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You may have heard that 20% is the ideal down payment on a house, but that doesn’t mean you must pony up that amount to become a homeowner. In truth, the average house down payment is considerably smaller. Currently, the median down payment for a house is 15%, according to data from the National Association of Realtors® (NAR).

Here, you’ll learn more about down payments so you can house-hunt like an insider. Getting a sense of what others are paying and how that differs based on geographic area is helpful. We’ll also share how you might access help if you can’t come up with 20%. Armed with this intel, you’ll be better prepared to navigate that major rite of passage: purchasing a home.

Average Down Payment Statistics

As of 2023, the median down payment for a house was 15%, or $63,908 if you consider that the median national home price in 2023 was $426,056, according to Redfin. This was up slightly from 13% in 2022, according to the NAR. (The median means half of buyers put down less and half put down more; it’s generally considered a better barometer than an average, because the latter can be thrown off by outliers — people who spend wildly more or less than usual.)

This 15% figure shows that the conventional wisdom that you need 20% down to purchase a home is, to a large extent, untrue. In fact, in an April 2024 SoFi survey of prospective homebuyers, many planned to put down far less than 20%. Almost a third of respondents (29%) said they planned to put down 10% or less, and 7% of those surveyed were exploring zero-down-payment options.

A 20% down payment will lower your mortgage amount and monthly payments vs. a smaller down payment, and will allow you to avoid private mortgage insurance (PMI), but it’s not the only game in town.

Average Down Payment on a House for First-Time Buyers

First-time buyers make about a third of all home purchases, and the typical down payment for first-time buyers in the NAR survey was 8%, while repeat buyers’ typical down payment was 19%. (Repeat buyers often have money from the sale of their first residence to put toward the purchase of their next one.)

Down Payment Requirements by Mortgage Loan Type

The amount of money you put down on a home may be governed in part by the type of mortgage loan you choose (and conversely, how much money you have saved for a down payment could dictate the type of mortgage you qualify for). Let’s take a look at the different loan types and their down payment requirements.

Remember that if you are buying your first home or you haven’t purchased a residence in three or more years, you may qualify as a first-time homebuyer and be eligible for special first-time homebuyer programs.

Conventional Loan

This is the kind of loan favored by most buyers, and for first-time homebuyers some conventional home loans can allow for as little as 3% down on a home purchase. A repeat homebuyer might need to put down a bit more — say 5%.

FHA Loan

An FHA loan, acquired through private lenders but guaranteed by the Federal Housing Administration, allows for a 3.5% minimum down payment if the borrower’s credit score is at least 580.

VA Loan and USDA Loan

These loans usually require no down payment, although there are still other hoops to jump through to qualify for one of these loans.

A VA loan backed by the Department of Veterans Affairs, is for eligible veterans, service members, Reservists, National Guard members, and some surviving spouses. The VA also issues direct loans to Native American veterans or non-Native American veterans married to Native Americans. For a typical VA loan borrower, no down payment is required.

A USDA loan backed by the U.S. Department of Agriculture is for households with low to moderate incomes buying homes in eligible rural areas. The USDA also offers direct subsidized loans for households with low and very low incomes. Typically, a credit score of 640 or higher is needed. While borrowers can make a down payment, one is not required.

Jumbo Loan

A jumbo loan is a loan for an amount over the conforming loan limit, which is set by the Federal Housing Finance Agency (FHFA). In most U.S. counties, the conforming loan limit for a single-family home in 2025 is $806,500. Minimum down payment rules for jumbo loans vary by lender but are generally higher than those for conforming loans. Some lenders require a 10% down payment, and others require as much as 20%.

For all of the above loan types, the home being purchased must be a primary residence in order to qualify for the minimum down payment, but a homebuyer can use a conventional or VA loan to purchase a multifamily property with up to four units if one unit will be owner-occupied.

Average Down Payment by Age Group

The latest NAR Home Buyers and Sellers Generational Trends Report breaks down by age the percentage of a home that was financed by homebuyers in 2023.

Older buyers tend to use proceeds from the sale of a previous residence to help fund the new home. Buyers 59 to 68 years old, for instance, put a median of 22% down, the NAR report shows.

Most younger buyers depend on savings for their down payment. Buyers ages 25 to 33 put down a median of 10%, and those ages 34 to 43, 13%. A fortunate 20% of the younger homebuyers (those age 25-33) received down payment help from a friend or relative.

Percentage of Home Financed

Average Down Payment by State

The average house down payment in any given state is tied to home prices in that location. You can look into the cost of living by state for an overview and then find the median home value in a particular state at a given point in time and estimate what your down payment might be.

The least expensive states in which to buy a home? Iowa, Oklahoma, Ohio, Mississippi, and Louisiana are among them, according to Redfin.

Average Down Payment On a House in California

California, the most populous state and one of the largest by area, is joined by Hawaii and Colorado on many lists of the most expensive states in which to buy a house. Redfin shows a median sales price of $859,300 in California in spring of 2024. A 3% down payment would be $25,779; 10% down, $85,930; and 20% down, $152,260. The Los Angeles housing market is among the toughest in California, with the median sale price up more than 10% in the last year to $1,050,000. You might want to check out housing market trends by city as well if you are interested in finding out where owning a home could be more or less expensive.

Hawaii comes out near the top with a median home price of $754,800. Three percent down would be $22,644; 10% down, $75,480; and 20%, $150,960. In Hawaii, the conforming loan limit is $1,209,750, a reflection of the state’s high home prices. If you need a mortgage for more than that amount in Hawaii, you’ll be in the market for a jumbo loan.

