How to Buy a House With No Down Payment: 2026 Options

The 20% down payment requirement is one of the most persistent myths in real estate. In reality, research from the National Association of Realtors consistently shows that first-time buyers put down significantly less than 20% — and a meaningful share put down nothing at all.

Zero down payment mortgages are real, available in 2026, and appropriate for a broader range of buyers than most people assume. They do come with tradeoffs, and those tradeoffs are worth understanding before you decide whether a no-down-payment path is right for your situation.

Is Zero Down Payment Actually Possible?

Yes, and it is more common than many buyers realize. There are two main government-backed loan programs that offer 0% down payment options without requiring private mortgage insurance in the traditional sense:

• VA loans — for eligible veterans, active-duty military, and surviving spouses
• USDA loans — for buyers purchasing in eligible rural and suburban areas

Beyond these programs, many buyers achieve zero out-of-pocket down payment by combining a low-down-payment mortgage (3%-3.5%) with down payment assistance grants or second mortgage programs that cover the required down payment.

Option 1: VA Loans (0% Down, No PMI)

The VA loan is broadly considered the best mortgage product available to eligible borrowers. It requires no down payment, charges no monthly private mortgage insurance, and offers competitive interest rates that are typically lower than conventional loan rates.

Who Qualifies

• Veterans with qualifying service history
• Active-duty military members (typically 90 days during wartime, 181 days during peacetime)
• National Guard and Reserve members (six years of service, or 90 days under Title 32)
• Surviving spouses of veterans who died in the line of duty or from a service-connected disability

Key Features

• 0% down payment required
• No monthly PMI
• No maximum loan amount (buyers with full entitlement)
• Competitive rates, typically below conventional market rates
• VA funding fee: 1.25%-3.3% of the loan amount (waived for veterans with service-connected disability ratings of 10% or more)

The funding fee can be rolled into the loan, so it does not require cash at closing. For a complete breakdown of terms and eligibility, see our VA loan requirements for first-time buyers guide.

Option 2: USDA Loans (0% Down in Eligible Areas)

USDA Rural Development loans are available in areas designated by the USDA as rural or rural-adjacent — a designation that includes many suburban communities outside major metros. Approximately 97% of the United States land mass is USDA-eligible, covering about 35% of the U.S. population.

Who Qualifies

• Buyers purchasing in a USDA-eligible geographic area
• Income at or below 115% of the area median income (limits vary by county and household size)
• Credit score typically 640+ (though some lenders go lower)
• Property must be the primary residence

Key Features

• 0% down payment required
• Annual guarantee fee: 0.35% of the loan balance (lower than FHA MIP)
• Upfront guarantee fee: 1% of the loan (can be financed into the loan)
• Competitive rates, often similar to conventional
• Household income limits apply

For full eligibility details and how to check your area’s status, see our USDA loan requirements 2026 guide.

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Option 3: Down Payment Assistance Programs (Covering the Gap)

For buyers who do not qualify for VA or USDA loans, down payment assistance (DPA) programs can effectively eliminate the down payment requirement by providing grants, forgivable loans, or second mortgages that cover the required down payment on a conventional or FHA loan.

How DPA Programs Work

Grants: Free money that does not need to be repaid. Typically funded by state housing finance agencies, nonprofit organizations, or local governments. Usually 2-5% of the purchase price.

Forgivable second mortgages: A silent second mortgage that is forgiven after you remain in the home for a specified period (typically 3-10 years). If you sell or refinance before the forgiveness period, you repay a prorated share.

Deferred-payment second mortgages: No monthly payment required; the balance is repaid when you sell, refinance, or pay off the first mortgage.

Matched savings programs: Some programs match savings dollar-for-dollar up to a maximum, requiring some contribution but amplifying it significantly.

Where to Find DPA Programs

• Your state’s Housing Finance Agency (HFA) — every state has one
• HUD-approved housing counseling agencies
• Local housing authorities and community development organizations
• Some lenders have proprietary DPA programs

For a state-by-state breakdown, see first-time home buyer grants by state and our down payment assistance programs guide.

Option 4: Employer and Workforce Assistance Programs

Some employers — particularly healthcare systems, school districts, and municipal governments — offer homebuyer assistance as an employee benefit. These programs may provide forgivable loans or grants specifically for employees purchasing in defined geographic areas.

University systems, hospitals, and public safety agencies are among the most common employers offering these programs. Check with your HR department before assuming no such benefit exists.

Option 5: Combining Programs

The most effective approach for buyers who need maximum assistance is stacking programs. Examples that analysis of state program structures supports:

• USDA loan (0% down) + closing cost assistance grant
• FHA loan (3.5% down) + state DPA grant (3.5% grant to cover down payment) = effectively 0% down
• VA loan (0% down) + seller concessions (covering closing costs) = zero out-of-pocket

Not all lenders support combined programs, and not all DPA programs are compatible with every loan type. Confirming compatibility is a critical step. See our best mortgage lenders for first-time buyers article for what to ask lenders about program compatibility.

Tradeoffs of Zero Down Payment Loans

Zero down payment is not free. Understanding the tradeoffs helps you make a genuinely informed decision.

Higher Monthly Cost

A smaller down payment means a larger loan balance, which means a larger monthly payment. On a $300,000 home:

Down Payment	Loan Amount	Estimated Monthly P&I (at 7%)
0%	$300,000	$1,996
3.5% (FHA)	$289,500	$1,926
5%	$285,000	$1,896
20%	$240,000	$1,597

Mortgage Insurance Costs

Beyond VA and USDA loans (which have their own fee structures), zero or low down payment conventional and FHA loans require mortgage insurance:

• FHA: upfront MIP of 1.75% plus annual MIP of 0.55-1.05% of the loan, for the life of the loan in most cases
• Conventional with PMI: typically 0.2-1.5% annually, cancellable at 80% LTV

For buyers who do not qualify for VA or USDA, a conventional loan with a state grant covering the down payment often results in a lower long-term cost than FHA because PMI is cancellable.

Less Equity Buffer

Buyers who put 0% down start with no equity cushion. A modest decline in home values can result in being underwater — owing more than the home is worth. This is particularly relevant if the buyer needs to sell within the first few years.

Stricter Qualification in Some Cases

Some no-down-payment paths have income limits, geographic restrictions, or eligibility requirements that limit availability.

Is No Down Payment Right for You?

A zero down payment path makes sense when:

• You are VA or USDA eligible and otherwise financially ready
• A DPA grant covers your down payment and you can handle the monthly payment comfortably
• Local market conditions make waiting to save a down payment more expensive than carrying mortgage insurance
• You have stable employment, solid credit, and an emergency fund beyond the home purchase

It may be worth waiting when:

• You would be financially stretched by the monthly payment with no cushion
• You have significant debt that already creates DTI pressure — for help with this, see our first-time home buyer with student loans guide
• You are in a declining or flat market where equity will not build quickly
• Your credit score needs improvement before you qualify for competitive rates — see our how to improve your credit score fast guide

What to Check Before You Apply

Before committing to a no-down-payment strategy, verify:

1. VA or USDA eligibility (property location and borrower qualification)

1. DPA program income and purchase price limits for your target area

1. Lender compatibility with your chosen program

1. Total monthly payment including taxes, insurance, and any mortgage insurance

1. Whether you have reserves to handle unexpected home expenses after closing

The first-time home buyer checklist walks through each of these steps in order.

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Summary

Buying a house with no down payment is legitimate, achievable, and widely used by first-time buyers in 2026. The two strongest paths are VA loans for eligible military borrowers and USDA loans for buyers in eligible areas. For everyone else, combining a low-down-payment loan with a state or local down payment assistance grant can achieve the same outcome.

The key is understanding the full cost — monthly payment, mortgage insurance, and long-term equity trajectory — before committing. For a broader view of your options, also review first-time home buyer programs in 2026 and our FHA loan requirements guide.

How Much House Can You Afford in 2026? The 28/36 Rule Explained

One of the most important questions in home buying — and one of the most misunderstood — is how much house you can actually afford. Lenders will approve you for the maximum amount your income and credit support. That number is not the same as the amount you should borrow.

This guide breaks down the two most widely used affordability frameworks, applies them to real numbers for 2026 home prices and interest rates, and explains how to find a number you can live with comfortably — not just one you can technically qualify for.

The Difference Between Pre-Approval Amount and Affordability

Lenders approve loans based on debt-to-income ratios and credit history. Their job is to determine whether you can repay the loan — not whether the payment fits your lifestyle, retirement goals, childcare costs, or vacation plans.

Buying at the top of your approval amount is one of the most common first-time buyer mistakes. Studies of mortgage default patterns consistently show that borrowers who stretch to maximum approval amounts are significantly more vulnerable to financial stress when income disruptions or unexpected expenses occur.

The goal of affordability analysis is to set a comfortable ceiling before you start shopping — not after you fall in love with a house.

The 28/36 Rule: The Standard Framework

The 28/36 rule is the most widely referenced affordability guideline in personal finance:

• 28% rule: Monthly housing costs (principal, interest, property taxes, homeowners insurance, and HOA fees if applicable) should not exceed 28% of gross monthly income.
• 36% rule: Total monthly debt payments (housing + all other debts) should not exceed 36% of gross monthly income.

Applying the 28/36 Rule

For a household with $85,000 gross annual income ($7,083/month):

• Maximum monthly housing cost: $7,083 x 28% = $1,983
• Maximum total monthly debt: $7,083 x 36% = $2,550
• If existing debts (car, student loans, credit cards) total $400/month, maximum housing cost under the 36% rule: $2,550 – $400 = $2,150
• The binding constraint is the lower of the two: $1,983/month

At current rates, what does $1,983/month in housing costs buy?

