more; subsequent use with less than 5% down is charged at 3.3%. Those rates took effect on 7 April 2023. Borrowers receiving compensation for a service-connected disability, those entitled to it but drawing retirement or active-duty pay instead, surviving spouses receiving Dependency and Indemnity Compensation, and active-duty members awarded a Purple Heart before closing do not pay the fee at all.

Two practical points: seller credits on a VA purchase cannot exceed 4% of the home's reasonable value, and unlike the funding fee, other closing costs cannot be rolled into a purchase loan.

USDA loans: no deposit outside the cities

USDA Rural Development guarantees Section 502 loans so that approved lenders can offer 100% financing to low- and moderate-income households buying a primary residence in an eligible rural area. Applicants must be US citizens, US non-citizen nationals or qualified aliens.

Two filters decide whether this is worth pursuing. The property has to sit inside an eligible area, which you check by address on USDA's own eligibility site rather than by guessing from a map. And household income has to fall under the limit for that area, which is set locally rather than nationally. The programme itself sets no minimum credit score, though applicants are expected to show they can manage debt.

Conventional loans from about 3% down

Most US mortgages are conventional, meaning they are not government-insured. Lenders write them to the standards of Fannie Mae or Freddie Mac so the loans can be sold on.

The CFPB's guidance is that in most cases you need a down payment of at least 3%, while many lenders want 5% or more, and that low or no-deposit options usually come at increased cost. Fannie Mae's HomeReady product allows as little as 3% down and does not require you to be a first-time buyer, but caps qualifying income at 80% of the area median income for the property's location. The standard 97% loan-to-value option takes a different approach: at least one borrower must be a first-time buyer, defined as not having owned residential property in the previous three years. Where every occupying borrower is a first-time buyer, one of them must complete homeownership education from a qualified provider.

For most visa holders this is the route that exists. Fannie Mae buys mortgages made to non-US citizens who are lawful permanent or non-permanent residents, on the same terms available to citizens. It does not prescribe which documents prove legal presence, leaving the lender to decide case by case and to warrant that the borrower is legally present. In practice that means your visa, status documents and employment authorisation will all be examined closely.

What small deposits cost you every month

Borrowing with little equity is not free. FHA charges an upfront mortgage insurance premium of 1.75% of the base loan amount, plus an annual premium collected monthly; how long the annual premium runs depends on your loan terms, so ask the lender to show you the figure in writing. Conventional loans below 20% equity usually carry private mortgage insurance, which can fall away as equity builds. VA loans carry neither.

Closing costs are a separate bill

Newcomers routinely save a deposit and then discover a second set of charges. The CFPB puts closing costs, excluding the down payment, at roughly 2% to 5% of the purchase price, varying with the price, your deposit, lender charges, loan type, property type and location.

The items it lists include appraisal fees, tax service provider fees, title insurance, government taxes, and prepaid expenses such as property taxes, homeowners insurance and interest up to your first payment. You will see all of it twice: once as an estimate on the Loan Estimate and again as final figures on the Closing Disclosure. Some of those costs the lender cannot increase at all, some by up to 10%, and some by any amount, which is exactly why the two documents are worth comparing line by line.

The CFPB also suggests keeping three to six months of expenses in reserve before deciding how much of your savings to put into a deposit. A house you cannot maintain is not a bargain.

Paperwork a newcomer should expect to produce

Gather this before you approach a lender, not after:

• Passport, visa and status documents, or your green card
• Social Security number, plus any employment authorisation document
• Two years of employment history where possible, with pay slips and an offer or employment letter
• Federal tax returns and W-2 or 1099 forms for the years you have filed
• Bank statements covering the deposit, with a paper trail for any gifted funds
• Evidence of rent, utility and insurance payments if your credit file is thin
• A written record of debts abroad, since they may affect your debt-to-income calculation

Our guide to living and working in the USA covers the earlier steps, including opening an account and starting a credit file, and the green card routes guide explains what permanent residence involves if FHA eligibility matters to you.

Getting to completion, step by step

1. Build the cash picture. Deposit, closing costs and an emergency cushion, listed separately.
2. Check your credit reports and dispute errors before a lender sees them.
3. Confirm which programmes your status allows, using the table above as a starting point.
4. Get pre-approved by more than one lender so you know your real budget.
5. Compare Loan Estimates side by side, on total cost rather than rate alone.
6. Make an offer and agree the contract terms, including any seller contribution.
7. Order an appraisal and an independent inspection. These answer different questions.
8. Read the Closing Disclosure against your Loan Estimate and query differences.
9. Close, then keep every document for the tax year ahead.

Tax once you own

IRS Publication 530 is the guide for new homeowners. Mortgage interest is generally deductible on debt used to buy, build or substantially improve a main or second home, subject to a limit of $750,000 for loans taken out after 15 December 2017, or $375,000 if married filing separately. State and local taxes, including property tax, are deductible up to a combined cap of $40,000, or $20,000 if married filing separately. Points may be deductible in the year paid if conditions are met, or spread over the life of the loan.

Several things are not deductible, and people assume otherwise: homeowners insurance, mortgage insurance premiums, the principal portion of your payment, repairs, utilities, homeowners association fees, title insurance and most settlement costs. Check the current edition of Publication 530 before you file, because these figures are revisited.

If your income is still finding its level, it may be worth waiting rather than stretching. Our list of higher-paying US jobs gives a sense of what different fields pay before you fix a budget you will live with for decades.

This guide is general information and not legal, tax or financial advice.