Recommended: How to Afford a Down Payment on Your First Home

Source of Down Payment

You’re probably wondering where homebuyers get the money to afford a down payment, especially first-time homebuyers. NAR has polled buyers to probe that question. Not surprisingly, more than half of buyers (53%) simply say they have saved up the money — which of course isn’t simple at all.

Savings is especially likely to fund a home purchase for those ages 25-33. Almost three-quarters of younger buyers rely on it for their down payment. Older buyers also use savings but are more likely to draw on the sale of a primary residence. This is especially true after age 59.

Other down payment sources include gifts from relatives or friends, sale of stock, a loan or draw from a 401K or pension, or an inheritance. For those who don’t have generational wealth or savings to rely on, first-time homebuyer programs can make home ownership possible.

City, county, and state down payment assistance programs are also out there. They may take the form of grants or second mortgages, some with deferred payments or a forgivable balance.

How Does Your Down Payment Affect Your Monthly Payments?

Curious to see what your potential mortgage would look like based on different down payments? Start with a home affordability calculator (like the one below) to get a feel for how much you’ll need to put down and other expenses.

Or use this mortgage calculator to estimate how much your mortgage payments would be, depending on property value, down payment, interest rate, and repayment term.

Should You Aim for 20% Down?

You’re probably wondering if you should try to put 20% down to get a mortgage loan? Not necessarily. It’s an individual decision. Here are some things to consider:

If Your Down Payment Is 20% or More

Putting down at least 20% has benefits:

•  You won’t have to pay for mortgage insurance: If you put down 20% or more with a conventional loan, you won’t be required to pay for PMI, which protects the lender if you were to stop making payments.

•  Your loan terms may be better: Lenders look at an applicant’s credit history, employment stability, income, debt-to-income ratio, and savings. They’ll calculate the loan-to-value (LTV) ratio, or what percentage of the home’s purchase price will be covered by the mortgage.

Lenders often provide a better rate to borrowers who have an LTV ratio of 80% or lower — in other words, at least a 20% down payment — because they consider them a better risk.

•  You have instant equity in the property: You borrowed less than you could have, which translates to a lower mortgage payment, less interest paid over the life of the loan, and the potential later to take out a home equity loan.

Recommended: What Do I Need to Buy a House?

If Your Down Payment Is Less Than 20%

If your down payment will be less than 20%, you now know that you’ll have plenty of company. (In SoFi’s survey, 14% of would-be buyers said not having an adequate down payment was their primary challenge.) Consider these ways to optimize the situation:

•  A government loan could be the answer: FHA loans are popular with some first-time buyers because of the lenient credit requirements. The down payment for an FHA loan is just 3.5% if you have a credit score of 580 or more. Just know that upfront and monthly mortgage insurance premiums (MIP) always accompany FHA loans, and remain for the life of the loan if the down payment is under 10%. If you put 10% or more down, you’ll pay MIP for 11 years.

•  You may be able to improve your loan terms: If you can’t pull together 20% for a down payment, you can still help yourself by showing lenders that you’re a good risk. You’ll likely need a FICO® score of at least 620 for a conventional loan. If you have that and other positive factors, you may qualify for a more attractive interest rate or better terms.

•  You can eventually cancel PMI: Lenders are required to automatically cancel PMI when the loan balance gets to 78% LTV of the original value of the home. You also can ask your lender to cancel PMI on the date when the principal balance of your mortgage falls to 80% of the original home value.

You may be able to find down payment assistance: City, county, and state down payment assistance programs are out there, and SoFi’s survey suggests they don’t get enough attention: About half (49%) of the homebuyers who said they were challenged to come up with a down payment hadn’t looked into city or state down payment assistance programs. The assistance may take the form of grants or second mortgages, some with deferred payments or a forgivable balance.

Dream Home Quiz

The Takeaway

What is the average down payment on a house? Currently, it’s about 15% of the home’s purchase price, which usually means mortgage insurance and higher payments for the buyer. But buyers who put less than 20% down on a house unlock the door to homeownership every day. If you want to join them, you can be helped along by low down payments for first-time homebuyers, as well as government loans, down payment assistance, and other programs.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

FAQ

Is 10% down payment enough for a house?

Yes. More than a third of all buyers put down 10% or even less to buy a home. Lower down payments are especially common among younger and/or first-time homebuyers.

What is the minimum you should put down on a house?

Conventional wisdom says the minimum down payment is 20%, but most buyers put down less — 15% is far more common. Younger buyers and first-time homebuyers, especially, often put down far less and some home loans allow you to finance 97% or even 100% of the home’s cost.

What factors can affect my down payment requirements?

The amount of down payment you’ll need to come up with depends on your loan type, credit history and credit score, the cost of the property you’re buying, and whether you are a first-time homebuyer.

What are the pros and cons of putting down less than 20% on a house?

Putting down less than 20% on a house might allow you to buy a home sooner. It might also permit you to set aside money for renovations or to pay off other debts. The disadvantage is that those who put down less than 20% usually have to pay for private mortgage insurance which adds to their monthly costs. (Those with FHA loans who put down less than 20% will pay a mortgage insurance premium.)

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

^¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
^†Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.

SOHL-Q324-107

There are a lot of myths about buying a house: that you need at least a 20% down payment, perfect credit (or close to it), and a specific income level.

But the truth is, you don’t need a particular down payment amount, salary, or a credit score over 700 to become a homeowner. What you do need is insight into the process, preparation, and a game plan.

