First-Time Buyer FAQ
First-Time Homebuyer Questions, Answered.
The money and process questions that actually trip people up. No jargon.
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Affordability comes down to your debt-to-income, or DTI, ratio. Conventional loans run through automated underwriting allow a back-end DTI up to 50%, while manual underwriting caps lower, around 36-45% with strong credit and reserves. Lenders count your new payment plus all monthly debts against your gross income. Estimate your affordability here, then get pre-approved for a precise figure. (Source: Fannie Mae B3-6-02)
Earnest money is a good-faith deposit, usually 1-3% of the price as an example, held in escrow. It's generally refundable if you back out under a valid contingency, like financing, appraisal, or inspection. Waiving contingencies puts it at risk. It gets credited toward your down payment or closing costs. (Source: CFPB)
Lenders finance the lower of the appraised value or the price. If the home appraises low, you cover the gap in cash, renegotiate, or, with an appraisal contingency, walk away with your earnest money. An appraisal gap clause commits you to cover a set amount above the appraised value. (Source: CFPB)
On conventional primary-residence loans, gift funds can cover your full down payment, closing costs, and reserves from an acceptable donor, like a relative, fiancé, or domestic partner. Gifts aren't allowed on investment properties. You'll need a signed gift letter and proof of the transfer. (Source: Fannie Mae B3-4.3-04)
HomeReady is Fannie Mae's 3%-down conventional loan for first-time and lower-income buyers at or below 80% of the area median income, with a 620 minimum score. It offers reduced PMI that cancels at 20% equity, and it lets you count boarder or rental income. No income limit applies in low-income census tracts. (Source: Fannie Mae HomeReady Product Matrix)
On conventional loans, interested-party contributions cap by down payment: 3% under 10% down, 6% for 10-25% down, and 9% over 25% down, or 2% for investment property. FHA allows 6%, and VA allows 4% plus normal closing costs. Concessions can't fund your down payment. (Source: Fannie Mae B3-4.1-02)
Don't open new credit, finance a car, make big purchases, change jobs, or make large undocumented deposits. Any of those can shift your DTI or credit and put your approval at risk. Review your Closing Disclosure, which arrives three business days before closing, carefully, and call me before any financial change. (Source: CFPB)
A financing contingency lets you exit and recover your earnest money if your loan is denied. An appraisal contingency protects you if the home appraises below the contract price. Both are buyer safeguards. Waiving them strengthens your offer but puts your deposit at risk. (Source: CFPB)
A rate lock holds a quoted rate for a set period, often 30-60 days, while your loan processes, protecting you from increases before closing. Locks expire, and missing your closing date can mean an extension fee. Rates aren't guaranteed until you have a lock agreement in hand. (Source: CFPB)
Many loans include an escrow account, where the servicer collects 1/12 of your annual taxes and homeowners insurance with each payment and pays those bills for you. Your total payment is principal, interest, taxes, and insurance, plus any HOA dues or PMI. That's often called PITI. (Source: CFPB)
Conventional loans generally need a 620. FHA allows 580 with 3.5% down, or 500 with 10% down. Higher scores earn better pricing. Score isn't everything, though. Your DTI, reserves, and down payment matter too. (Source: Fannie Mae; HUD 4000.1)
Per the FHFA, the 2026 conforming loan limit for one-unit properties is $832,750, up from $806,500 in 2025. High-cost areas reach a ceiling of $1,249,125. Loans above these limits are jumbo loans, which come with stricter requirements. (Source: FHFA, Nov. 25, 2025)
Last updated: June 5, 2026
This page is educational and isn't an offer to lend. Percentages shown for earnest money are illustrative examples, not requirements. Guidelines from Fannie Mae, HUD, the FHFA, and the CFPB may change without notice. All loans are subject to credit and property approval.
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