First-Time Homebuyers
Buying your first home — a complete guide to the process
The first time you buy a home, you are navigating a process with a lot of moving parts — loan types with different cost structures, upfront costs that go beyond the down payment, and a sequence of stages from pre-approval to closing that each require something specific from you. This page covers the full process — what each stage requires, what the real cost picture looks like, and what the differences between loan types mean in practice.
Upfront Costs
Three cost categories, all due at closing
Down payment, closing costs, and prepaids are separate line items. The amount you owe at closing varies based on loan type, prepaid insurance, and initial escrow deposits. Understanding all three before you set a budget is how you arrive at an accurate number.
| Cost Category | Typical Range | What It Is |
|---|---|---|
| Down Payment | 3% — 20% of purchase price | Your equity stake in the home. The minimum varies by loan type. Lower down payments are available on FHA, conventional, VA, and USDA loans — each with a different structure and cost profile. |
| Closing Costs | 2% — 5% of purchase price | Lender fees, title insurance, appraisal, attorney fees, and recording charges. These are a separate line item from the down payment — not included in it. |
| Prepaids | Varies by property and closing date | Homeowners insurance (lenders typically require a full year paid at closing), initial escrow deposits for property taxes and insurance, and daily interest from your closing date to the end of the month. |
FHA allows a fully gifted down payment
On an FHA loan, the entire down payment can come from a gift from a family member. The borrower does not need any of their own cash for the down payment, as long as the gift is documented with a signed gift letter and the funds are properly sourced. This option is available on HomeReady single-family purchases as well.
Loan Types
Loan types first-time buyers most commonly use
These four loan types account for the majority of first-time buyer purchases — they are not the only options, but they cover the most common situations. Each has a different structure, cost profile, and eligibility requirement. Each card links to the full page for that loan type.
FHA Loan
Government-backed. 3.5% down with a 580+ credit score. Flexible on credit history and debt-to-income ratios. The down payment can be fully gifted from a family member.
FHA requires mortgage insurance (MIP) — both an upfront premium of 1.75% of the loan amount, typically rolled into the loan, and an ongoing monthly premium. The full MIP structure, including how long it lasts and the conditions under which it can be removed, is covered on the FHA page.
For buyers with a credit score below 620 or limited savings, FHA is often the most accessible path to qualification.
Full FHA overview →Conventional Low-Down-Payment Loans
Three programs — HomeReady (Fannie Mae), Home Possible (Freddie Mac), and standard Conventional 97 — allow 3% down without a government guarantee.
Income limit: HomeReady and Home Possible both cap household income at 80% of the area median income (AMI) for where you are buying. A household over that limit does not qualify for either program. The standard Conventional 97 product carries no income limit.
Key structural difference from FHA: Conventional PMI cancels once your equity reaches 20%. Loan limits for these programs adjust annually — confirm current figures with me.
VA Loan
Available to eligible active-duty service members, veterans, National Guard and Reserve members, and qualifying surviving spouses. Zero down payment. No monthly mortgage insurance. Rates that consistently come in below conventional pricing.
The VA does not lend directly — it guarantees a portion of the loan, which is what allows private lenders to offer those terms. VA loans include a one-time funding fee at closing; veterans receiving VA disability benefits are typically exempt.
The VA page covers exactly how the benefit works and what to confirm before you apply.
Full VA overview →USDA Loan
Zero down payment for eligible properties in rural and suburban areas. No monthly PMI. Annual costs run well below comparable FHA loans. Household income must be at or below 115% of the area median income — that is a household calculation, meaning all income in the home counts.
The geographic eligibility is wider than the name suggests. Towns with populations up to 35,000 residents frequently qualify, and even condos can be eligible. The USDA updates its eligibility map periodically, so an address that qualifies today may not qualify after the next census revision.
Full USDA overview →Down Payment Assistance
Over 2,600 active programs — with an average benefit around $18,000
Nearly every state has at least one down payment assistance (DPA) program, and most states have several. These programs range from outright grants to forgivable loans to deferred second mortgages — and the structure matters as much as the dollar amount. A $15,000 forgivable loan and a $15,000 deferred repayable loan look identical at closing and work very differently when you sell or refinance.