To help you move ahead with your home-owning dreams, read this guide. You’ll learn answers to these and other questions:

•   What are the requirements to buy a house?

•   How much of a down payment do you need to buy a house?

•   What credit score do you need to buy a house?

•   What documents are needed to buy a home?

8 Requirements to Buy a House

Here’s the scoop on the items you need to line up in order to buy a home. Consider this your checklist to achieving that dream; it can be an especially valuable first-time homebuyer guide:

1. Credit

Your credit score is one of the primary factors lenders will consider when reviewing your mortgage application. It helps a lender evaluate how well you have managed debt and made timely payments in the past.

Being aware of your current score might help you understand what loan programs you may be eligible for.

So what credit score is needed to buy a house, given the possible range of scores from 300 to 850?

•   If you’re aiming for a conventional (nongovernment) loan, you’ll likely need a credit score of at least 620. However, most homebuyers have a score that’s higher than that, and if you have a brag-worthy credit score (say, 740 or above), you may qualify for better loan terms.

•   But what if your score is not so lofty? Don’t fret — you’re not alone. In fact, more than one in 10 buyers in the home market are concerned about an insufficient credit score, according to an April 2024 SoFi survey of 500 people. For a government-backed loan (these include FHA, VA, and USDA loans), you may be able to qualify with a credit score in the 500s. For an FHA loan, 580 is the minimum score to qualify for the 3.5% down payment advantage. Applicants with a score as low as 500 must put down 10%. Lenders may require a minimum score of 580 for a VA loan; and for a USDA loan, 640.

The government offers periodic free credit reports so consumers can review their credit history, but the reports do not give a credit score. However, seeing your credit report can allow you to recognize and remedy any errors or delinquent accounts.

You can monitor your credit score with a paid service as well. You may find these third-party services are available for free from some banks and credit card issuers, and use one at no cost with this money tracker.

2. Debt-to-Income (DTI) Ratio

Your debt-to-income ratio, or DTI, matters when determining the mortgage amount and the type of loan program you qualify for.

The DTI ratio equates to your monthly minimum debt payments divided by your gross monthly income. To find it, you would add up your monthly payments towards an existing mortgage (or rent) and related expenses (say, property taxes and insurance), plus any credit card debt and student, car, or other loans. Then you would divide that by your monthly salary, before taxes and other deductions are taken out.

Mortgage lenders usually like to see a DTI ratio of 36% or less for conventional loans. However, some will accept up to 45% and possibly even 50%. There is some flexibility out there, but it may require a bit of shopping around if you have a relatively high DTI.

3. Proof of Income

Even if you have a stellar credit score, for the majority of loan programs, you still have to prove your income to the lender to gain loan approval. This helps the lender verify that you have the means to pay the mortgage back.

For mortgage preapproval, you’ll typically need to submit W-2s, your two most recent pay stubs, and your two most recent federal tax returns for the lender to verify your income. (Self-employed applicants will need to submit a year-to-date profit and loss statement and two years of records.)

If you are currently unemployed or have changed jobs recently, it’s wise to know that this may create a hurdle when seeking a mortgage. You might want to delay your home-buying plans until you have a more consistent employment record, or search for a lender that is less rigid in terms of this qualification.

4. Savings for a Down Payment and Closing Costs

As you think about how much house you can afford and consequently how much of a down payment you will need, you will likely want to run some numbers. You might start with a home affordability calculator to help you know your target range.

Now, about that down payment: Perhaps you’ve cobbled together a few thousand, but wonder about what is the average down payment on a house. Many people have heard you need at least 20% down, which can be an intimidatingly high number.

You can breathe a bit easier: Many homebuyers put 13% down — that’s $39,000 on a $300,000 home. Nothing to sneeze at. But 29% of would-be buyers in SoFi’s survey were planning to put down 10% or less — and 7% were exploring zero-down-payment financing options.

The more you can put down, the more likely it is that you could get a lower interest rate. In most cases, you’ll need a 20% down payment to avoid private mortgage insurance or a mortgage insurance premium.

Here’s a glimpse of loan types and down payments of each:

•   Conventional conforming loan. This is the most common type of home mortgage loan and typically has a minimum down payment requirement of 3%.

•   FHA loan. This loan, among a few kinds of government home loans, requires as little as 3.5% down for those who qualify.

•   VA loan. If you qualify for a VA loan, you can usually buy a home with no money down.

•   USDA loan. This income-restricted loan, geared toward rural properties, requires no down payment.

If you are a first-time homebuyer, you can also look into down payment assistance programs. (In the SoFi survey, among people who said having a down payment was their top homebuying concern, 49% had not explored these programs.) An online search for these programs from the Department of Housing and Urban Development (HUD), state and local housing authorities, nonprofits, and other organizations can help you reach your homeownership aspirations. They can offer grants and loans.

The other aspect of buying a house that may require cash: closing costs. These typically add up to between 3% and 6% of your loan. They include items like bank processing costs, title search, appraisal costs, and more. It’s worth noting that some lenders may offer credits toward closing costs; that can be something to keep in mind when you are searching for a lender.

