First-Time Home Buyer Programs 2026

Who Qualifies as a First-Time Buyer

The definition of "first-time home buyer" is broader than most people realize, and understanding who qualifies can open the door to programs and benefits that many potential buyers overlook. According to HUD, a first-time home buyer is any individual who has not owned a principal residence during the three-year period ending on the date of purchase of the new property. This means you do not need to have never owned a home in your life to qualify as a first-time buyer.

This three-year rule creates opportunities for several groups of people. If you owned a home but sold it four years ago and have been renting since, you are a first-time buyer again. If you went through a divorce and your ex-spouse retained the home more than three years ago, you qualify. Even if you currently own an investment property or vacation home, you may still qualify as a first-time buyer if the investment or vacation property was never your principal residence during the relevant three-year period.

There are additional categories that qualify under the HUD definition. A displaced homemaker who has only owned with a spouse qualifies as a first-time buyer. A single parent who has only owned with a former spouse during the marriage also qualifies. And anyone who has owned only a principal residence that was not permanently affixed to a permanent foundation (such as a mobile home not on a permanent foundation) qualifies as well.

Why does this classification matter so much? Because dozens of federal, state, and local programs reserve their benefits exclusively for first-time buyers. These benefits can include lower down payment requirements, reduced interest rates, waived fees, grant money for down payments, and tax credits. A buyer who mistakenly believes they do not qualify as a first-time buyer could miss out on thousands of dollars in financial assistance. Before beginning your home search, verify your first-time buyer status based on the HUD definition, and work with a lender who is knowledgeable about first-time buyer programs in your area.

It is worth noting that some state and local programs have their own definitions of "first-time buyer" that may differ from the federal definition. Some programs define it more narrowly (never having owned any property) while others use the standard three-year rule. Always check the specific eligibility criteria for any program you are considering. Use our affordability calculator to understand how much home you can comfortably purchase as a first-time buyer.

FHA Loans for First-Time Buyers

Federal Housing Administration (FHA) loans have been the gateway to homeownership for millions of first-time buyers since the program's creation in 1934. Insured by the FHA and originated by private lenders, these loans are specifically designed to make homeownership accessible to borrowers who may not qualify for conventional financing due to limited savings, lower credit scores, or higher debt levels.

The most attractive feature of FHA loans for first-time buyers is the low down payment requirement. With a credit score of 580 or higher, you can purchase a home with just 3.5% down. On a $300,000 home, that amounts to $10,500 rather than the $60,000 needed for a traditional 20% down payment. Even borrowers with credit scores between 500 and 579 can qualify with a 10% down payment, making FHA the most credit-flexible mortgage program available. Estimate your FHA loan payments with our FHA loan calculator.

FHA loans also have more lenient debt-to-income (DTI) ratio requirements than conventional loans. While conventional loans generally require a DTI of 45% or less, FHA loans may approve borrowers with DTI ratios up to 50% if they have compensating factors such as substantial cash reserves, a long employment history, or minimal payment increase compared to their current housing cost. This higher DTI threshold allows buyers with existing student loan debt, car payments, or other obligations to still qualify for a mortgage.

The down payment for an FHA loan can come from a wide range of sources, providing additional flexibility. While conventional loans may restrict certain gift or grant sources, FHA loans allow down payment funds from family members, employers, government agencies, nonprofit organizations, and down payment assistance programs. The gift donor must provide a gift letter confirming the funds are not a loan, but there is no limit on the percentage of the down payment that can be a gift.

However, FHA loans come with costs that buyers should understand. The most significant is mortgage insurance, which is required for the life of the loan if you put less than 10% down. FHA charges an upfront mortgage insurance premium (UFMIP) of 1.75% of the loan amount, which is typically financed into the loan, plus an annual mortgage insurance premium (MIP) of 0.55% of the loan balance for most borrowers, paid monthly. On a $290,000 loan (after 3.5% down on $300,000), the upfront MIP is approximately $5,075, and the annual MIP adds about $133 per month to your payment. Unlike conventional loans where private mortgage insurance (PMI) can be canceled at 20% equity, FHA MIP remains for the life of the loan, making it more expensive over the long term. Learn more about mortgage insurance costs with our PMI calculator.

