First-Time Buyers Mortgage Questions

Explore sample First-Time Buyers questions and educational explanations from the RatesQ team.

• Can I buy a home with 5% down?

  I have about $22,000 saved and looking at homes in the $350-400k range. Is 5% down realistic for a first-time buyer with good credit (720 score) and steady income? What are the downsides compared to 20%?

  Yes, 5% down is totally doable with a 720 score. You'll pay PMI but at 720 it shouldn't be brutal — probably in the $80-150/month range depending on the lender. The bigger issue is making sure you have enough left after the down payment for closing costs (plan for 2-4% of purchase price on top of the down payment) and some cash reserve.

  At 720 credit with 5% down on a $375k home, you're looking at a $356k loan. PMI at your credit tier will likely run $90-130/month and drops off once you reach 20% equity. One thing worth checking: some lenders offer lender-paid PMI (LPMI) where they absorb the PMI in exchange for a slightly higher rate — can simplify the payment and might make sense if you expect to refinance before you'd otherwise hit 20% anyway. Get quotes both ways. Your savings level looks a bit tight depending on the purchase price — make sure you have closing costs plus 2+ months of mortgage payments in reserves after closing.

  Also check for first-time buyer programs in your state — some offer down payment assistance or lower PMI. Varies a lot by state and income level but worth a 10-minute Google before you decide.

• How much should I have saved before buying my first home?

  I have $35k saved. I want to buy something around $300k in a medium cost-of-living city. Is $35k enough or am I still short?

  Let's run the numbers: 5% down on $300k = $15,000. Closing costs in a medium COL city might be $7,000-$10,000. That's $22-25k total. You'd have $10-13k left as reserves after closing. Most lenders want 2+ months of PITI in reserves. On a $300k home your PITI might be ~$2,200-$2,400/month. So 2 months = $4,400-$4,800. You should be fine. The question is whether you're comfortable with that much of your savings going to the purchase.

  The numbers look workable, but a few things to verify: closing costs vary by state — some states have higher transfer taxes. Also check if your area has first-time buyer assistance programs that cover down payment or closing costs, which would stretch your $35k further. One thing often overlooked: moving costs, home repairs after purchase, and any immediate needs (appliances, etc.) can eat into savings quickly. Having $35k going in with $300k purchase is feasible, but lean. If you can hold off 6-12 months and save another $10-15k, you'd feel less stretched after closing.

  Also FHA with 3.5% down would be $10,500 down instead of $15k, which frees up $4,500. Trade-off is MIP for 11+ years. Might be worth comparing both scenarios with a lender.