The first-time homebuyer guide
Everything you actually need to know, in plain English, from a broker who has closed loans in Northern Kentucky and Cincinnati for 23 years. Jump in anywhere, this guide is built to be skimmed, searched, or read end-to-end.
Are you financially ready?
Four concrete checks before you start touring homes. If three of the four are solid, you're ready; if two are close, we can usually bridge the gap with a 30-60 day plan.
Credit score 580 or better
580+ opens FHA. 620+ unlocks conventional. 680+ gets meaningfully better pricing. Below 580 is workable, we'll tell you the specific steps to improve.
3% to 5% saved for down payment
On a $250,000 home that's $7,500 to $12,500. VA and USDA buyers can do zero down. Gift funds from family are eligible on most programs.
Steady income for 2 years
W-2 employees need 2 years at the same employer (or in the same industry). Self-employed buyers need 2 years of tax returns. Job gaps under 30 days are fine.
Debt-to-income under 50%
Your total monthly debt (including the new mortgage) divided by gross monthly income. FHA allows up to 57%; conventional caps around 50%. We compute it for you.
Five down-payment myths costing first-time buyers
Bad information is the single biggest reason otherwise-qualified first-time buyers don't buy for another 2-3 years than they needed to.
Most first-time buyers put 3% to 5% down. 20% is only needed to avoid private mortgage insurance (PMI) on a conventional loan, not to qualify. PMI adds $80-$200/month but is often worth it vs waiting years to save 20%.
PMI lets you buy sooner with less cash down. On a conventional loan, it automatically drops off at 78% loan-to-value (usually 5-8 years in at typical appreciation). You can also request removal at 80% LTV. The math often favors buying with PMI over renting another 3 years saving for 20% down.
Gift funds are fully eligible on FHA (100% of down payment), conventional (first-time buyer programs), and VA. A signed gift letter from the donor is required. Many first-time NKY buyers use partial gifts from parents or grandparents.
Not always. Paying down debt helps DTI, but emptying savings to do it hurts your cash-to-close and reserves. We model both paths when there's meaningful debt, sometimes keeping the debt and buying now wins financially.
A pre-approval requires a hard credit pull, which takes a few points off temporarily (usually 2-5) and recovers within a couple months. Multiple mortgage inquiries within a 45-day window count as a single pull for scoring purposes, so shop around without fear.
Four loan programs built for first-timers
We run your file through every one of these and tell you which saves the most money over 5, 10, and 30 years. Not every program fits every buyer, the right one depends on your credit, income, and down payment.
FHA
Most forgiving credit + DTI in the market
- Best for
- Buyers with credit scores 580-699 or those with higher debt loads.
- Watch out
- Mortgage insurance runs for the life of the loan unless you refinance to conventional at 20% equity.
Conventional 97
Lowest down payment in the conventional world, PMI drops off
- Best for
- First-time buyers with strong credit (700+) and under 45% DTI who want PMI that disappears.
- Watch out
- First-time-buyer definition is "no ownership in the past 3 years." Income limits may apply on specific variants.
VA
Zero down, no monthly mortgage insurance, competitive rates
- Best for
- Active-duty service members, veterans, and eligible surviving spouses.
- Watch out
- One-time funding fee (usually 2.15% first use, waived for disabled vets). Property must meet VA minimum standards.
USDA
Zero down in eligible rural and suburban areas
- Best for
- Low- to moderate-income buyers looking outside city cores. Parts of Boone, Grant, and outer Campbell counties qualify.
- Watch out
- Income cap by household size. Property must be in a USDA-eligible geographic area.
The 8-step first-time buyer process
Start to finish, most first-time buyers are keys-in-hand within 60-90 days. Every step below shows what actually happens and when, the mortgage itself (accepted offer to closing) usually runs 22-25 days.
- Week 0
Get your number (pre-approval)
A 15-minute call + a secure doc upload gets you a real pre-approval letter. We pull credit, verify income, and tell you exactly what you qualify for. Letter in 24-48 hours.
Start with Lee - Week 1
Find your agent
If you don't have a Realtor, we'll introduce you to one we trust. A good agent is free to you (seller pays the commission) and critical for first-timers.
- Weeks 1-4
Shop with your budget locked in
Tour homes with your agent. Stay at or below the price we pre-approved you for. Most first-time buyers look for 2-4 weeks and write 1-3 rounds of offers before acceptance.