FHA loans also have maximum loan limits that vary by county. In 2026, the standard FHA loan limit for a single-family home is $524,225 in most areas, with higher limits in designated high-cost areas reaching up to $1,209,750 in the most expensive markets. Buyers in areas where home prices exceed the FHA limit will need to consider conventional financing or explore the FHA high-cost exception. Check your county's FHA limit before beginning your search to ensure FHA financing is viable for the homes you are considering.

Conventional 97 and HomeReady Programs

While FHA loans receive the most attention among first-time buyer programs, conventional low-down-payment options have become increasingly competitive and may actually be the better choice for many first-time buyers, particularly those with credit scores above 700. Two programs stand out: the Conventional 97 (also called HomeReady by Fannie Mae and Home Possible by Freddie Mac).

The Conventional 97 program, backed by Fannie Mae, allows qualified buyers to purchase a home with just 3% down. On a $300,000 home, that is $9,000 compared to $10,500 for FHA. The program is available to first-time home buyers (at least one borrower must be a first-time buyer as defined by Fannie Mae) and requires a minimum credit score of 620, though scores of 680 or above are needed for the most competitive rates. The property must be a one-unit primary residence, and there are no income limits for standard Conventional 97 loans.

Fannie Mae's HomeReady program is a more feature-rich version of the low-down-payment conventional loan, specifically designed for low-to-moderate income buyers. HomeReady requires just 3% down and has income limits: borrowers cannot exceed 80% of the area median income (AMI) for the property's location. In exchange for this income restriction, HomeReady offers several advantages over standard conventional loans. Mortgage insurance rates are reduced, often 25% to 35% lower than standard PMI for the same credit score and LTV combination. HomeReady also allows non-borrower household income (such as income from a parent or adult child living in the home) to be considered as a compensating factor, even though it is not used to qualify for the loan itself.

Freddie Mac's Home Possible program is Freddie's counterpart to HomeReady, with very similar features: 3% down, reduced mortgage insurance, and income limits at 80% of AMI. One subtle difference is that Home Possible uses Freddie Mac's automated underwriting system (Loan Product Advisor) rather than Fannie Mae's Desktop Underwriter, which can occasionally produce different approval results for the same borrower. If one program declines your application, it is worth trying the other.

The most significant advantage of conventional 3% down loans over FHA is the ability to cancel mortgage insurance. With FHA, if you put less than 10% down, MIP remains for the life of the loan. With conventional loans, PMI can be canceled once you reach 20% equity through payments, appreciation, or a combination of both. The Homeowners Protection Act requires automatic PMI cancellation at 22% equity based on the original value, and borrowers can request cancellation at 20%. For a buyer who expects to stay in their home for five or more years, the ability to eventually eliminate mortgage insurance can save thousands of dollars compared to an FHA loan. Model different scenarios with our mortgage calculator.

Both HomeReady and Home Possible require completion of a homebuyer education course, typically available online and costing $75 to $100. While this is an additional step, the education course provides valuable information about the home buying process, budgeting for homeownership, and avoiding common pitfalls. Some lenders and down payment assistance programs will cover the cost of the course, and Fannie Mae offers its own free online course called HomeView.

VA Loans for First-Time Military Buyers

For eligible active-duty service members, veterans, National Guard and Reserve members, and surviving spouses, VA loans represent arguably the best mortgage program available anywhere. Guaranteed by the U.S. Department of Veterans Affairs, VA loans offer benefits that no other loan program can match, making them an exceptionally powerful tool for first-time military buyers.

The headline benefit of VA loans is zero down payment. VA loans allow eligible borrowers to finance 100% of the home's purchase price with no down payment required. On a $350,000 home, this saves $12,250 compared to FHA's 3.5% requirement and $10,500 compared to Conventional 97's 3% requirement. For service members who may have been deployed frequently and had limited opportunity to accumulate savings, the zero-down feature removes the single biggest barrier to homeownership. Use our VA loan calculator to see what your monthly payment would look like with zero down.

VA loans also do not require any form of monthly mortgage insurance. Neither PMI nor MIP applies, which is unique among all low-and-no-down-payment loan programs. This single feature can save VA borrowers $100 to $300 or more per month compared to FHA or conventional loans with less than 20% down, translating to savings of $36,000 to $108,000 over a 30-year loan term. The absence of mortgage insurance also means more of each payment goes toward building equity.

