The scheme is only available on newly-built flats and houses up to a maximum value of £500,000 in England only.
Properties must also not be linked with any other scheme such as shared equity or shared ownership.
Three lenders, Barclays, NatWest and Nationwide, have launched NewBuy products with Santander also saying it will participate in the scheme.
Under the scheme the builder pays 3.5% of the sale price into an account held by the lending bank for seven years.
The government will provide additional guarantees of 5.5% which will only be called upon in the event of a major property crash.
Prime Minister, David Cameron said: “Strong families and stable communities are built from good homes. That’s why I want us to build more homes and I want more people to have the chance to own their home.”
Housing minister, Grant Shapps added: “This government inherited a housing market in disarray, with millions of hard working people blocked from taking their first step on the housing ladder - their desire to buy a home no longer a dream, but a distant fantasy. We want to help everyone achieve their aspirations and feel the pride of home ownership. So I'm delighted that from today the NewBuy Guarantee will give thousands of prospective buyers the chance to buy a home with a fraction of the deposit normally required.”
NewBuy is currently backed by the Council of Mortgage Lenders and the Home Builders’ Federation and seven construction firms.
Paul Smee, director general of the CML, said: “We are delighted that three lenders are today launching mortgages under NewBuy, and that more are set to follow. These mortgages will help creditworthy borrowers who simply haven't yet managed to build up a large enough deposit to gain access to finance to buy a newly built home.
“NewBuy is good news for home-buyers, and potentially good news for jobs and the wider economy too.”
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