Run the numbers - Day 1 of contract
Make an offer
Your agent writes the offer with your pre-approval letter attached. Earnest money (1-2% of purchase price) goes into escrow. We're on call that day if sellers or their agents have lender questions.
- Day 3-10
Inspection
Inspector walks the home. Major issues can be renegotiated, credited back, or used to walk away without losing earnest money. Never skip this, even on new construction.
- Day 7-22
Appraisal and underwriting
Lender orders an appraisal to confirm value. Underwriter reviews your file against program guidelines. Most of the "hurry up and wait" lives here, 15-20 days typical. May request additional docs.
- Day 22-25
Clear to close
Underwriter signs off. Closing disclosure is sent 3 business days before closing (federally required). You wire your cash-to-close the morning of signing.
- Closing day
Keys
Sign papers at the title company. Seller typically vacates 1-3 days prior or same day. Keys hit your hand. Congratulations, you own a home.
Six mistakes we see kill deals
Every single one of these has derailed a first-time purchase in our office. They're the most preventable reasons closings fall apart.
Opening a new credit card mid-process
Any new credit activity between application and closing can derail underwriting. Don't open cards, don't finance furniture, don't co-sign anything until after keys are in hand.
Changing jobs or income structure
Switching from W-2 to self-employed mid-process usually kills the loan. A W-2-to-W-2 switch in the same field can work but needs extra documentation. Talk to us first.
Making large cash deposits
Cash deposits over $1,000 or so raise sourcing questions. Everything going into your account during the process should be traceable. Gift funds need a letter and are fine; untraceable cash is not.
Skipping the inspection
Never. Even on new construction. Inspections are $400-$600 and have saved buyers $5,000-$50,000 over and over. Use your inspection contingency.
Maxing out your pre-approval
Just because we approved you for $400,000 doesn't mean that's where you should shop. Budget for the payment you're comfortable making, not the top dollar you qualify for.
Waiving contingencies in a hot market
Sellers in competitive markets sometimes pressure buyers to waive financing or inspection contingencies. Don't. Strong offers win by price, earnest money, and closing terms, not by giving up your safety nets.
A plain-English glossary
The 10 terms every first-time buyer ends up Googling.
- APR
- Annual Percentage Rate. Your interest rate plus fees, expressed as a yearly cost. Compare APRs when shopping offers.
- Closing Costs
- All the one-time fees to complete the loan: lender fees, title insurance, escrow, first year of homeowners insurance, a few months of taxes held in escrow, and prepaid interest. Typically 2-3% of purchase price.
- DTI
- Debt-to-Income ratio. Your total monthly debt (including the new mortgage) divided by gross monthly income.
- Earnest Money
- The deposit (typically 1-2% of purchase price) you put into escrow when your offer is accepted. Applied to your cash-to-close; forfeit only if you breach contract.
- Escrow
- (Two meanings.) 1) A neutral third-party account holding earnest money during contract. 2) Monthly escrow on your mortgage payment: taxes and insurance collected with P&I and held by the lender.
- HOA
- Homeowners Association. Common in condos and planned communities. Dues and restrictions apply; affects your DTI.
- LTV
- Loan-to-Value. Loan amount divided by appraised value. 95% LTV means 5% down.
- PITI
- Principal, Interest, Taxes, and Insurance, the four components of your monthly mortgage payment. Includes PMI when applicable.
- PMI
- Private Mortgage Insurance. Required on conventional loans with less than 20% down. Drops off automatically at 78% LTV.
- Points
- Prepaid interest paid at closing to lower your rate. One point = 1% of the loan amount. Worth it if you'll keep the loan long enough to break even.
Tools you can use today
Mortgage calculator
Estimate monthly P&I, taxes, insurance, and PMI at any price and down payment. No sign-up.
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Live Freddie Mac averages for 30-year, 15-year, and 5/1 ARM loans. Updated every Thursday.
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Conventional, FHA, VA, USDA, Jumbo, HELOC, investment, and refinance explained.
Compare programs10 questions we hear every week
- Less than most people think. FHA requires 3.5% down. Conventional first-time-buyer programs go as low as 3%. VA and USDA can be zero down. Plus closing costs (typically 2-3% of purchase price), though sellers often cover some of those. On a $250,000 home, a realistic cash-to-close budget for an FHA buyer is roughly $13,000-$16,000 before any seller concessions.
Start your homebuying journey
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