Using a 6.75% rate with a 10% down payment and estimates for taxes ($300/month) and insurance ($120/month):

• Total housing budget: $1,983
• Taxes + insurance: $420
• Available for P&I: $1,563
• At 6.75%, $1,563/month supports approximately a $245,000 loan
• Plus 10% down: approximately a $272,000 home

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The 28/36 Rule vs Lender Approval Standards

Lenders do not use the 28/36 rule. They use debt-to-income ratio standards that are significantly more permissive:

Loan Type	Max Front-End DTI	Max Back-End DTI
Conventional	28% (guideline)	45-50%
FHA	31% (guideline)	43-57%
VA	No hard limit	41% (residual income test)
USDA	29%	41%

A lender approving you at 45% back-end DTI may approve a payment $500-$800/month higher than what the 28/36 rule recommends. That gap represents money that cannot go toward savings, retirement, childcare, or life’s inevitable surprises.

The 25% Post-Tax Rule: A More Conservative Approach

Some financial planners recommend the 25% post-tax rule: keep total housing costs below 25% of monthly take-home pay (net income after taxes and payroll deductions).

For the same $85,000 gross income household, assuming 22% effective federal tax rate and 7.65% payroll taxes:

• Monthly take-home (estimate): ~$5,500
• 25% of take-home: $1,375/month

This is more conservative than the 28/36 rule and reflects what many financial planners consider a sustainable long-term housing cost level — particularly for single-income households or households with variable income.

Real Affordability by Income Level (2026)

The following estimates use a 6.75% interest rate, 5% down payment, and average property tax/insurance estimates. These are illustrative ranges, not guarantees.

Annual Income	28% Rule Max Payment	Estimated Home Price Range
$50,000	$1,167/month	$155,000 – $180,000
$65,000	$1,517/month	$205,000 – $235,000
$80,000	$1,867/month	$255,000 – $295,000
$100,000	$2,333/month	$320,000 – $370,000
$120,000	$2,800/month	$385,000 – $445,000
$150,000	$3,500/month	$485,000 – $560,000

Actual affordability depends heavily on property taxes (which vary enormously by state and county), HOA fees, existing debt load, and down payment amount.

What Affects Your Actual Affordability

Interest Rate

Mortgage rates are the single biggest variable in monthly payment calculations. The difference between a 6.0% and a 7.0% rate on a $350,000 loan is approximately $215/month — or roughly $25,000 over five years.

Buyers who improve their credit score before applying or who shop multiple lenders can often secure rates 0.25%-0.50% below what they would receive from a single lender without comparison shopping.

Property Taxes

Property tax rates vary from under 0.3% of home value annually (Hawaii) to over 2.5% (Illinois, New Jersey). On a $350,000 home, the difference between a 0.5% and 2.0% tax rate is $437/month — enough to dramatically shift affordability.

First-time buyers often underestimate property taxes. Always research the specific county rate for homes you are considering.

HOA Fees

Homeowners association fees for condos and planned communities range from $100 to $800+ per month. HOA fees are included in the front-end DTI calculation by lenders and directly reduce how much loan you can afford.

Down Payment

A larger down payment reduces the loan size, the monthly payment, and often the PMI cost — but it also reduces your liquid reserves. Buyers should model affordability with and without PMI to understand how different down payment amounts affect both monthly cash flow and long-term cost.

See our detailed guide on how much down payment do you really need.

Existing Debt

Every $100/month in existing minimum debt payments reduces your available housing budget by roughly $100/month under the 36% back-end rule. Paying down a car loan or credit card before buying can meaningfully increase buying power.

Income Scenarios: Single vs Dual Income

Dual-income households have significantly more buying power, but also more risk exposure. If one income disappears, the housing payment may not be sustainable on a single income.

A useful stress test: can you make the mortgage payment on one income alone for at least 3-6 months? If the answer is no, you may be reaching beyond what is financially safe.

The Emergency Fund Rule

Buying a home changes your expense profile significantly. Homes require maintenance, and ownership costs that renters ignore — roof repairs, HVAC replacement, plumbing failures — become your responsibility. Industry estimates suggest budgeting 1%-2% of the home value annually for maintenance.

For a $300,000 home, that is $3,000-$6,000 per year, or $250-$500 per month that does not appear in any lender’s calculation.

Before finalizing a buying budget, confirm you have:

• Down payment covered
• Closing costs covered (2%-5% of loan amount)
• Emergency fund of 3-6 months of living expenses remaining after closing
• A realistic monthly maintenance budget factored into your housing cost ceiling

For guidance on avoiding the common errors that stretch buyers too thin, see our first-time home buyer mistakes to avoid guide.

How to Increase Your Buying Power

If today’s affordability numbers are frustrating, several strategies can improve the picture:

1. Improve your credit score: Moving from 650 to 720 can reduce your interest rate by 0.5%, adding $40,000-$60,000 in buying power on a typical loan. See how to improve your credit score fast.

1. Pay down existing debt: Eliminating a $350/month car payment can increase your housing budget by that same amount — potentially $50,000+ in buying power.

1. Explore assistance programs: Down payment grants and assistance programs reduce the cash you need upfront and may allow a larger down payment, shrinking the loan size. See down payment assistance programs and first-time home buyer grants by state.

1. Consider different loan types: VA loans (zero down, no PMI) or USDA loans (zero down, low annual fee) dramatically change the affordability equation for eligible buyers. See first-time home buyer programs 2026 for a full overview.

1. Expand your geographic search: Home prices and property tax rates vary significantly even within metro areas. A 20-minute commute change can open access to meaningfully lower prices.

Rent vs Buy: Is Buying Even the Right Move?

Affordability is not just about whether you can afford to buy — it is about whether buying makes financial sense compared to renting in your market.

In markets where home prices are high relative to rents, renting and investing the would-be down payment sometimes produces better outcomes over a 5-7 year horizon. In markets where prices are moderate relative to rents, buying typically wins after 3-5 years.

Our rent vs buy calculator models both scenarios with your specific numbers.

The First Step: Get Pre-Approved

Knowing your theoretical affordability ceiling is useful, but pre-approval from a lender confirms what you will actually be approved for and at what rate. Most sellers require a pre-approval letter to accept an offer.

Get pre-approved by at least two or three lenders to compare rates and fees. The process involves a hard credit pull, but multiple mortgage inquiries within a 45-day window count as a single inquiry for credit scoring purposes.

See our mortgage pre-approval process guide and our first-time home buyer checklist to ensure you are ready before you start shopping.

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Best Mortgage Lenders for First-Time Home Buyers in 2026 (Compared)

Choosing a mortgage lender is one of the most consequential financial decisions a first-time buyer makes. A quarter-point difference in interest rate on a $350,000 loan translates to roughly $16,000 in extra interest over 30 years. Yet most buyers accept the first offer they receive, largely because the mortgage landscape feels overwhelming from the outside.

This guide breaks down what separates the best lenders from the rest, what loan programs to look for, and how to evaluate offers side by side so you make an informed choice in 2026.

What Makes a Lender Good for First-Time Buyers

Not every lender is built for buyers who are going through the process for the first time. The best ones share a few characteristics:

• Low minimum down payment options — 3% conventional or 3.5% FHA programs
• Flexible credit score requirements — willingness to approve borrowers with scores below 680
• Down payment assistance compatibility — the ability to layer grants or second mortgages on top of their products
• Transparent fee structures — origination fees disclosed early, not buried in the Loan Estimate
• Educational resources — loan officers who explain terms rather than just push approvals
• Digital tools — online pre-approval, document upload, and loan tracking

First-time buyers should also look for lenders that participate in first-time home buyer programs and down payment assistance programs, since not all lenders accept every state or local program.

Types of Lenders to Consider

National Banks

Large institutions like Wells Fargo, Chase, and Bank of America offer convenience — you may already have accounts there — along with wide product menus. The downside is that their underwriting is often less flexible and their loan officers handle high volume, which can mean less personalized service.

Credit Unions

Credit unions are member-owned and frequently offer below-market rates and lower fees to members. Some have first-time buyer programs with reduced PMI requirements. The tradeoff is that membership eligibility varies and technology platforms tend to lag behind fintech lenders.

Mortgage Brokers

A broker shops your file to multiple wholesale lenders simultaneously, which can surface better rates than approaching lenders directly. Brokers are particularly useful for buyers with unusual income situations (self-employed, commission-based) or credit challenges.

Online / Nonbank Lenders

Lenders like Rocket Mortgage, Better, and loanDepot built their businesses around digital efficiency. They typically offer fast pre-approvals, strong app experiences, and competitive rates. Research shows online lenders close loans faster on average than traditional banks.

Community Development Financial Institutions (CDFIs)

CDFIs focus specifically on underserved borrowers and communities. They often offer products that go well below standard credit thresholds and may combine mortgage lending with homebuyer counseling.

Key Loan Programs First-Time Buyers Should Know

Before comparing lenders, understand which loan types apply to your situation. Each has different qualification requirements and cost structures.

Loan Type	Min. Down Payment	Min. Credit Score	Best For
FHA	3.5%	580 (500 with 10% down)	Lower credit scores
Conventional 97	3%	620	Buyers with good credit
VA	0%	Varies by lender	Veterans, active military
USDA	0%	640 typical	Rural and suburban areas
Jumbo	10-20%	700+	High-cost markets

For a deeper comparison of FHA versus conventional options, see our guide on FHA vs. conventional loans for buyers with bad credit.

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What to Compare When Evaluating Lenders

Interest Rate vs. APR

The interest rate is the base cost of borrowing. The annual percentage rate (APR) includes the interest rate plus lender fees, mortgage points, and other costs. Always compare APRs — not just rates — when shopping lenders. Two lenders quoting the same rate can have meaningfully different APRs if one charges heavier origination fees.

