Your first home, without the myths

The 20 percent myth

Twenty percent down is not a requirement. It never was — it is simply the threshold above which a conventional lender stops requiring private mortgage insurance. Below it, loans exist, and they are used constantly.

• Conventional loans can go as low as 3 percent down for qualified buyers.
• FHA loans start at 3.5 percent down with a qualifying credit score.
• VA loans require no down payment at all for eligible service members, veterans, and certain surviving spouses.
• USDA loans require no down payment for eligible buyers purchasing in designated rural areas, subject to income limits.

What mortgage insurance actually costs you

Putting less down usually means paying mortgage insurance, which protects the lender, not you. On a conventional loan, private mortgage insurance can typically be removed once you have built enough equity. FHA mortgage insurance works differently and, on most current FHA loans with a low down payment, remains for the life of the loan unless you refinance. That difference is worth real money over time — make your lender show you both scenarios side by side.

Credit and debt-to-income

Two numbers decide most of your approval and most of your rate.

Credit score

Your score sets both whether you qualify and what you pay. The difference between a mediocre score and a strong one, on a 30-year loan, is frequently tens of thousands of dollars in interest. If your score is not where you want it, that is fixable — and often faster than people expect. Pay everything on time, get revolving balances well below their limits, do not close old accounts, and do not open new ones while you are in the process.

Debt-to-income (DTI)

DTI is your total monthly debt payments — the new mortgage payment plus car loans, student loans, credit card minimums, and any other obligations — divided by your gross monthly income. Lenders have DTI ceilings that vary by program and by compensating factors like reserves and credit strength. The practical consequence: paying off a car loan can raise your buying power more than saving another few thousand dollars. Ask your lender to run both scenarios before you decide where your next dollar goes.

The four main loan types

These are federal programs. The rules are the same in every state — only the loan limits, which are set by county, and the property eligibility for USDA vary geographically.

There is no universally "best" program. The right one depends on your credit, your cash, the property, and how long you intend to hold the home. A good loan officer will model at least two options for you. If yours will not, get a second quote — I can introduce you to lenders who will.

Closing costs and cash to close

The down payment is not the whole bill. Your cash to close is the down payment plus closing costs plus prepaid items — and buyers who budget only for the down payment get an unpleasant surprise three days before signing.

What is in there

• Lender charges — origination, underwriting, points if you buy the rate down, and the credit report.
• Third-party services — appraisal, title search, title insurance, settlement or escrow fee, and recording.
• Prepaid items — the first year of homeowners insurance, prepaid interest to the end of the month, and the initial deposit into your tax and insurance escrow account.
• Taxes and government charges — recording fees and, in many places, transfer taxes.

Seller concessions

In some negotiations the seller agrees to pay part of your closing costs. Each loan program caps how much of that is allowed, and the cap depends on your down payment. It is a real tool — but it is a negotiated term, not something you can count on before you have an accepted contract.

First-time buyer assistance programs

Down-payment and closing-cost assistance programs are real, and a great many first-time buyers qualify for one without ever knowing it existed. Typical forms include grants, forgivable second loans, deferred-payment second mortgages, and mortgage credit certificates.

One rule of thumb that does hold everywhere: most of these programs define "first-time buyer" as someone who has not owned a principal residence in the past three years. If you owned a home years ago, do not assume you are disqualified.

The mistakes that actually kill deals

• Financing anything before you close. A new car, new furniture, or a new credit card between pre-approval and closing changes your DTI and can un-approve you days before signing. Underwriters re-pull credit at the end. Buy nothing.
• Changing or leaving your job. Your income has to be verifiable at closing, not just at application. If a change is coming, tell your lender and me before it happens — some changes are fine, some are fatal, and the difference matters.
• Moving money around. Large unexplained deposits have to be sourced and documented. Cash gifts need a proper gift letter. Do not shuffle funds between accounts once you are in process.
• House hunting before pre-approval. You will fall in love with something you cannot buy, or lose something you could have bought to a buyer who was ready. Financing first, always.
• Skipping the inspection to win the offer. There are ways to make an offer competitive without going blind on the condition of the largest purchase of your life. Ask me for them.
• Budgeting the mortgage payment instead of the total cost. Property taxes, homeowners insurance, mortgage insurance, HOA dues, utilities, and maintenance are all real. A home you can technically finance is not always a home you can comfortably own.
• Trusting emailed wiring instructions. Wire fraud targets first-time buyers specifically. Always call the closing office at a number you independently verified before sending any funds. Never trust an email.

One more thing you should know

Since August 2024, buyers working with an agent sign a written buyer representation agreement before touring homes. That is national. It spells out what your agent does for you and exactly how they get paid — and the terms are negotiable. Read it, ask questions, and do not sign anything you do not understand. The buyer's guide walks through it in detail.