Are You Ready to Buy Your First Home? Tips for First Time Home Buyers
Last Updated: October 26, 2026
Quick Summary
The best tips for first time home buyers start with your monthly housing budget, not the amount a lender approves. Aim to keep housing costs near 28% of gross monthly income and total debt near 36%, then compare Loan Estimates from at least three lenders to find the lowest total borrowing cost.
Conventional loans commonly accept 3% down, FHA loans accept 3.5%, and VA loans can require nothing down.
Pull all three credit reports, dispute errors, and pay down revolving balances before applying for a mortgage.
Request a Loan Estimate from at least three lenders within a few days of each other.
Common earnest money deposits run 1% to 3% of the purchase price and are held in escrow.
Set aside 1% of the home's value annually for maintenance, though older homes often demand more.
Table of Contents
How Much House Can I Afford? Start With Your Monthly Housing Budget
Closing Costs for First-Time Home Buyers: What to Expect and How to Prepare
Your First-Time Home Buyer Checklist: A Step-by-Step Timeline
Getting Pre-Approved for a Mortgage: Why It Comes Before House Hunting
Comparing Mortgage Lenders and Loan Estimates: How to Calculate Total Borrowing Cost
Understanding Mortgage Types, Loan Terms, and First-Time Buyer Programs
Offer Strategy, Contingencies, and the Risks of Waiving Protections
Your First-Year Ownership Budget: Costs Beyond the Mortgage Payment
How Much House Can I Afford? Start With Your Monthly Housing Budget
The best tips for first time home buyers start with a single number: the monthly payment you can carry without straining your budget. The house you can afford is not the amount a lender approves. It is the amount you can pay comfortably for years.
A useful starting point is the 28/36 rule. Housing costs should stay near 28% of gross monthly income, and total debt near 36%. Lenders weigh more than that ratio, though. They review your credit history, savings reserves, employment stability, and the size of your down payment.
Front-end ratio: proposed mortgage payment, property taxes, homeowners insurance, and association dues divided by gross monthly income
Back-end ratio: all monthly debt payments, including car loans and student loans, divided by gross monthly income
Cash reserves: money left after closing, which protects you when the water heater fails
Run your income and debts through a mortgage calculator to see what monthly payment fits before you tour a single house.
First-Time Home Buyer Down Payment Options: From 0% to 20%
A 20% down payment is not the entry requirement most people assume. Conventional loans commonly accept 3% down, FHA loans accept 3.5%, and VA loans can require nothing down for eligible veterans and service members. Three Peaks Mortgage offers flexible down payment options from 0% to 5%.
Down Payment | Typical Loan Type | What It Means for You |
0% | VA | No down payment; funding fee may apply |
3% | Conventional | Lower upfront cash, possible private mortgage insurance |
3.5% | FHA | Flexible credit standards, mortgage insurance required |
5% | Conventional | Lower monthly insurance burden than 3% options |
20% | Conventional | No private mortgage insurance on most loans |
Smaller down payments usually mean private mortgage insurance, which adds to the monthly payment until you build enough equity. Do the math on both scenarios before deciding.
Closing Costs for First-Time Home Buyers: What to Expect and How to Prepare
Closing costs for first-time home buyers are due at closing alongside your down payment. Together, these form your cash to close. The Consumer Financial Protection Bureau publishes a guide to closing costs and the Closing Disclosure that explains each line item.
Common costs include:
Lender fees, including origination and underwriting charges
Appraisal and home inspection fees
Title search and title insurance
Recording fees and prepaid property taxes
Prepaid homeowners insurance and escrow deposits
Ask your lender for a Loan Estimate early. It lists projected closing costs in standardized categories, which makes side-by-side comparison possible. Sellers sometimes cover part of these costs through negotiation, so raise it in your purchase offer.
Your First-Time Home Buyer Checklist: A Step-by-Step Timeline
A first-time home buyer checklist can help organize the steps from first savings deposit to keys in hand. New buyers can also book a homebuyer education session for a guided walkthrough of the whole process.
