First-Time Home Buyer Questions, Answered

How much do first-time home buyers actually put down?

The median down payment for first-time buyers was 10%, according to the National Association of Realtors' 2025 Profile of Home Buyers and Sellers. Repeat buyers put down a median of 23%. Remember that a median is the middle of the range, not a minimum — half of first-time buyers put down less than 10%.

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Do you really need 20% down to buy a house?

No. Conventional loans go down to 3% for qualified first-time buyers, FHA to 3.5%, and VA and USDA loans require nothing down for eligible borrowers. What 20% buys you is the avoidance of mortgage insurance on a conventional loan — a real saving, but not a requirement for getting approved.

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How much money do I need to buy a $400,000 house?

At FHA's 3.5% minimum, the down payment is $14,000. Add closing costs of 2%–5% of the price — $8,000 to $20,000 per the CFPB — plus earnest money (credited back at closing) and a couple of months of reserves. A realistic all-in cash figure is roughly $25,000 to $40,000 unless you are putting more down.

Guide: cash needed for a $400k house →

Can I use gift money for my down payment?

Yes. Both FHA and conventional loans allow gift funds for a primary residence, but the money must be documented: a signed gift letter stating it is not a loan, plus a paper trail showing the transfer. Lenders also restrict who can give it — typically family, and for FHA also employers or approved charities.

How much should I have left in savings after closing?

Lenders like to see roughly two to three months of mortgage payments in reserves after closing, and some loan programs require it. Beyond the lender's rule, keeping a cash cushion matters more once you own: repairs arrive on their own schedule, and an empty account turns a $2,000 problem into credit card debt.

Guide: hidden costs of buying →

Is it better to make a bigger down payment or keep the cash?

More down means a smaller loan, a lower payment, and — at 20% on a conventional loan — no PMI. Less down keeps cash available for repairs and emergencies. The middle path most buyers land on: put down enough to get a good rate, keep the two to three months of payments in reserve lenders like to see (above), and cancel PMI later as equity builds.

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What credit score do I need to buy a house?

FHA allows 3.5% down at a 580 score, and scores of 500–579 with 10% down. Conventional loans generally start at 620. VA and USDA set no government minimum, though lenders typically apply their own floors around 620 and 640. A higher score does not just decide approval — it lowers your rate and your PMI.

Guide: credit score to buy a house →

What is down payment assistance, and do I qualify?

Down payment assistance comes as grants, forgivable second loans, repayable seconds, or mortgage credit certificates, usually from state and local housing agencies. Eligibility is normally based on income limits, purchase price caps, and a homebuyer education course. Many programs define a first-time buyer as anyone who has not owned a home in three years.

Guide: down payment assistance →

What is the current mortgage rate?

Freddie Mac's Primary Mortgage Market Survey put the 30-year fixed average at 6.58% and the 15-year fixed at 5.96% for the week of July 23, 2026. That is a national average of offered rates, not a quote — yours will depend on your credit score, down payment, loan type, and the lender you choose.

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How much house can I afford on my salary?

The common guideline is 28/36: housing costs up to 28% of gross monthly income, total debt payments up to 36%. Many lenders approve total debt up to 43%, and higher with compensating factors. Being approved for a number is not the same as being comfortable with it — run the payment against your actual budget.

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Does getting pre-approved hurt my credit score?

A pre-approval involves a hard inquiry, which typically costs a few points. The important protection: multiple mortgage inquiries made inside a 45-day window count as a single inquiry, so shopping several lenders does not multiply the damage. The CFPB explicitly encourages comparing offers for exactly this reason.

How long does a mortgage pre-approval last?

Typically 60 to 90 days, though some lenders issue 30-day letters — this is lender policy, not a rule. When it expires you re-verify income, assets, and credit, which usually means another credit pull. If your house hunt runs long, ask your loan officer to refresh it before you write an offer.

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What is the difference between pre-qualification and pre-approval?

Pre-qualification is an estimate based on numbers you state, with little or no verification — useful for early budgeting. Pre-approval means the lender has pulled your credit and reviewed documentation of income and assets. Sellers take pre-approval seriously and often will not consider an offer without one.

FHA or conventional — which one is cheaper for me?

It usually comes down to mortgage insurance. FHA charges 1.75% upfront plus an annual premium (commonly 0.55%) that lasts the life of the loan when you put less than 10% down. Conventional PMI can be cancelled at 20% equity. FHA often wins on approval with a lower score; conventional usually wins on long-run cost.

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Should I pay points to lower my rate?

One discount point costs 1% of the loan amount and buys a lower rate, though the CFPB notes the reduction varies by lender, loan type, and market — there is no fixed exchange rate. Points make sense only if you keep the loan past the break-even month, so compare the upfront cost against the monthly saving.

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How many lenders should I get quotes from?

The CFPB recommends collecting at least three Loan Estimates. They use a standard format, so you can compare rate, origination charges, and cash to close line by line. Request them within the same 45-day window and the credit inquiries count as one. This is the highest-value hour in the whole process.

How much are closing costs for a first-time buyer?

