Myths busted, numbers named, and every step of the process laid out in plain English. Everything you need to know before buying your first home.
🏡You don't need perfect credit, a 20% down payment, or today's rates to be forever. You just need the right information — and a great team.
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Three Things to Know Right Now
You do not need 20% down. The median first-time buyer puts down 8%, and FHA loans go as low as 3.5%. You do not need perfect credit. FHA loans accept FICO scores starting at 580. You do not need to wait for rates to drop. You can refinance later — you cannot un-pay rent. This page covers everything else.
8%
Median down payment for first-time buyers — not 20%
NAR 2024
3.5%
Minimum down payment on FHA with a 580+ FICO score
HUD / FHA
2,500+
Down payment assistance programs available in all 50 states
Down Payment Resource
56.99%
Max DTI many lenders allow with compensating factors
FHA / GSE Guidelines
Common Misconceptions
Myths & Realities
These five beliefs stop more people from buying homes than anything else — and every single one of them is wrong.
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Myth
"I need 20% down before I can even look."
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✓ The Reality
The median first-time buyer puts down 8%. Conventional loans go as low as 3%, FHA 3.5%, and VA and USDA loans require 0% down. Many state programs can gift or forgive a portion of your down payment entirely. The 20% figure comes from avoiding PMI — which is a cost worth understanding, not a barrier to homeownership.
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Myth
"My credit needs to be perfect."
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✓ The Reality
FHA accepts FICO scores from 580 with 3.5% down — and sometimes 500 with 10% down. Conventional loans start at 620. A 740+ score gets you the best rate, but you don't need it to qualify. What you do need is a plan — and we can help you build one whether you're ready now or in six months.
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Myth
"I should wait until interest rates drop."
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✓ The Reality
You marry the house, you date the rate. Waiting often costs more in rising home prices than you'd ever save on rate. You can refinance when rates drop — you cannot recover years of rent paid. The buyers who waited for a "better rate" in 2021 are still waiting while prices have climbed significantly above where they stood.
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Myth
"I have to pay off all my debt first."
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✓ The Reality
Most buyers qualify while carrying debt. What lenders care about is your debt-to-income ratio — and 43% is not the ceiling. Many lenders allow DTI up to 56.99% of gross income with compensating factors. Important note: aggressively paying off cards right before applying can actually lower your credit score by changing your utilization pattern.
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Myth
"Pre-qualification means I'm approved."
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✓ The Reality
Pre-qualification is an estimate. Pre-approval is a verified offer. Pre-approval involves a hard credit pull and actual document verification — income, assets, employment. Sellers won't take your offer seriously without a pre-approval letter, and in competitive markets, many won't even let you tour without one.
What Not to Do
Don't Do This
From pre-approval to closing, your financial profile is essentially frozen. These eight mistakes have derailed loans days before closing.
⚠️ The Eight Deal-Killers
Avoid every single one of these from the day you apply until after you close.
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Don't open new credit lines.Even a store card inquiry drops your score and adds debt. It can change your qualification entirely.
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Don't finance furniture, a car, or appliances.Wait until after closing — every $200/month in new payments can cut roughly $30,000 from your borrowing power.
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Don't change or quit your job.Lenders re-verify employment within days of closing. Even a promotion that switches you from W-2 to 1099 can kill the loan.
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Don't miss any payment.One 30-day late payment can drop your FICO score 60–100 points and disqualify the loan outright.
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Don't move money between accounts without documentation.Underwriters trace every dollar. Unexplained transfers — even moving your own money — can freeze your file.
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Don't make large cash deposits.Cash gifts require a signed letter and typically 60 days of "seasoning" to count toward your assets.
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Don't co-sign for anyone's credit.A friend's car loan or your kid's apartment becomes your debt on the lender's spreadsheet and counts against your DTI.
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Don't waive your inspection.A $400–$600 inspection has saved buyers from six-figure foundation, roof, and structural surprises. Never skip it.
Step by Step
The Process, Day by Day
From your first conversation to getting keys, the typical purchase takes 20–30 days. Here's exactly what happens — and when.
⏱ Total timeline: 20–30 days from contract acceptance to closing. Each step has a name, a job, and a deadline. Knowing all three keeps you in control.
01
Pre-Approval
The lender pulls your credit, verifies income and assets, and issues a max-loan letter you'll attach to every offer you make. This is not a guess — it's a verified commitment from the lender.
Day 1–3
02
House Hunt
Tour homes with your real estate agent. Most first-time buyers see 5–10 homes before writing an offer. Your pre-approval letter makes your offers credible and competitive.
Week 1–∞
03
Offer & Negotiate
You and your agent submit an offer including price, contingencies, and earnest money — typically 1–3% of purchase price. Earnest money goes into escrow and counts toward your down payment at closing.
Day 0
04
Home Inspection
A licensed inspector evaluates the home's condition — roof, foundation, electrical, plumbing, HVAC, and more. You can renegotiate, request repairs, or walk away based on findings. Never skip this step.
Day 5–10
05
Appraisal
The lender orders an independent appraisal to confirm the home's market value. The lender will not lend more than the appraised value — if the home appraises low, you'll need to renegotiate or cover the gap.
Day 10–20
06
Underwriting
The underwriter reviews your entire loan file and verifies everything. Expect requests for additional documents — this is normal. Respond quickly. Conditions are just the lender being thorough.
Day 20–40
07
Clear to Close
The two best words in real estate. All conditions are met and the lender is ready to fund. You'll receive your final Closing Disclosure at least 3 business days before signing — review it carefully.