Instead of mortgage insurance, VA loans charge a one-time VA funding fee, which helps sustain the program for future veterans. The funding fee varies based on the type of service, down payment amount, and whether it is the first or subsequent use of the VA loan benefit. For first-time use with zero down, the funding fee is 2.15% of the loan amount. On a $350,000 loan, that equals $7,525, which can be financed into the loan rather than paid out of pocket. Veterans with service-connected disabilities are exempt from the funding fee entirely, making the VA loan even more affordable for disabled veterans.

VA loans have no maximum loan amount for borrowers with full entitlement, meaning eligible veterans can borrow whatever amount a lender will approve based on their income and creditworthiness, all with zero down. There is also no official minimum credit score requirement imposed by the VA itself, though most lenders set their own minimums, typically around 580 to 620. VA loans feature competitive interest rates that are often 0.25% to 0.5% lower than conventional rates for similar borrowers, because the VA guarantee reduces the lender's risk.

Eligibility for VA loans is based on military service. Generally, you need at least 90 consecutive days of active service during wartime, 181 days during peacetime, or 6 years of service in the National Guard or Reserves. You must have been discharged under conditions other than dishonorable. Surviving spouses of service members who died in the line of duty or from a service-connected disability are also eligible. To verify your eligibility, request your Certificate of Eligibility (COE) through the VA's eBenefits portal, through your lender, or by submitting VA Form 26-1880 by mail. Most lenders can obtain your COE electronically within minutes.

USDA Loans for Rural First-Time Buyers

The U.S. Department of Agriculture (USDA) offers a loan guarantee program that many first-time buyers overlook, largely because they assume it is only for farms or extremely remote areas. In reality, USDA loans are available in surprisingly accessible locations and offer zero-down-payment financing with competitive terms for eligible borrowers in qualifying areas.

USDA's Section 502 Guaranteed Loan Program is designed to help moderate-income buyers purchase homes in rural and suburban areas. The definition of "rural" is broader than you might expect: approximately 97% of the U.S. land mass qualifies, and many areas that feel distinctly suburban are eligible. Towns with populations up to 35,000 may qualify, and some communities adjacent to metropolitan areas are included. You can check whether a specific address is in a USDA-eligible area using the USDA's online eligibility map at eligibility.sc.egov.usda.gov.

Like VA loans, USDA loans require zero down payment, making them accessible to buyers who have limited savings. However, unlike VA loans, USDA loans have income limits. To qualify, your household income cannot exceed 115% of the area median income (AMI) for the county where the property is located. The income limit applies to all household members, not just those on the loan application. For a family of four in a typical county, the 2026 income limit is roughly $103,500, though this varies significantly by location. Higher limits apply in high-cost areas.

USDA loans charge two types of fees in place of traditional mortgage insurance. An upfront guarantee fee of 1% of the loan amount is charged at closing (and can be financed into the loan). An annual fee of 0.35% of the remaining loan balance is charged monthly. This annual fee of 0.35% is substantially lower than FHA's 0.55% annual MIP and is competitive with the best PMI rates available on conventional loans. On a $250,000 loan, the annual fee adds about $73 per month to your payment, compared to approximately $115 per month for FHA MIP.

USDA loans require a minimum credit score of 640 for automatic underwriting approval through the GUS (Guaranteed Underwriting System). Borrowers with scores below 640 may still be approved through manual underwriting, but this process is more time-consuming and requires stronger compensating factors. The property must be a primary residence, and there are limits on the home's size and features (for example, it cannot have an in-ground swimming pool or income-producing features), though these restrictions are less stringent than many buyers assume.

For first-time buyers considering locations outside major metropolitan cores, USDA loans can be an excellent option that combines zero down payment with low ongoing costs and competitive interest rates. Many USDA-eligible areas offer lower home prices, more space, and growing amenities, making them attractive for young families and remote workers. Check our down payment calculator to compare the savings of a zero-down USDA loan versus other low-down-payment options.

Down Payment Assistance Programs by State

Down payment assistance (DPA) programs are among the most valuable and most underutilized resources available to first-time home buyers. According to the National Council of State Housing Agencies (NCSHA), there are more than 2,000 DPA programs operating across the United States, offered by state housing finance agencies, local governments, nonprofit organizations, and employers. Despite their widespread availability, studies show that many eligible buyers never apply because they are unaware the programs exist.

DPA programs come in several forms, each with different terms and repayment requirements. Grant programs provide money that never needs to be repaid, making them the most generous form of assistance. Forgivable second mortgages provide a loan that is forgiven (meaning you owe nothing) after you live in the home for a specified period, typically 5 to 15 years. Deferred-payment second mortgages require repayment only when you sell, refinance, or move out of the home, with no monthly payments required in the meantime. Repayable second mortgages require monthly payments but typically at below-market interest rates, sometimes as low as 0% to 2%.

