First-time homebuyers guide: What you should consider before buying your first home

Happy parents and kids in home with moving boxesImage: Happy parents and kids in home with moving boxes

In a Nutshell

Buying a home for the first-time is no easy feat. Here’s what you need to know before you take the plunge.
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Buying your first home is an exciting milestone. But it takes a lot of research and planning to make it a reality.

To make your experience a bit easier, we’ll go over what you should know as a first-time homebuyer. You’ll learn about the qualifications you’ll need to meet and different mortgage options to consider.

We’ll also help you determine how much house you can afford and touch on first-time home buyer programs that can help bring your dream of homeownership to life.

Qualifications for first-time homebuyers

Before you shop for a home and apply for a mortgage, there are certain qualifications that first-time homebuyers should keep in mind.

What credit scores do I need to buy a house?

Although credit scores play an important role in qualifying for a mortgage, there’s no single good credit score to buy a house. But there’s a standard range of scores for different types of home loans. And lenders can set their own standards. Generally speaking, the minimum credit score needed for most fixed-rate mortgages is 620.

An FHA loan, however, has more lenient credit score requirements than conventional loans. With a 3.5% down payment, you’ll need a minimum credit score of 580. But with a 10% down payment, you can qualify with a minimum credit score of 500.

What debt-to-income ratio do I need to buy a house?

Your debt-to-income ratio,  or DTI, shows how much of your gross monthly income goes toward debt payments. In general, lenders look for a DTI of no higher than 43%. If your DTI is too high, it’s a good idea to pay down some debt to lower it.

How much do most first-time homebuyers put down?

If you can afford it, the rule of thumb is to put down 20% toward a conventional loan. But in 2023, the typical down payment for first-time homebuyers was 8%, according to the National Association of REALTORS.

Putting down 20% can help you avoid private mortgage insurance, or PMI, on a conventional mortgage. If you don’t have enough cash to make a 20% down payment, you might be able to put down less, depending on the type of mortgage you choose.

For example, VA loans and USDA loans don’t require a down payment, and an FHA loan requires a down payment of just 3.5% if your credit score is at least 580.

What is the best type of mortgage for first-time home buyers?

The right mortgage depends on your particular needs, preferences and finances. Here are several options you may want to explore.

  • Conventional loan: A conventional loan is issued by private lenders and doesn’t involve a government program. The loan can be conforming — which meets limits set by the Federal Housing Finance Agency — or nonconforming, which means it exceeds those limits. In 2024, the conforming loan limit for single-family homes is $766,550 in most areas and up to $1,149,825 in high-cost areas.
  • FHA loan: An FHA loan is insured by the Federal Housing Administration. With an FHA loan, you can buy a home with a minimum credit score of 500 and a down payment of as little as 3.5%.
  • VA loan: A VA loan is insured by the Department of Veterans Affairs. It’s designed for active-duty service members, eligible veterans and qualifying spouses. As long as you’re eligible, you can take out a VA loan without putting any money down.
  • USDA loan: A USDA loan is offered by the U.S. Department of Agriculture. You may use it to buy a home in a rural area, often without a down payment. But your income can’t be higher than the USDA’s low-income limit for the county where you’re buying a home.
  • Jumbo loan: A jumbo loan is a mortgage for a larger amount than the limit set by the FHFA. It can help you buy an expensive home or a home in a pricey area. In 2024, jumbo loans are larger than $766,550 in most areas.
  • Variable-rate loan: Also known as an adjustable-rate mortgage, or ARM, a variable-rate loan has an interest rate that might go up or down, depending on market conditions. It may start with a lower rate than a fixed-rate loan but will change after a certain period of time, which could be months, a year or several years.
  • Fixed-rate loan: The interest rate on a fixed-rate loan is set in stone. It won’t change for the life of your loan, even if market conditions cause rates to go up or down. This means your monthly payments will remain steady.