Closing costs typically run 2% to 5% of the purchase price, according to the CFPB, and that is on top of your down payment. Against the June 2026 median existing-home price of $440,600 reported by NAR, that is roughly $8,800 to $22,000. Location matters a lot — transfer taxes vary widely by state.

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What is actually included in closing costs?

Two buckets. Loan costs: origination charges, any discount points, appraisal, and credit report fees. Other costs: title search and title insurance, recording fees and transfer taxes, plus prepaids — homeowners insurance, property taxes, and interest collected in advance. Your Loan Estimate itemizes all of it before you commit.

Can the seller pay my closing costs?

Often, yes. On a conventional loan for a primary residence, Fannie Mae caps interested-party contributions at 3% when your loan-to-value is above 90%, 6% between 75.01% and 90%, and 9% at 75% or below. FHA allows up to 6% of the sales price. Anything above the cap is treated as a price reduction.

Who pays the buyer's agent commission in 2026?

It depends, and that's the change. Before August 17, 2024, the seller almost always paid the buyer's agent through the MLS listing. After the NAR settlement, that offer can no longer appear on the MLS, and any agent working with you under an MLS listing must first have you sign a written buyer-agency agreement stating their fee before touring homes — the fee is negotiable, not fixed by law. The seller can still agree to cover it as a concession, but nothing guarantees it. Clever Real Estate's 2026 survey put the buyer-side average at roughly 2.5%–2.8% of the price — about $10,000–$11,200 on a $400,000 home — so ask upfront who is expected to pay it before you tour.

Guide: buying without a realtor after the NAR settlement →

How much earnest money do I need, and do I get it back?

Typically 1% to 3% of the purchase price, higher in competitive markets. It is held in escrow, not by the seller, and it is credited toward your down payment or closing costs at closing. You get it back if you cancel under an active contingency — financing, appraisal, or inspection — within the contract deadlines.

Guide: earnest money →

What is the difference between the down payment and closing costs?

The down payment is your equity — money that goes toward the price of the house and stays with you as ownership. Closing costs are fees for services and taxes that make the transaction happen, and that money is spent. Both are due at closing, which is why the total cash to close surprises people.

Guide: cash needed to buy a house →

Do I pay for the inspection and appraisal upfront?

Largely yes. A home inspection runs roughly $296 to $424 (average about $343), per Angi's 2026 cost data, and you pay the inspector directly, usually before you know whether the deal survives. Appraisals run about $300 to $450 (average near $357), per HomeAdvisor and Opendoor, and lenders often collect that fee upfront too. Budget roughly $700 combined as money at risk during the contingency period — and again on the next house if a contract falls through. If the appraisal comes in below your offer price, an appraisal contingency lets you renegotiate, cover the gap in cash, or walk away with your earnest money.

Guide: what to do if the appraisal comes in low →

What are prepaids and escrow at closing?

Prepaids are future costs collected early: a year of homeowners insurance, several months of property taxes to fund the escrow account, and interest from closing to the end of the month. They are not lender fees and they are not lost — but they are real cash you need at the table.

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Can I roll closing costs into my mortgage?

Generally not on a purchase — that is a refinance feature. The two realistic alternatives are seller concessions, within the caps above, and lender credits, where you accept a higher interest rate in exchange for money toward closing costs. Both reduce cash today at a cost you should quantify before agreeing.

What is PMI and how much does it cost?

Private mortgage insurance protects the lender, not you, and is required on most conventional loans with less than 20% down. It typically costs 0.5% to 1.5% of the loan amount per year, billed monthly — roughly $150 to $450 a month on a $360,000 loan. Better credit and a larger down payment lower the rate.

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When does PMI go away?

Under the Homeowners Protection Act you can request cancellation at 80% of the home's original value if you are current on payments, have no junior liens, and the value has not declined. Your servicer must terminate it automatically at 78%, and in any case by the midpoint of the loan term — year 15 of a 30-year loan.

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How much should I budget for maintenance and repairs?

The common rule of thumb is 1% to 2% of the home's value each year — $4,400 to $8,800 on a $440,000 house. It is a rule of thumb, not a measured figure: older homes and harsh climates run higher, and costs arrive lumpy rather than monthly. Set the money aside anyway.

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Will my monthly mortgage payment change after I buy?

The principal and interest portion of a fixed-rate loan never changes. The escrow portion does: property tax assessments and homeowners insurance premiums are re-evaluated annually, and your servicer adjusts the payment to match. A payment rising a hundred dollars at the annual escrow analysis is normal, not an error.

True Cost of Homeownership →

How much will property taxes and homeowners insurance cost?

Property taxes are local. Tax Foundation data puts effective rates on owner-occupied housing at roughly 0.3% to just over 2% of value depending on the state — a spread of thousands of dollars a year on the same house. Insurify projects an average homeowners premium near $3,057 for 2026, with wide regional variation.

Guide: insurance cost by state →

What can I deduct as a homeowner?

Only if you itemize. The mortgage interest deduction covers interest on up to $750,000 of acquisition debt for loans taken after December 15, 2017. State and local taxes, including property tax, are capped at $40,400 for 2026 per the IRS, reduced above $505,000 of modified AGI. Energy-efficiency upgrades may qualify for separate credits.

Guide: home energy tax credits →