Grants
No repayment required once applied to closing. The least common DPA structure — typically more restrictive on income, geography, and loan type — and usually more modest in amount, often $5,000 — $10,000. Some lender-funded grants may be reported as taxable income.
Forgivable loans
No monthly payment and no balance due if you stay in the home as your primary residence through the forgiveness period — often five years. One structural detail to understand: refinancing your primary mortgage before the forgiveness period ends typically triggers full repayment of the DPA balance. The DPA page walks through how that plays out in practice.
Deferred and repayable seconds
No monthly payment, but the balance comes due when you sell, refinance, or the home is no longer your primary residence. Often carry zero or low interest. Some programs allow resubordination — meaning the DPA lien can stay in second position when you refinance your first mortgage — which makes them more flexible than forgivable loans if rates change.
Credit
Credit score thresholds — and what they actually determine
Thresholds by loan type
- FHA at 3.5% down: 580+ credit score
- FHA at 10% down: 500 — 579
- Conventional (HomeReady, Home Possible, standard): 620+ is the standard lender threshold. Fannie Mae and Freddie Mac removed their automated minimum score requirements in late 2025, but most lenders still apply overlays starting at 620.
- VA and USDA: No program-set minimum, though lenders typically apply overlays starting at 580 — 620.
What your score determines beyond eligibility
A 580 and a 720 both qualify for FHA, but the interest rate will differ. On conventional loans, your score also affects the cost of PMI. These thresholds are both a pass/fail gate and a pricing input.
Reviewing your credit report before applying gives you time to address errors or resolve open items. Multiple mortgage lender pulls within a 45-day window count as a single inquiry — so comparing lenders during that period does not compound the score impact.
Pre-Approval
Pre-qualification and pre-approval are not the same thing
Pre-qualification
Based on self-reported information — income, debts, assets — without document verification or a credit pull. It produces an estimate of what you might qualify for. Seller’s agents treat it as an indication of interest, not a verified financing commitment.
Full pre-approval
Based on verified documents — pay stubs, W-2s, tax returns, bank statements — with an actual credit pull. The lender has reviewed the file and confirmed qualification up to a specific amount. When a seller’s agent advises their client on whether to accept an offer, a fully underwritten pre-approval carries significantly more weight than a pre-qualification letter.
Home Financing Snap Shot
See what the numbers look like for your situation
A Home Financing Snap Shot is a one-page comparison of your loan options — monthly impact, total cost, and break-even point. One page, three key numbers, one clear recommendation. No phone number required.
Request a Snap ShotThe Buying Process
What each stage involves
The process has more moving parts than most people expect, but each stage has a defined purpose. Knowing what comes next makes each one easier to navigate.
Home Financing Snap Shot
Before pre-approval, a Snap Shot review establishes your current position: credit, income, assets, target price range, and loan type eligibility. This shapes which direction pre-approval takes and whether any DPA programs apply to your situation.
Pre-Approval
Documents are collected and reviewed, credit is pulled, and the lender confirms an approval amount and loan type. You receive a pre-approval letter to submit with offers. Your rate options and estimated payment are discussed at this stage.
Offer and Acceptance
Your real estate agent submits an offer. Once accepted, you are under contract and the timeline for the remainder of the process begins. Your earnest money deposit is submitted at this stage.
Inspection and Appraisal
A home inspector examines the property’s condition. Separately, the lender orders an appraisal to confirm the home’s value supports the loan amount. Inspection findings may lead to renegotiation or repair requests. The appraisal either supports the purchase price or creates a gap that needs to be addressed before closing.
Underwriting
The lender’s underwriter reviews the full loan file — income, credit, appraisal, title, and property — and issues an approval, an approval with conditions, or a denial. Conditions are common and typically mean providing additional documentation. Responding to underwriter requests promptly keeps the timeline on track.
Clear to Close
All conditions are satisfied and final approval is issued. Your closing disclosure — the document detailing all closing costs and cash to close — is provided at least three business days before closing. Review it against your loan estimate and ask about any line items that differ.
Closing Day
Loan documents are signed, funds are disbursed, title transfers, and you receive the keys. The full process from accepted offer to closing typically runs 30 — 45 days, depending on loan type, market conditions, and how quickly documentation is assembled on both sides.
