The First Time Home Buyer Guide If You Don’t Know Where to Start

This is everything you need to know about buying property as a first time home buyer, from estimating your down payment to applying for a home mortgage (minus the confusing financial jargon!)

You’ve been saving money every month. You’re scrolling Zillow before and after work. You have strong opinions about kitchen layouts, and an even stronger opinion about parking. But when it comes to loan types and down payment programs, you’re stuck.

I know the feeling all too well. I bought my first home in my early 20s and wish I had known half of what I’m about to share with you. There are programs, grants, and loan options designed specifically for buyers in your position, and most people have no idea they exist until it’s too late to use them.

In this guide, I’m covering the first time home buyer programs everyone should know about, the loan options available to you, how to find down payment assistance and grants in your area, and the step-by-step process from pre-qualification to offer-ready.

And once you’re past the financial stuff, I have more first time home buyer guides on submitting your first offer and surviving closing day, so you know what to expect at each step.

A quick note: this is general information only. I’m not a licensed mortgage advisor, and nothing here should replace personalized guidance from a qualified lender.

First-Time Home Buyer Qualifications & Income Limits

First-time home buyer qualifications vary by program and loan type. One thing worth knowing: HUD defines a first-time buyer as someone who hasn’t owned a primary residence in the past three years. So if you sold a home a while back and have been renting since, you may still qualify.

In general, most programs evaluate you on these five criteria.

First-Time Home Buyer Benefits You May Want to Consider

Many first-time home buyers (myself included) are completely unaware of the perks and benefits available to people purchasing their first home. Whether you actually take advantage of them is up to you. But they’re worth knowing about before you start house shopping.

First-Time Home Buyer Loan Options

Your loan type affects your interest rate, monthly payment, down payment requirement, and total long-term cost, so it’s important that you understand your options before signing anything.

Here is a breakdown of the four most common first-time home buyer loans.

Conventional Loans

Conventional loans are offered by private lenders and follow guidelines set by Fannie Mae and Freddie Mac (but they’re not government-backed).

First-time home buyer loan requirements for conventional:

• Minimum credit score: 620
• Minimum down payment: 3% (through programs like Fannie Mae’s HomeReady or Freddie Mac’s Home Possible)
• DTI ratio: typically under 43%

Conventional loans are a good option if you have strong credit, low DTI, and a stable income/employment history. 

FHA Loans

FHA loans are backed by the Federal Housing Administration and are one of the most popular first-time home buyer loans. 

First-time home buyer loan requirements for FHA:

• Minimum credit score: 580 for 3.5% down and 500 for 10% down
• Minimum down payment: 3.5%
• DTI ratio: typically under 43%

Unlike conventional loans, FHA loans require mortgage insurance for the life of the loan if you put less than 10% down. AKA, the PMI doesn’t go away when you hit the 20% equity threshold, so keep that in mind.

VA Loans

VA loans are available to eligible active duty service members, veterans, and surviving spouses. They’re backed by the Department of Veterans Affairs and offer some of the best terms on the market.

First-time home buyer loan requirements for VA:

• No minimum credit score
• No down payment required
• No private mortgage insurance
• Certificate of eligibility required

If you or your partner served, start with this first time home buyer loan option first.

USDA Loans

USDA loans are backed by the U.S. Department of Agriculture and are designed for buyers in eligible rural and suburban areas. Even if you think your area doesn’t qualify, check anyway (click here to search your address).

First-time home buyer loan requirements for USDA:

• Minimum credit score: 640 (for automated approval)
• Down payment: None required
• Income limits: typically under 115% of the area median income
• Property must be in a USDA-eligible area

If you’re living in a suburban or rural community or are open to moving to a USDA-eligible area, this first time home buyer loan option is worth exploring.

First-Time Home Buyer Down Payment Requirements

The down payment is typically the biggest financial hurdle when buying your first home. Here’s what to expect by loan type:

• Conventional: 3% to 20%
• FHA: 3.5% (or 10% if your credit score is below 580)
• VA: 0%
• USDA: 0%

You’ll also need to budget for closing costs, which typically run 3 to 6% of the loan amount. These include lender fees, title insurance, appraisal fees, and prepaid items like homeowners insurance and property taxes.

For a full breakdown of what to expect at the closing table, I put together a cost breakdown so you know how much to save beyond the down payment. Read the post here 👉 Real Estate Closing Costs: What You Need to Know Before You Sign.

First-Time Home Buyer Programs and Grants

Beyond individual loans, there’s a separate world of first time home buyer programs and first time home buyer grants designed to make homeownership more accessible.

