Ready to start? Let’s build your first-time buyer plan

Buying your first home can feel like a lot of steps, because it is. The good news is that the process becomes simple once you understand the order of operations and what really matters at each stage.

First-time buyers are still a major part of the market, even though affordability has made the journey tougher in recent years. The National Association of REALTORS® reports first-time buyers were 21% of recent purchases and the median first-time buyer age was 40. National Association of REALTORS®

Key takeaways

• Most first-time buyers do not put 20% down. NAR reports the typical down payment for first-time buyers was 10%. National Association of REALTORS®
• Pre-approval (not online “pre-qual”) is the move that makes your budget real and your offer stronger.
• Inspections and appraisal are two different steps, and both protect you in different ways.
• If you choose a conventional loan with PMI, you may be able to request cancellation when you reach 80% of the home’s original value, and it can auto-terminate at 78% if you are current (rules and exceptions apply). Consumer Financial Protection Bureau+1

Step 1: Set your “comfortable monthly payment” target

Home price is only one piece. Your real budget is the total monthly housing payment, which can include:

• Principal and interest
• Property taxes
• Homeowners insurance
• Mortgage insurance (if required)
• HOA dues (if applicable)

A quick way lenders evaluate affordability is your debt-to-income ratio (DTI). Lower is generally better, but the “right” DTI depends on your full file and loan program.

Pro tip: If you are close to qualifying, paying down revolving credit card balances can help more than people expect.

Step 2: Understand cash-to-close (so you do not get surprised)

Your down payment is not the only upfront cost. Cash-to-close commonly includes:

• Down payment
• Closing costs (title, escrow, lender fees, etc.)
• Prepaids (insurance, taxes, and interest)
• Inspections and appraisal (often paid during the process)

Plan for the full number, not just a percent down.

Step 3: Choose a down payment strategy that fits real life

Yes, 20% down can eliminate PMI on conventional loans, but it is not required. Many buyers choose a smaller down payment to buy sooner and keep reserves.

Here are common ways first-time buyers structure the upfront funds:

• Savings + a low down payment loan option
• Gift funds (with the correct documentation)
• Down payment assistance (DPA) when available
• Negotiated seller credits to reduce closing costs (when the deal supports it)

NAR reports the typical first-time buyer down payment was 10%, which is a helpful reality check if 20% feels out of reach. National Association of REALTORS®

Step 4: Get pre-approved before you shop

A real pre-approval helps you:

• Confirm your price range
• Move faster when you find the right home
• Make a stronger offer with sellers
• Catch documentation issues early

What you will typically provide:

• Pay stubs and W-2s (or self-employed income docs)
• Bank statements
• Photo ID
• Permission to pull credit

Step 5: Know your loan options (in plain English)

A few common first-time buyer-friendly paths:

Conventional low down payment options (as low as 3% down for eligible buyers)

Some conventional programs allow 3% down and can be a great fit for buyers with solid credit and stable income. For example, Fannie Mae HomeReady and Freddie Mac Home Possible advertise 3% down options for eligible borrowers. Fannie Mae+1

FHA loans

Often chosen by buyers who benefit from more flexible credit guidelines. FHA has its own mortgage insurance rules, so it is important to compare total monthly payment and long-term cost.

VA loans

For eligible Veterans, service members, and some surviving spouses. Often 0% down and no monthly mortgage insurance (some borrowers pay an upfront funding fee, with exemptions for some).

USDA loans

Can offer 0% down in eligible areas, with income and location requirements.

Also new for 2026: conforming loan limits increased. The FHFA baseline limit for one-unit properties is $832,750 in most areas, with a ceiling of $1,249,125 in high-cost areas. FHFA.gov

Step 6: Work with the right real estate agent (and use a clear wish list)

A great agent does two things well: helps you win the right home, and helps you avoid mistakes.

Bring a “needs vs. nice-to-haves” list:

• Location and commute
• School boundaries (if relevant)
• Property type (single-family, condo, townhome)
• Condition (move-in ready vs. fixer)
• HOA comfort level
• Must-have features (bed/bath count, yard, garage)

Step 7: Make an offer and understand earnest money

Once you decide, your offer typically includes:

• Price and terms
• Contingencies (inspection, financing, appraisal, etc.)
• Earnest money deposit

Earnest money varies by market, but a common range is about 1% to 3% of the purchase price, with higher amounts sometimes used for new construction or highly competitive situations. Veterans United Home Loans

Step 8: The “under contract” phase (what happens in the 30-ish days before closing)

Once you are under contract, the major milestones usually include:

Home inspection

This is your chance to understand the home’s condition and potential repair risks. The inspection can also become a negotiation point (repairs, credits, or price adjustments depending on the contract and findings).

Appraisal

The lender orders an appraisal to support the value. Appraisal costs vary by location and property type; one recent estimate puts the typical single-family appraisal range around $314 to $423, with an average around $357 (based on 2025 data cited by Bankrate). bankrate.com

Final loan approval

Your lender verifies:

• Income and employment
• Assets
• Credit
• Property details
• Title and insurance items

Important: Avoid opening new credit, financing furniture, or making large undocumented deposits while you are in underwriting.

Mortgage insurance: what it is, and how you can get rid of it

If you put less than 20% down on a conventional loan, you may pay PMI. The CFPB explains PMI is typically required with a conventional loan when your down payment is less than 20%, and it protects the lender. Consumer Financial Protection Bureau

If you have PMI on a conventional loan:

• You generally have the right to request cancellation when your principal balance is scheduled to reach 80% of the home’s original value (if you meet requirements). Consumer Financial Protection Bureau
• PMI can automatically terminate at 78% of the original value if you are current (rules and exceptions apply). NCUA

Closing day and your first week as a homeowner

At closing you will:

• Review and sign documents
• Provide your closing funds
• Confirm insurance is in place
• Get your keys based on your contract’s possession terms

First week checklist:

• Save all closing documents in a secure folder
• Set up auto-pay for mortgage and utilities
• Change locks and update garage codes
• Create a simple maintenance calendar (filters, HVAC service, gutters)

Ready to start? Let’s build your first-time buyer plan

Lifetime Home Loans will help you map out:

• Your price range and monthly payment target
• Down payment and cash-to-close game plan
• Loan options side-by-side (conventional vs FHA, etc.)
• A clean pre-approval so you can shop confidently