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Hal Bundrick, CFP® · Senior Writer As a first-time home buyer, you'll want to understand each step of the home-buying process, as well as your loan options and exclusive benefits. It’s crucial to be prepared as you enter the housing market in 2026 for the first time.
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Discover whether now is a good time to buy a house.
What is a first-time home buyer?
To qualify for special home buyer benefits, borrowers purchasing a single-family home as a primary residence are defined as “first-time home buyers” in one of three ways:
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You've never purchased a single-family home before.
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You haven't owned a home in the last three years, including sole or joint ownership.
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You're a displaced homemaker or single parent who has never owned a home other than jointly with a spouse in the last three years.
In addition, eligibility requirements for a first-time home buyer loan will typically include a steady household income and a manageable debt load. More on that later.
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What's the best age to buy your first house?
How buying your first home works: Step by step
1. Know how much house you can afford
As Step 1, you'll want to determine how much house you can afford comfortably. If you properly gauge your financial capacity, your monthly mortgage payment will feel right from the beginning and get even easier to make over time.
Divide your gross (pre-tax) monthly salary by four. That's a good start for a target monthly payment. But that's not just principal and interest payments. You will also want to include property taxes and homeowners insurance in the total.
Mortgage lenders often recommend that your housing costs total around 28% of your gross pay. That calculation is known as your debt-to-income ratio (DTI).
Don’t forget to figure in closing costs. These costs include (but aren’t limited to) things like your appraisal and home inspection fees, loan origination costs, and title insurance, and they generally cost between 2% and 5% of your home’s purchase price. Here’s an example:
Say you’re buying a $500,000 home. Your closing costs will be 2% to 5% of the total, or between $10,000 and $25,000.
There are several ways to reduce your closing costs. You can often save thousands by simply comparing multiple lenders, looking for those offering lender credits, and negotiating directly with your lender.
2. Shop mortgage lenders
Over the last 10-plus years, more than 60% of home buyers said they shopped more than one lender, according to Fannie Mae research. Gone are the days when buyers just went with a real estate agent's "preferred lender," no questions asked. Comparison shopping to find the best mortgage lenders for first-time home buyers with the best rate and most favorable fees will help you get the best deal.
When comparing lenders, it’s important to look beyond the advertised annual percentage rate (APR) for your preferred loan. You’ll want to compare key criteria that impact your total loan experience.
For example, look at each company’s mortgage origination fee. Search for lenders with low to no origination fees to help keep costs down.
Again, don't forget to consider the total closing costs. Comparing Loan Estimates from all lenders will help uncover costs beyond your monthly mortgage payment so you can find the lender with the lowest interest rate and total loan costs.
3. Shop for a home
Now for the fun part: looking at houses.
Make a list of what you’re looking for in a house, including the “must haves” and “would be nice to haves.”
Attend open houses and scour the local market to find neighborhoods and amenities that suit you best. Find a couple of contenders: one to make an offer on and some backup options if your favorite falls through.
Your buyer's agent will handle the details of making an official offer and negotiating counteroffers.
4. Select your mortgage lender
With an offer in hand, you can get real-deal loan offers. Each lender vying for your business will give you a written offer.
Ask each lender to provide you with a zero-discount-points offer. This way, you can compare apples to apples to truly find the best mortgage lender for your situation — and then decide if you want to buy mortgage discount points to lower your interest rate.
Once your offer is accepted and your loan is approved, you can move forward with the home appraisal, inspection, and other steps before closing.
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Learn more about discount points and whether they’re worth purchasing.
5. Prepare to close the loan
Three days before closing, you'll receive an official Closing Disclosure form detailing the mortgage interest and up-front fees you'll pay.
Then, on signing day, you close on the house.
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First-time home buyer perks
If you're looking to buy a house in early 2026, a lower down payment and credit-score flexibility are two of the biggest breaks you get.
Down payment and closing costs assistance
While 20% down has been the historical goal — because it eliminates private mortgage insurance, a fee to protect lenders from a default — first-time home buyers can make a minimum down payment of 3% of the home purchase price (and some lenders buy that down to 1%).