Day 40–45
08
Closing Day
You'll sign approximately 50+ documents, wire your closing funds (confirmed by phone beforehand), and receive your keys. Order the pizza. You're a homeowner.
Day 45–60
Run the Numbers
Buying Power at a Glance
What you'll actually pay at closing and each month — for common price points, at two of the most popular loan types.
Home Price
FHA · 3.5% Down · 6.25% Rate
Conventional · 5% Down · 6.75% Rate
Down Payment
P&I / Month
Down Payment
P&I / Month
$200,000
$7,000
$1,189
$10,000
$1,232
$250,000
$8,750
$1,486
$12,500
$1,540
$300,000
$10,500
$1,783
$15,000
$1,849
$350,000
$12,250
$2,080
$17,500
$2,157
$400,000
$14,000
$2,377
$20,000
$2,465
$500,000
$17,500
$2,971
$25,000
$3,081
P&I = principal & interest only on a 30-year fixed rate. Does not include property taxes, homeowners insurance, PMI, or HOA. Conventional rate assumes 760+ FICO. Your actual payment will vary based on credit, loan program, ZIP code, and lender.
The True Cost of Ownership — Per Year
~1.25%
Property Taxes (national avg)
~0.5–1%
Homeowners Insurance
~1%
Maintenance Reserve
Varies
HOA Fees (if applicable)
0.3–1.5%
PMI if less than 20% down (drops at 22% equity)
Know the Language
Terms, Translated
Ten terms you'll hear repeatedly — explained in plain English so nothing catches you off guard at the table.
Pre-Approval
Step 1
A lender's verified letter stating how much they'll lend you, based on actual credit and income review. Bring it to every showing. It's what separates serious buyers from browsers.
Earnest Money
1–3% of price
Your "I'm serious" deposit placed in escrow when your offer is accepted. Goes toward your down payment at closing — or you forfeit it if you walk away without a valid contingency.
Appraisal
$400–$700
An independent licensed appraiser's opinion of the home's market value. The lender will not fund a loan for more than the appraised amount — it protects both you and them.
Escrow
Held by 3rd party
A neutral account managed by a title company or closing attorney. Holds earnest money during the transaction, then later your property taxes and insurance as part of your monthly payment.
DTI Ratio
Aim < 43%
Debt-to-Income — your total monthly debt payments divided by your gross monthly income. The single most important number lenders use to evaluate your ability to repay. Most programs allow up to 43–57%.
PMI
Drops at 20% equity
Private Mortgage Insurance — required when you put less than 20% down on a conventional loan. It protects the lender, not you. It falls off automatically when you reach 22% equity based on original value.
Points
1pt = 1% of loan
Optional fees paid upfront to "buy down" your interest rate. Each point typically lowers your rate by 0.25%. Generally worth it if you plan to stay in the home 7+ years.
Closing Costs
2–5% of price
All fees to finalize your loan — title insurance, origination fees, recording fees, prepaid taxes and insurance. Sellers can sometimes be asked to cover a portion. Always ask.
Contingency
Your escape hatch
A condition in your contract that lets you exit the deal and recover your earnest money — the most common are inspection, appraisal, and financing contingencies. Never waive them without understanding the risk.
Clear to Close
The magic words
Underwriting is complete, all conditions are met, and the lender is ready to fund. You'll receive your final Closing Disclosure at least 3 business days before signing. Review every line.
Know Your Score
Your Credit, Your Rate
Your FICO score is one of the biggest levers you have on your interest rate. Here's how the ranges translate to real pricing.
FICO ScoreTier & NotesEst. 30-yr Rate*
760–850
Excellent — best available rate, no overlays
6.250%
720–759
Very Good — top-tier pricing
6.375%
680–719
Good — conventional fully accessible
6.500%
640–679
Fair — most loan programs approved
6.625%
620–639
Conventional minimum threshold
6.750%
580–619
FHA territory — 3.5% down available
6.875%
500–579
FHA only — 10% down required
7.500%
*Illustrative rates as of May 2026. Actual rate depends on loan type, LTV, debt-to-income ratio, and individual lender pricing. Rates change daily.
Before You Start
Four Smart Moves Right Now
Do these before you ever tour a home and you'll be ahead of 90% of first-time buyers.
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Pull Your Free Credit Report
Visit annualcreditreport.com for one free report per bureau per year — no card required, federally guaranteed. Look for errors and dispute anything inaccurate before a lender sees it.
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Know Your Real Budget
Your payment isn't just principal and interest — factor in taxes, insurance, PMI, and HOA. A good rule: keep total housing costs below 28–30% of your gross monthly income.
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Gather Your Documents
Two years of W-2s and tax returns, two months of bank statements, most recent pay stubs, and a photo ID. Having these ready turns a 3-day pre-approval into a same-day one.
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Research Down Payment Assistance
There are more than 2,500 assistance programs across the country — many are income-based, some are geographic. Ask us to run a search for your specific situation before you assume you're on your own.
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The Quick Summary
Minimum down payment: 3% conventional, 3.5% FHA, 0% VA/USDA
Minimum credit score: FHA = 500 w/10% down | 580 w/3.5% down · Conventional = 620 · USDA = 580 · VA = No min credit score set by the VA
Timeline: 20–30 days from offer to keys
Closing costs: Budget 2–4% of the purchase price
Max DTI: FHA = 56.99% · Conventional = 50% · USDA = 45% · VA = No max ratio set by VA (compensating factors apply in all scenarios)
Rates: You can refinance later — you can't un-pay rent
Ready to Get Pre-Approved?
The best way to know what you can afford is to find out for real.