Phase 1: Financial Foundation (3-6 Months Before)
Pull your credit reports and dispute errors
Set a down payment savings target and automate transfers
Build an emergency fund separate from closing money
Gather pay stubs, tax returns, and bank statements
Phase 2: Pre-Approval and Home Search (2-3 Months Before)
Complete mortgage pre-approval
Define needs versus wants for the home search
Interview real estate agents and pick one
Tour homes within your approved budget
Phase 3: Offer, Inspection, and Closing (30-45 Days)
Submit a purchase offer with earnest money
Complete the home inspection and request repairs
Appraisal and underwriting run in parallel
Review the Closing Disclosure, then close
Checking and Improving Your Credit Score Before You Apply
Your credit score is the single biggest lever on your mortgage rate. Higher scores generally unlock better pricing and more loan options. Pull all three credit reports, check for errors, and pay down revolving balances before applying. For personalized help raising your score, book a credit counseling session. Payment history and credit use carry the most weight in scoring models.
A common mistake is opening new credit cards during the mortgage process. Underwriters recheck credit before closing, and a new account can derail an approval.
Getting Pre-Approved for a Mortgage: Why It Comes Before House Hunting
Mortgage pre-approval can help establish a borrowing range before house hunting. You can book a pre-approval appointment to review your credit profile, income, and assets.
Pre-approval also sets your home search boundaries.
Comparing Mortgage Lenders and Loan Estimates: How to Calculate Total Borrowing Cost
Comparing mortgage quotes means comparing total borrowing cost, not just the interest rate. Two lenders can advertise identical rates while charging very different lender fees. Total borrowing cost combines the interest rate, annual percentage rate, origination charges, discount points, and mortgage insurance over the life of the loan.
Use this comparison method:
Request a Loan Estimate from at least three lenders within a few days of each other
Compare section A origination charges line by line
Compare the annual percentage rate, which folds fees into the rate
Ask each lender whether the rate is locked and for how long
Calculate total cost over your expected holding period, not just the first year
A lower rate with high fees can cost more than a slightly higher rate with low fees if you sell or refinance early. To review loan options, compare loan options.
Understanding Mortgage Types, Loan Terms, and First-Time Buyer Programs
Loan choice comes down to three variables: how long you stay, how much risk you can carry, and what you qualify for. A fixed-rate mortgage locks the interest rate for the full loan term, usually 30 or 15 years. An adjustable-rate mortgage starts lower and can change after an initial fixed period. Conventional loans follow standard underwriting; government-backed loans include FHA and VA programs.
Here is how the main programs differ in practice:
Loan Type | Typical Minimum Down Payment | Key Eligibility or Cost Feature |
Conventional | 3% | Private mortgage insurance usually required below 20% down; PMI can be removed once you reach sufficient equity |
FHA | 3.5% | More flexible credit standards; mortgage insurance premium required upfront and annually |
VA | 0% | For eligible veterans, active-duty service members, and surviving spouses; a funding fee may apply |
USDA | 0% | For eligible rural areas; income limits apply; a guarantee fee may apply |
First-time buyer programs and down payment assistance expand access, but the details matter more than the headline. Many state housing finance agencies offer grants, deferred second mortgages, and reduced-rate loans. Eligibility usually depends on household income relative to area median income, purchase price limits, and sometimes a homebuyer education requirement. Repayment terms vary widely: some assistance is a forgivable grant if you stay in the home for a set number of years, some is a silent second mortgage with 0% interest due on sale or refinance, and some is a low-interest loan repaid monthly.
Before you assume you cannot afford the down payment, check these sources:
Your state housing finance agency's first-time buyer page for income and purchase price limits
The U.S. Department of Housing and Urban Development's directory of local homebuyer programs
Local nonprofit housing counseling agencies that administer assistance funds
Application timing matters. Many assistance programs require you to complete a homebuyer education course before closing, and some require the funds to be reserved before you sign a purchase contract. Ask about recapture provisions, which can require repayment if you sell or refinance within a certain period.
Three Peaks Mortgage works with VA, FHA, Conventional, and Jumbo programs, which matters when your situation does not fit a single box.
Offer Strategy, Contingencies, and the Risks of Waiving Protections
A purchase offer is a negotiation, not a formality. Price matters, but so do contingencies, earnest money, and closing timeline. Standard contingencies cover financing, appraisal, and inspection. Each one protects you if something goes wrong.
A typical offer includes:
Purchase price and any escalation clause. An escalation clause raises your offer automatically up to a stated cap if a competing offer comes in higher, often by a set increment. Example: offer $400,000 with an escalation to $420,000 in $2,000 increments, requiring the seller to show the competing offer.