The amount of assistance varies widely by program but typically ranges from $5,000 to $25,000, with some programs offering up to 5% of the purchase price. For a buyer purchasing a $300,000 home, a 5% DPA grant would provide $15,000, which would more than cover the 3% to 3.5% down payment required by Conventional 97 or FHA loans and potentially cover a portion of closing costs as well.

Most DPA programs have eligibility requirements based on income, purchase price, and buyer status. Income limits are the most common restriction, typically capping eligibility at 80% to 120% of the area median income. Purchase price limits ensure the assistance goes to moderately priced homes rather than luxury properties. And many programs require the buyer to be a first-time purchaser, though as noted earlier, the definition usually follows the three-year rule.

State housing finance agencies (HFAs) are the largest providers of DPA and offer programs in all 50 states. Examples include California's CalHFA MyHome Assistance Program (up to 3.5% of the purchase price as a deferred-payment loan), Texas's My First Texas Home program (up to 5% of the loan amount as a forgivable grant), Florida's Hometown Heroes program (up to $35,000 in down payment and closing cost assistance for community workers), and New York's SONYMA Down Payment Assistance Loan (up to $15,000 as a forgivable loan for qualifying buyers). These are just a few examples; similar programs exist in every state.

To find DPA programs available in your area, start with your state's housing finance agency website, which will list state-level programs and often link to local options. HUD maintains a state-by-state directory of homeownership assistance at HUD.gov. Your lender should also be knowledgeable about programs available in your market, though it is worth verifying independently since not all lenders participate in every program. Some programs require using an approved lender, so confirming lender participation early in the process is important. Use our affordability calculator to see how DPA reduces your out-of-pocket costs and affects your monthly payment.

First-Time Buyer Tax Credits and Deductions

While the federal first-time homebuyer tax credit that existed during the 2008-2010 housing crisis has expired, several tax benefits remain available to first-time buyers in 2026. Understanding these benefits and how to claim them can reduce your tax burden and effectively lower the cost of homeownership.

The mortgage interest deduction remains one of the most valuable tax benefits for homeowners. If you itemize your deductions, you can deduct the interest paid on mortgage debt up to $750,000 ($375,000 for married filing separately). For a first-time buyer with a $300,000 mortgage at 6.5% interest, the interest paid in the first year would be approximately $19,400, which could reduce your taxable income by that amount if you itemize. At a 22% marginal tax rate, this translates to approximately $4,268 in tax savings in the first year alone.

Property taxes paid on your primary residence are also deductible if you itemize, though the Tax Cuts and Jobs Act limits the total state and local tax (SALT) deduction to $10,000 per year ($5,000 for married filing separately). In states with high property taxes, this cap may limit the benefit, but for many first-time buyers in moderate-tax areas, the full property tax amount is deductible within the SALT cap.

Mortgage credit certificates (MCCs) are a lesser-known but potentially valuable benefit available through many state housing finance agencies. An MCC provides a direct dollar-for-dollar tax credit (not just a deduction) for a portion of the mortgage interest you pay each year, typically 20% to 40% of the interest. For a buyer with a $250,000 mortgage at 6.5% paying approximately $16,200 in annual interest, a 20% MCC would provide a $3,240 tax credit, directly reducing the tax owed. Unlike a deduction, which reduces taxable income, a credit reduces your tax bill dollar for dollar, making it significantly more valuable. MCCs are issued by state HFAs and are typically available only to first-time buyers who meet income and purchase price limits. You can claim both the MCC credit and deduct the remaining portion of your mortgage interest that is not covered by the credit.

If you withdraw funds from a traditional IRA to buy your first home, you can avoid the 10% early withdrawal penalty on up to $10,000. This exception applies to "first-time home buyers" as defined by the IRS (which uses a two-year rule rather than HUD's three-year rule). While you still owe income tax on the withdrawal, avoiding the 10% penalty saves $1,000 on a $10,000 withdrawal. Both spouses can each withdraw up to $10,000 penalty-free, for a combined $20,000. Roth IRA contributions (but not earnings) can be withdrawn at any time without penalty or tax, providing another source of down payment funds for first-time buyers who have been contributing to a Roth.