5. Documentation

There are a couple more answers to “What do I need to buy a house?” When preparing to buy a home, you will likely need documents; a lot of documents, in fact. Assembling a file of what’s required can be an important step in getting organized. Here is some paperwork you may want to gather as you begin thinking about working with a mortgage lender:

•   Recent tax returns and W-2 forms as well as proof of other income

•   A letter from your employer verifying your employment

•   For those who are self-employed, a business tax returns and P&L statements

•   Recent bank account, brokerage account, and retirement account statements

•   Student loan, car loan, and credit card statements, to show how much debt you have

•   Titles to your assets, such as a current home or your car

•   A gift letter, if appropriate (a statement that, say, a family member gave you funds toward your down payment)

•   Photo ID

Yes, it can feel like a lot, but starting sooner rather than later and chipping away at the list can make it easier.

6. Preapproved Mortgage

Before you go home shopping, it can be wise to get a preapproval letter from a lender or a few lenders. You submit some credentials that share financial information, and the lender says that you likely qualify for a loan of a certain amount.

While not a guarantee of mortgage approval, this will give you insight into what kind of loan you qualify for. It can also show homeowners that you are a serious shopper who is ready to buy.

Recommended: Mortgage Preapproval vs. Prequalification

7. Mortgage Loan

When you find a property you love and work your way to an accepted offer and contract, you will probably be ready to apply for your mortgage. You will likely have to make decisions about the term of the mortgage (30 years is common, but shorter terms with higher monthly payments are possible, too), the rate (both the percent you’ll pay and whether you go with a fixed or adjustable rate), and other details.

When you submit your application, you will provide documentation of your financial qualifications. You will likely work your way through questions as your file goes through underwriting and you move toward your final approval and closing date. Getting a mortgage isn’t a slam dunk 100% of the time, and in fact in SoFi’s survey of home-shoppers, 11% of would-be homeowners said difficulty securing a mortgage was the biggest challenge they were facing. Here again, going through the mortgage preapproval process can help head problems off early on.

8. Real Estate Agent (Probably)

The vast majority of buyers use the services of a real estate agent or broker, according to the National Association of Realtors® (NAR). In 2022, 86% of homebuyers worked with one.

You can go it alone, but finding a real estate agent who is experienced and knowledgeable can be key to, well, getting you a new set of house keys.

Agents have access to the multiple listing service, which is a comprehensive list of homes for sale by a real estate agent or broker in your desired location.

A buyer’s agent can help you:

•   Build your wishlist and hunt for homes that fit your needs

•   Check out listings in person

•   Write offers and counteroffers, including putting an offer on a contingent house

•   Negotiate with the seller

•   Navigate the complexities of the purchase contract.

Using a real estate agent might also relieve some of the stress that comes with purchasing a home, especially when buying in a hot house market.

Dream Home Quiz

The Takeaway

What do you need to buy a house or condo? First, you’ll want to be on pretty solid financial footing, typically with a good credit score, income history, and DTI, as well as some money saved toward a down payment and closing costs. You may also want to have a good agent and the right documentation in your corner.

If, like many buyers, you are hunting for a mortgage, check out what SoFi Mortgage Loans can offer you. You’ll find competitive rates and access to a host of SoFi perks. Plus, first-time homebuyers who qualify can put as little as 3% down.

FAQ

What are the basic needs to buy a house?

To buy a house, you will likely need documentation of your finances, a reasonable credit score and debt-to-income ratio, a mortgage preapproval, and probably funds for a down payment and closing costs, as well as a real estate agent to help you manage the process. And you’ll need to find a house you can afford: In an April 2024 SoFi survey of 500 would-be homeowners, 42% said finding a home within their price range was the largest challenge they were facing.

How much money should you have before buying a house?

Lenders will likely want to see that you are financially stable and can afford the costs associated with owning a home. In terms of a down payment, the typical amount is 13% of the home’s price, but there are ways to buy a home with less or perhaps with no money down. A down payment of 20% or more will allow you to avoid paying for private mortgage insurance (PMI).

What credit score is good to buy a house?

The credit score needed to buy a house will vary, with 620 being the usual minimum for a conventional loan, though most buyers have a score of 650 or higher. Those with scores of 740 or higher will usually get the best loan terms. There are also programs to help those people with credit scores in the 500s become homeowners.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

SOHL-Q324-107

If you’re getting ready to buy your first home, there are probably thousands of questions running through your mind. Questions about location, real estate services, expenses, and more — it’s a huge financial commitment and you probably want to make sure you have the best chance at getting exactly what you want. While it can be a difficult process to navigate, there is help for first-time homebuyers, from resources and advice to first-time homebuyer programs to help you finance a home.

Worried you won’t ever be able to purchase a home? Take a deep breath and a good look at your finances. You can start by reviewing your current financial situation and beginning to save for a down payment. (There are investment accounts and savings options that can help you reach your goal of buying a home, too.) Here are 12 helpful tips for first-time homebuyers.

1. Know Your Credit Score

Your credit score is typically very influential in determining what kind of interest rate you can get on a home mortgage loan. You can get one free credit report from each of the three major credit bureaus (Equifax®, Experian®, and TransUnion®) every 12 months, and may also be able to view free reports more frequently online. You can review your credit report to spotlight any errors that may affect what lenders are willing to offer you.

If you find any errors, you can report them and have them removed. This process can sometimes take a while, even if the mistakes are obvious, so consider starting a credit report review early on in your home-buying process.

2. Calculate What You Can Afford

Do you know how to figure out how much house you can afford? While the size of your mortgage is generally determined by an evaluation of your personal finances and debt, there are a few rules of thumb that may be relevant.

One general guideline is that your housing costs, including your mortgage payment, should, ideally, be no more than 28% of your gross monthly income.