Lender Fees

Typical lender fees include:

• Origination fee — usually 0.5% to 1% of the loan amount
• Discount points — prepaid interest to buy down your rate (optional)
• Application fee — some lenders charge $300-500 upfront; others charge nothing
• Underwriting fee — ranges from $500 to $1,000+

For a full breakdown of what you will owe at closing, read our article on closing costs for first-time home buyers.

Loan Estimate Comparison

Federal law requires lenders to provide a Loan Estimate within three business days of receiving a complete application. Request estimates from at least three lenders before choosing. The Loan Estimate standardizes how costs are presented, making side-by-side comparison straightforward.

Rate Lock Policies

In a rising rate environment, how long a lender will lock your rate — and at what cost — matters. Standard locks run 30 to 60 days. Some lenders offer free float-down provisions that let you capture a lower rate if the market drops during the lock period.

Customer Service and Speed

Loan processing speed affects your ability to close on time. Sellers in competitive markets prefer buyers who can demonstrate fast, reliable financing. Ask each lender about their average time from application to closing and whether they guarantee closing dates.

How Your Credit Score Affects Lender Options

Your credit score shapes which lenders will approve you and at what rate. The relationship is not linear — most lenders tier their pricing, so moving from a 679 to a 680 score can shift you into a better pricing bucket.

• 760 and above — access to the best conventional rates
• 700-759 — competitive conventional rates with minor adjustments
• 640-699 — conventional approval with higher rate adjustments; FHA is often more competitive
• 580-639 — FHA is typically the primary path; limited conventional options
• Below 580 — FHA with 10% down; specialized lenders only

If your score needs work, our guide on how to improve your credit score fast covers the fastest legitimate methods before you apply.

How Much House Can You Actually Afford?

Lenders will approve you for more than you can comfortably afford. The maximum loan amount a lender will extend is not a recommendation — it is a ceiling. Before committing to a loan size, use our how much house can I afford calculator to find a payment that fits your real budget.

A common guideline is the 28/36 rule: housing costs should not exceed 28% of gross monthly income, and total debt payments should not exceed 36%. Lenders themselves often approve up to a 45-50% debt-to-income ratio, which can leave buyers house-poor.

The Pre-Approval Process

Before you can make a competitive offer on a home, you need a pre-approval letter. This requires submitting financial documentation for a lender to verify your income, assets, and credit. Getting pre-approved by multiple lenders within a 45-day window counts as a single hard inquiry on your credit report under FICO scoring rules, so rate shopping does not significantly damage your score.

For a detailed walkthrough of what to prepare, see our mortgage pre-approval process guide.

What to Ask Every Lender Before Committing

1. What is the APR, not just the interest rate?

1. What are your total origination and underwriting fees?

1. Do you accept down payment assistance from [my state’s program]?

1. What is your average time from application to closing?

1. Do you offer a rate lock, and is there a float-down option?

1. Will my loan be serviced by your company or sold after closing?

1. What documents do I need to provide upfront?

Red Flags to Watch For

• Lenders who pressure you to skip the Loan Estimate review
• Verbal quotes that do not match the written Loan Estimate
• Unusually low rates with unusually high points
• No clear answer on whether they accept state assistance programs
• Demands for large upfront fees before you have seen a Loan Estimate

Getting Multiple Quotes Pays Off

Research from the Consumer Financial Protection Bureau found that borrowers who obtained five quotes saved an average of $3,000 over the life of their loan compared to those who got only one. In a $350,000 purchase, the difference between lenders can easily exceed $5,000 in total first-year costs when fees and rate differences are combined.

Also look at first-time home buyer grants by state before finalizing your lender — some state programs require you to use an approved lender list, which narrows your choices but also simplifies the process.

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Summary

The best mortgage lender for a first-time buyer is the one that combines competitive rates, low fees, compatibility with assistance programs, and a process that actually makes sense to a first-time buyer. Do not pick based on brand recognition alone. Get at least three Loan Estimates, compare APRs, and ask about assistance program compatibility before you commit.

For your next step, review the first-time home buyer checklist to make sure your finances and paperwork are in order before submitting applications.

Closing Costs for First-Time Home Buyers: What to Expect and How to Reduce Them

Closing costs blindside more first-time buyers than almost any other expense in the homebuying process. Buyers spend months focused on saving for a down payment, then discover at the closing table that they owe an additional $8,000 to $15,000 on top of it.

The good news is that closing costs are more negotiable and reducible than most buyers realize. This guide breaks down exactly what these costs are, who charges them, what is negotiable, and how to minimize what you pay.

What Are Closing Costs?

Closing costs are fees and expenses paid at settlement to complete the real estate transaction. They cover services performed by third parties (title companies, appraisers, attorneys) and fees charged by the lender. They are separate from your down payment, though both are due at closing.

According to aggregated industry data, closing costs typically run between 2% and 5% of the loan amount. On a $300,000 purchase:

• 2% = $6,000
• 3% = $9,000
• 5% = $15,000

Exact amounts vary significantly by state, loan type, and lender.

Complete Breakdown of Closing Cost Categories

Lender Fees

These are charged by your mortgage lender and are the most negotiable category:

• Origination fee: 0.5%-1% of the loan amount for processing your application
• Underwriting fee: $500-$1,000 for evaluating your risk profile
• Application fee: $0-$500 depending on the lender (many charge nothing)
• Rate lock fee: sometimes charged for locks longer than 30 days
• Discount points: optional prepaid interest to buy down your rate (1 point = 1% of loan)

Third-Party Service Fees

These cover services required to complete the transaction:

• Appraisal: $300-$700 for a licensed appraiser to value the property
• Home inspection: $300-$600 (sometimes paid before closing)
• Title search: $200-$400 to verify the property’s ownership history
• Title insurance — lender’s policy: $500-$1,500, required by virtually all lenders
• Title insurance — owner’s policy: $500-$1,500, optional but strongly recommended
• Survey: $300-$700 if required by the lender or title company
• Attorney fee: $500-$1,500 in states that require an attorney at closing

Government and Recording Fees

These are set by local and state governments and are largely non-negotiable:

• Recording fees: $50-$250 to record the deed and mortgage with the county
• Transfer taxes: varies widely by state; some states charge 0%, others charge 2%+
• Property tax prorations: you may owe reimbursement to the seller for taxes paid in advance

Prepaid Items and Escrow Deposits

These are not technically fees — they are expenses paid upfront to establish your escrow account:

• Homeowner’s insurance: first year’s premium paid at closing
• Prepaid interest: interest for the days between closing and your first payment
• Property tax escrow: 2-6 months of estimated property taxes deposited upfront
• Mortgage insurance premium: FHA loans require an upfront MIP of 1.75% of the loan amount

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Closing Cost Comparison by Loan Type

Loan Type	Upfront MIP/Funding Fee	Avg. Other Closing Costs	Notes
Conventional	None (PMI is monthly)	2%-3% of loan	Best for high credit scores
FHA	1.75% of loan (upfront MIP)	2%-3% of loan	Higher upfront, lower rate
VA	1.25%-3.3% funding fee	1%-2% of loan	Fee waived for disabled vets
USDA	1% guarantee fee	2%-3% of loan	Fee can be rolled into loan

For first-time buyers weighing FHA versus conventional, see our FHA vs. conventional loan guide.

The Loan Estimate: Your Best Tool for Cost Comparison

Within three business days of applying, lenders must provide a Loan Estimate. Page 2 breaks down all estimated closing costs into three categories:

• Section A: Origination charges (lender fees, negotiable)
• Section B: Services you cannot shop for (appraisal, credit report — lender-selected)
• Section C: Services you can shop for (title insurance, settlement agent)

Focus your negotiation energy on Section A and shop aggressively for Section C providers.

Proven Strategies to Reduce Closing Costs

1. Negotiate Lender Fees

Origination fees and underwriting fees are negotiable. Ask the lender to waive or reduce the origination fee in exchange for a slightly higher interest rate (called a “lender credit”), or vice versa. When comparing lenders, this is where getting multiple Loan Estimates pays off most.

For help comparing lenders, see our best mortgage lenders for first-time buyers guide.

2. Shop for Title and Settlement Services

Many buyers do not realize they can choose their own title company and settlement agent. Prices for title searches and settlement fees vary by 30-50% between providers. Get quotes from two or three before accepting the lender’s default recommendation.

3. Ask the Seller for Concessions

In slower markets, sellers often agree to pay a portion of the buyer’s closing costs as a condition of the sale. This is negotiated as part of your purchase offer. Lender programs set limits on seller concessions:

• Conventional (less than 10% down): up to 3% of purchase price
• Conventional (10-25% down): up to 6%
• FHA: up to 6%
• VA: up to 4% plus all standard closing costs

4. Use Down Payment Assistance Programs That Cover Closing Costs

Many down payment assistance programs cover both the down payment and closing costs. State HFA programs, USDA Rural Development loans, and some municipal programs include closing cost grants or forgivable second mortgages. See first-time home buyer grants by state to find programs in your area.

5. Roll Costs Into the Loan (No-Closing-Cost Mortgage)

Some lenders offer no-closing-cost mortgages where fees are rolled into the loan balance or offset with a higher interest rate. This reduces cash needed at closing but increases your long-term costs. Run the math on your break-even timeline before choosing this option.

6. Close at the End of the Month

Closing costs include prepaid interest from the closing date to your first payment. Closing on the 28th of the month instead of the 5th reduces prepaid interest from 25 days to 3 days — saving several hundred dollars in some cases.

7. Check for First-Time Buyer Programs With Reduced Fees

Some loan programs reduce specific fees for first-time buyers. Fannie Mae’s HomeReady and Freddie Mac’s Home Possible programs offer reduced PMI rates. FHA’s UFMIP is fixed at 1.75% but can be financed into the loan on most FHA loans. See first-time home buyer programs in 2026 for current program availability.

