Greg Rutolo | Loan Factory

Greg Rutolo | NMLS # 34860 | email gregory.rutolo@loanfactory.com

Buying your first home is exciting, but it also comes with confusion, myths, and a lot of conflicting advice online. This guide breaks down the five most common first-time homebuyer questions—using plain English and an SEO focus so you can actually find the answers you’re looking for.
Use this as your go-to first-time homebuyer FAQ when you’re researching low down payment options, comparing FHA vs conventional loans, understanding the mortgage process, and planning for surprise costs in your first three years of homeownership.

1. How Much House Can I Afford?
   When first-time homebuyers search online, “How much house can I afford?” and “How much house can I buy with my income?” are always at the top of the list.
   Lenders look at three big pieces:
   • Your gross monthly income
   • Your existing monthly debts (credit cards, auto loans, student loans, etc.)
   • Your available funds for down payment and closing costs
   From there, they calculate your debt-to-income ratio (DTI) and reverse-engineer a comfortable price range and monthly payment that fits within guidelines and your comfort zone.
   What most buyers really want to know is:
   “How much will my monthly payment be—all in?”
   That full payment typically includes:
   • Principal and interest on the mortgage
   • Property taxes
   • Homeowners insurance
   • Mortgage insurance (if required)
   • HOA or condo dues (if applicable)
   If you’re using online “How much house can I afford?” calculators, make sure they factor in taxes, insurance, and HOA dues, not just principal and interest. Otherwise, you’ll underestimate your real monthly payment.

2. What Low Down Payment Options Are Available?
   A huge myth for first-time homebuyers is “I need 20% down.” In reality, many buyers buy with far less—sometimes even 0% down.
   0% Down Payment Options
   For qualified buyers, there are two major zero-down mortgage options:

VA loans: For eligible veterans, active-duty service members, certain Guard/Reserve members, and some surviving spouses.
• 0% down
• No monthly mortgage insurance
• Often very competitive interest rate

USDA loans: For homes in eligible rural and many suburban areas, with household income limits.
• 0% down
• Uses a guarantee fee instead of traditional PMI
• Great if you’re open to buying slightly outside dense city centers

If you qualify for either of these, they are usually the first low or no down payment loans to explore.
FHA Loans: 3.5% Down
FHA loans are popular with first-time homebuyers because they’re more forgiving:
• Minimum 3.5% down (with qualifying credit)
• More flexible credit score and DTI requirements
• Ideal if your credit history is limited or a little “bruised”
Tradeoff: FHA loans require both an upfront and ongoing mortgage insurance premium, often for as long as you keep the loan. Many buyers use FHA to get into the home, then refinance into a conventional mortgage later once they’ve built equity and improved their profile.
Conventional Loans: 3% Down Options
Many conventional loan programs offer:
• As little as 3% down for qualifying first-time buyers
• Cancellable private mortgage insurance (PMI) once you reach about 20% equity
Conventional loans tend to favor:
• Stronger credit scores
• Lower DTIs
• Stable, documented income
If you qualify, conventional financing can be cheaper over the long term because you can eventually drop PMI and avoid life-of-loan mortgage insurance.
Layering Down Payment Assistance
On top of these core options, first-time homebuyers can often use:
• State housing agency programs
• City and county grants
• Employer or community programs
These may help with:
• Down payment
• Closing costs
• Prepaid taxes and insurance
In many markets, a smart combination of 3%–3.5% down plus local assistance can bring your out-of-pocket “cash to close” close to what many people think they need just for rent and moving expenses.

3. What’s the Difference Between FHA, Conventional, VA, and USDA Loans?
   “FHA vs conventional” and “Which loan program is best for first-time homebuyers?” are some of the most Googled mortgage questions. The key is understanding who each program is designed for.
   Conventional Loans
   • Not government-insured
   • Best for buyers with solid credit, stable income, and some savings
   • PMI required if you put less than 20% down, but it can be removed later
   Think of conventional as the reward program for a strong overall financial profile and a focus on long-term cost.
   FHA Loans
   • Government-backed
   • Minimum 3.5% down (with qualifying credit score)
   • More flexible on credit and DTI
   • Upfront and monthly mortgage insurance, often for the life of the loan
   Think of FHA as the access product—built to help you get in the door when your credit or DTI isn’t quite conventional-ready.
   VA Loans
   • For eligible military members, veterans, and some surviving spouses
   • 0% down
   • No monthly mortgage insurance
   • One-time funding fee in many cases (often financed into the loan)
   For eligible borrowers, VA is often the most powerful combination of low cash to close and low monthly payment.
   USDA Loans
   • For owner-occupied homes in USDA-eligible rural and suburban areas
   • Income limits apply
   • 0% down
   • Uses guarantee fees instead of traditional PMI
   USDA is a great fit if your income and the property location meet program rules and you’re open to areas outside major city cores.
   Simple Way to Explain It to Yourself
   • Strong credit, good income, some savings? Start with conventional.
   • Lower scores or higher DTI? FHA may be the better entry point.
   • Military service? Check VA first.
   • Open to rural/suburban living and under income caps? Explore USDA.

