{"id":35232,"date":"2026-04-06T17:00:55","date_gmt":"2026-04-06T17:00:55","guid":{"rendered":"https:\/\/indafunds.com\/?p=35232"},"modified":"2026-04-06T17:00:56","modified_gmt":"2026-04-06T17:00:56","slug":"first-time-homebuyer-guide-bankrate","status":"publish","type":"post","link":"https:\/\/indafunds.com\/?p=35232","title":{"rendered":"First-Time Homebuyer Guide | Bankrate"},"content":{"rendered":"
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\n Key takeaways<\/span>
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  • \n A first-time homebuyer is someone who has never owned a home or who has not owned a home in the last three years.\n <\/li>\n
  • \n Buying a new house involves many steps, from securing a mortgage to negotiating with sellers and navigating the underwriting process.\n <\/li>\n
  • \n First-time homebuyer programs offer mortgages with low down-payment requirements and other favorable terms or assistance.\n <\/li>\n<\/ul>\n<\/div>\n

    What is a first-time homebuyer?<\/h2>\n

    A first-time homebuyer<\/u> is someone who has never owned a home before, or someone who hasn\u2019t owned a home for at least the previous three years. In certain tax circumstances, the IRS considers someone who hasn\u2019t owned a home in the prior two years a first-time buyer, as well.<\/p>\n

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    \n 44%
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    \n Current homeowners who specifically saved for the down payment and closing costs on their first home, according to Bankrate\u2019s 2025 Down Payment Survey.<\/p><\/div>\n<\/p><\/div>\n

    Step-by-step first-time homebuyer guide<\/h2>\n
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    Step 1: Assess your finances<\/h3>\n

    A home is the single biggest purchase most people make. If you can\u2019t pay all cash, you\u2019ll have to get a loan, so it\u2019s important to ensure you\u2019re in a good position financially to qualify for \u2014 and handle \u2014 a mortgage. Start by checking your credit report and score, examining your budget and assessing your ability to make a down payment and pay closing costs.<\/p>\n

    Credit<\/h4>\n

    With a higher credit score \u2014 ideally, 760 or more \u2014 you\u2019ll qualify for more favorable loan terms that could save you money over the life of your mortgage. That said, you can still get a loan with a score as low as 620 for a conventional loan<\/u> or 500 for an FHA loan<\/u>. You might not get the most attractive interest rate with that score, however, and might need a larger down payment.<\/p>\n

    Debt-to-income ratio<\/h4>\n

    Calculate your debt-to-income (DTI) ratio<\/u>. Depending on the type of mortgage you\u2019re getting, the ideal amount to spend on housing costs \u2014 including the mortgage payment, property taxes and homeowners insurance \u2014 is 28 percent of your gross monthly income. For all of your monthly debt payments, including housing costs, the ideal amount is 36 percent.<\/p>\n

    For a conventional loan \u2014 the most popular kind of loan \u2014 many mortgage lenders look for a maximum 43 percent DTI ratio. But some lenders go higher, up to 50 percent, if you have other compensating factors, like a lot of money in savings. The higher your DTI ratio, the more likely you are to pay a higher mortgage rate<\/u>.<\/p>\n

    Down payment<\/h4>\n

    If you\u2019re interested in a conventional loan and can put 20 percent down, you\u2019ll avoid paying private mortgage insurance<\/u> (PMI). This is an extra monthly fee that covers the lender should you default on, or stop paying, the loan.<\/p>\n

    You don\u2019t have to put down 20 percent, though \u2014 you can pay as little as 3 percent with PMI. If you\u2019re getting a VA loan<\/u> or USDA loan<\/u>, you likely won\u2019t have to make any down payment. FHA loans, meanwhile, require a minimum of 3.5 percent down.<\/p>\n

    Savings<\/h4>\n

    Closing costs can range from 2 percent to 5 percent of the home\u2019s purchase price. There\u2019s also the earnest money deposit, which is a smaller amount submitted with your initial offer to buy a home, usually 1 percent of the home\u2019s purchase price.<\/p>\n

    Don\u2019t forget: You\u2019ll also want some savings lined up for moving expenses and furniture or possible repairs or updates you\u2019d like to make to the home.<\/p>\n

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    \n How much house can I afford?\n <\/p>\n

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    Along with ensuring you can qualify for a mortgage, a look at your finances will help you set a homebuying budget. There are many different ways of thinking about how much of your income should go toward a mortgage, but generally speaking, you\u2019ll want to be sure you can comfortably pay for your housing costs and other recurring debts while still paying daily costs and \u2014 ideally \u2014 saving some money. Bankrate can help you decide how much house you can afford. <\/p>\n<\/p><\/div>\n<\/p><\/div>\n<\/p><\/div>\n<\/section>\n

    Step 2: Decide which type of mortgage to get<\/h3>\n

    There are many types of mortgages<\/u>. Besides choosing a loan type, you\u2019ll also decide whether you want a fixed-rate or adjustable-rate mortgage and how long you want your loan term to be.<\/p>\n

