If you’re buying a home for the first time, there’s a lot of information out there—and a lot of it is either incomplete or flat-out misleading.

This guide breaks down what first-time homebuyers actually need to know, specifically for conventional loans, so you can make informed decisions and avoid costly mistakes.

You’re considered a first-time homebuyer if:

• You’ve never owned a home, or
• You haven’t owned a home in the past three years

This definition matters because it unlocks certain loan programs and benefits designed specifically for first-time buyers.

One of the most common myths is that there are plenty of zero-down or no-closing-cost mortgage options available.

Here’s the reality:

Most of those programs come from down payment assistance (DPA) or grant programs, and they:

• Vary by location (state, county, city)
• Come with restrictions and qualifications
• Often include tradeoffs

Nothing is truly free in mortgage financing—every option has a cost somewhere.

There are true zero-down options (like VA and USDA loans), but those are separate programs with specific eligibility requirements.

With a conventional loan, first-time homebuyers can put down as little as:

3% Down

However, there are important limitations:

• Must be a single-unit property
• Includes single-family homes, condos, and townhomes
• Not available for multi-unit properties

This low down payment option is one of the biggest advantages for first-time buyers using conventional financing.

Here’s something most first-time buyers don’t know:

If your income is below the Area Median Income (AMI) for your area, you may qualify for:

• Reduced loan-level pricing adjustments (LLPAs)
• Lower interest rates

Mortgage rates are built from:

• Base rate
• Adjustments for credit score, down payment, property type, etc.

When certain adjustments are waived, your rate can drop—sometimes significantly.

Important detail:

• This is based on qualifying income, not total income
• If your base income qualifies you, additional variable income may not hurt you

Additional benefits may apply if your income is below 80% of AMI, depending on the program.

Discount points allow you to lower your interest rate by paying upfront.

• 1 point = 1% of the loan amount
• Pay more upfront → get a lower rate

But here’s where buyers get tripped up:

Some lenders quote rates with points already included—without clearly explaining it.

What to Ask:

• Rate with points
• Rate without points
• Break-even timeline

Why it matters:
Most first-time buyers stay in their home for about 5 years. If it takes longer than that to break even, paying points may not make sense.

Points are a strategy—not a requirement.

In addition to your down payment, you’ll need to budget for closing costs, which typically average around 3% of the purchase price (varies by location).

Lender Fees

• Underwriting
• Appraisal
• Credit report
• Origination (if applicable)

Third-Party Costs

• Title and escrow
• Recording fees
• Transfer taxes
• Inspections

Prepaid Costs

These aren’t really fees—they’re upfront payments for:

• Property taxes
• Homeowners insurance
• Prepaid interest

If you’re putting less than 20% down, you’ll typically have an escrow account, meaning taxes and insurance are included in your monthly payment.

At closing, you’ll:

• Pre-fund escrow with a few months of taxes/insurance
• Pay your first year of homeowners insurance
• Pay daily interest for the remainder of the month

Understanding this upfront helps avoid surprises.

First-time buyers often use outside funds to help with costs.

Gift Funds

Allowed from:

• Family members
• Relatives

Requirements:

• Must be documented
• Must be sourced
• Requires a signed gift letter

Retirement Accounts

You may be able to:

• Borrow from or withdraw funds
• Potentially avoid penalties (depending on your plan)

However, this should be evaluated carefully due to long-term financial impact.

The biggest advantage you can give yourself is starting early and getting educated.

There’s no shortage of information online—but much of it is:

• Outdated
• Oversimplified
• Not tailored to your situation

Working with an experienced loan officer who understands the details can help you:

• Avoid costly mistakes
• Structure your loan correctly
• Move through the process with confidence

If you’re thinking about buying your first home, the next step is getting clear on your numbers and options.

We’ll help you:

• Understand what you qualify for
• Break down your true costs
• Build a strategy that fits your goals

No guesswork—just a clear path forward.