And if you want to learn more about home renovation financing options, I put together a full breakdown to help you bring your project to life. Read the post here 👉 Home Renovation Loan Options: 6 Ways to Fund Your Project Without Draining Your Savings.

Your Step-By-Step First Time Home Buyer Guide

Here’s how the first time home buyer process flows from getting pre-approved for a mortgage to shopping for your first home. 

Step 1: Reach Out to a Mortgage Lender

If you’re interested in financing your home purchase, the first step is to contact a mortgage lender to get pre-qualified.

Pre-qualification gives you a general sense of how much you can borrow based on your income, debts, and assets. The lender will review your financial information – income, debts, assets, etc. and tell you how much they are willing to lend based on that information. Pre-qualification can happen quickly, over the phone or online. No formal application or credit pull is required. 

If you’re a credit union member or have a bank you’re comfortable working with, start there. Ask specifically about first-time home buyer loan options and any programs the lender works with (not every lender participates in state assistance programs!)

Step 2: Get Your Finances in Order

Meeting with a mortgage lender can help determine what you need to do to qualify for a mortgage. A lender may advise you to pay down debt, improve your credit score, or save up for closing costs and a down payment.

• Credit Score: Even a small improvement in your credit score can significantly lower your rate. Pay down balances, dispute errors, and avoid opening new lines of credit if you can.
• Debt-to-Income Ratio: Most lenders prefer a DTI under 43%. Pay down existing debt (if possible) before applying.
• Savings: Build separate savings goals for your down payment, closing costs, and moving expenses. Track them individually in a spreadsheet or separate savings accounts so you know exactly where you stand.
• Employment Stability: Lenders want to see at least two years of steady income. Make sure you have at least two years of tax returns and your most recent pay stubs ready to go.

Step 3: Get Pre-Approved for a Mortgage

Getting pre-approved is way more involved than getting pre-qualified. When you get pre-approved, the lender will review your financial information, pull your credit report, and verify your employment and income.

The lender will then give you a letter that states how much they are willing to lend you. This letter is important because it gives you a budget to work with as you start shopping for homes. It also signals to sellers and real estate agents that you are serious about buying and have been vetted by a lender.

Step 4: Partner with a Real Estate Agent You Trust

Unless you have experience reading real estate contracts, I recommend partnering with a buyer’s agent. A good agent will help you find homes that fit your criteria, negotiate on your behalf, and guide you through every step of the offer process.

The best way to find a great agent is through referrals from people who have recently bought or sold in your area. Another option is to visit open houses in the neighborhoods you’re interested in and talk to the agents there (we’ve actually found a lot of great agents this way!) 

I always recommend interviewing multiple agents so that you can find someone you feel comfortable working with. It might take a few conversations before you find the right fit.

If this is your first time hiring a real estate agent, I covered the exact process my mom and I use to find with the best local agents. Read the post here 👉 How to Find the Best Real Estate Agent: 5 Must-Know Tips Before You Sign.

Step 5: Start Shopping for a Home

There are a few ways to find homes for sale. You can drive around your desired neighborhood and look for “For Sale” signs. This is a slower process, but it’s a great way to get to know the surrounding areas before you dig deeper into the properties.

Or you can take the more conventional route and search online on websites like Zillow, Redfin, and Trulia. These are pulled from the Multiple Listing Service (MLS), the most comprehensive database of homes for sale. Your agent will have direct MLS access and can set up alerts so you are notified the moment a home that fits your criteria hits the market.

Once you’ve scanned the available listings, create a list of your favorites and visit as many as you can in person. IMO, there’s no such thing as a wasted house tour. Even if you don’t like the property, you’ll get a better idea of what you like, what you hate, and what you want in your next house.

First-Time Home Buyer Checklist to Buy

We covered a lot of ground! If you need a quick refresher before getting started, check out the first time home buyer checklist to buy below:

• Check your credit score and debt-to-income ratio
• Research your state’s first-time home buyer programs and income limits
• Explore first-time home buyer loan options (conventional, FHA, VA, USDA)
• Get pre-qualified with a mortgage lender
• Gather your financial documents (tax returns, pay stubs, bank statements, etc.)
• Get pre-approved and review your pre-approval letter
• Partner with a trusted buyer’s agent
• Set up MLS alerts and start touring homes

Starting Your First-Time Home Buyer Journey

This process can look daunting when you see it laid out. But it doesn’t happen all at once. Start with what you can control right now: your credit score, your savings, and the loan options available to you. 

The more prepared you are when walking into that first lender conversation, the more confident you will feel every step after it.

This post is all about the beginning stages of the first time home buyer process!