If you are paying off student loans, credit card debt, or have a car payment, you may want to adjust your budget accordingly. Some people try to keep their debt to 36% of their gross monthly income, so that they can still prioritize financial goals like saving for retirement. (This is just another rule of thumb and everyone’s financial goals are different.)

And having less debt may make you more appealing to mortgage lenders. Understanding how much money you feel comfortable spending on a house can, in turn, impact the properties you consider. As you build your budget, you can also check out SoFi’s mortgage calculator.

The good news is that knowing what you can afford — and sticking to your budget — will help streamline the aspect of homebuying that shoppers say is the most confusing: finding the right property. In an April 2024 SoFi survey of 500 would-be homeowners, 41% said that choosing a property was the most confusing thing, worse even than the process of negotiating with a seller.

3. Look into First-Time Homebuyers’ Programs

While you are evaluating your options and creating your budget, it could be worth looking into some first-time homebuyers’ programs. Some programs offer down payment and closing cost assistance, or loans with reduced interest rates.

There are a variety of options available for first-time homebuyers looking for assistance. For example, the Federal Housing Administration offers a mortgage insured by the FHA. These loans often come with competitive interest rates and allow for smaller down payments.

The USDA also helps first-time homebuyers with a program focused in rural areas. And the VA loan program provides assistance to active duty military members, veterans, and surviving spouses. There are even more first-time homebuyer programs and loans available from various states as well.

4. Understand the Expenses

There are plenty of other expenses that come with purchasing a home beyond your down payment and closing costs. For example, when you’re renting property, you don’t have to worry about property tax or general maintenance. When you own property, you do.

In addition to property tax, you’ll likely also need insurance to protect your new home. And you’ll be responsible for maintaining the property, of course, which can include painting, replacing windows, updating the roof, replacing appliances, and more regular maintenance and upkeep.

You may also need to factor in additional purchases like a lawn mower or professional landscaping if the property you are looking at has a yard. Will you need to buy a snowblower to clear the driveway during long winters? These are all factors that can come into consideration when figuring out the cost of your new home.

💡 Quick Tip: Jumbo mortgage loans are the answer for borrowers who need to borrow more than the conforming loan limit values set by the Federal Housing Finance Agency ($806,500 in most places, or $1,209,750 in many high-cost areas). If you have your eye on a pricier property, a jumbo loan could be a good solution.

5. Remember that Location Matters

Location is, obviously, important to many buyers. In some cases, you may have to decide if being in the neighborhood you want is more important than having extra square footage or other, similar trade-offs.

If you have kids or are planning to, you will likely be considering the school district each potential property falls in. Even if you aren’t planning to have kids, it could be worth considering the school district since it can have an impact on the value of your property and could make it easier to sell the house down the line.

6. Plan for the Future

Zoning laws and development plans are another factor to consider when house-hunting. If there is undeveloped land nearby, it can’t hurt to do some digging and see if there are any plans for development.

It may also be worth looking into the property value of other homes in the area. Have they been declining in recent years? If so, this could impact the future value of a home you’re considering.

7. Use Your Imagination

When shopping around for houses, you can take the opportunity to look at a property’s potential, as well as its current value. It’s easy to be distracted by the current owner’s décor, paint, carpet, or other factors that are easy to change. You can easily repaint or update the appliances, but you won’t be able to adjust the location, floorplan, or add rooms to the home as easily.

💡 Quick Tip: Backed by the Federal Housing Administration (FHA), FHA loans provide those with a fair credit score the opportunity to buy a home. They’re a great option for first-time homebuyers.

8. Reserve Cash for Home Improvements

When you’re getting ready to put a down payment on a house, it may be tempting to clean out your savings account. And while that’s completely understandable, keeping your emergency fund close at hand may be a good idea when becoming a homeowner.

After closing costs have been sorted out and you’ve moved into your new home, you might find that unexpected repairs pop up. Having a reserve stash of cash can be helpful if the roof in your new home starts leaking, or you need to replace an appliance.

9. Get a Real Estate Agent

With all of the housing apps and free resources available on the internet, it may seem like a real estate agent is unnecessary. But in reality, navigating the housing market can be tricky and hiring an agent up front can save you time and help make your home-buying experience easier.

While you could spend your time going to open houses and scouring real estate listings, an agent can tailor the home search so that you spend less time looking at houses that don’t meet your criteria. They also can have access to new listings that aren’t yet on the market and may be willing to “preview” homes for you. A real estate agent can also help you navigate the intricacies of contract negotiations and paperwork. If you’re wondering how the real estate agent gets paid take heart: They are typically paid from the seller’s proceeds.

10. Know What to Expect from a Home Inspection

Having a home inspection completed is a critical step in buying a home, yet about a third of prospective homebuyers admit to being confused by this part of the process, according to SoFi’s survey. Inspection procedures vary from state to state, so it can be important to understand what is included in the home inspection in your state, since this is a great chance to truly examine the property and uncover any issues—before they become your issues.

Inspectors should have access to every part of the house including the roof and crawl spaces, and you should be able to attend the inspection yourself.

Don’t be afraid to ask the inspector questions; the more information you have, the better prepared you can be to decide if this is the right house for you.

11. Negotiate the Offer

You’ll have an opportunity to negotiate when you’re making an offer on a house. A lot of factors can influence an offer and negotiating terms in your favor could result in serious savings, especially if you are in a buyer’s market.

If you are working with a real estate agent, they can help give you a good idea of what is considered a reasonable purchase bid by providing comparable sales. A “comparable” is a home similar to the one you are considering (and in the same condition and location) that has sold in the last three months. An agent can help give you an estimated price range and manage your expectations.