First-time homebuyer programs

In most cases, first-time home buyer programs are administered by state housing authorities. They vary from state to state and make it easier for first-time homebuyers to purchase a home. If you’re a first-time homebuyer, you might want to look into these programs:

  • Down payment assistance programs: This help might come in handy if you don’t have that much money to put down. Typically, these programs are created in the form of grants, forgivable loans or second mortgages.
  • Closing cost assistance programs: These can help you cover closing costs, which are usually 2% to 5% of the purchase price of the home. Like down payment assistance programs, they’re usually in the form of grants, forgivable loans or second mortgages.
  • Good Neighbor Next Door program: This program is worth considering if you’re a teacher, firefighter, police officer or EMT. It can allow you to buy a home at half price in certain areas.
  • HomePath Ready Buyer program: Offered through Fannie Mae, the HomePath Ready Buyer program may be an option if you’d like to purchase a foreclosed home. You can get up to 3% of the purchase price back in the form of closing cost assistance.
  • Charity and nonprofit programs: Some charities and nonprofit organizations offer first-time homebuyer programs. The Neighborhood Assistance Corp. of America, for example, provides a mortgage with no down payment or closing costs.
  • Employer-sponsored programs: There are some programs created by employers to help their employees purchase a home. Employer Assisted Housing, for example, is a program that provides a loan to pay for qualified employees’ down payment and closing costs. As long as the employee stays with the company, the loan is forgiven over time.

What are the benefits of first-time home buyer programs?

First-time home buyer programs vary. But they all make it easier and more convenient for first-time homebuyers to buy a home. Depending on where you live, the type of home you hope to buy and your financial situation, a first-time homebuyer program can help you save on your down payment, closing costs or both. It might also allow you to lower your federal tax bills as some programs come with tax credits.

How much house can I afford?

There are several factors that can help you figure out how much house you can afford. These include your annual pre-tax income, monthly debt payments, estimated mortgage interest rate and down payment.

Plug them into our handy home affordability calculator to get an idea about the estimated maximum amount you can afford. Remember, don’t buy more than you can afford. If you do, you may become “house poor” and find it difficult to cover other expenses and meet other financial goals.

What’s next? Apply for mortgage preapproval

If you’re ready to buy your first home, you may want to apply for a mortgage preapproval. With a preapproval letter, you’ll have a better idea of how much you can borrow. This can help you narrow your search to houses that fit your budget. It will also position you as a more serious buyer and may make your offer more attractive to sellers.

Want to learn more? Check out some of our top mortgage lenders for first-time homebuyers.

  • Homebridge Mortgage: Homebridge offers resources that specifically cater to first-time homebuyers.
  • Rocket Mortgage: Consider Rocket Mortgage if you’d prefer an online-first experience.
  • PennyMac Mortgage: PennyMac offers a wide variety of home loans and shares current rates on its site, which can be helpful for people looking to buy their first home.
  • USAA Mortgage: USAA is a good option for military members and their families. 


What is a first-time homebuyer?

A first-time homebuyer is usually anyone who hasn’t owned a primary home within the previous three years. They may also be a single parent who has only owned a property with a former spouse while they were married. It can also be a “displaced homemaker” who only owned property with their spouse.

Who qualifies for first-time homebuyer programs?

Most first-time homebuyer programs are for homebuyers who haven’t owned property in the last three years. Each program has its own set of qualification requirements.

How much do first time homebuyers typically put down?

Down payments for first-time homebuyers vary by mortgage type and personal financial situation. While a down payment of 20% is ideal for a conventional loan, homebuyers can get a conventional loan with as little as 3% down or a government-backed loan for zero or 3.5% down.

How can I apply for a first-time homebuyer program?

To apply for a first-time homebuyer program, you’ll need to follow the directions for the specific program you’re interested in. Most programs allow you to apply online.

What are the benefits of first-time homebuyer programs?

First-time homebuyer programs often offer down payment and closing cost assistance. Some of them provide federal tax credits.

How much mortgage can I afford?

The mortgage amount you can afford depends on your specific situation. But most lenders will not give you a mortgage that’s more than 28% of your pre-tax monthly income.

About the author: Anna Baluch is a freelance personal finance writer from Cleveland, Ohio. You can find her work on sites like The Balance, Freedom Debt Relief, LendingTree and RateGenius. Anna has an MBA in marketing from Roosevelt Un… Read more.