Some states offer additional tax credits or deductions specifically for first-time home buyers. For example, certain states provide property tax exemptions or reductions for first-time buyers during the first few years of ownership, and a few states offer their own mortgage interest credits in addition to the federal MCC program. Check your state's department of revenue or housing finance agency for state-specific tax benefits that may be available to you.

Government Grants for Home Buyers

Government grants for home buyers represent free money that never needs to be repaid, making them the most desirable form of financial assistance. While grants are more limited in availability than loans or tax benefits, they exist at the federal, state, and local levels, and many first-time buyers who would qualify never apply simply because they do not know the programs exist.

At the federal level, the HUD Good Neighbor Next Door program offers a 50% discount on the list price of homes in designated revitalization areas for law enforcement officers, firefighters, emergency medical technicians, and teachers. This is not a grant in the traditional sense, but the 50% discount functions as a substantial subsidy. Participants must commit to living in the home as their primary residence for at least 36 months. The program's inventory changes frequently and can be found on HUD's Home Store website.

The National Homebuyers Fund (NHF) is a nonprofit organization that provides down payment assistance grants of up to 5% of the loan amount to eligible buyers nationwide. The NHF program does not have first-time buyer requirements, but it does have income limits that vary by location. The grant can be used with FHA, VA, USDA, or conventional financing, and because it is a true grant, there is no repayment, no lien on the property, and no recapture requirement. Not all lenders participate in the NHF program, so you may need to work with an approved lender.

State housing finance agencies frequently offer grant programs that are specifically funded by their state's budget or through the federal HOME Investment Partnerships Program. These grants typically range from $5,000 to $15,000 and are income-restricted. As one example, the Florida Housing Finance Corporation's Salary-Based Down Payment Assistance provides grants of up to 5% of the loan amount for buyers who meet income limits and complete homebuyer education. Similar programs operate in most states, with funding levels and availability changing annually based on legislative appropriations and demand.

Local government grants are often the most generous and least well-known. Many cities and counties offer their own homebuyer grant programs funded by Community Development Block Grants (CDBG) or local tax revenues. These programs may offer grants of $10,000 to $50,000 or more, particularly in communities focused on combating displacement or encouraging homeownership in targeted neighborhoods. Because these programs are locally administered, they are best discovered through your city or county housing department, a HUD-approved housing counseling agency, or a knowledgeable local real estate agent or lender.

Employer-assisted housing programs represent another grant-like opportunity. Some large employers, particularly hospitals, universities, and government agencies, offer homebuyer assistance to employees as a retention and recruitment tool. These programs may provide grants, forgivable loans, or matched savings contributions, and are sometimes restricted to purchases in specific geographic areas near the workplace. Check with your human resources department to find out if your employer offers any homebuyer assistance.

Steps to Buying Your First Home

Buying your first home involves a series of steps that, when followed in the right order, can prevent costly mistakes and reduce stress. While every transaction is unique, the following roadmap provides a reliable framework for first-time buyers navigating the process from initial planning to closing day and beyond.

Step one is to assess your financial readiness. Before looking at homes or applying for a mortgage, take an honest inventory of your financial situation. Pull your credit reports from all three bureaus and review them for errors. Calculate your debt-to-income ratio by adding all monthly debt payments and dividing by your gross monthly income. Build an emergency fund of three to six months of living expenses separate from your down payment savings. Use our affordability calculator to determine a realistic purchase price based on your income, debts, and available down payment.

Step two is to get pre-approved for a mortgage. A pre-approval involves submitting a full loan application to a lender, who reviews your income, assets, debts, and credit history to determine the maximum loan amount you qualify for. A pre-approval letter is much stronger than a pre-qualification, which is typically a less thorough review. In competitive markets, sellers may not even consider offers from buyers who have not been pre-approved. Get pre-approved with at least two or three lenders to compare rates and terms, as this comparison can save you thousands over the life of the loan.

Step three is to research first-time buyer programs and assistance available in your area. Contact your state housing finance agency, check HUD's resource directory, and ask your lender about DPA programs, grants, and special loan products. This research should be completed before or concurrently with your pre-approval, as some programs require specific lender participation or have application deadlines that do not align with your home search timeline.

Step four is to find a real estate agent who specializes in working with first-time buyers. An experienced buyer's agent provides valuable guidance on neighborhoods, pricing, negotiation strategy, and the transaction process. In most markets, the seller pays the buyer's agent commission, so there is no direct cost to you for this representation. Look for agents with specific first-time buyer experience and strong knowledge of local assistance programs.

