Who this is for
- Anyone who has not owned a home in the last three years, since that counts as first-time for most programs.
- Buyers with 3% to 5% saved, plus enough left over to cover closing costs.
- Renters who are comparing their monthly rent against the total monthly cost of owning a home.
How it works, step by step
- Check your credit and fix any errors three months before you shop, because each 20-point change in your score changes your price.
- Get pre-approved by two or three lenders in the same week, since the credit checks count as one inquiry if done within 45 days.
- Ask about down payment assistance from your state housing agency, since many programs are grants or loans that get forgiven over time.
- Compare Loan Estimates line by line, paying close attention to Section A, the lender fees, and the APR shown at the top.
Pros
- Low down payment programs exist for most buyers: 3% for conventional, 3.5% for FHA, and 0% for VA and USDA loans.
- State and local housing agencies offer assistance grants that lower your upfront cost.
- Lenders compete hard for first-time buyers, and that competition can work in your favor.
Cons
- Under 20% down means you pay mortgage insurance until your equity grows enough.
- Closing costs of 2% to 5% of the loan amount surprise many first-time buyers.
- Stress and time pressure during the search push people to skip shopping around for a lender.