What is DTI and why does it matter?

Debt-to-income (DTI) compares your monthly debt payments—including the new mortgage—to your gross monthly income. Lower DTI improves approval odds and pricing. Programs have maximum DTI limits.

First-Time Home Buyer Guide

Q: How much should a first-time buyer put down?

Many buyers put 3%–5% down on Conventional loans and 3.5% on FHA. VA and USDA can allow 0% down if eligible. A larger down payment can lower your rate and help you avoid monthly PMI.

Q: What credit score do I need for a mortgage?

Guidelines vary by program and lender. Conventional loans often price best at 740+. FHA programs may allow lower scores with other compensating factors. Strong credit generally improves pricing.

Q: What’s the difference between pre-qualification and pre-approval?

Pre-qualification is an informal estimate based on self-reported info. Pre-approval reviews your credit, income, assets and provides a conditional commitment subject to underwriting and property review.

Q: Are closing costs the same as the down payment?

No. Your down payment reduces the loan amount. Closing costs (typically ~2–5% of the loan) include lender, title, and government fees, plus prepaids for taxes and insurance.

Your complete, step-by-step guide to navigating the home buying process with confidence. Learn the steps, what lenders look for, how payments are built, and how to avoid surprises.

Estimate your payment Mortgage glossary

Are You Ready to Buy a Home?

Start with a candid look at your budget, savings, and timeline. Homeownership brings recurring costs—maintenance, utilities, and potential HOA dues—on top of your mortgage.

Emergency fund: Many buyers keep 3–6 months of expenses in reserve.
Stable income: Lenders verify employment and income history.
Time horizon: Buying makes more sense if you’ll stay long enough to offset closing costs.

Getting Your Finances in Order

Credit & DTI

Stronger credit typically lowers your rate. Debt-to-income (DTI) compares your monthly debts—including the new mortgage—to your gross income. Lower is better.

Down payment & closing costs

Minimums vary by program (as low as 0% for eligible VA/USDA, 3–3.5% for many others). Closing costs are usually ~2–5% of the loan. See Closing Costs Explained.

Quick checklist: pull credit reports; pay down revolving balances; build reserves; estimate down payment + closing costs; avoid new debt before closing.

Understanding Mortgages

Loan types

Conventional: Broadly used; PMI if < 20% down.
FHA: Flexible credit; upfront + annual MIP.
VA: For eligible veterans; no monthly PMI; funding fee may apply.
USDA: Zero down in eligible rural areas; guarantee fees.

Rate structure

Choose between a fixed rate (stable payment) and an ARM (lower initial rate that can adjust). Compare in our ARM vs. Fixed guide.

Using the Mortgage Calculator Effectively

Enter price and down payment (% or $).
Set rate and term; add property tax, insurance, HOA, and PMI/MIP if applicable.
Review the payment breakdown (PITI) and amortization tables.

Try different scenarios to see how price, rate, and term affect your monthly payment and total interest. Launch the calculator from the top of this page or go now.

The Mortgage Pre-Approval Process

A pre-approval reviews your credit, income, and assets and issues a conditional commitment. It strengthens offers and helps set a realistic price range.

Checklist: pay stubs, W-2s/1099s, two months of bank statements, ID, rental history (if applicable), and details for any debts or child support.

Pre-qual vs. pre-approval: pre-qual is an estimate; pre-approval is a document-backed review.

Finding Your Home & Making an Offer

Work with a local agent who understands your market and budget.
Create a “needs vs. wants” list (location, commute, beds/baths, HOA/fees).
Use recent comps to guide offer strategy. Include your pre-approval letter.

Application & Underwriting

After the contract is signed, your lender gathers documents and evaluates the “Three C’s”—Capacity (income/DTI), Capital (assets/reserves), and Collateral (the property via appraisal).

Inspection & Appraisal

A home inspection helps you understand condition and negotiate repairs or credits. The appraisal estimates market value for the lender. Significant gaps between price and value may require renegotiation or a larger down payment.

Preparing for Closing

Secure homeowners insurance and provide the binder to your lender.
Review your Closing Disclosure (CD)—compare to the Loan Estimate.
Arrange wired funds or cashier’s check for cash to close.

Need a refresher on fees? Read Closing Costs Explained.

Closing Day

Complete a final walkthrough to confirm condition and repairs.
Bring a government ID and any required funds.
Sign the note, deed of trust/mortgage, and final disclosures.

After You Close

Set up autopay for your mortgage and escrow analysis reminders.
Track principal reduction and equity growth over time.
Create a maintenance plan and budget for ongoing costs.

Frequently Asked Questions

How much should a first-time buyer put down?

Minimums vary by loan type. Bigger down payments may reduce your rate and help avoid PMI on Conventional loans.

What credit score do I need for a mortgage?

There’s no single number. Conventional pricing improves at higher tiers (e.g., 740+), while FHA can allow lower scores with other strengths.

What’s the difference between pre-qualification and pre-approval?

Pre-approval reviews documentation and credit; it’s stronger than pre-qualification.

Are closing costs the same as the down payment?

No—closing costs are additional fees and prepaids due at closing.