KfW is the development bank of Germany – Kreditanstalt für Wiederaufbau. Part of its mission is to support domestic development.
KfW offers co-financing to banks so that your mortgage is not just from the bank but also includes a portion from the KfW. Up to 100.000 Euro can be financed with the KfW for the purchase of your home in Germany. You do need to occupy it yourself: You have to move into the property within 12 months after the KfW mortgage is paid out. It does not matter whether it is your first home, or you have already bought other homes. And you can also get it for a second home, like a holiday home.
The KfW charges lower interest rates than most banks but requires relatively rapid repayment, and also allows you to fix the rate for only 10 years. This does imply a high monthly payment in the first 10 years of your loan and relatively expensive follow-up financing. The main benefit is that it can lower the interest rate on the loan portion offered by the local bank or even persuade them to offer the loan in the first place.
KfW also offers very attractive subsidized loans of up to 120.000 Euros for energy efficient newly constructed houses. The implicit subsidies can be up to 30.000 Euros.
You can read more about this here: KfW loans: How to save money on your German mortgage