How to Qualify for a Home Loan as a First-Time Home Buyer

Buying your first home can feel like learning a new language. Terms like “DTI,” “underwriting,” and “preapproval” may sound intimidating, but qualifying for a mortgage is more achievable than you think.

Whether you’re just starting your home buying journey or getting ready to apply, we’ll show you the key steps to qualify for a loan as a first-time buyer.

Who counts as a first-time home buyer?

You don’t have to be a literal first-timer to qualify for first-time buyer programs. According to federal guidelines, you’re considered a first-time home buyer if:

• You haven’t owned a home in the last three years
• You’re a single parent who only owned with a former spouse
• You’re a displaced homemaker who owned with a partner
• You’ve never owned a home that met building code standards

This flexible definition opens the door to loan programs and perks designed to make homeownership more accessible.

How to qualify for a home loan as a first-time buyer

Getting approved for your first mortgage doesn’t require perfection. It just takes some preparation. Whether you’re still building credit or have had a few financial hiccups, there’s usually a way forward. Here’s what matters most and how to get yourself in shape to qualify.

1. Check your credit score (and improve it if needed)

Your credit score is one of the biggest factors lenders consider, and it plays a major role in what types of loans you can access and what interest rate you’ll get. The good news is, you don’t need a perfect score to qualify.

Here’s a general idea of what you’ll need:

• FHA loans: 580 or higher with 3.5% down
• Conventional loans: Usually 620 or above
• VA and USDA loans: No official minimum, but 620 is often the benchmark

To get started, request your free credit reports at AnnualCreditReport.com and check your credit score through your bank or credit card app. If you find any errors, dispute them right away. Paying down credit card balances can also boost your score and improve your approval odds.

2. Save for your down payment and closing costs

Many people still believe they need a 20% down payment to buy a home, but that’s an outdated myth. Most first-time buyers qualify for programs that allow much smaller down payments:

• 3% for Conventional 97 loans
• 3.5% for FHA loans
• 0% for VA and USDA loans (if eligible)

Beyond your down payment, you’ll also need to budget for closing costs. These typically add up to 2%-5% of the home’s purchase price and cover things like lender fees, taxes, and insurance.

Use a mortgage calculator to estimate your total upfront costs based on your price range. Knowing what to expect helps you set a clear savings goal.

3. Gather the documents you’ll need

When you apply for a mortgage, your lender needs to verify that you have stable income, enough savings, and legal identification. Having these documents ready before you apply can save you time, reduce stress, and show the lender you’re organized and serious about buying.

You’ll typically need:

• Pay stubs from the last 30 days
• Tax returns and W-2s or 1099s from the past two years
• Bank statements from the last two months
• A government-issued ID and your Social Security number

If you’re self-employed, you may also be asked for a year-to-date profit and loss statement or additional business documentation.

4. Understand and improve your debt-to-income ratio

Your debt-to-income ratio, or DTI, compares how much you owe each month to how much you earn. Lenders use it to assess whether you can comfortably take on a mortgage. Most want to see your DTI at 43% or lower, though some may allow up to 50% if you have strong credit or extra savings.

A high DTI doesn’t mean you can’t buy a home, but it may limit your options or affect your loan amount. The lower your DTI, the better your chances of qualifying and getting a good rate.

To improve your DTI, focus on paying down smaller balances to reduce your monthly obligations. Avoid taking on new debt before applying, and consider removing yourself from joint accounts that increase your debt without adding income.

5. Get preapproved by a lender

Getting preapproved is a key step in the homebuying process. It shows sellers that you’re a serious, qualified buyer, and it helps you understand how much house you can actually afford before you start shopping.

Preapproval typically involves:

• A soft credit check (won’t affect your score)
• Submitting financial documents like pay stubs, W-2s, and bank statements
• Verifying your income and employment

Once you’re preapproved, you’ll receive a letter stating how much you’re qualified to borrow. That letter can make your offer much stronger, especially in competitive markets.

You don’t need to be perfect, just prepared

Qualifying for a home loan as a first-time buyer isn’t about being perfect but about being prepared. Lenders aren’t looking for flawless credit or massive savings. They’re looking for stability, responsibility, and a borrower who’s ready to take the next step.

Take time to check your credit, pay down debt where you can, save what’s realistic for your situation, and get preapproved when you feel ready. Each small step brings you closer to homeownership.

You don’t need to wait for everything to be perfect. You just need a plan and the willingness to follow it.