12. Find the Right Mortgage

SoFi’s survey found that understanding mortgage options is one of the most befuddling parts of the homebuying process, with 38% of would-be owners admitting they were confused. Before committing to a mortgage, it’s smart to shop around and see what various lenders are willing to offer you. A few things to consider include the interest rates, loan terms, application process (Is it lengthy? Online only?), and any hidden fees included in applying for or repaying the mortgage. Familiarize yourself with the different types of mortgage loans available during this shopping process.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

Photo credit: iStock/PeopleImages

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

^¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.

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Buying a house for the first time is a major life moment, both emotionally and financially. For many people, it’s the biggest investment they will ever make. With the median price of a house hitting $436,800 in 2023 (ka-ching), it’s not a purchase to be made lightly.

If you’re buying your first home, you may expect it to be the same as those quick, fun-and-done experiences portrayed on reality TV shows. In truth, however, it’s a process with a steep learning curve and many moving parts, from figuring out your home-shopping budget to satisfying your final mortgage contingencies. There can be minor hiccups and major missteps along the way.

There are so many things to know as a first-time homebuyer, it’s better to educate yourself in advance rather than learn as you go. To that end, this guide will cover the 10 most common first-time homebuyer mistakes to avoid, including:

•   Not knowing how much house you can afford

•   Failing to include other factors, like insurance and repairs, in your budget

•   Waiving an inspection because you’ve found your dream house

10 Home-Buying Mistakes to Avoid

Home-buying mistakes are easy to make, especially when buying a house for the first time. Review these 10 common first-time homebuyer mistakes before searching for your dream home — so you can ensure you’ll avoid them.

1. Forgetting to Check Your Credit

When’s the last time you checked your credit? It’s absolutely crucial to know your credit score when buying a house.

Why? You may not qualify for a mortgage if your credit score is too low. For most types of mortgage loans, you’ll need a 620, though lenders also consider other factors, like your down payment and your debt-to-income (DTI) ratio. You’ll get better rates if you wait to apply for a mortgage until your score is 740 or above.

The lesson? Don’t let a low credit score rule out buying your first home, but if it’s on the lower side, maybe consider taking some time to build your credit score before shopping for a house.

Recommended: Tips for Buying a House with Bad Credit

2. Not Being Realistic About What You Can Afford

Before you start looking at listings online or working with a real estate agent — and certainly before you try to get preapproved for a mortgage — calculate how much house you can afford.

Once you know the number, avoid looking at houses above your limit. In an April 2024 SoFi survey of 500 potential homebuyers, 54% of those whose home budget was $500,000 or more had a household income of less than $100,000 — hinting that at least some buyers have unrealistic expectations of what they can afford.

So how do you calculate how much house you can afford? There are a few easy methods:

•   DTI: Think about your debt-to-income ratio (your debts divided by your gross income). When adding a monthly mortgage payment into your current DTI calculation, the percentage shouldn’t pass 43%. That’s typically the highest ratio mortgage lenders will accept.

•   28/36 rule: With this method, your max mortgage payment should be 28% of your gross income, and your total debts — mortgage and otherwise — should be no more than 36% of your gross income.

•   35/45 rule: Spend no more than 35% of your gross income on debt and no more than 45% of your after-tax income on debt.

•   25% after-tax rule: After adjusting for taxes, your mortgage should not account for more than 25% of your income.

💡 Quick Tip: You deserve a more zen mortgage. SoFi Mortgage Loan Officers are dedicated to closing your loan on time — backed by a $5,000 guarantee offer.‡

3. Putting Too Much or Too Little Down

In their eagerness to become homeowners, many first-time buyers make the mistake of going overboard and directing every bit of money they have to the purchase. (A notable 14% of potential homebuyers in SoFi’s survey said not having saved enough for a down payment was the biggest challenge they are facing.)

If you have to drain your emergency savings to manage the down payment on a home, you might want to dial down the amount or wait and save up a bit more. Consider what could happen if the home needs a costly repair or, worse, if you or someone in your family suddenly has an expensive medical bill. That’s a good example of when to use an emergency fund.

Conventional wisdom says to put 20% down (and it does help you to avoid paying private mortgage insurance (PMI). But with housing costs so high, that’s all but impossible for most homebuyers. Instead, focus on the minimum down payments required for the type of loan you’re considering:

•   Conventional loan: As low as 3%

•   FHA loan: As low as 3.5%

•   VA loan: As low as 0%

Remember, though, that if you put down very little, you’ll need to borrow more. Your monthly payments will be higher, and you could pay more interest over the life of the loan.

4. Forgetting About Homeowners Insurance and Property Taxes

Your monthly mortgage loan payment is more than just the cost of your home. You’ll also need to cover the cost of homeowners insurance and property taxes, which are often paid into an escrow account. Depending on the type of mortgage and how much you’ve paid, you may also have to pay for PMI. Together, these all increase your monthly payment — sometimes substantially. (Indeed, in SoFi’s survey of potential homeowners, 46% of respondents were concerned about property tax costs.)

When you look at a home, the real estate agent should be able to show you property tax history so you can get an idea of what you’d pay each year. You can also work with an insurance agent to simulate insurance quotes for various homes you’re considering.

Property taxes will change from year to year, and you can always change your homeowners insurance to lower the cost, even if you pay for it through the escrow account. It may be a good idea to bundle home and auto policies together to take advantage of a discount.

Recommended: How Much Homeowners Insurance Do You Need?