What You Cannot Avoid

Some costs are effectively fixed:

• Government recording fees
• State transfer taxes
• Appraisal (required by the lender)
• Homeowner’s insurance (required before closing)
• Prepaid interest (determined by closing date)

Focusing negotiation on lender fees and third-party services is more productive than trying to reduce these fixed costs.

Closing Disclosure: Review It Before Closing Day

At least three business days before closing, you will receive the Closing Disclosure — the final version of the Loan Estimate with actual (not estimated) figures. Compare it line by line to your most recent Loan Estimate. Federal rules prohibit certain fees from increasing at all and others from increasing by more than 10%.

If you spot discrepancies, contact your lender immediately. Errors and last-minute additions do occur and must be addressed before you sign.

Total Cash Needed at Closing: A Real Example

Here is a realistic cost breakdown for a first-time buyer purchasing a $300,000 home with 5% down using a conventional loan:

Item	Estimated Cost
Down payment (5%)	$15,000
Origination fee (0.75%)	$2,138
Appraisal	$500
Title insurance (lender + owner)	$1,800
Prepaid interest (15 days)	$620
Homeowner’s insurance (1 year)	$1,200
Property tax escrow (3 months)	$1,500
Recording and government fees	$400
Total estimated cash to close	$23,158

With seller concessions of $5,000, the buyer’s out-of-pocket drops to roughly $18,158.

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Summary

Closing costs are unavoidable but they are manageable. The biggest savings come from comparing lender Loan Estimates, shopping for title and settlement services, and negotiating seller concessions into your purchase contract. First-time buyers should also check whether state and local assistance programs in their area cover closing costs in addition to down payment — many do.

For a complete picture of the homebuying process, review the first-time home buyer checklist and the mortgage pre-approval process guide.

How Much Down Payment Do You Really Need? Real Numbers by Loan Type

The idea that you need 20% down to buy a home is one of the most persistent myths in personal finance. In reality, most first-time buyers put down far less — and several loan programs allow zero down payment. The right down payment depends on your loan type, credit score, income, and financial goals.

This guide breaks down the actual minimums, the trade-offs, and the math behind the 20% benchmark so you can make the choice that fits your situation.

The 20% Myth — and Where It Came From

The 20% down payment threshold is not an arbitrary number. It is the point at which conventional lenders no longer require private mortgage insurance (PMI). PMI protects the lender — not you — if you default. It typically costs 0.5% to 1.5% of the loan annually, depending on your credit score and down payment size.

So 20% down means no PMI, a lower monthly payment, and immediate equity cushion. But it is not a requirement to buy a home — it is a threshold where one cost disappears.

According to National Association of Realtors data, the median down payment for first-time buyers has historically ranged from 6% to 8%. Many buyers put down much less.

Down Payment Minimums by Loan Type (2026)

Loan Type	Minimum Down Payment	Minimum Credit Score	Mortgage Insurance
FHA	3.5%	580	Required (MIP)
FHA (lower credit)	10%	500	Required (MIP)
Conventional (standard)	5%	620	PMI if < 20%
Conventional (HomeReady/Home Possible)	3%	620	PMI if < 20%
VA	0%	No minimum (lenders set ~580-620)	None
USDA	0%	No minimum (lenders set ~640)	Guarantee fee
Jumbo	10-20%	700+	Varies by lender

FHA Loans: 3.5% Down

The FHA loan is the most common low-down-payment option for buyers with credit scores between 580 and 679. The 3.5% minimum is straightforward.

For a $350,000 home:

• Minimum down payment: $12,250
• Loan amount: $337,750
• Upfront MIP (1.75%): $5,909 (can be rolled into the loan)
• Annual MIP: approximately $154/month

The downside: FHA mortgage insurance premium lasts for the life of the loan if you put down less than 10%. The only way to remove it is to refinance.

For the full qualification breakdown, see FHA loan requirements 2026.

Conventional Loans: 3% to 5% Down

Fannie Mae’s HomeReady and Freddie Mac’s Home Possible programs allow conventional loans with just 3% down for first-time buyers who meet income limits (generally 80% of area median income).

Standard conventional loans without income limits require 5% down.

For a $350,000 home with 5% down:

• Down payment: $17,500
• PMI cost: approximately $145-$220/month at a 680 credit score
• PMI cancels at 20% equity

Conventional 3% down programs have slightly higher PMI rates than 5% down, but the lower upfront cash requirement can be the deciding factor for buyers who are cash-constrained.

For full eligibility details, see conventional loan requirements for first-time buyers.

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VA Loans: 0% Down

VA loans are available to eligible veterans, active-duty service members, and qualifying surviving spouses. They offer zero down payment with no mortgage insurance requirement — making them the most powerful financing tool for those who qualify.

The VA does charge a funding fee (currently 2.15% for first-time use with 0% down), but this can be rolled into the loan. Certain veterans with service-connected disabilities are exempt.

For a $350,000 home:

• Down payment: $0
• VA funding fee (rolled in): $7,525
• No PMI ever

See the full guide to VA loan requirements for first-time buyers.

USDA Loans: 0% Down

USDA loans are available for homes in eligible rural and suburban areas, with income limits that vary by location. Like VA loans, they require no down payment.

USDA charges two fees:

• Upfront guarantee fee: 1% of the loan amount
• Annual fee: 0.35% of the remaining balance

For a $250,000 home in an eligible area:

• Down payment: $0
• Upfront guarantee fee: $2,500 (typically rolled into the loan)
• Annual fee: approximately $73/month initially

USDA annual fees are lower than FHA MIP and do not require a lump-sum upfront payment the way VA funding fees do. For income limits and eligible areas, see USDA loan requirements 2026.

What Happens When You Put Down Less Than 20%

Putting down less than 20% means paying for mortgage insurance in some form. Here is a comparison of the ongoing insurance costs across loan types for a $300,000 loan:

Loan Type	Down Payment	Insurance Cost/Month	Insurance Ends?
FHA (580+ credit)	3.5%	~$138	Only via refinance
Conventional (680 credit)	5%	~$150	Yes, at 80% LTV
Conventional (700+ credit)	10%	~$75	Yes, at 80% LTV
VA	0%	$0	N/A
USDA	0%	~$88	Technically whole loan

The Real Cost of a Smaller Down Payment

A smaller down payment means a larger loan, which means more interest paid over time. Here is the 30-year total interest comparison for a $350,000 home at a 6.75% rate:

Down Payment	Loan Amount	Monthly P&I	Total Interest (30yr)
3% ($10,500)	$339,500	$2,202	$452,720
5% ($17,500)	$332,500	$2,157	$443,520
10% ($35,000)	$315,000	$2,043	$420,480
20% ($70,000)	$280,000	$1,816	$373,760

The difference between 3% and 20% down is approximately $79,000 in interest over 30 years. However, most buyers do not stay in a home for 30 years, and that $59,500 difference in upfront cash could be invested, used for emergency reserves, or kept as liquidity.

When a Larger Down Payment Makes Sense

• You can put down 20% without depleting your savings — maintaining 3-6 months of expenses in reserve
• You have a credit score above 740 and want to lock in the best rate with the lowest PMI costs
• The home is in a competitive market and a larger down payment strengthens your offer
• You are buying a higher-priced home where a jumbo loan is required

When a Smaller Down Payment Makes Sense

• Your savings would be exhausted by a 20% down payment, leaving no emergency fund
• Home prices in your area are rising faster than you can save
• Down payment assistance is available to bridge the gap
• You qualify for VA or USDA and can preserve your cash entirely
• You plan to build equity through appreciation rather than high initial equity

Our first-time home buyer mistakes to avoid guide covers the common error of depleting all savings on a down payment and leaving nothing for closing costs, repairs, and emergencies.

Down Payment Assistance Programs

For many first-time buyers, the gap between what they have saved and what they need can be bridged by grants and down payment assistance programs. These programs vary by state and locality, but many offer:

• Outright grants that do not need to be repaid
• Forgivable loans (typically forgiven after 3-5 years in the home)
• Deferred-payment second mortgages
• Low-interest second mortgages

Explore options in our guides to down payment assistance programs and first-time home buyer grants by state.

Also see our overview of first-time home buyer programs 2026 for a consolidated look at all available support.

Gift Funds and Down Payments

All four major loan types — FHA, conventional, VA, and USDA — allow gift funds from family members to cover part or all of the down payment (with documentation). FHA is the most flexible, allowing 100% of the down payment to come from a gift. Conventional loans require the borrower to contribute at least 3% from their own funds if putting down less than 20%.

Closing Costs Are Separate

New buyers sometimes overlook that closing costs are in addition to the down payment. Closing costs typically run 2%-5% of the loan amount. On a $350,000 purchase, that could be $7,000-$17,500.

Some strategies to cover closing costs:

• Negotiate seller concessions (seller pays closing costs)
• Ask your lender about lender credits in exchange for a slightly higher rate
• Use an assistance program that covers both down payment and closing costs

For a full breakdown, see our closing costs for first-time home buyers guide.

How to Decide

The right down payment amount balances three competing priorities:

1. Monthly payment: Lower down payment means higher payment

1. Cash reserves: You need money after closing for emergencies

1. Opportunity cost: Cash tied up in home equity cannot be invested elsewhere

A useful rule: do not put more down than leaves you with at least 3 months of living expenses in reserve after closing costs are paid.

Use our rent vs buy calculator to model how different down payment amounts affect your total cost of ownership compared to renting.

