You can buy your first home with far less than 20% down. FHA loans need 3.5% down with a 580 credit score, conventional loans for first-time buyers need 3%, and VA and USDA loans need nothing down. Many states also offer grants or forgivable loans for the down payment and closing costs.
You count as a first-time home buyer for most programs if you haven’t owned a home in the past three years, so many past owners qualify too. This guide covers the loans, the assistance, the costs most buyers forget, and the steps from saving to getting the keys.
Key takeaways
- Start with your budget, not the listing price. Aim for a total housing payment under about 28% of your gross monthly income.
- Compare FHA, conventional 3% down, VA and USDA loans. The cheapest one depends on your credit score and down payment.
- Check your state housing finance agency for down payment assistance before you make an offer.
- Plan for closing costs of 2% to 5% of the price, plus moving, repairs and an emergency fund.
In this guide: Loans for first-time buyers · Assistance programs · How much you need · 10 steps · Mistakes to avoid · FAQ
First-Time Buyer Calculator: What Can You Afford?
Full guide: how much house can I afford calculator
Includes property tax, homeowners insurance, PMI or FHA mortgage insurance, and HOA dues.
Loans for first-time home buyers
| Loan | Minimum down | Typical minimum credit | Good fit for |
|---|---|---|---|
| FHA | 3.5% (10% with a 500 to 579 score) | 580 | Scores under about 680, higher debt |
| Conventional 97 | 3% | 620 | Good credit; PMI can be removed later |
| HomeReady / Home Possible | 3% | 620 to 660 | Income at or below 80% of the area median |
| VA | 0% | None set by VA; lenders often want 580 to 620 | Veterans, service members, some spouses |
| USDA | 0% | None set by USDA; lenders often want 640 | Rural and suburban areas, income at or below 115% of the area median |
FHA vs. conventional: FHA is easier to qualify for, but you pay a 1.75% upfront premium and annual mortgage insurance that lasts 11 years with 10% down, or the life of the loan with less. Conventional PMI depends heavily on your credit score and can be removed at 20% equity. Our FHA loan calculator and conventional loan guide compare the costs.
If you’ve served in the military, start with a VA loan. If you’re buying outside a big city, check USDA eligibility by address.
Down payment assistance and first-time buyer programs
- State housing finance agencies (HFAs): every state has one. Most offer down payment and closing cost assistance as grants, forgivable second mortgages or low-rate second loans, often with income and price limits and a homebuyer education course.
- City and county programs: many local governments add their own grants, especially for buyers in specific neighborhoods or professions.
- Mortgage Credit Certificates (MCCs): offered through some HFAs, they turn part of your mortgage interest into a federal tax credit each year.
- Employer and lender programs: some employers, credit unions and banks offer grants or credits for first-time buyers.
- IRA withdrawal: first-time buyers can take up to $10,000 from an IRA without the 10% early-withdrawal penalty. Income tax still applies to traditional IRA money.
Assistance usually has strings: you may need to live in the home for several years or repay the help if you sell or refinance early. Read the terms before you count on it.
How much money you need
| Cost | $350,000 home with 3.5% FHA | $350,000 home with 10% conventional |
|---|---|---|
| Down payment | $12,250 | $35,000 |
| Closing costs (about 3%) | $10,500 | $10,500 |
| Inspection and appraisal | $1,100 | $1,100 |
| Moving and setup | $2,000 | $2,000 |
| Cash to buy | $25,850 | $48,600 |
Keep an emergency fund on top of this. Lenders may also want to see reserves, a few months of payments left in the bank after closing. Our guides to down payments and closing costs break each number down.
10 steps to buying your first home
- Set your budget. Use the calculator above and check your debt-to-income ratio. Most loans allow 43% to 50%, but a lower number leaves room in your monthly budget.
- Check your credit at least three months ahead. Pay down card balances and dispute errors. See what score you need.
- Save for the down payment, closing costs and reserves, and keep the money in an account you can document.
- Look up assistance programs in your state and city.
- Get preapproved with two or three lenders. Learn the difference between preapproval and prequalification.
- Choose an agent who works with first-time buyers, and agree in writing on how they’ll be paid.
- Shop for homes within your budget, including taxes, insurance and HOA dues.
- Make an offer with an inspection contingency and earnest money, usually 1% to 3% of the price.
- Get an inspection, appraisal and insurance, and lock your rate.
- Review your Closing Disclosure and close. Compare it with your Loan Estimate at least three business days before closing.
First-time buyer mistakes to avoid
- Shopping by the price your lender approves instead of the payment you’re comfortable with.
- Forgetting property taxes, insurance and PMI, which can add $600 to $900 a month. Our mortgage payment calculator includes them all.
- Opening new credit cards, financing a car or changing jobs between preapproval and closing.
- Draining all your savings for a bigger down payment and keeping nothing for repairs.
- Skipping the inspection to win a bidding war.
Frequently asked questions
What is the minimum down payment for a first-time buyer?
0% with VA or USDA loans, 3% with conventional first-time buyer and low-income programs, and 3.5% with FHA.
What credit score do first-time buyers need?
580 for FHA with 3.5% down and 620 for most conventional loans. Scores of 740 and up get the lowest rates and PMI.
Can I be a first-time buyer if I owned a home before?
Usually yes, if you haven’t owned a home in the past three years. Many programs also include single parents and displaced homemakers who only owned with a former spouse.
How much do I need to make to buy a $300,000 house?
With 10% down and today’s rates, the full payment is about $2,420 a month, so the 28% rule points to an income of roughly $104,000 a year with little other debt. Our affordability calculator runs the numbers for your income.
The bottom line
Your first home is more reachable than the 20% down myth suggests. Know your budget, compare loan types, check for assistance, and keep a cushion after closing.
Estimates only. HomeAffordLab is not a lender and does not provide financial advice. This page may contain ads. See our Advertising Disclosure.
Sources: HUD: definition of first-time homebuyer (24 CFR 92.2) and FHA Handbook 4000.1 · Fannie Mae HomeReady and 97% LTV options · Freddie Mac Home Possible · VA Home Loans · USDA Single Family Housing Guaranteed Loan Program · IRS Publication 590-B (first home exception)