5. Failing to Budget for Home Repairs and Maintenance

Forgetting to budget for homeowners insurance and property taxes is one of the most common first-time homebuyer mistakes — but those expenses aren’t the only ones people forget to budget for when buying a house for the first time.

If you’ve been accustomed to calling a landlord whenever something breaks in a rental, reset your expectations. Now, you’ll have to take care of basic home maintenance — like replacing air filters, cleaning the gutter, resealing wood decks, and cleaning the chimney — and repairs. When the air conditioner is blowing hot air, the oven stops working, or your roof starts leaking, you’re on the hook for the repairs.

Some issues may be covered by homeowners insurance (but there’s still a deductible!), but other issues caused by general wear and tear are solely your responsibility. And then there are other possible costs, like higher utility bills and homeowners association fees, that can eat into your budget.

6. Not Hiring a Qualified Home Inspector

It may be tempting to waive the home inspection when you’re trying to buy the home of your dreams — especially if you have some stiff competition to be the winning bidder for an in-demand property.

Sorry to say, this is a risky strategy. A home inspection might reveal critical information about the condition of a home and its systems, from electrical problems to hidden mold; from a failing septic system to a leaky roof. What you learn in an inspection could reveal that your dream home is actually a money pit.

What’s more, your inspection report might serve as a useful negotiating tool: You could use it to ask for repairs or to work out a better price from the seller. And if you really aren’t happy with the inspection results, you may be able to use it to cancel the offer to buy.

And in the grand scheme of things, an inspection isn’t too expensive. The average home inspection costs $300 to $500.

Recommended: The Ultimate Home Inspection Checklist

7. Overlooking the Neighborhood and Surrounding Area

You may have fallen in love with a specific home, but when you buy a house, you’re also buying the neighborhood that comes with it, so to speak.

How are the surrounding properties maintained? Do the people seem friendly? If you have kids or are planning on having them, do you see other families with young children? How are the schools in the area? What’s the traffic like? How’s the noise level? What restaurants and stores are nearby?

Think about your ideal community — and then try to find a dream home in that type of community.

8. Letting Your Emotions Get the Best of You

Buying your first home or any home thereafter can be a roller coaster, so it’s important to prepare yourself psychologically as well as financially. If you’ve ever talked to someone buying a house, you know there are potential pitfalls all through the purchasing process.

You might fall in love with the perfect house and find it’s way over your budget. You might get annoyed with the sellers or their real estate agent, especially during the negotiation process. You might disagree with your partner about priorities.

All of these scenarios can cause a person to behave emotionally. It might make you want to walk away from a great deal. It might lead you to barrel ahead with a purchase, even when warning lights are flashing.

Our advice to a first-time homebuyer? Recognizing that this will be a challenging and, at times, stressful process (especially because you are new to it), take a deep breath, and proceed calmly. Find tools that help you move ahead with patience and a sense of calm, best as you can. With your eye on the prize — namely, your first home — you’ll get there.

Recommended: Improving Your Relationship With Money

9. Not Considering Future Resale Value

Houses are more than a place to live — they’re an investment. While you certainly want to prioritize buying a home you’ll be happy in, it’s also a good idea to think about how much the property might be worth in five, 10, 15 years and beyond.

It’s impossible to predict the market, but you can feel more confident about strong future resale value by choosing a house with multiple bedrooms and bathrooms, a well-appointed kitchen, and a yard. Other features, like a finished basement or a garage, may also make it easier to sell the home in the future.

10. Not Having an Emergency Fund

One of the basic tenets of personal finance is building an emergency fund. And here’s some blunt advice for first-time homebuyers: You’re going to need an emergency fund.

House emergencies can happen at any time: A tree falls on your roof, a toilet starts to leak, your dog destroys the carpet, you name it. Having money socked away to cover these expenses is crucial when buying a home.

Dream Home Quiz

6 Smart Moves for First-Time Homebuyers

We’ve covered some of the most common first-time homebuyer mistakes, so let’s shift gear to smart moves you can make when buying your first home.

1. Get Paperwork Moving ASAP

What do first-time homebuyers need when getting a mortgage? Here are some of the most common docs to start putting together:

•   Proof of income: Lenders will often want to see two months’ worth of pay stubs or bank statements that confirm your income. They’ll also want your tax returns from the previous two years.

•   Proof of funds: To take you seriously, lenders want to know you have enough money to cover a down payment and closing costs.

•   Proof of identification: This could include a government ID, a passport, or your driver’s license.

Early in the process, you can furnish this basic information to get prequalified at various lenders. They’ll also run a credit check during the prequalification process.

Being prequalified simply allows lenders to give you an idea of what types of mortgages (fixed rate vs. variable rate, 15-year vs. 30-year, etc.) you might get approved for. It’s not a promise of approval, but it does help set expectations as you start to browse listings.


💡 Quick Tip: Your parents or grandparents probably got mortgages for 30 years. But these days, you can get them for 20, 15, or 10 years — and pay less interest over the life of the loan.

2. Check Out First-Time Homebuyer Programs

It’s wise to shop around for a few different mortgage quotes, but it would be a rookie mistake to overlook some great, government-sponsored programs that make buying a house more affordable. These include:

•   FHA loans: These mortgages are designed for those with low to moderate incomes. They typically offer low down-payment requirements, low interest rates, and the ability to get approval even if you have a fair credit score.

•   USDA loans: These provide affordable mortgages to those with a lower income who are planning on buying a home in a qualifying rural area.

