How much do I need for a down payment on my first home?

It depends on the loan type. Conventional loans typically require 3-20% down, FHA loans require 3.5%, VA loans require 0%, and USDA loans require 0%. A 20% down payment avoids PMI on conventional loans, but many first-time buyers put down significantly less. The median first-time buyer down payment is around 6-8%.

What is PMI and how do I avoid it?

PMI (Private Mortgage Insurance) is insurance that protects the lender if you default. It's required on conventional loans with less than 20% down and typically costs 0.5-1.5% of the loan amount annually. You can avoid it by putting 20% down, using a VA loan, or requesting removal once you reach 20% equity.

What are closing costs and how much should I expect?

Closing costs are fees paid at the finalization of your home purchase, including lender fees, title insurance, appraisal, attorney fees, and prepaid items like taxes and insurance. They typically range from 2-5% of the home price. On a $350,000 home, expect $7,000-$17,500 in closing costs.

How long does it take to buy a house from start to finish?

The typical timeline from starting your search to closing is 3-6 months. Getting pre-approved takes 1-3 days, house hunting varies widely, and once you have an accepted offer, closing takes 30-45 days on average. In competitive markets, the search phase can take much longer.

Should I get pre-approved before looking at homes?

Yes. Pre-approval tells you exactly how much you can borrow, gives you a budget to work with, and shows sellers you're a serious buyer. In competitive markets, many sellers won't even consider offers from buyers who aren't pre-approved. The process is free and typically takes 1-3 business days.

First-Time Homebuyer Guide: Everything You Need to Know

Buying your first home is simultaneously one of the most exciting and most stressful financial decisions you'll make. The process involves dozens of unfamiliar terms, large sums of money, and decisions with consequences that last decades. This guide walks through every major step so you know exactly what to expect.

Step 1: Figure out what you can actually afford

Before you start browsing listings, you need to understand your budget. This isn't just about the monthly mortgage payment — it's the total cost of owning a home, including property taxes, insurance, maintenance, and utilities.

The standard guideline is the 28/36 rule: spend no more than 28% of your gross monthly income on housing costs, and no more than 36% on total debt (housing plus car payments, student loans, credit cards, etc.). If you earn $6,000 per month gross, that means a maximum of $1,680 for housing and $2,160 for total debt payments.

But lenders will often approve you for more than you should comfortably spend. Just because a bank says you can borrow $400,000 doesn't mean you should. Leave room in your budget for maintenance (1-2% of the home's value annually), unexpected repairs, and the lifestyle you actually want to live.

Use our home affordability calculator to find your comfortable price range based on your specific income and debts.

Step 2: Check and improve your credit score

Your credit score directly affects the interest rate you'll get, which determines how much you pay over the life of the loan. On a $300,000 mortgage, the difference between a 6.5% and 7.5% rate is roughly $200 per month — and over $72,000 in total interest over 30 years.

Most conventional loans require a minimum score of 620. FHA loans go as low as 580 (or 500 with 10% down). But minimum scores get you the worst rates. To get competitive rates, aim for 740 or higher.

If your score needs work, start 6-12 months before you plan to buy. Pay down credit card balances to below 30% of limits, make every payment on time, don't open new credit accounts, and dispute any errors on your credit reports. Even a 40-point improvement can save you tens of thousands over the life of a mortgage.

Step 3: Save for the down payment

The down payment is the cash you pay upfront toward the home's purchase price. The more you put down, the less you borrow, the lower your monthly payment, and the better your interest rate will be.

Conventional loans: 3-20% down. Less than 20% requires PMI.

FHA loans: 3.5% down with a 580+ credit score. These have both upfront and annual mortgage insurance premiums.

VA loans: 0% down for eligible veterans and active military. No PMI required.

USDA loans: 0% down for eligible rural properties. Income limits apply.

On a $350,000 home, a 5% down payment is $17,500; 10% is $35,000; 20% is $70,000. Don't forget that you'll also need cash for closing costs (2-5% of the price), moving expenses, and an emergency fund for the home.

Use our down payment calculator to figure out how long it will take to reach your savings goal.

Step 4: Get pre-approved (not just pre-qualified)

Pre-qualification is an informal estimate based on self-reported financial information. Pre-approval is a formal process where a lender verifies your income, assets, debts, and credit, and issues a letter stating how much they'll lend you.

Pre-approval matters for two reasons. First, it gives you a firm budget. Second, it makes your offers stronger. In competitive markets, sellers often won't entertain offers from buyers who aren't pre-approved.

To get pre-approved, you'll typically need: two years of tax returns, recent pay stubs, two months of bank statements, a list of debts and assets, and permission for a credit check. The process usually takes 1-3 business days.

Get pre-approved by 2-3 lenders. Each will pull your credit, but multiple mortgage inquiries within a 14-45 day window (depending on the scoring model) count as a single inquiry. Comparing lenders can save you thousands.

