First-time buyer loans
First-time buyers do not need 20% down. Conventional loans start at 3% down for qualifying buyers and FHA at 3.5%, and the entire down payment can come from a gift. You generally count as a first-time buyer if you have not owned a principal residence in the past three years.
Best for: Anyone buying their first home, or returning to ownership after three or more years of renting.
What makes this loan different
The 20% rule is a myth
It is the single most common reason people delay buying. Conventional financing goes down to 3% for qualifying first-time buyers, and FHA to 3.5%. Waiting years to save a fifth of the price is rarely the cheaper path.
Gift funds count
Your down payment can come entirely from an eligible gift from family. This matters for buyers who have steady income but have not had time to build savings.
Three-year rule
You do not need to have never owned a home. If you have not owned a principal residence in the past three years, you generally qualify as a first-time buyer again for programs that use the term.
Reduced mortgage insurance
Fannie Mae HomeReady and Freddie Mac Home Possible are built for lower-income buyers and carry cheaper mortgage insurance than standard conventional pricing.
What you'll need
- A credit score that qualifies for your chosen program — FHA is the more forgiving of the two.
- Down payment of 3% (conventional, qualifying buyers) or 3.5% (FHA), from savings or an eligible gift.
- Documented income and assets, plus an appraisal.
- Debt-to-income ratio within program limits, counting property taxes, insurance and any HOA dues.
- The home must be your primary residence.
Honest trade-offs
- Less than 20% down means mortgage insurance. On conventional it can be removed later; on FHA it generally lasts the life of the loan.
- A smaller down payment means a larger loan and a higher payment — worth seeing both scenarios rather than assuming the minimum is right.
- In a competitive Triangle market, a strong pre-approval matters more than a large down payment. Get that in place before you shop.
Common questions
Do I count as a first-time buyer if I owned a home years ago?
Usually yes. The standard definition is that you have not owned a home as your principal residence in the past three years. Someone who sold a house four years ago and has rented since generally qualifies again for programs that use the term.
How much do I really need for a down payment?
Far less than most people assume. Conventional loans start at 3% down for qualifying first-time buyers and FHA at 3.5%, and eligible veterans and USDA-area buyers may need nothing at all. The whole amount can come from a gift on many programs.
Should I put down as little as possible?
Not automatically. A smaller down payment preserves cash but means a larger loan, a higher payment and mortgage insurance. A larger one does the reverse. The right answer depends on what else you need the cash for — it is worth pricing both rather than defaulting to the minimum.
How much house can I afford as a first-time buyer in Raleigh?
That depends on your income, existing debts, credit and down payment far more than on any rule of thumb. The fastest honest answer is to run your actual numbers through the rate calculator, which shows the payment for real loan options in about two minutes without a credit pull.
Check the rules yourself
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