4. What Does the Mortgage Loan Process Actually Look Like?
   Another top SEO question: “What is the mortgage process step by step?” First-time homebuyers don’t just want definitions; they want a clear timeline.
   Step 1: Pre-Approval
   • You provide income, asset, and debt information and authorize a credit check.
   • The lender issues a pre-approval letter with a price range and estimated payment.
   • This letter makes your offers stronger and keeps your search within realistic limits.
   Step 2: House Hunting and Making an Offer
   • With pre-approval in hand, you shop for homes within your budget.
   • When you find a home you like, your agent writes an offer that includes price, contingencies (inspection, appraisal, financing), and proposed closing date.
   • Once the seller accepts, you’re under contract, and your timelines kick in.
   Step 3: Full Application and Disclosures
   • You complete a full mortgage application tied to the specific property.
   • You update your documents (pay stubs, bank statements, ID, purchase agreement, etc.).
   • Within three business days, you receive a Loan Estimate showing rate, payment, and projected closing costs.
   Step 4: Processing, Appraisal, and Underwriting
   • The lender orders the appraisal and title work, verifies your income and assets, and prepares your file for underwriting.
   • The appraiser confirms the property value and basic condition; title ensures you’re buying clean ownership.
   • An underwriter reviews everything against program guidelines and issues a conditional approval that lists any final conditions needed (additional documents, letters of explanation, updates).
   Step 5: Clear to Close and Closing Day
   • Once all conditions are satisfied, you receive a “clear to close” and a Closing Disclosure at least three business days before closing.
   • On closing day, you sign loan and title documents, pay your remaining cash to close, and the loan funds.
   • After recording, you get the keys and officially become a homeowner.
   Most purchase transactions today close in roughly 30–45 days, depending on the property, the loan program, and how quickly everyone—buyer, seller, lender, and title—provides what’s needed.

5. What Unexpected Costs Should First-Time Homebuyers Plan for in the First Three Years?
   Searches like “hidden costs of owning a home” and “unexpected homeowner expenses” are exploding, and with good reason: your mortgage payment is only part of the picture.
   Repairs, Maintenance, and Major Systems
   Even with a good inspection:
   • Water heaters, furnaces, air conditioners, and appliances wear out.
   • Roof leaks, plumbing issues, and small electrical problems happen.
   • Routine maintenance (gutters, HVAC servicing, caulking, pest control) adds up.
   A common rule of thumb is at least 1% of the home’s value per year for maintenance and repairs. Some years will be lighter; others will be heavy when a major system fails.
   Property Taxes, Insurance, and Escrow Surprises
   • Property taxes can rise after you buy, especially if the home is reassessed.
   • Insurance premiums can jump due to claims, regional risk, or carrier changes.
   • When your escrow account comes up short, your monthly payment can increase.
   First-time buyers often budget based on the seller’s old tax bill or an initial estimate, then get surprised in year two or three.
   Utilities and Services
   Owning a home often means:
   • Higher heating and cooling costs, especially in larger or older homes
   • Separate water, sewer, and trash bills you may not have seen as a renter
   • Higher internet costs or required service levels in some areas
   Those increases can easily add a few hundred dollars per month compared to apartment living.
   Yard, Exterior, and HOA Costs
   • Lawn equipment, landscaping, tree trimming, snow removal, and exterior cleaning all cost money.
   • Fences, decks, and exterior paint or siding need ongoing care.
   • If you’re in an HOA or condo, monthly dues and special assessments can hit your budget.
   Furnishings and “Nice-To-Have” Projects
   • Filling more space means more furniture, rugs, blinds, and storage solutions.
   • Small upgrades—paint, light fixtures, smart thermostats, closet systems, backsplash—add up over time.
   Many first-time homeowners are surprised to look back after year three and see how much they spent on “just making it feel like home.”