Who Qualifies
Key Mechanics to Know
Credit score
580+ for FHA at 3.5% down. 620+ for conventional at the lender level. 500 — 579 for FHA at 10% down. Your score affects both eligibility and your interest rate — and on conventional loans, the cost of PMI.
Debt-to-income ratio
Your total monthly debts — including the future mortgage payment — as a percentage of gross monthly income. FHA typically allows up to 43%, with flexibility to 50% in compensating-factor situations. Conventional generally allows up to 45%. These are guidelines; individual lender overlays apply.
Employment and income
Two years of stable employment history is the general standard. Self-employed borrowers are underwritten using two years of tax returns. Recent job changes within the same field are generally acceptable; changes in field or employment gaps require more documentation.
Program minimums vs. lender overlays
FHA’s published minimum credit score is 500. Most lenders will not originate an FHA loan below 580 — that is a lender overlay, not an FHA rule. As an independent broker, I work with multiple lenders and can identify which ones work with scores and situations that others decline. The floor I quote you reflects what is actually available across the lenders I work with.
Common Situations
How the options apply in practice
Solid income, limited savings
A buyer with stable employment and a 650 credit score has $10,000 saved. On a $280,000 purchase, FHA requires $9,800 down — which leaves little room for closing costs and prepaids. A state DPA program or a family gift letter can change that math considerably. An FHA loan paired with a forgivable DPA second covering closing costs can bring total out-of-pocket to near zero for an income-eligible buyer.
One condition to understand: forgivable DPA loans typically require repayment if you refinance before the forgiveness period ends — often five years. If rates drop in year two, refinancing to a lower rate would require repaying the DPA balance first. The full breakdown is on the DPA page.
Credit below 620, looking at conventional options
Conventional loans — HomeReady, Home Possible, and standard products — generally require 620 at the lender level. A borrower at 590 is not yet eligible for those programs. FHA at 3.5% down is the most accessible path at that score. The practical question is how long it would take to get to 620, and whether that timeline makes sense against current prices and personal circumstances. A credit review can usually identify the one or two items that would move the score most quickly.
Good income, good credit — HomeReady or Home Possible looks attractive
A buyer with a 680 score and a $90,000 household income is looking at the 3% conventional option. Whether they qualify depends on their area’s AMI. HomeReady and Home Possible both cap household income at 80% of AMI. In a metro where AMI is $100,000, the cap is $80,000 — a $90,000 household income does not qualify for either income-limit program. The standard Conventional 97 product remains available without an income cap, at different PMI pricing.
AMI limits are address-specific, not city-wide — they are indexed by census tract. The same income may qualify at one address and not at one nearby. Confirm your specific address before drawing conclusions.
FHA’s mortgage insurance structure over time
FHA is frequently the right choice for buyers with credit in the 580 — 619 range or limited savings, and the upfront cost is clear: a 1.75% upfront MIP (on a $300,000 loan, $5,250, typically rolled into the loan) plus an ongoing monthly premium. The full picture on how long MIP lasts and how it can be removed is on the FHA page.
The comparison worth making is not just FHA MIP versus conventional PMI in isolation — it is the total cost of each path, including how long you plan to stay and what local appreciation looks like. A buyer who waits 18 months to build savings and credit for conventional may be entering a higher-priced market. A Snap Shot is designed to surface that trade-off with your actual numbers.
How I Work
Independent, and working on your side of the table
As an independent mortgage broker, I am not tied to one lender’s product lineup. I work with a network of lenders and match the loan to your situation.
For first-time buyers, that typically means laying out two or three realistic options side by side: total upfront cost, monthly payment including mortgage insurance, and what the cost picture looks like at year five and year ten if you stay in the home. The right loan depends on your credit, income, down payment, timeline, and what you plan to do with the property.
When a situation calls for more time — to build credit, increase savings, or resolve an open item — I will say so and explain what to address first.
- Access to FHA, VA, USDA, conventional, and jumbo products across multiple lenders
- Knowledge of current DPA programs and how to layer them with primary loan products
- Can originate in multiple states — confirm yours
- Pre-approval that carries weight with seller’s agents
- Responsive through underwriting, not just at application
Get Started
Request a Home Financing Snap Shot
A one-page comparison of your loan options, focused on monthly impact, total cost, and break-even point. Three key numbers. One clear recommendation. No phone number required.
Request a Snap ShotFAQ