First-Time Homebuyer Guide

Before you browse a single listing, do an honest financial checklist. Starting the process before you're ready costs time, credit inquiries, and often heartbreak. Here's what lenders and experienced buyers both look for:

• Credit score 620+ for conventional, 580+ for FHA (500+ with 10% down)
• Steady, documented income for 2+ years in the same field
• Debt-to-income ratio under 43% (housing + all monthly debts)
• Emergency fund of 3–6 months expenses, separate from your down payment
• Stable employment — changing jobs mid-process can halt or kill a loan

The break-even question: renting vs. buying

Buying only wins financially if you stay long enough. When you buy, you pay closing costs (2–5% of the purchase price), PMI if your down payment is under 20%, and maintenance — none of which build equity immediately. Renting carries none of those upfront costs.

At current rates, most markets require 5–7 years to break even on a purchase vs. renting the equivalent space. Run the rent vs. buy calculator → with your actual numbers before deciding.

Knowing your budget before you fall in love with a house is the single most important move a first-time buyer can make. Lenders use two ratios to determine how much they'll lend you.

Worked example

Use the calculator to find your number

Want the full affordability page? Open the affordability calculator →

What lenders actually look at

How much do you actually need to save?

Down payment is only part of it. Add closing costs (2–5% of purchase price) and a 3-month cash reserve and the real number is higher:

Down payment assistance programs

Every state has down payment assistance (DPA) programs — grants and forgivable second mortgages that can cover part or all of the down payment for eligible buyers. Most programs have income limits and require a homebuyer education course. See the state programs section below for specific agencies.

Savings strategies

• High-yield savings account (HYSA): Park your down payment savings in a HYSA earning 4–5% APY while you save. This is not an investment account — it's for stability, not growth.
• Automate transfers: Set up an automatic transfer to your HYSA on payday. Saving what's left at the end of the month doesn't work.
• Gift funds: Conventional and FHA loans allow gift money from family. FHA requires a 60-day seasoning period — the funds must be in your account for 60 days before closing, or you need a gift letter from the donor.

Document checklist

• Last 2 years W-2s (self-employed: 2 years of tax returns + 1099s)
• Last 30 days of pay stubs
• Last 2 months of bank statements (all accounts)
• Government-issued photo ID
• List of monthly debts (student loans, car payments, credit cards)
• Landlord contact info for rental history verification (if applicable)

What to watch for in your Loan Estimate

Within 3 business days of your application, lenders must provide a standardized Loan Estimate. Review these items carefully:

• APR vs. interest rate: APR includes fees and is the true cost of borrowing — use this to compare lenders, not the raw rate.
• Origination fees: Some lenders charge 0.5–1% of the loan amount to originate. Others charge zero origination but a higher rate.
• Points: Paying points upfront ("buying down the rate") reduces your monthly payment — worth it if you plan to stay 7+ years.
• Prepayment penalty: Rare on modern mortgages, but check. You don't want to be penalized for paying off your loan early.

Loan type is one of the most consequential decisions you'll make, and most first-time buyers default to FHA without running the numbers on conventional. Spend 10 minutes here — it can save you tens of thousands.

FHA vs. Conventional: run both scenarios

$350,000 home · 5% down ($17,500) · $332,500 loan · 700 credit score

Conventional saves $87/mo and eliminates PMI at ~year 8. Over 10 years: ~$20,000+ in savings vs. FHA for a 700-score borrower.

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  Get a buyer's agent

  Free to you in most states — the seller pays the commission (clarify compensation upfront post-NAR settlement). Interview 2–3 agents. Look for recent transactions in your target area.
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  Earnest money deposit

  Typically 1–3% of the purchase price. Signals you're serious. Goes toward your closing costs at settlement. You can get it back if you walk away during contingency periods.
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  Keep your contingencies

  Always include an inspection contingency, financing contingency, and appraisal contingency. These protect you if the home has problems, your loan falls through, or the home appraises below the purchase price.
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  When to waive contingencies

  Almost never as a first-time buyer. Waiving contingencies is an offer of last resort in the most competitive markets. You're taking on significant financial risk.
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  Negotiate seller concessions

  Ask for closing cost credits rather than price cuts when possible. A $5,000 concession reduces your cash to close — more impactful short-term than a $5,000 price reduction, which only saves ~$25/mo on your payment.
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  After offer accepted

  You'll enter a due diligence period: get a home inspection, wait for the appraisal, respond to underwriting requests, and review the Closing Disclosure before closing day.

From accepted offer to keys: typically 30–60 days. Here's what happens and what not to do during that window.

During underwriting — do not:

• Open new credit accounts or apply for new cards
• Make large purchases (furniture, appliances, car) on credit
• Change jobs or become self-employed
• Make large cash deposits without documentation explaining their source
• Co-sign any loans for anyone

Any of these can trigger a re-underwrite or kill the loan entirely. Stay boring financially until after closing.

Closing costs breakdown

Double-check your final monthly payment before closing day

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  First mortgage payment timing

  Due on the first of the month that is 30–45 days after your closing date. If you close June 15, your first payment is August 1. You prepay interest for June at closing.
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  Set up autopay immediately

  A missed mortgage payment hits your credit score within 30 days and triggers late fees. Set it up the day you get home from closing.
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  Keep all closing documents

  Store your settlement statement, deed, title policy, and loan documents in a fireproof place. You'll need the HUD-1 or Closing Disclosure at tax time — mortgage interest is deductible.
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  Home maintenance fund

  Budget 1–2% of your home's value per year for maintenance and repairs. On a $350,000 home, that's $3,500–$7,000/year. Things will break in year one. Have a cushion.
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  When to refinance

  Think about refinancing when rates drop 1%+ below your current rate and you plan to stay at least 3 more years. Calculate your break-even using the refinance calculator before committing.

Calculate your refinance break-even → · Should I refinance my mortgage? →

Federal programs

State Housing Finance Agencies

Every state has a Housing Finance Agency (HFA) offering below-market rates, DPA grants, and mortgage credit certificates. Most require a homebuyer education course and have income limits.

Most DPA programs require a homebuyer education course (typically $99–$150 online) and have household income limits. Funds are often limited — apply early.