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The Ultimate First-Time Homebuyer Guide

A step-by-step roadmap to buying your first home — from budgeting and loan options to closing day.

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Last updated: February 2026Reviewed by National Mortgage Center team

Are You Ready to Buy?

Answer 6 quick questions to find your personalized next step.

Estimate Your Budget

Slide the numbers to see your estimated monthly payment and cash to close.

First-Time Buyer Loan Programs

Compare the most popular programs for first-time homebuyers.

FHA Loans

3.5% down · 580+ credit

Best for: Lower credit scores & small down payments

  • Government-backed
  • Gift funds allowed
  • Higher DTI accepted
Learn More

Conventional

3% down · 620+ credit

Best for: Good credit & competitive rates

  • No PMI at 20% down
  • Flexible terms
  • Higher loan limits
Learn More

VA Loans

0% down · 620+ credit

Best for: Veterans & active military

  • Zero down payment
  • No PMI
  • Competitive rates
Learn More

USDA Loans

0% down · 640+ credit

Best for: Rural & suburban buyers

  • Zero down payment
  • Low mortgage insurance
  • Income limits apply
Learn More
FeatureFHAConventionalVAUSDA
Min. Down Payment3.5%3%0%0%
Min. Credit Score580620620640
PMI/MIP Required?Yes (MIP)<20% downNoYes (low)
Max DTI57%45%41%41%
Gift Funds Allowed?YesYesYesYes

The Home Buying Journey: Step by Step

Click each step to see what happens, what you need, and common pitfalls to avoid.

What Happens

Submit your financial information to a lender to get a pre-qualification letter showing how much you can borrow.

What You Need

Income docs, ID, credit authorization, bank statements.

Watch Out

Don't skip this step — sellers won't take your offer seriously without it.

Understanding the True Cost of Buying

A clear breakdown of every dollar you'll need — from down payment to closing day.

Cost Transparency

Understand what you'll need to bring to the table before closing.

Down Payment

0–20%, varies by program

VA and USDA offer 0% down. FHA requires 3.5%. Conventional typically 3–20%.

Closing Costs

2–5% of purchase price

Loan origination, title insurance, appraisal, recording fees, and more.

Escrow/Prepaids

2–6 months taxes + insurance

Lenders often require upfront escrow for property taxes and homeowners insurance.

Earnest Money

1–3% of offer price

Good-faith deposit held in escrow. Applied to down payment or closing at settlement.

Inspection

$300–$500 typical

Professional home inspection to identify structural, mechanical, and safety issues.

Appraisal

$400–$700 typical

Lender-ordered appraisal to confirm the property's market value.

Cash-to-Close Breakdown Example

Based on a $350,000 home purchase:

  • Down payment (5%)$17,500
  • Closing costs (~3%)$10,500
  • Escrow/prepaids (est.)$3,500
  • Earnest money (2%)$7,000
  • Inspection$450
  • Appraisal$550
Estimated cash to close$39,500

Ways to Reduce Cash to Close

Seller concessions

Ask the seller to contribute toward closing costs (common in balanced markets).

Lender credits

Accept a slightly higher rate in exchange for credits that reduce upfront costs.

Down payment assistance

State and local programs may offer grants or forgivable loans for first-time buyers.

Gift funds

Family members can gift money for down payment with a proper gift letter.

Documents You'll Need

Get organized early — here's every document your lender will ask for.

Offers, Inspections & Appraisals

Critical decision points — know what to expect and how to protect yourself.

Offer, Inspection & Appraisal

Understand each step from making an offer through appraisal.

Making an Offer

What it involves
Your offer includes the purchase price, earnest money deposit, contingencies (inspection, financing, appraisal), and proposed closing date. Your agent submits it to the seller's agent.
Contingencies
Common contingencies protect you: financing contingency (loan falls through, you get earnest money back), inspection contingency (major issues found, you can renegotiate or walk), and appraisal contingency (if the home appraises below the offer, you can renegotiate or cancel).
Earnest money
Typically 1–3% of the offer price, held in escrow. It shows good faith and is applied to your down payment or closing costs at settlement. You may forfeit it if you back out without a valid contingency.
Negotiation tips
Know your max budget. Consider seller needs (timing, rent-back). In competitive markets, a clean offer with fewer contingencies can win. In balanced markets, you may have room to negotiate price or repairs.

Home Inspection

What the inspector checks
Structure, roof, HVAC, plumbing, electrical, foundation, and major systems. The inspector provides a written report with findings and recommendations.
Common issues
Roof wear, outdated electrical, plumbing leaks, foundation cracks, mold, and HVAC problems. Not all findings are deal-breakers—some are normal wear or can be negotiated.
How to protect yourself
Attend the inspection if possible. Read the full report and ask questions. Use the inspection contingency to request repairs, credits, or a price reduction—or walk away if issues are too severe.
Cost
Typically $300–$500 for a standard home inspection. Specialty inspections (septic, radon, termite) cost extra but can be worth it in certain areas.

