Loanplaced first-time home buyer guide
First-time home buyers get better mortgage terms than most people realize — but only if the file is structured correctly. Loanplaced's mortgage lead spent 12 years underwriting these files before joining us. Here's what actually works.
What counts as "first-time" (it's more generous than the name suggests)
Federal programs typically define a first-time buyer as someone who has not owned a principal residence in the past three years. That means you can qualify for first-time buyer programs even if you previously owned a home years ago. This matters — the programs unlock lower down payments and down payment assistance.
The main first-time buyer program options
| Program | Min down payment | Min FICO | Best for |
|---|---|---|---|
| Conventional (Fannie HomeReady/Freddie Home Possible) | 3% | 620 | Buyers with FICO 700+ and stable income |
| FHA | 3.5% | 580 | Buyers with FICO 580–680 or higher DTI |
| VA (military) | 0% | 580 (lender-dependent) | Qualifying veterans, active duty, eligible surviving spouses |
| USDA (rural/suburban) | 0% | 640 | Properties in eligible zones with income under limit |
| State/local DPA programs | Varies — often $10K–$25K grants or 0% forgivable loans | Varies | Stacked with FHA or Conventional to reduce cash-to-close |
The cash you actually need to close
Beyond the down payment, first-time buyers commonly under-budget for closing costs and reserves. On a $350,000 purchase:
- Down payment (3.5% FHA): $12,250
- Closing costs (2–5% of loan): $7,000–$17,500
- Prepaid escrow (taxes + insurance): $2,500–$4,500
- Cash reserves (2 months PITI recommended): ~$5,000
- Total cash needed: ~$27,000–$40,000
Loanplaced advisors run this budget with borrowers before pre-approval so the number doesn't surprise you at closing.
The Loanplaced first-time buyer checklist
- Pull your credit reports 90 days before shopping. Dispute any errors immediately (see our credit guide).
- Stop opening new credit. No new cards, no new auto loans, no BNPL from now through closing. Every new inquiry can shift your rate.
- Document 2 years of employment history. Gaps need explanation; job changes within field are usually fine.
- Verify your down payment source is "seasoned." Money in your account 60+ days doesn't need documentation. Recent large deposits will require paper trail.
- Get pre-approved (not just pre-qualified). Pre-approval requires document verification and gives you a real offer letter. Realtors take pre-approvals seriously.
- Shop with the pre-approval as your ceiling, not your target. If Loanplaced pre-approves you for $400K, shopping under $350K keeps you safely qualified even if rates rise before closing.
Common first-time buyer mistakes Loanplaced sees
- Assuming 20% down is required. It isn't. See the program table above.
- Chasing the lowest advertised rate. Rate on a billboard is quoted for a hypothetical perfect borrower. Your rate depends on FICO, DTI, LTV, property type, and loan program.
- Skipping the home inspection. Not required by lenders in most states, but worth every dollar.
- Emptying the emergency fund for the down payment. Reserves after closing are as important as the down payment. Lenders check this.
- Applying for a mortgage while switching jobs. Underwriters need employment stability. If the change is unavoidable, get in writing that you'll still receive the same or higher income at the new job.