It depends on the program. Fannie Mae and Freddie Mac both define a first-time home buyer as someone who has not owned a primary residence in the last three years. FHA, VA, and USDA do not have a first-time buyer designation per se; they are simply available regardless of prior homeownership. Many state and local Down Payment Assistance programs have their own definitions, sometimes including income limits and homebuyer-education requirements.

The program minimums: VA and USDA at 0% down, FHA at 3.5% down, conventional Fannie HomeReady and Freddie Home Possible at 3% down, standard conventional at 5% down. Many first-time buyers qualify for one of the low-down-payment programs. State and local Down Payment Assistance can cover all or part of the remaining down payment and closing costs. We work with lenders going to program minimums where allowed.

Conventional loans with less than 20% down require Private Mortgage Insurance (PMI). PMI on a conventional loan is removable once you reach 20% equity (by paying down the loan or by appreciation). FHA mortgage insurance (MIP) is different: on most FHA loans originated after June 3, 2013, MIP is for the life of the loan. The way out of FHA MIP is to refinance into a conventional loan once you have enough equity, typically 80% LTV or lower.

A common rule of thumb is to keep the total housing payment (Principal + Interest + Taxes + Insurance + HOA) at or below 28-33% of gross monthly income, and total debt payments (housing plus all other monthly debt) at or below 43% of gross monthly income. Lenders will go higher with strong compensating factors. We recommend running the affordability math on the lower end to leave a buffer for life, not maxing the qualification.

Program minimums: FHA at 580, VA and USDA at lender discretion (typically 580-620), conventional at 620. The best pricing is at 740+ FICO across all programs. Below 580, FHA at 500-579 is possible with 10% down. We pull both a soft inquiry and a hard inquiry depending on stage; the initial pre-approval pull is typically a soft pull that does not affect your score.

Pre-qualified is an informal estimate based on what you tell the lender; it does not carry weight with sellers. Pre-approved means the lender has run credit, verified income and assets, and issued a real letter that can be shown to listing agents. For competitive offers in any reasonable market, you need a pre-approval letter, not just a pre-qualification.

Typical closing costs run 2-5% of the purchase price on a primary residence. Components include lender origination, appraisal, title insurance (lender and owner policies), title search, escrow setup, recording fees, transfer taxes (varies by state and county), and prepaid items (homeowners insurance premium, prorated property taxes, prepaid interest). Many of these are negotiable, and seller concessions can cover some of them. We give you a Loan Estimate within three business days of application so you can see the full picture.