    Types of mortgages<\/h4>\n

    Examples of different kinds of mortgages include:<\/p>\n

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    • \nConventional loans: <\/strong>Conventional mortgages are the most common type of mortgage. A conventional mortgage isn\u2019t backed by the U.S. government, and it comes with stricter qualifying criteria.<\/li>\n
    • \nFHA loans: <\/strong>An FHA mortgage is a government-backed loan insured by the Federal Housing Administration (FHA). These loans come with lower credit score requirements, as low as 500 with a 10 percent down payment.<\/li>\n
    • \nUSDA loans: <\/strong>Like FHA loans, a USDA mortgage is a government-backed mortgage. These types of mortgages are designed for borrowers in eligible rural areas and do not require a down payment.<\/li>\n
    • \nVA loans: <\/strong>A VA loan is guaranteed by the U.S. Department of Veterans Affairs. These mortgages are available to eligible veterans, active-duty service members and surviving spouses and generally don\u2019t require any money down.<\/li>\n<\/ul>\n

      Fixed or adjustable rate<\/h4>\n

      Fixed-rate loans<\/u> tend to have slightly higher rates, but the rate never changes. An adjustable-rate mortgage (ARM) typically starts with a lower rate for a set time \u2014 such as five or seven years \u2014 and then adjusts up or down based on prevailing rates at a predetermined interval, such as once every six months. If mortgage rates are up, your personal rate will increase, and so will your monthly payment.<\/p>\n

      Fixed-rate mortgages are more common and are generally easier to get. They offer a more predictable payment long-term and have simpler eligibility criteria than an ARM. However, if you\u2019re savvy and meet the financial requirements \u2014 and you also plan to move or refinance before the rate adjusts \u2014 an ARM could save you some money in the short-term. The caveat is that it comes with risk. For many people, you will need to be able to sell or refinance for an ARM to make financial sense.<\/p>\n

      Loan terms<\/h4>\n

      Also consider your loan term, such as 15 or 30 years. Shorter-term loans have lower rates but larger monthly payments. This means less flexibility in your monthly budget in exchange for lower overall borrowing costs. Most first-time homebuyers get a 30-year, fixed-rate mortgage<\/u>.<\/p>\n

      Step 3: Get quotes from at least three mortgage lenders<\/h3>\n

      Comparing mortgage loan offers is one of the essential steps to buying a house. Aim to get rate quotes from at least three lenders, as mortgage interest rates vary considerably and change often.<\/p>\n

      Some lenders offer rate quotes online after you enter your contact info and financial details. Other lenders will require you to hop on the phone for a quick conversation. When comparing these rate quotes, take into account the fees that come with the loan. For instance, one loan may have a lower interest rate, but it requires you to buy points upfront to lower the rate. Always use the annual percentage rate (APR) to compare loans, because the APR factors in the cost of fees.<\/p>\n

      While some lenders refer to this step as prequalification, don\u2019t get it confused with preapproval. Prequalification allows you to get an estimated rate and understand how much you can afford. The rate and fees you\u2019ll pay are a best guess based on the limited financial info you give to a mortgage lender. When you go to get preapproved, you\u2019ll need to submit more documentation and submit to a credit check.<\/p>\n

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      For 2026 so far, rates for 30-year fixed-rate mortgages have been between 6% and 6.5%. It\u2019s expected that rates will stay in this range throughout the year. However, rates offered on Bankrate are much lower than average. As of April 1, the top offer on Bankrate is 5.86%.<\/p>\n<\/p><\/div>\n<\/p><\/div>\n<\/p><\/div>\n<\/section>\n

      Step 4: Get preapproved for a mortgage<\/h3>\n

      When you\u2019re ready to search for a home and make offers, get preapproved<\/u> for a mortgage. A preapproval is a written, preliminary commitment from a lender to loan you a certain amount of money at a certain rate. It is not a finalized offer. However, a preapproval letter is crucial when you\u2019re shopping for a home because it shows sellers you\u2019re likely able to finance the purchase.<\/p>\n

      To get preapproval for a mortgage, you\u2019ll need to provide a variety of documents and personal financial information including:<\/p>\n

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      • Bank statements and pay stubs from at least the past two months<\/li>\n
      • Federal tax returns from the past two years<\/li>\n
      • Employer contact information<\/li>\n
      • Business records if self-employed<\/li>\n
      • Statements from retirement and investment accounts<\/li>\n<\/ul>\n
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        \n Keep in mind:
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        \n While quotes can be a valuable means of comparison, your rate won\u2019t be finalized until you lock it in with the lender.\n <\/p>\n<\/div>\n

        Step 5: Find a real estate agent<\/h3>\n

        Once you\u2019re preapproved and ready to start looking for homes, connect with a real estate agent<\/u> who has experience with homebuyers in your area. Ask family or friends for a recommendation, or research agents online. Bear in mind, some might specialize in working with sellers instead of buyers.<\/p>\n

        Keep in mind, too, that you don\u2019t have to sign a contract with the first agent you meet. Interview a few, and ask about their experience, track record and whether they specialize in any particular type of residence, such as condos. Make sure you understand their communication style \u2014 will you hear from them every day with new listings? \u2014 and ask for references. Ideally, the agent should know the local housing market well and be able to provide valuable insights about things like neighborhoods and school districts.<\/p>\n

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