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FHA Loan Requirements 2026: Credit, DTI, Down Payment, Limits

FHA loans remain one of the most accessible mortgage options for first-time buyers with limited credit history, lower credit scores, or modest down payment savings. In 2026, the program continues to offer flexible qualification standards — but there are specific requirements you need to meet before a lender can approve your application.

This guide covers every major FHA loan requirement so you know exactly what to expect before you apply.

What Is an FHA Loan?

An FHA loan is a mortgage insured by the Federal Housing Administration, a division of the U.S. Department of Housing and Urban Development (HUD). The insurance protects lenders against default, which allows them to offer better terms to borrowers who would not qualify for conventional financing.

FHA loans are issued by private lenders — banks, credit unions, and mortgage companies — not by the government directly. HUD sets the qualification standards; the lender processes and funds the loan.

FHA Loan Requirements at a Glance (2026)

Requirement	Standard Threshold
Minimum credit score (3.5% down)	580
Minimum credit score (10% down)	500
Maximum DTI ratio	43% (up to 57% with compensating factors)
Minimum down payment	3.5% (580+ score)
Upfront MIP	1.75% of loan amount
Annual MIP	0.55% for most borrowers
Loan limit (standard, 2026)	$524,225 (single-family)
High-cost area limit	Up to $1,209,750
Owner-occupancy	Required
Employment history	2 years preferred

Credit Score Requirements

FHA sets a two-tier credit score requirement:

580 or above: Eligible for the standard 3.5% minimum down payment. This is the most common qualification path for first-time buyers.

500 to 579: Eligible for an FHA loan, but requires a 10% down payment. Lenders also have discretion to set higher minimums, and many will not approve applications below 580 regardless of FHA guidelines.

Below 500: Not eligible for FHA financing.

Important note: individual lenders can impose higher standards than FHA’s minimums. Many lenders set their own floor at 620 or even 640. Shopping multiple lenders is essential if your score is in the 580-619 range. See our best mortgage lenders for first-time buyers 2026 guide for lenders known for flexible credit standards.

If your score needs work before you apply, our how to improve your credit score fast guide covers the most effective methods.

Down Payment Requirements

FHA’s minimum down payment depends on your credit score:

• 580+ credit score: 3.5% minimum down payment
• 500-579 credit score: 10% minimum down payment

For a $300,000 home:

• 3.5% down = $10,500
• 10% down = $30,000

Down payment funds can come from:

• Personal savings
• Gift funds from a family member (100% gift allowed with proper documentation)
• Down payment assistance grants or loans from state/local programs
• Employer assistance programs

FHA does not allow the down payment to come from seller concessions or unsecured loans (such as a personal loan or credit card advance).

For a full comparison of how down payment amounts affect your loan costs, see how much down payment do you really need.

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Debt-to-Income Ratio (DTI) Requirements

DTI is the percentage of your gross monthly income that goes toward debt payments. FHA uses two DTI ratios:

Front-end DTI (housing ratio): The percentage of gross income allocated to housing costs (principal, interest, taxes, insurance, MIP). FHA prefers this to be at or below 31%.

Back-end DTI (total debt ratio): Total monthly debt payments including housing, student loans, car payments, credit cards, and other obligations. FHA prefers this at or below 43%.

However, FHA allows back-end DTI up to 57% with compensating factors such as:

• Large cash reserves (3+ months of mortgage payments in savings)
• Residual income above program thresholds
• Minimal increase in housing payment from current rent
• Credit score significantly above the minimum

This flexibility makes FHA particularly useful for buyers with high student loan debt. Our first-time home buyer with student loans guide explains how FHA calculates student loan payments for DTI purposes — which differs from conventional loan rules.

FHA Mortgage Insurance Premium (MIP)

Every FHA loan requires mortgage insurance, regardless of down payment size. FHA MIP has two components:

Upfront MIP

• Amount: 1.75% of the base loan amount
• Paid at closing or rolled into the loan
• For a $300,000 loan: $5,250 upfront MIP

Annual MIP

• For loans with 3.5-9.99% down: 0.55% annually, divided into monthly payments
• For a $300,000 loan: approximately $138/month
• Duration: Life of the loan (for down payments below 10%)
• For loans with 10%+ down: MIP cancels after 11 years

The permanent MIP is the main drawback of FHA loans compared to conventional loans, where PMI can be canceled. Many buyers use FHA as a starting point and refinance into a conventional loan once they have built equity and improved their credit score.

Employment and Income Requirements

FHA does not set a minimum income requirement — there is no income cap or floor. However, lenders must verify that your income is stable, consistent, and likely to continue.

Standard documentation requirements:

• Two years of employment history (W-2s or tax returns)
• Most recent 30 days of pay stubs
• For self-employed borrowers: two years of federal tax returns plus a year-to-date profit and loss statement

Gaps in employment history are allowed with explanation. A two-year gap followed by stable current employment is generally acceptable. Job changes in the same field are typically viewed favorably.

FHA Loan Limits for 2026

FHA loan limits are set annually by county. In 2026:

• Standard (low-cost areas): $524,225 for a single-family home
• High-cost areas (such as major metro areas): Up to $1,209,750
• Alaska, Hawaii, Guam, U.S. Virgin Islands: Higher limits apply

FHA also sets limits for multi-unit properties:

• 2-unit: Up to $671,200 (standard) — $1,548,975 (high-cost)
• 3-unit: Up to $811,275 (standard)
• 4-unit: Up to $1,008,300 (standard)

Buying a multi-unit property and living in one unit is an FHA-eligible strategy for generating rental income to offset mortgage costs.

Property Requirements

FHA-insured loans can only be used for homes that meet HUD’s minimum property standards. The FHA appraisal evaluates both value and condition.

Common property requirements:

• Must be the borrower’s primary residence
• No peeling lead paint (homes built before 1978 are subject to additional inspection)
• Functional utilities: working heat, plumbing, and electrical systems
• Sound roof with at least two years of remaining life
• No active pest infestations
• Safe and accessible

New construction must be completed and have a certificate of occupancy. Condominiums must be in an FHA-approved project.

If the home needs repairs, consider the FHA 203k loan, which allows buyers to finance renovation costs into the mortgage.

FHA vs Conventional: Which Is Right for You?

FHA is typically the better choice when:

• Credit score is below 680
• Down payment is 3.5%-9%
• DTI ratio is above 45%
• Employment history has gaps or recent changes

Conventional may be better when:

• Credit score is 700+
• You can put down 20% to avoid PMI entirely
• You plan to stay long-term and want PMI to eventually go away

For a full side-by-side analysis, see our FHA vs conventional loan for bad credit guide.

How to Apply for an FHA Loan

The FHA loan process follows the same steps as any mortgage:

1. Check your credit score and review your credit report

1. Calculate your DTI using current debts and expected housing payment

1. Save for the down payment and closing costs (typically 2%-5% of the loan)

1. Get pre-approved by multiple FHA-approved lenders

1. Compare loan estimates (interest rate, MIP, closing costs)

1. Select a lender, make an offer, and complete the underwriting process

Our mortgage pre-approval process guide walks through each step in detail.

State and Local Assistance for FHA Borrowers

FHA loans can be combined with down payment assistance programs and first-time buyer grants in most states. These programs often provide the 3.5% down payment as a grant or a deferred-payment second mortgage.

See what is available in your area in our first-time home buyer grants by state and down payment assistance programs guides.

For a full overview of all loan programs available to first-time buyers, see first-time home buyer programs 2026.

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USDA Loan Requirements 2026: Who Qualifies for Zero-Down Rural Financing

For buyers who qualify, the USDA loan is one of the best mortgage programs available — zero down payment, competitive interest rates, and lower mortgage insurance costs than FHA. The catch is that you have to meet income limits and buy in an eligible geographic area. But those limits are broader than many buyers realize.

This guide covers every USDA loan requirement for 2026, including income thresholds by household size, eligible areas, credit standards, and how USDA compares to other zero-down options.

What Is a USDA Loan?

The USDA Single Family Housing Guaranteed Loan Program is backed by the U.S. Department of Agriculture. Despite the name, it is not limited to farms or agricultural land. The program was designed to support homeownership in rural and suburban communities outside major metropolitan centers.

USDA loans are issued by private approved lenders, with USDA guaranteeing up to 90% of the loan in case of default. This guarantee is what allows lenders to offer zero-down financing.

There are two types of USDA home loans:

• Guaranteed loans: Issued by private lenders, backed by USDA. This is what most buyers use.
• Direct loans: Issued directly by USDA for very low-income borrowers. Income limits are stricter and the program has limited funding.

This guide focuses on guaranteed loans.

USDA Loan Requirements at a Glance (2026)

Requirement	Standard Threshold
Minimum down payment	0%
Credit score (USDA)	No official minimum
Credit score (most lenders)	640
Maximum household income	115% of area median income
Property location	Must be USDA-eligible area
Owner-occupancy	Required (primary residence only)
Upfront guarantee fee	1% of loan amount
Annual fee	0.35% of remaining balance
Debt-to-income ratio	41% (flexible with compensating factors)

Geographic Eligibility: Where Can You Use a USDA Loan?

USDA eligibility is determined by property location, not by whether a buyer considers themselves rural. USDA defines eligible areas as locations outside urbanized areas with populations above 35,000. In practice, this includes:

• Small cities and towns (under 35,000 population)
• Suburbs outside major metros
• Rural areas and exurbs
• Many communities within commuting distance of large cities

Approximately 97% of the U.S. land area qualifies for USDA financing. The USDA maintains an interactive eligibility map where buyers can enter any property address and immediately see whether it qualifies.

Do not assume a property is ineligible without checking the map. Many suburban communities outside cities like Austin, Nashville, Charlotte, and Phoenix contain USDA-eligible addresses.

Income Limits: Who Qualifies?