Step 5: Find the right home

With pre-approval in hand, you can shop with confidence. Work with a buyer's agent — they're typically paid by the seller, so their services cost you nothing. A good agent knows the local market, can spot potential problems, and handles the negotiation and paperwork.

When evaluating homes, think beyond the listing price. Consider property taxes (which vary enormously by location), HOA fees, commute costs, school districts (even if you don't have kids — they affect resale value), and the condition of major systems like the roof, HVAC, plumbing, and electrical.

Don't fall in love with a house before you've done the math. A beautiful home in a high-tax area with deferred maintenance can cost far more than a modest home in good condition with lower taxes.

Step 6: Make an offer and negotiate

Your offer includes the price, contingencies (conditions that must be met for the deal to proceed), earnest money deposit (typically 1-3% of the price, held in escrow), and your proposed closing date.

Common contingencies include: financing contingency (you can back out if you can't get a loan), inspection contingency (you can back out or negotiate if the inspection reveals problems), and appraisal contingency (you can back out if the home appraises below the purchase price).

In a buyer's market, you may negotiate below asking price and ask for seller concessions like closing cost credits. In a seller's market, you may need to offer at or above asking price and waive some contingencies (though waiving the inspection contingency is risky).

Understanding closing costs

Closing costs are the fees and expenses beyond the down payment that you pay when the sale is finalized. They typically range from 2-5% of the home price. On a $350,000 home, that's $7,000-$17,500.

Common closing costs include:

Lender fees: Origination fee (0.5-1% of loan), application fee, underwriting fee, credit report fee.

Title and escrow: Title search, title insurance (protects against ownership disputes), escrow fees.

Government fees: Recording fees, transfer taxes (vary by state and locality).

Prepaid items: Prorated property taxes, prepaid homeowners insurance, prepaid interest from closing to the end of the month.

Other: Home appraisal ($300-$500), home inspection ($300-$600), survey, attorney fees (required in some states).

You'll receive a Loan Estimate within three business days of applying for a mortgage, which itemizes expected closing costs. Compare this across lenders — some fees are negotiable.

Understanding PMI (Private Mortgage Insurance)

If you put less than 20% down on a conventional loan, your lender will require PMI. This insurance protects the lender (not you) in case you default. PMI typically costs 0.5-1.5% of the original loan amount per year, paid monthly.

On a $300,000 loan, PMI might cost $125-$375 per month. That's real money that builds zero equity. This is the main argument for saving a full 20% down payment — but it's not always the right call. If saving to 20% means waiting several more years while home prices rise, you may end up paying more overall.

PMI on conventional loans can be removed once you reach 20% equity (based on the original purchase price). The lender must automatically cancel it at 22%. FHA loans have mortgage insurance that lasts the entire loan term if you put less than 10% down — the only way to remove it is to refinance into a conventional loan once you have enough equity.

The home inspection: don't skip it

A home inspection costs $300-$600 and can save you tens of thousands. A licensed inspector examines the home's structure, roof, foundation, plumbing, electrical, HVAC, and major appliances.

The inspection report will categorize issues as safety hazards, major defects, or minor maintenance items. No home is perfect — the question is whether the problems are deal-breakers or negotiating leverage.

After the inspection, you can: proceed with the purchase as-is, ask the seller to make repairs, ask for a price reduction or closing cost credit, or walk away (if you have an inspection contingency).

Pay particular attention to the roof (replacement costs $8,000-$20,000+), foundation issues (can be extremely expensive), water damage or mold, electrical panel condition, and HVAC age (replacement costs $5,000-$12,000). These are the items that can turn a dream home into a money pit.

Consider specialized inspections for older homes: sewer line camera inspection ($100-$300), radon testing ($150-$200), and termite inspection ($75-$150). These catch problems a general inspection might miss.

Choosing the right mortgage

The two biggest decisions are your loan term and whether you want a fixed or adjustable rate.

30-year fixed: The most popular option. Lower monthly payments but you pay more total interest. Predictable payments for the life of the loan.

15-year fixed: Higher monthly payments but dramatically less total interest. You build equity much faster and own your home free and clear in half the time.

Adjustable-rate mortgages (ARMs): Start with a lower rate that adjusts after an initial fixed period (typically 5 or 7 years). Good if you plan to sell or refinance before the adjustment period, risky if you don't.

Use our mortgage payment calculator to compare monthly payments across different terms, and our amortization schedule calculator to see how each option pays down principal over time.

After closing: what to expect

Congratulations, you own a home. Now budget for ongoing costs that renters don't face: property taxes (may increase), homeowners insurance, maintenance (budget 1-2% of the home's value annually), HOA fees if applicable, and potentially higher utility costs.

Set up an emergency fund specifically for home repairs. Water heaters fail, roofs leak, HVAC systems die — usually at the worst possible time. Having $5,000-$10,000 set aside for emergencies prevents these normal events from becoming financial crises.

Keep all your closing documents in a safe place. You'll need them for tax purposes and when you eventually sell or refinance.