Step five is to search for homes within your pre-approved budget and make an offer. When you find a home you want, your agent will help you prepare a purchase agreement that includes the price, contingencies (financing, appraisal, inspection), closing timeline, and any seller concessions you are requesting. In competitive markets, your agent's guidance on crafting a strong offer is particularly valuable.

Step six is to complete due diligence. After your offer is accepted, you typically have a period to conduct a home inspection, review any HOA documents, obtain an appraisal (ordered by the lender), and finalize your financing. The home inspection is perhaps the most important step here: hire a qualified inspector to evaluate the home's structure, systems, and condition. If significant issues are found, you can negotiate repairs, a price reduction, or exit the contract depending on your contingency terms.

Step seven is closing. At closing, you sign the mortgage documents, pay your closing costs and down payment, and receive the keys. Your lender will provide a Closing Disclosure at least three business days before closing, detailing all costs. Review this document carefully and compare it to the Loan Estimate you received earlier. After closing, set up your mortgage payment, update your homeowners insurance, and begin the rewarding journey of building equity in your first home.

Mistakes First-Time Buyers Should Avoid

The home buying process is filled with potential pitfalls, and first-time buyers are especially vulnerable because they lack the experience that repeat buyers have accumulated. Avoiding these common mistakes can save you thousands of dollars, prevent heartbreak, and set you up for long-term financial success as a homeowner.

One of the most damaging mistakes is buying more home than you can comfortably afford. Just because a lender approves you for a $400,000 loan does not mean you should borrow $400,000. Lenders evaluate your ability to make the payment, but they do not account for your lifestyle, savings goals, childcare costs, travel plans, or personal spending preferences. A good rule of thumb is to keep your total housing payment (including mortgage, taxes, insurance, and any HOA fees) at or below 28% of your gross monthly income, and your total debt payments at or below 36%. Being house-poor, where nearly all your income goes to housing costs, leads to financial stress and limited flexibility for years.

Draining your savings for the down payment is another frequent error. While it is tempting to put as much money down as possible to reduce your monthly payment, leaving yourself with little or no emergency fund is dangerous. Homes require maintenance and unexpected repairs, from a broken furnace to a roof leak, and these costs fall entirely on you as the homeowner. Financial advisors recommend maintaining at least three months of living expenses in reserve after covering your down payment and closing costs. Down payment assistance programs exist precisely to help buyers preserve their savings while still purchasing a home.

Skipping the home inspection to save $400 to $600 or to make a more competitive offer is a gamble that can backfire spectacularly. A thorough inspection can reveal structural problems, electrical issues, plumbing failures, mold, pest infestations, and other conditions that could cost tens of thousands of dollars to repair. Even in competitive markets where waiving the inspection contingency is common, consider getting an inspection before submitting your offer (called a pre-offer inspection) rather than waiving it entirely.

Not comparing multiple lenders is a mistake that costs first-time buyers an average of $3,000 to $5,000 over the life of the loan, according to CFPB research. Interest rates, closing costs, lender fees, and loan terms can vary significantly between lenders, even for the same borrower on the same day. Get quotes from at least three lenders, including a bank, a credit union, and a mortgage broker, to ensure you are getting the most competitive offer available. All rate quotes within a 45-day window count as a single credit inquiry for scoring purposes, so shopping around does not hurt your credit score.

Overlooking the total cost of homeownership beyond the mortgage payment is a trap that catches many first-time buyers off guard. Your monthly mortgage payment is just one component of your housing cost. Property taxes, homeowners insurance, private mortgage insurance (if applicable), HOA fees, utilities, maintenance, and eventual repairs all add to the true cost of owning a home. A common estimate for maintenance and repairs is 1% to 2% of the home's value per year. On a $300,000 home, that is $3,000 to $6,000 annually, or $250 to $500 per month, on top of your mortgage and other costs. Use our mortgage calculator to build a complete picture of your monthly housing expense before committing to a purchase.

Finally, making major financial changes during the mortgage process can derail your loan approval. Once you are pre-approved and under contract, avoid opening new credit accounts, making large purchases on credit, changing jobs, moving large sums of money between accounts without documentation, or co-signing loans for others. Your lender will re-verify your financial situation before closing, and any changes that affect your credit score, debt ratio, or asset documentation can delay or cancel your loan approval even after you have found your dream home.