USDA income limits are based on household income — not just the borrower’s income. All household members’ income is counted, including non-borrowers who will live in the home.

The standard income limit is 115% of the area median income (AMI) for your county. In 2026, example limits by household size for a sample of locations:

Household Size	National Baseline	High-Cost Adjustment
1-4 members	~$112,450	Up to ~$148,400
5-8 members	~$148,450	Up to ~$195,850

Exact limits vary by county and are updated annually. Buyers near metro areas where median incomes are higher will typically have higher USDA income limits.

Note that USDA allows certain deductions from household income for calculation purposes:

• Childcare expenses for children under 12
• Disability expenses
• Medical expenses exceeding 3% of gross income (for elderly households)
• $480 deduction per dependent child

These deductions can help buyers whose gross household income is slightly above the limit.

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Credit Score Requirements

USDA does not set an official minimum credit score for guaranteed loans. However, virtually all private lenders require at least a 640 score to use their automated underwriting systems. Below 640, manual underwriting is required — fewer lenders offer this, and the process is more intensive.

For the best rates and easiest approval, a score of 660 or above is recommended. Buyers with scores below 640 who cannot yet qualify for USDA may want to start with an FHA loan and refinance later.

If your credit needs improvement, see our guide on how to improve your credit score fast.

For a comparison of how USDA credit standards compare to other programs, see minimum credit score to buy a house.

Debt-to-Income (DTI) Requirements

USDA’s standard DTI limits are:

• Front-end (housing) ratio: 29% of gross monthly income
• Back-end (total debt) ratio: 41% of gross monthly income

UsDA allows exceptions above 41% back-end DTI with compensating factors, including:

• Credit score above 680
• Significant cash reserves post-closing
• History of consistently paying high housing costs relative to income
• Evidence of stable, long-term employment

USDA Fees: Guarantee Fee and Annual Fee

USDA does not require traditional mortgage insurance, but it does charge two fees that serve a similar function:

Upfront Guarantee Fee

• 1% of the total loan amount
• Due at closing but can be rolled into the loan (financing above 100% LTV is allowed for this purpose)
• For a $250,000 loan: $2,500 upfront fee

Annual Fee

• 0.35% of the remaining loan balance, paid monthly
• For a $250,000 loan: approximately $73/month initially
• Decreases slightly each year as the balance is paid down
• Lasts for the life of the loan

Comparison to FHA MIP (for a $250,000 loan):

• FHA upfront MIP: $4,375 (1.75%)
• FHA annual MIP: ~$115/month (0.55%)
• USDA upfront fee: $2,500 (1%)
• USDA annual fee: ~$73/month (0.35%)

USDA is meaningfully cheaper than FHA on a monthly basis for eligible borrowers.

Employment and Income Documentation

USDA lenders typically require:

• Two-year employment history
• Most recent 30 days of pay stubs
• Most recent two years of W-2s or federal tax returns
• Bank statements (60-90 days) documenting assets and reserves
• Self-employed borrowers: two years of tax returns plus year-to-date P&L statement

Income must be stable and expected to continue. USDA lenders evaluate income types including salary, hourly wages, self-employment income, Social Security, disability, alimony, child support, and rental income with documentation.

Property Requirements

The home must be a primary residence in a USDA-eligible area. Additional property standards:

• Single-family home, condo, or planned unit development (condos must be approved)
• Modest in size and design relative to the area (no luxury properties)
• No income-producing features (cannot be used for farming operations that generate income)
• Must meet USDA’s thermal and site standards
• New construction must be complete and have a certificate of occupancy

Condominiums are eligible but require USDA project approval, which fewer condo communities have compared to FHA approval.

USDA vs VA vs FHA: Which Zero- or Low-Down Program Is Best?

Feature	USDA	VA	FHA
Down payment	0%	0%	3.5%
Mortgage insurance	Yes (annual fee)	No	Yes (MIP, often lifetime)
Monthly insurance cost	~0.35%/yr	None	~0.55%/yr
Income limits	Yes	No	No
Location limits	Yes (rural/suburban)	No	No
Eligibility limits	None beyond income/location	Veterans/service members	None
Upfront fee	1%	2.15% (first use)	1.75%

For eligible veterans, VA is typically the best option. For non-veterans buying in rural or suburban areas who meet income limits, USDA is usually better than FHA.

For buyers who do not qualify for either VA or USDA, see the full FHA vs conventional loan comparison.

Buying with No Down Payment: What to Know

Zero-down financing is genuinely powerful, but it comes with trade-offs:

• You start with no equity, so if home values fall, you could owe more than the home is worth
• Closing costs still apply (2%-5% of the loan) and must come from savings or seller concessions
• Your monthly payment is higher than if you had put down some amount

Most financial planners recommend maintaining an emergency fund equivalent to 3-6 months of expenses even when using a zero-down loan. Depleting all savings to cover closing costs leaves buyers vulnerable to the inevitable repairs and expenses of homeownership.

For more guidance, see our first-time home buyer checklist and buying a house with no down payment guide.

How to Apply for a USDA Loan

1. Confirm the property address is USDA-eligible using the USDA eligibility map

1. Verify your household income is below the limit for your county and household size

1. Check your credit score — aim for 640 minimum, 660+ preferred

1. Get pre-approved by USDA-approved lenders (not all lenders offer USDA)

1. Compare loan estimates from multiple lenders

1. Complete the standard underwriting process with your chosen lender

Our mortgage pre-approval process guide explains what documents to prepare.

See all available programs in our first-time home buyer programs 2026 overview.

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VA Loan Requirements 2026: A First-Time Buyer’s Guide for Veterans

The VA home loan is widely recognized as the most favorable mortgage program available — zero down payment, no mortgage insurance, and competitive interest rates backed by the U.S. Department of Veterans Affairs. For eligible veterans, active-duty service members, and qualifying surviving spouses buying a home for the first time, understanding VA loan requirements is essential to making the most of this benefit.

This guide covers every requirement, fee, and trade-off so first-time veteran buyers can approach lenders prepared.

What Is a VA Loan?

A VA loan is a mortgage guaranteed by the Department of Veterans Affairs. Like FHA and USDA, the VA does not lend money directly — private lenders issue VA loans, and the VA’s guarantee (up to 25% of the loan) reduces lender risk enough to allow zero-down financing without mortgage insurance.

The program was established by the Servicemen’s Readjustment Act of 1944 and has helped over 28 million veterans become homeowners.

VA Loan Benefits Summary

• No down payment required
• No private mortgage insurance (PMI)
• Competitive interest rates (typically lower than conventional loans)
• Limited closing costs (VA restricts what lenders can charge)
• No prepayment penalty
• Reusable benefit (can be used multiple times)
• Assumable by a qualified buyer if you sell

Who Is Eligible for a VA Loan?

VA loan eligibility is based on service history. The requirements vary by service category:

Active-Duty Service Members

• 90 consecutive days of active service during wartime
• 181 days of active service during peacetime

Veterans

• Same wartime/peacetime service requirements as above
• Discharged under conditions other than dishonorable

National Guard and Reserve Members

• 6 years of service in the Selected Reserve or National Guard, OR
• 90 days of active duty (at least 30 consecutive) under Title 32, with at least one day during a qualifying period, OR
• Discharged due to a service-connected disability

Surviving Spouses

• Unmarried surviving spouses of veterans who died in service or from a service-connected disability
• Spouses of veterans who are totally and permanently disabled from service-connected conditions
• Spouses of MIA or POW veterans (under certain conditions)

Obtaining a Certificate of Eligibility (COE)

The Certificate of Eligibility (COE) is the official document that proves VA loan eligibility to a lender. It can be obtained through:

• The VA’s eBenefits portal
• A VA-approved lender (most lenders can retrieve it electronically in minutes)
• By mail using VA Form 26-1880

Most first-time VA buyers obtain the COE through their lender during pre-approval.

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Credit Score Requirements

The VA does not set a minimum credit score. However, individual lenders impose their own standards. In 2026, most VA lenders require:

• Minimum 580-620 for approval (some lenders go lower with manual underwriting)
• 640+ for most streamlined approvals
• 660-680 for the best available rates

VA loans are available to borrowers with lower credit scores than most conventional lenders will accept. Buyers with scores in the 580-619 range should shop multiple lenders, as credit minimums vary significantly.

For context on how credit scores affect loan eligibility across program types, see minimum credit score to buy a house.

Debt-to-Income (DTI) Requirements

The VA uses a 41% back-end DTI as a benchmark, but it is not a hard cutoff. VA underwriters also use a residual income test, which is often more important than the DTI ratio.

Residual Income Test

Residual income is the amount of money left after all monthly obligations are paid — including the mortgage, taxes, insurance, and consumer debts. The VA sets regional residual income thresholds based on loan amount and family size.

For example, a family of four in the South with a loan above $80,000 must have at least $1,003 in residual income after all obligations. A family of four in the West with the same loan needs $1,117.

A borrower with a 50% DTI but strong residual income can be approved. A borrower with a 38% DTI but very low residual income could be denied. This nuance is one reason VA loans are better evaluated by VA-specialized lenders.

VA Funding Fee (2026)

The VA funding fee is a one-time charge that funds the VA loan program. It replaces mortgage insurance. The fee varies by:

• Down payment amount
• Whether it is a first or subsequent VA loan use
• Borrower type (veteran, active-duty, reserve/guard)

First-Use Funding Fees (2026)

Down Payment	First Use	Subsequent Use
Less than 5%	2.15%	3.30%
5% to 9.99%	1.50%	1.50%
10% or more	1.25%	1.25%

For a $350,000 home with zero down:

• First-use funding fee: $7,525 (2.15%)
• This can be rolled into the loan (financing above 100% LTV)

Funding Fee Exemptions

The following borrowers are exempt from the funding fee:

• Veterans receiving VA disability compensation
• Veterans eligible for compensation but receiving retirement pay
• Surviving spouses of veterans who died in service or from service-connected disability
• Service members with a proposed or memorandum disability rating

If you have any service-connected disability claim pending, consult with a VA-specialized lender before closing — an approved disability rating after closing typically does not generate a refund.