Earnest money deposit. Common amounts run 1% to 3% of the purchase price, though competitive markets can push higher. The deposit is held in escrow and applied to your closing costs or down payment. It is usually refundable if you cancel within a contingency period, but not if you waive contingencies and then back out.
Contingency deadlines. Inspection might be 7 to 10 days; financing and appraisal might be 21 to 30 days. Shortening these windows can strengthen an offer, but it also compresses the time you have to discover problems.
Closing timeline. A 30- to 45-day close is common. A seller who needs a faster close may accept a slightly lower price.
Waiving an inspection to win a bidding war is the riskiest move in a competitive market. You accept the property in unknown condition, and repairs can cost far more than the edge the waiver bought you. A safer alternative is an information-only inspection: you keep the right to walk away during a short window but agree not to request repairs. Another option is a pre-offer inspection, which lets you bid with real information without a contingency.
Waiving the appraisal contingency means covering any gap between the appraised value and your offer in cash. If the home appraises at $390,000 and you offered $400,000, you need $10,000 more at closing unless the seller agrees to lower the price. Ask your lender whether an appraisal waiver or a higher down payment changes that exposure.
A balanced strategy: keep the inspection contingency, offer a short inspection window, and increase earnest money to show commitment. Watch out: in a hot housing market, pressure to waive protections rises, and the buyers who regret it most are the ones who skipped the inspection. Before you sign, ask your agent to show you exactly what you give up with each waiver and what it would cost to buy that protection back later.
Your First-Year Ownership Budget: Costs Beyond the Mortgage Payment
First-year ownership costs go well beyond principal and interest. Budget for property taxes, homeowners insurance, utilities, maintenance, and any association dues. A common approach is setting aside 1% of the home's value annually for maintenance, though older homes often demand more.
A first-year budget template:
Mortgage payment, including escrowed taxes and insurance
Utilities: electric, gas, water, trash, internet
Maintenance reserve, funded monthly
Furnishings, tools, and lawn equipment
Emergency fund covering three to six months of housing costs
Neighborhood choice affects this budget as much as the house. Property taxes and insurance vary by location, so factor them into your home search.
Frequently Asked Questions
What percentage do most first time home buyers put down on a house?
Many first time home buyers put down far less than 20%. Some loan programs allow low down payments. Three Peaks Mortgage offers flexible down payment options from 0% to 5%.
What credit score do you need to buy your first home?
The minimum credit score depends on the loan type. A higher score can lower your mortgage rate and reduce private mortgage insurance costs. Before you apply, check your credit reports for errors, pay down balances, and avoid opening new credit lines.
How much money should first-time home buyers save before buying?
Plan to save for three buckets: down payment, closing costs, and a reserve fund. If your down payment is 5% or less, budget for private mortgage insurance and any immediate maintenance costs. A detailed first-year ownership budget helps you avoid surprises.
Should you get pre-approved before looking at homes?
Yes. Mortgage pre-approval gives you a clear price range, shows sellers you are a serious buyer, and speeds up the offer process. It requires income verification, asset statements, and a credit check. Getting pre-approved early also reveals any credit or debt-to-income issues while you still have time to fix them.
What costs should first-time home buyers expect at closing?
Closing costs for first-time home buyers usually include lender fees, title search and insurance, appraisal, recording fees, prepaid property taxes, and homeowners insurance. Ask your lender for a Loan Estimate within three business days of applying and compare it to the Closing Disclosure before you sign.
What are the top 5 things to consider when buying a house?
Focus on these five: 1) your monthly housing budget, including property taxes and insurance; 2) your credit score and debt-to-income ratio; 3) the down payment and closing costs you can afford; 4) the neighborhood and long-term needs versus wants; and 5) the total borrowing cost across loan terms. Getting pre-approved and comparing loan estimates from multiple lenders helps you make an informed decision rather than rushing into a purchase.
Buying your first home in Colorado Springs or anywhere along the Front Range takes preparation, and the right financing partner shortens the path. Three Peaks Mortgage brings more than 20 years of loan origination experience, a full suite of VA, FHA, Conventional, and Jumbo programs, down payment options from 0% to 5%, and one team handling pre-approval through closing. Get started with Three Peaks Mortgage and move into your first home with a payment you can actually afford.
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