Appraisal

What it is
A licensed appraiser evaluates the property and compares it to recent sales to determine fair market value. The lender uses this to ensure the loan amount doesn't exceed the property's worth.
What happens if value is low
If the appraisal comes in below your offer price, the lender will only loan based on the appraised value. You may need to bring more cash to close, renegotiate with the seller, or walk away (if you have an appraisal contingency).
How to handle gaps
Options include: increasing your down payment to cover the gap, asking the seller to reduce the price, meeting in the middle, or disputing the appraisal if you believe it's inaccurate (rare but possible).

Closing Day Explained

The final step to getting your keys — here's exactly what happens.

Closing Day Explained

What to expect on the day you become a homeowner.

What Happens at Closing

  • Signing documents: You'll sign the promissory note, deed of trust, and other loan documents. The title company or attorney will guide you through each form.
  • Reviewing the Closing Disclosure: You receive this at least 3 business days before closing. Compare it to your Loan Estimate and ask about any changes before signing.
  • Final walkthrough: Typically done the day of or day before closing. Verify the property is in the agreed condition and any repairs were completed.

What You Bring

  • Photo ID: Government-issued (driver's license or passport) for identity verification.
  • Cashier's check or wire: For your cash-to-close amount. Get the exact figure from your lender or title company in advance.
  • Proof of insurance: Evidence that homeowners insurance is in place and meets lender requirements.

When You Get Your Keys

Keys are typically handed over at the closing table once all documents are signed and funds have been disbursed. In some states, the deed must be recorded first—your title company will confirm the exact timing.

Top 10 First-Time Buyer Mistakes

Avoid these common pitfalls that can delay or derail your home purchase.

Frequently Asked Questions

Expert answers to the most common first-time homebuyer questions.

How much down payment do I need as a first-time homebuyer?
First-time buyers can put down as little as 0% with VA or USDA loans, 3% with conventional loans, or 3.5% with FHA loans. Down payment assistance programs may further reduce your out-of-pocket cost. Your ideal down payment depends on your loan type, credit score, and financial goals.Learn more →
What credit score do I need to buy my first home?
You can qualify for an FHA loan with a score as low as 580 (3.5% down) or 500 (10% down). Conventional loans typically require 620+. Higher scores unlock better interest rates and lower PMI costs. If your credit needs work, a specialist can help you build a plan.Learn more →
How much house can I afford?
Use the 28/36 rule: your housing payment should stay under 28% of gross income, and total debts under 36%. For example, with $6,000/month gross income, aim for a housing payment under $1,680. Use our affordability calculator above for a personalized estimate.Learn more →
What are closing costs and how much should I expect?
Closing costs typically run 2–5% of the purchase price and include lender fees, title insurance, appraisal, inspection, and prepaid taxes/insurance. On a $350,000 home, expect $7,000–$17,500. Some costs are negotiable, and sellers or lenders may offer credits.
Should I get pre-qualified before house hunting?
Absolutely. Pre-qualification shows sellers you're a serious buyer, helps you know your budget, and lets you move quickly when you find the right home. It typically takes 1–3 days and does not require a hard credit pull with many lenders.Learn more →
FHA vs. Conventional — which is better for first-time buyers?
FHA loans are ideal if your credit is below 700 or you have limited savings (3.5% down). Conventional loans are better if you have 620+ credit and want to avoid mortgage insurance once you reach 20% equity. We help you compare both options side by side.Learn more →
What first-time buyer assistance programs are available?
Programs include state housing finance agency grants, local government down payment assistance, employer programs, FHA/VA/USDA loans, and Good Neighbor Next Door (50% discount for teachers, police, firefighters). You may qualify for multiple programs simultaneously.
How long does it take to buy a house as a first-time buyer?
The entire process typically takes 3–6 months: 1–2 months for preparation and pre-qualification, 1–3 months for house hunting, and 30–45 days from contract to closing. Being prepared with documents and a pre-qualification letter speeds everything up.
What should I NOT do before closing on a home?
Don't open new credit accounts, make large purchases, change jobs, co-sign loans, make large undocumented deposits, or miss any bill payments. These actions can delay or derail your mortgage. Stay financially stable from pre-qualification through closing day.
What is earnest money and how much do I need?
Earnest money is a deposit (typically 1–3% of the offer price) that shows the seller you're serious. It goes toward your down payment or closing costs at closing. If you back out without a valid contingency, you may forfeit it.
What's the difference between a home inspection and an appraisal?
An inspection checks the home's condition (structure, roof, plumbing, electrical) and protects you. An appraisal determines the home's market value and protects the lender. Both are essential — never skip the inspection to save a few hundred dollars.
Can I buy a home with student loans?
Yes. Student loans factor into your debt-to-income ratio, but many buyers with student debt qualify for mortgages. FHA loans are particularly flexible with debt ratios (up to 57% DTI in some cases). Income-driven repayment plans can also help lower your calculated monthly obligation.Learn more →

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National Mortgage Center is Powered by Stride Bank – NMLS ID #466690. VA-approved lender. Not affiliated with any government agency.