VA Loan Limits in 2026

Since 2020, VA loans have had no loan limit for eligible borrowers with full VA entitlement. Full entitlement means you either have never used your VA benefit, or you have paid off a previous VA loan and had your entitlement fully restored.

Borrowers with partial entitlement (remaining from a previous VA loan that was not paid off) may face loan limits that correspond to local conforming loan limits ($806,500 in most areas for 2026).

For loan amounts above conforming limits (jumbo VA loans), most lenders require a small down payment — typically 25% of the amount above the county loan limit.

Property Requirements

VA loans require the home to meet minimum property requirements (MPRs) established by the VA. These ensure the property is safe, sound, and sanitary:

• Safe access to the property and each room
• Adequate space for living, sleeping, cooking, and sanitation
• Functional plumbing, heating, and electrical systems
• Structurally sound roof and foundation
• Free from wood-destroying insects or fungus if applicable by region
• No lead paint hazards on homes built before 1978
• Adequate drainage and no basement water intrusion

The VA requires an appraisal by a VA-approved appraiser. This appraisal establishes value and flags any MPR deficiencies. If the seller will not make required repairs, the buyer has options: negotiate seller credits, arrange repairs before closing, or walk away.

VA loans cannot be used for investment properties or vacation homes. The property must be the borrower’s primary residence.

Closing Costs on VA Loans

The VA limits what fees lenders can charge VA borrowers. The lender’s origination fee cannot exceed 1% of the loan amount. Certain fees are non-allowable (the seller or lender must pay them rather than the buyer).

Typical VA buyer closing costs (beyond the funding fee):

• VA appraisal fee: $500-$800
• Title insurance and search
• Homeowner’s insurance prepaid
• Property taxes (prorated)
• Recording fees
• Survey (if required)

Sellers can pay all of the buyer’s closing costs — up to 4% of the purchase price in seller concessions are allowed under VA rules, plus reasonable and customary closing costs. Negotiating seller concessions is common in buyer’s markets and can eliminate most out-of-pocket costs.

For a detailed breakdown of what to expect, see our closing costs for first-time home buyers guide.

VA Loan vs FHA vs Conventional: Quick Comparison

Feature	VA	FHA	Conventional
Down payment	0%	3.5%	3-20%
Mortgage insurance	None	Lifetime MIP	PMI (cancellable)
Min credit score (typical)	580-620	580	620
DTI flexibility	High (residual income)	High (up to 57%)	Moderate (up to 45%)
Upfront fee	2.15% (0 down, first use)	1.75%	None
Loan limits	None (full entitlement)	$524,225 standard	$806,500

For buyers who qualify for VA, the program is almost always the best financial option. The absence of monthly mortgage insurance alone saves VA borrowers hundreds of dollars per month compared to FHA.

How to Apply for a VA Loan

1. Obtain your Certificate of Eligibility (through your lender or VA eBenefits)

1. Gather financial documents: pay stubs, W-2s, tax returns, bank statements

1. Get pre-approved by multiple VA-approved lenders

1. Compare loan estimates — pay attention to rate, funding fee, and origination charges

1. Make an offer on a home that meets VA property requirements

1. Complete underwriting and appraisal

1. Close and fund

Our mortgage pre-approval process guide walks through the document preparation in detail.

For a full overview of all first-time buyer programs, see first-time home buyer programs 2026.

If down payment assistance is still needed alongside a VA loan (rare but possible), our down payment assistance programs guide lists programs that can cover closing costs for VA buyers.

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Down Payment Assistance Programs: How to Find Free Money for Your First Home

The down payment is the single biggest financial barrier to homeownership for most first-time buyers. A 2025 National Association of Realtors survey found that saving for a down payment is the top obstacle cited by non-owners who want to buy. What many of those buyers do not know is that thousands of programs exist to close that gap — with money that, in many cases, never has to be repaid.

Down payment assistance (DPA) programs provided an estimated $10 billion in aid to buyers in recent years, yet research consistently shows that eligible buyers are unaware these programs exist. This guide explains how they work, what they cover, and how to find and apply for them.

What Does Down Payment Assistance Cover?

Despite the name, DPA programs frequently cover more than just the down payment. Most programs allow funds to be used for:

• Down payment
• Closing costs (which typically run 2-5% of the purchase price)
• Prepaid expenses (homeowner’s insurance, property tax escrow, prepaid interest)
• Mortgage insurance premium (for FHA loans)

The ability to cover closing costs is significant. On a $300,000 home, closing costs can run $6,000 to $15,000 — an expense that catches many first-time buyers off guard even after they have saved enough for the down payment itself.

Types of Down Payment Assistance

Grants

Grants are the simplest form — money provided with no repayment obligation. They are the least common form of DPA because they deplete program funds quickly. Most are targeted to buyers with lower incomes or in specific professions.

Forgivable Loans

The most common form of DPA. These are second mortgages that carry no interest and require no monthly payments. The balance is forgiven — incrementally or all at once — if you remain in the home for the required period, typically three to five years.

If you sell or refinance before the forgiveness period ends, you repay the unforgiven portion.

Deferred Payment Loans

Deferred loans also carry no monthly payments, but they are not forgiven on a schedule. The full balance becomes due when you sell the home, refinance, or pay off the primary mortgage. These preserve program funds longer than forgivable loans.

Second Mortgages With Low Interest

Some programs provide low-interest second mortgages with monthly payments that help buy down the primary mortgage rate or reduce the down payment requirement. These are repaid over a set term, typically 10 to 15 years.

Matched Savings Programs

Individual Development Accounts (IDAs) and similar programs match your savings contributions dollar-for-dollar up to a maximum. If you save $3,000, the program adds $3,000 (or more, depending on match ratio). These require participation for a longer period — often 12 to 24 months of consistent saving.

Who Qualifies?

Eligibility requirements vary by program, but common factors include:

Requirement	Typical Range
Income limit	80% to 120% of area median income
Credit score minimum	620 to 640
Purchase price cap	Varies by county and loan type
Buyer status	First-time buyer (no ownership in last 3 years)
Occupancy	Primary residence only
Homebuyer education	Required by most programs

Income limits are calculated based on the number of people in your household and the median income for your specific county or metro area. A family of four in a rural county may qualify with a much higher income than the same family in a high-cost metro.

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How Much Can You Get?

Assistance amounts range dramatically based on program funding, location, and buyer income:

• Minimum: Many programs offer $5,000 to $10,000
• Typical range: $10,000 to $30,000
• High-cost areas: Some California, Washington, and New York programs offer $50,000 to $100,000 or more
• Profession-based programs: Teachers, first responders, nurses, and veterans often qualify for enhanced amounts

The Department of Housing and Urban Development (HUD) Good Neighbor Next Door program offers a 50% discount on list price for teachers, firefighters, law enforcement officers, and emergency medical technicians buying in designated revitalization areas. That is not a traditional DPA program, but it represents the most significant assistance available to qualifying buyers.

How to Find Programs in Your Area

Because programs are administered locally, there is no single national database that is fully comprehensive. Use multiple search strategies:

State Housing Finance Agency (HFA)

Every state has one. Search for “[your state] housing finance agency” and look for homebuyer programs. State HFAs administer both first mortgage programs and down payment assistance programs, often in partnership.

HUD Approved Housing Counselors

HUD-approved counseling agencies are required to know the programs in their service area. A free consultation with one of these agencies can surface programs you would not find on your own. Find one at hud.gov/find-a-housing-counselor.

Down Payment Resource

Down Payment Resource is a third-party database that aggregates DPA programs nationally. Many lenders and real estate agent websites embed this tool. It allows you to search by location and basic eligibility criteria.

Your Mortgage Lender

Lenders who work frequently with first-time buyers maintain current knowledge of active programs in their market. Ask specifically: “What down payment assistance programs are currently funded in this area?”

Local Government Housing Departments

Many cities and counties run their own programs funded by federal Community Development Block Grants (CDBG) or HOME Investment Partnership funds. Contact your city or county housing department directly.

Combining DPA With First Mortgage Programs

Down payment assistance is almost always layered on top of a primary loan, not used independently. The combination affects how much assistance you can receive and which programs are compatible.

Primary Loan	Compatible DPA
FHA	Most state HFA programs, many local grants
VA	Limited — VA typically covers the full purchase price
USDA	USDA has its own grant program; some state programs compatible
Conventional (HomeReady)	Fannie Mae-approved second mortgages, state HFA programs

Not all primary loan programs allow all forms of DPA. Confirm with your lender that the specific combination you are considering is permitted under the primary loan’s guidelines.

For an overview of all primary loan programs available in 2026, see first-time home buyer programs 2026. To understand which loan type works best for your credit situation, see FHA vs conventional loan for bad credit.

Step-by-Step: How to Apply for DPA

1. Check your eligibility: Income, credit score, first-time buyer status

1. Identify programs in your area: Use the strategies above

1. Confirm program funding: Some programs are temporarily exhausted; ask if there is a waitlist

1. Get pre-approved: Most DPA programs require you to be pre-approved by a participating lender

1. Complete homebuyer education: Required by most programs; complete it early

1. Submit application: Many programs require application before you make an offer

1. Close with DPA funds: The assistance is typically applied at closing through the title company

The mortgage pre-approval process guide explains what to expect when getting pre-approved and what documents you will need.