Another big benefit of being a first-timer: government and nonprofit first-time home-buyer programs that cover closing costs and down payment assistance. These loan programs empower potential homeowners from all walks of life: teachers, first responders, Native American borrowers, public housing residents, and low- and middle-income households.
While many programs involve loans or tax credits, you might also qualify for a first-time home buyer grant that you don't have to repay.
The Department of Housing and Urban Development offers resources for first-time home buyers to find assistance programs they may be eligible for. State housing finance agencies can also provide additional information on homeownership programs.
Some employers also offer homeownership assistance to help employees buy their first home. Ask your human resources rep if your company offers any such programs.
Credit score breaks
Is a low credit score making it hard to qualify for a mortgage? Good news: First-time home buyers can get an FHA loan with a FICO credit score as low as 500 with 10% down, or a conventional loan with a score as low as 620.
To qualify for a more expensive home loan, called a jumbo mortgage, you'll need a FICO 700.
You need a score of 760 or higher to qualify for the most favorable interest rate on any product.
A good lender will walk you through all the types of mortgage programs you qualify for.
Education
Home buyer education courses are also available to first-timers and can help you discover and understand the process for buying a house.
First-time home buyer challenges
Mortgage rates are at their lowest point in over three years, but they can still be a sticking point for many first-time buyers. Current rates are just over 6%, but existing homeowners with rates of 5% or lower are unlikely to move and lose what is likely a significantly lower interest rate.
That's worsening the 3.8 million-unit housing supply shortage. As a result, Realtor.com estimates that a lack of affordable housing prevents 1.6 million Gen Z and millennial would-be buyers or renters from forming households.
Home prices have risen in the last few years, but they are beginning to moderate.
Finally, saving for a down payment stymies many first-time buyers. That can be blamed on recent high inflation, rising home prices, and lagging income growth.
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Learn about 7 costly first-time home buyer mistakes — and how to avoid them.
Best types of mortgages for first-time home buyers
If this is your first time buying a home, consider one of the following types of home loans to finance your purchase:
FHA loans
FHA loans can be great for first-time buyers who may not have had time to pay down debts or build up credit yet. You only need a 580 credit score and 3.5% down payment (or a 500 credit score with 10% down). You can also have a DTI ratio of up to 43%.
VA loans
VA loans are great choices for military personnel and their families. You don't need any down payment.
USDA loans
You might qualify for a USDA loan if you're a low- to moderate-income buyer in a rural area. USDA loans don't require down payments, either.
HomeReady and Home Possible loans
HomeReady (by Fannie Mae) and Home Possible (by Freddie Mac) are two mortgage programs that let you get a mortgage with just 3% down — and you may not need a minimum qualifying credit score.
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Here's how to get a mortgage if you don’t have a credit score.
First-time home buyer guide: FAQs
How much do most first-time home buyers put down?
A 2024 report by the National Association of REALTORS® (NAR) stated that the typical down payment for first-time home buyers was 9% in 2024. This is much lower than that of repeat buyers, with a typical down payment of 23%.
What qualifies you as a first-time home buyer?
There are three ways to qualify as a first-time home buyer: You have never bought a single-family home before, you haven't owned a home in the last three years, or you're a displaced homemaker/single parent who hasn't owned a home in the last three years (unless it was joint ownership with a spouse).
Which loan is best for a first-time home buyer?
An FHA loan is the best option for many first-time buyers because it accepts lower credit scores and higher debt-to-income ratios (DTIs) than many other types of mortgages.
What do first-time home buyers get?
First-time home buyer benefits vary by lender. Some mortgage lenders offer down payment assistance programs available only to first-time buyers. Others allow for lower down payments on conventional loans — for example, a lender may require 5% down for repeat buyers but only 3% down for first-timers.
What are first-time buyer education courses?
Some mortgage programs require first-time home buyers to take an educational course so they're informed and prepared for homeownership. For example, HomeReady by Fannie Mae and Home Possible by Freddie Mac both require first-time buyers to complete online education courses.
Laura Grace Tarpley edited this article.
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