FHA

• The Federal Housing Administration, established in 1934, is a federal agency that insures home loans for high-risk mortgage borrowers. Many first time home buyers do not have a lengthy credit history, nor do they have a large sum of cash to afford a 20 percent down payment on a property. FHA loans instead require only 3 percent down and much lower credit scores than traditional home loans. Additionally, home owners that take advantage of FHA loans enjoy lower closing costs and less money out-of-pocket during the home-buying process.
  
  

Taxes

• In the past, congress enacted temporary tax provisions and incentives for first-time home buyers. For example, between 2008 and 2010, anyone purchasing a home for the first time could claim a one-time tax credit of up to $8,000. Unfortunately, that credit is now expired, but home owners can still take advantage of significant real estate tax deductions. If you itemize your deductions on your federal income tax, you can deduct the amount you pay in mortgage interest and real estate taxes. And because many first-time buyers do not have a 20-percent down payment for their homes, you can deduct the amount you pay in private mortgage insurance as well. Also, don't forget to keep track of your moving expenses, as they may be deductible.
  
  

Counseling

• If you need help purchasing your first home, the U.S. Department of Housing and Urban Development will provide you with free or low-cost housing counseling from a HUD-approved housing counselor. These counselors can assist you through the home-buying process, as well help you determine how much you can afford to spend on a home.
  
  

Considerations

• Ask your local lenders if your state or city government offers any local assistance for first-time home buyers. According to AnnaMaria Andriotis of SmartMoney.com, many states and counties across the U.S. provide local residence with lending assistance, many of which target first-time home buyers. For example, the State of New Mexico encourages residents to purchase homes in rural areas by offering state assistance for home sales in certain rural communities.