Common Pitfalls to Avoid

Waiting Too Long

Many programs operate on a first-come, first-served basis and exhaust their annual allocation. Starting your research early in the calendar year improves your chances of accessing funded programs.

Working With Non-Participating Lenders

Many DPA programs require the primary loan to be originated by a participating lender. If your lender does not participate, you cannot access the program through them. Ask specifically about participation before committing to a lender.

Ignoring Closing Costs

Buyers who focus only on the down payment often arrive at closing surprised by $8,000 to $15,000 in additional costs. Many DPA programs can cover these — but only if you have applied for that coverage. The closing costs for first-time home buyers guide breaks down exactly what to expect.

Not Stacking Available Programs

Many buyers use one program when they qualify for several. An income-qualified buyer might simultaneously use an FHA loan, a state HFA below-market rate, a local DPA grant, and a mortgage credit certificate — each providing a separate financial benefit.

How DPA Affects Your Mortgage Qualification

Lenders count DPA funds differently depending on the structure:

• Grant funds: Typically treated as part of the down payment, reducing the loan-to-value ratio
• Forgivable second mortgages: May or may not count as a liability depending on structure
• Deferred second mortgages: Some programs exclude them from DTI calculation; others include them at 1% of the balance

Your lender will walk you through how a specific program affects your debt-to-income calculation. Understanding this before you select a DPA program prevents surprises during underwriting.

For a full walkthrough of the preparatory steps before applying, the first-time home buyer checklist covers everything from credit preparation through closing day. And if you are still weighing whether buying makes financial sense, the rent vs buy calculator guide helps you run the numbers for your specific situation.

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The Complete First-Time Home Buyer Checklist: 12 Steps From Credit Prep to Closing

Buying your first home involves dozens of moving parts across several months. Most mistakes first-time buyers make — overpaying on rate, missing assistance programs, losing deals due to financing delays — come down to skipping steps or doing them in the wrong order.

This checklist walks through every major step in sequence, with practical guidance on what to do and what to watch for at each stage.

Step 1: Check Your Credit Reports (Do This First)

Before anything else, pull your credit reports from all three bureaus — Equifax, Experian, and TransUnion. You can do this for free at AnnualCreditReport.com.

Review each report for:

• Errors in account information or payment history
• Accounts you do not recognize (possible fraud)
• Negative items that may fall off soon (most negative items stay for seven years)
• High utilization on revolving accounts

Federal Trade Commission research found that approximately one in five credit reports contains an error that affects the score. Disputing errors takes 30 days. Starting this process early leaves time to correct problems before applying.

For the minimum scores required by each loan type, see minimum credit score to buy a house.

Step 2: Improve Your Credit Score If Needed

If your score is below the threshold for the loan you want — or even if it qualifies but is not optimal — targeted action before applying can save significant money.

Highest-impact actions:

• Pay revolving balances below 30% of each card’s limit (ideally below 10%)
• Dispute and correct errors identified in Step 1
• Avoid new credit applications for at least 90 days before your mortgage application
• Keep existing accounts open — do not close cards to simplify your finances

The difference between a 640 and 720 credit score can mean $100 to $200 less per month on a $300,000 mortgage and $40,000 or more saved in total interest.

Step 3: Calculate What You Can Afford

Knowing your budget before falling in love with specific homes prevents disappointment and sets realistic expectations.

Lenders use two primary ratios:

• Front-end ratio: Monthly housing costs (principal, interest, taxes, insurance) should be no more than 28-31% of gross monthly income
• Back-end ratio (DTI): Total monthly debt payments including the mortgage should be no more than 43% of gross monthly income (some programs allow up to 50% with compensating factors)

Beyond what you qualify for, consider what you are comfortable paying monthly. Being approved for a $400,000 loan does not mean a $400,000 home fits your lifestyle budget.

The how much house can I afford calculator helps you work through these numbers, and the rent vs buy calculator helps you compare the financial reality of buying versus continuing to rent.

Step 4: Research Assistance Programs

Before choosing a loan program, research what assistance is available to you. First-time buyers leave billions of dollars in assistance unclaimed every year.

Research:

• State housing finance agency programs
• Local city and county assistance
• Profession-based programs (teachers, first responders, healthcare workers, veterans)
• Down payment assistance and grant programs
• Mortgage credit certificates (annual tax credits)

Assistance programs often have income caps and purchase price caps, and many are funded first-come, first-served. Applying early is important.

Start with first-time home buyer programs 2026 and down payment assistance programs for a comprehensive overview.

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Step 5: Save for Down Payment and Closing Costs

The down payment gets the attention, but closing costs catch many buyers off guard. Plan for both.

Cost	Typical Range
Down payment (FHA)	3.5% of purchase price
Down payment (conventional, 3% programs)	3% of purchase price
Closing costs	2-5% of purchase price
Moving expenses	$1,000-$5,000
Initial home expenses (repairs, furnishings)	$2,000-$10,000
Cash reserves (lender requirement)	1-3 months of mortgage payments

For a $300,000 home, total cash needed can run from $15,000 to $35,000 depending on loan type and closing cost negotiation. Down payment assistance programs can reduce or eliminate the down payment portion. See closing costs for first-time home buyers for a full breakdown.

Step 6: Complete Homebuyer Education

Most assistance programs require a HUD-approved homebuyer education course. Fannie Mae HomeReady and Freddie Mac Home Possible also require it.

Completing education early serves two purposes:

1. You meet the requirement before it becomes a bottleneck

1. You gain practical knowledge that makes every subsequent step clearer

Courses typically take four to eight hours and cost $0 to $125. Most are available online and can be completed on your own schedule.

Step 7: Gather Your Financial Documents

Lenders require extensive documentation. Having these ready before starting lender conversations speeds up the process significantly.

Income documentation:

• Two years of federal tax returns (all pages)
• W-2s and 1099s for the past two years
• Recent pay stubs (30 days)
• Self-employed buyers: profit and loss statements, business returns

Asset documentation:

• Two months of bank statements (all pages, all accounts)
• Investment and retirement account statements
• Source documentation for large deposits

Identity and residence:

• Government-issued photo ID
• Social Security number
• Two years of addresses

Step 8: Get Pre-Approved by Multiple Lenders

Pre-approval is different from pre-qualification. Pre-qualification is an estimate based on self-reported information. Pre-approval involves a full credit pull, document review, and a conditional commitment from the lender.

Always get pre-approved by at least three lenders. Rate shopping within a 45-day window counts as a single credit inquiry. CFPB research found that getting two quotes instead of one saves buyers an average of $1,500 — getting five quotes saves more.

Compare lenders not just on rate but on:

• Total annual percentage rate (APR)
• Lender fees (origination, underwriting, processing)
• Points charged
• Which loan programs they offer
• Responsiveness and communication

For a full walkthrough of what to expect, see the mortgage pre-approval process guide and best mortgage lenders for first-time buyers 2026.

Step 9: Find a Real Estate Agent

For first-time buyers, a buyer’s agent who works primarily with buyers — rather than one who works both sides of transactions — is typically the better choice. The seller pays the buyer’s agent commission in most transactions, so there is no direct cost to the buyer.

Questions to ask when interviewing agents:

• How many first-time buyers did you represent last year?
• Are you familiar with assistance programs in this area?
• What is your communication style and response time?
• Can you provide references from recent buyers?

Step 10: Make an Offer and Negotiate

Once you find a home, your agent will help draft an offer. Key elements include:

• Purchase price: Based on comparable sales (comps) in the area
• Earnest money deposit: Typically 1-3% of the purchase price, applied to your down payment at closing
• Contingencies: Financing contingency, inspection contingency, appraisal contingency — these protect you if something falls through
• Closing date: Coordinate with your lender to set a realistic timeline (typically 30-45 days from acceptance)

Negotiating seller concessions — where the seller credits you money toward closing costs — is a common strategy for buyers who need to preserve cash. This is especially valuable for first-time buyers with limited reserves.

Step 11: Complete Inspection, Appraisal, and Underwriting

After an accepted offer, three major processes run concurrently:

Home inspection: Hire your own inspector (not one recommended by the seller or listing agent). The inspection report identifies material defects. You can negotiate repairs, price reductions, or closing credits based on findings.

Appraisal: Your lender orders an independent appraisal to confirm the home’s value supports the loan amount. If the appraisal comes in below the purchase price, you must renegotiate, cover the gap in cash, or walk away (if you have an appraisal contingency).

Underwriting: Your lender’s underwriter reviews all documents and conditions. Avoid major financial changes during this period — no new credit accounts, no large purchases, no job changes.

For first-time buyers using student loans, see first-time home buyer with student loans for how lenders count student loan payments toward your DTI.

Step 12: Prepare for Closing Day

Closing day involves signing a significant amount of paperwork and delivering the remaining funds needed to close. Prepare by:

• Reviewing the Closing Disclosure at least three business days before closing (the lender is required to provide it)
• Comparing Closing Disclosure figures to the Loan Estimate you received at application — flag any unexplained differences
• Confirming how to deliver closing funds (certified check or wire transfer; personal checks are rarely accepted)
• Doing a final walkthrough of the property 24 hours before closing

Common first-time buyer mistakes to avoid throughout this process are covered in detail at first-time home buyer mistakes to avoid.

Checklist Summary

• Check and correct credit reports
• Improve credit score if needed
• Calculate affordable price range
• Research assistance programs
• Save for down payment, closing costs, and reserves
• Complete homebuyer education
• Gather all financial documents
• Get pre-approved by multiple lenders
• Find and vet a buyer’s agent
• Make an offer with appropriate contingencies
• Complete inspection, appraisal, and underwriting
• Review Closing Disclosure and close

For buyers who have not started saving yet, the buying a house with no down payment guide explores zero-down options, and first-time home buyer grants by state details free money available in your state.

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