Photography by Getty Images; Illustration by Bankrate
In late 2024, Diana Muro paid $350,000 for a townhouse in Charlotte, North Carolina. When she closed on the home, she hit two milestones: Firstly, the software engineer achieved homeownership at age 27.
But Muro also became a first-generation homebuyer. Her parents, immigrants from Mexico, never bought a home, in part because her late father struggled to find lucrative work, in part because the family half-expected to move back to Mexico. “My family has always rented,” she says.
As a first-time buyer, Muro was able to combine down payment assistance through city, state and nonprofit programs totaling $100,000. She also made a down payment of about $35,000, which included contributions from her family. Muro now owns the three-bedroom home, and her mother lives with her.
As home prices continue to flirt with records and the racial homeownership gap remains stubbornly wide, what can be done to help first-generation homebuyers finally become homeowners?
First-generation buyers face steep hurdles
It’s a tough time to be a homebuyer at all these days. Home prices continue to flirt with record highs, and mortgage rates have more than doubled from their pandemic lows.
Bankrate’s 2025 Down Payment Survey contains a very telling finding: When asked how much of an obstacle coming up with a down payment and closing costs — the table stakes for homeownership — are, more than half (52 percent) of prospective homebuyers said “very significant.” An additional 29 percent describe that hurdle as “somewhat significant.” In addition, a big chunk of hopeful homeowners don’t think they’ll ever actually be able to save enough: When asked how long it would take them to save up for a down payment, 20 percent said “never.”
It’s safe to say that the challenges for first-generation buyers are especially acute. They’re less likely to have generational wealth to tap into, for one thing. And while adult children of homeowners can turn to their parents for advice about saving for a down payment and applying for a mortgage, lifelong renters lack that sort of first-hand experience. It can make an already-intimidating process feel even scarier.
Down payment assistance programs for first-generation buyers
During the 2024 presidential campaign, Democratic nominee Kamala Harris proposed $25,000 in down payment assistance to up to 400,000 first-generation homebuyers. That proposal ended with Harris’ defeat, but a handful of states are extending subsidies to first-generation buyers. Those programs include:
- The California Dream for All Shared Appreciation Loan offers up to $150,000 for first-generation homebuyers. About 4,000 homebuyers have received subsidies through the program since it launched in 2023, according to California Gov. Gavin Newsom. Applicants are subject to income limits that range from $139,000 in rural parts of the state to $295,000 in the Bay Area.
- Minnesota funded a First-Generation Homebuyer Loan Program in 2024. The $150 million fund was used up by the end of that year, according to Minnesota Housing.
- Massachusetts offers a down payment assistance program to first-generation buyers, with income limits of $60,000 in the Boston area and $45,000 elsewhere in the state, according to the Massachusetts Affordable Homeownership Alliance. In Boston, a new condo development opening in 2025 has set aside about 20 units for first-generation buyers.
It’s worth noting that first-generation buyers can achieve homeownership even if they don’t qualify for subsidies specifically geared toward their situation. Muro, for instance, received assistance through four different programs for first-time buyers, none of which were expressly for first-generation buyers.
Who qualifies as a first-generation homebuyer?
In 2024, mortgage giants Fannie Mae and Freddie Mac issued guidance on the definition of a first-generation buyer. To be eligible for down payment assistance, borrowers must meet the following criteria:
- The borrower must be the buyer of the home.
- The borrower must live in the home as a primary residence.
- The borrower must not have had any ownership interest in a home during the previous three years.
In addition, one of the following must apply:
- No parent of the borrower has had an ownership interest (sole or joint) in a property in the previous three years.
- The borrower has aged out of foster care.
- The borrower has become emancipated.
Addressing the wealth gap
Policymakers have targeted first-generation buyers as a way to tackle ongoing racial disparities in wealth and homeownership. As of the fourth quarter of 2024, just 46.4 percent of Black Americans and 48.8 percent of Hispanics owned their homes, compared to 74.4 percent of white Americans, according to the U.S. Census Bureau.
Lifelong renters miss out on an important piece of wealth-building, and they tend to be less able to help their children buy homes by contributing to their down payments.
Next steps for first-generation buyers
Here’s what to focus on first:
- Work on your credit score: Your three-digit credit score is the most important factor lenders use to analyze your mortgage application, so start building your credit.
- Examine your financial situation: Look at your debt-to-income (DTI) ratio, earnings and savings. Set a realistic budget for your home purchase, including the down payment and closing costs. The 28/36 rule is a good starting point.
- Do your homework: Find out what first-time buyer programs you qualify for. A savvy local loan officer or real estate agent may be able to help here. Many programs require borrowers to complete an education class, so get that task out of the way as early as possible — you might even be able to complete this course online.
- Get preapproved for a mortgage: When you’re ready to start house-hunting, get preapproved for financing. This helps you understand how much a lender is willing to let you borrow, and it makes any offers you submit on homes more attractive to the seller.
- Shop around: Rates, requirements and deals vary by mortgage lender, so it’s wise to shop around until you find your best fit. Read mortgage lender reviews and then narrow down your search to your top three before inquiring about what they can offer you.
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