First-time homebuyer savings account: What is it, do you need one, what states offer it?

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Andrew Dehan,

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Published on July 07, 2025 | 3 min read

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Key takeaways

First-time homebuyer savings accounts (FHSAs) are tax-advantaged accounts offered by some states to help people save for a down payment and closing costs for their first home.
The eligibility criteria vary by state, but in general, buyers must not have owned a home recently and must be tax-paying residents of that state.
While FHSAs are not a necessity, they can provide a significant financial advantage in a competitive housing market, and many states offer them.

The housing market is particularly tough right now for first-time homebuyers. That means if you’re looking to buy your first home, you should take advantage of any first-time homebuyer programs that you qualify for. One such program offered in several states is what’s called a first-time homebuyer savings account. These accounts help people build their savings to afford the costs that come with buying a home.

Let’s break down what these accounts are, whether you need one and how to take advantage of them.

What is a first-time homebuyer savings account?

First-time homebuyer savings accounts (FHSAs) are tax-advantaged savings accounts offered by certain states designed to help would-be homebuyers save money for a down payment and closing costs. Money saved in the accounts is tax-deferred to a certain amount. Many of these accounts also offer favorable interest rates, yielding you a larger return on your money than you would with many other savings accounts.

Each program has its own criteria, outlining how much you can save, when you have to use it by and any penalties for early withdrawal.

Who qualifies for a first-time homebuyer savings account?

Who qualifies for a first-time homebuyer savings account varies by state, but in general, the programs require buyers to:

Have never owned a home, or to have not owned a home in a set amount of years
Reside in the state and purchase their home in the state
Use the funds for eligible costs, such as a down payment, real estate agent fees and closing costs

Do you need a first-time homebuyer savings account?

Taking advantage of a first-time homebuyer savings account can be a smart move. While it’s not necessary, if you qualify and you don’t use it, you’re essentially leaving free money on the table.

“First-time homebuyer savings accounts are a powerful tool that help new buyers overcome one of the biggest hurdles to homeownership: the down payment,” says Justin Lally, vice president of growth for Sage Home Loans. “By allowing tax-advantaged savings, these accounts make it easier for buyers to build a strong financial foundation and enter the market with confidence.”

In this tight housing market, any advantage to help you afford a home is a good one. For example, say you’re buying a home in Toledo, Ohio. The housing market in Toledo was very competitive in May 2025, according to Redfin, with the median sales price at $129,900. Ohio’s Homebuyer Plus savings account program will let you save up to $100,000, with a savings interest rate of 3.08 percent at the time of writing. This little bump can help your savings compound over time — moreso than it would in a traditional, low-yield savings account.

“FHSAs are more than just a savings vehicle — they’re a catalyst for financial empowerment. For buyers navigating rising costs and market uncertainty, having a dedicated, tax-beneficial account can be the difference between waiting and winning,” says Lally.

Yet these accounts aren’t available everywhere, so it’s important to suss out if they’re an option for you first and foremost.

Learn more: First-time homebuyer guide

What states offer a first-time homebuyer savings account?

There are several states that offer first-time homebuyer savings accounts. These include:

Alabama
Colorado
Connecticut
Idaho
Iowa
Kansas
Maryland
Michigan
Minnesota
Mississippi
Missouri
Montana
Ohio
Oklahoma
Oregon
Virginia

Several other states have introduced bills to establish these accounts with mixed success. These states have bills pending:

Illinois
Massachusetts
Pennsylvania

Where can you open a first-time homebuyer savings account?

For most instances, to open one of these accounts, you need only to visit a participating bank or credit union branch in the state that offers the account. You’ll need to fill out paperwork and submit identification. You may also need to make a minimum deposit, depending on the state.

Call your local bank or credit union to learn what they offer and the specific process to open an account.

FAQs

In many states, family members — like parents and grandparents — can contribute to your first-time homebuyer savings account. In fact, some states, like Oregon, even allow friends to contribute to the account.
Yes, but most programs require you to have been a non-homeowner for a certain period in order to qualify. This can range from three to 10 consecutive years.
Because these accounts offer state tax incentives, most states want you to save and spend the money in their state. However, some states, like Colorado, offer exceptions, such as for active-duty military buying a home out-of-state.