•   VA loans: These mortgages help those on active military duty, veterans, and eligible surviving spouses become homeowners. If you can check one of those boxes, you may be eligible for a home loan with no down payment requirement and no PMI.

3. Consider Additional Costs Beyond the Mortgage

As we’ve discussed above, the actual monthly house payment is not your only cost. Your full mortgage payment includes property taxes, homeowners insurance, and, potentially, PMI.

But before you even get to the point of making monthly payments, consider these upfront costs of buying a house:

•   Closing costs, which are traditionally paid for by the buyer.

•   Home inspections, which we highly recommend.

•   Moving costs, whether just renting a truck or hiring movers.

4. Get Preapproved

Mortgage prequalification isn’t a commitment for the lender or buyer — it’s just a first step. If you appear to meet a lender’s standards, you could move on to the preapproval stage.

Getting preapproved for a home loan involves submitting additional income and asset documentation for a more in-depth review of your finances.

Once the lender approves these aspects of your loan application, you’ll receive a conditional commitment for a designated loan amount — called a preapproval letter — and have a better idea of what your loan terms will be.

Mortgage preapproval can help demonstrate to sellers that you’ve completed the first step in getting a mortgage because your credit, income, and assets have already been reviewed by an underwriter. This can smooth the bidding process and could give you an edge over others in a competitive situation with multiple offers.

Recommended: How Long is a Mortgage Preapproval Good For?

5. Choose the Right Type of Mortgage

You may qualify for various types of mortgage loans. Spend some time researching the different types so you have a better understanding of how they’ll impact your payments for the next several decades.

For instance, you’ll want to know the difference between a fixed-rate mortgage and an adjustable-rate mortgage (ARM). You’ll also want to understand how a 15-year term affects your monthly payments when compared to a 30-year term — but also how a longer term increases the amount you’ll pay in interest.

Other mortgage types to understand include:

•   Conventional loans vs. government-issued loans

•   Conforming vs. nonconforming loans

•   Reverse mortgages, jumbo mortgages, and interest-only mortgages

6. Shop Around for the Best Mortgage Rates

Finally, remember that you don’t have to go with the first mortgage offer you get. It’s worth your while to get multiple offers so you can compare interest rates, down payment requirements, terms, and more.

The Takeaway

Buying a house for the first time can be a stressful experience, but remember: At the end of it all, you’ll have a place you can call yours. You’ll build equity over time, and the house may increase in value. Just make sure you research the most common first-time homebuyer mistakes so you know how to avoid them.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

FAQ

What are some common mistakes first-time homebuyers make?

Some common home-buying mistakes for first-time homebuyers include forgetting to check (and improve) their credit, not calculating how much home they can actually afford, and forgetting to consider additional expenses, like inspections, homeowners insurance, property taxes, closing costs, and increased utilities. First-timers may also forget to consider the neighborhood as a whole or the future resale of the home.

What are the two largest obstacles for first-time homebuyers?

Two large obstacles for first-time homebuyers include rising housing prices and credit score requirements. Those who don’t already have equity in a current home may have more trouble coming up with a down payment on a new home. First-time homebuyers may also lack the credit score needed to get the best possible rate on a new mortgage.

What are three common mortgage mistakes?

Three common mortgage mistakes are 1) buying up to the limit you’re approved for rather than calculating how much you’re comfortable paying; 2) skipping the home inspection to expedite the process or make your offer more appealing to buyers; and 3) not considering related expenses you’ll have to budget for, including homeowners insurance, property taxes, and repairs and maintenance.

What are the most common mistakes that homebuyers make?

Homebuyers make a number of common mistakes, such as making an unnecessarily large down payment, forgetting to budget for related costs, buying more house than they can afford, and not shopping around for the best mortgage loans.

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

^‡SoFi On-Time Close Guarantee: If all conditions of the Guarantee are met, and your loan does not close on or before the closing date on your purchase contract accepted by SoFi, and the delay is due to SoFi, SoFi will give you a credit toward closing costs or additional expenses caused by the delay in closing of up to $10,000.^ The following terms and conditions apply. This Guarantee is available only for loan applications submitted after 04/01/2024. Please discuss terms of this Guarantee with your loan officer. The mortgage must be a purchase transaction that is approved and funded by SoFi. This Guarantee does not apply to loans to purchase bank-owned properties or short-sale transactions. To qualify for the Guarantee, you must: (1) Sign up for access to SoFi’s online portal and upload all requested documents, (2) Submit documents requested by SoFi within 5 business days of the initial request and all additional doc requests within 2 business days (3) Submit an executed purchase contract on an eligible property with the closing date at least 25 calendar days from the receipt of executed Intent to Proceed and receipt of credit card deposit for an appraisal (30 days for VA loans; 40 days for Jumbo loans), (4) Lock your loan rate and satisfy all loan requirements and conditions at least 5 business days prior to your closing date as confirmed with your loan officer, and (5) Pay for and schedule an appraisal within 48 hours of the appraiser first contacting you by phone or email. This Guarantee will not be paid if any delays to closing are attributable to: a) the borrower(s), a third party, the seller or any other factors outside of SoFi control; b) if the information provided by the borrower(s) on the loan application could not be verified or was inaccurate or insufficient; c) attempting to fulfill federal/state regulatory requirements and/or agency guidelines; d) or the closing date is missed due to acts of God outside the control of SoFi. SoFi may change or terminate this offer at any time without notice to you. *To redeem the Guarantee if conditions met, see documentation provided by loan officer.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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