What closing costs should I expect as a first-time buyer?

Closing costs typically run 2–5% of the purchase price. On a $300,000 home, expect $6,000–$15,000. These include lender fees, appraisal, title insurance, escrow setup, recording fees, and prepaid items like homeowners insurance.

First-Time Buyer Calculator 2026 | HomeAffordabilityCalc.info

Q: What credit score do I need to buy my first home?

For an FHA loan, you need a minimum 580 credit score with 3.5% down, or 500 with 10% down. For conventional loans, the minimum is typically 620, though lenders prefer 660+ for best rates. A score above 740 gets you the best available rate.

Q: Should I use FHA or conventional as a first-time buyer?

FHA loans are better if your credit score is under 700 or down payment under 10%. Conventional becomes more attractive above 700 credit and 10% down — PMI is cheaper and eventually removable. FHA mortgage insurance applies for the life of the loan if you put less than 10% down.

First-Time Buyer Affordability Calculator

Gross Annual Income

Pre-tax household gross income

Monthly Debt Payments

Car, student loans, card minimums

Current Savings (Down Payment)

Amount available for down payment

Mortgage Rate

30-yr fixed avg ~6.94% (May 2026)

Credit Score Tier Affects rate and program eligibility

Property Tax Rate

Annual rate, % of home value

Recommended Max Home Price

$—

FHA (3.5% Down)

—

—/mo

Conventional (3% Down)

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—/mo

Closing Costs (est.)

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Cash to Close

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Monthly PITI

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First-time buyer program eligibility grid
Program	Min Down	Min Credit	PMI?	You Qualify?
FHA Loan	3.5%	580	Yes (life)	—
Conventional 97	3%	620	Yes (removable)	—
Fannie HomeReady	3%	620	Yes (reducible)	—
Freddie Home Possible	3%	620	Yes (reducible)	—

Cash-to-Close Breakdown (FHA)

Down Payment (3.5%)—

Closing Costs (~3.5%)—

2-Month Reserve—

Total Cash Needed—

Score Range	Rate Impact	Best Program	Notes
760+	Best rate available	Conventional	No rate adjustments
740–759	+0.0–0.1%	Conventional	Near-best pricing
720–739	+0.1–0.2%	Conventional	Good qualification
700–719	+0.2–0.4%	Conventional or FHA	Compare both
680–699	+0.4–0.6%	FHA often better	FHA less score-sensitive
660–679	+0.6–0.9%	FHA preferred	Conventional becomes costly
640–659	+0.9–1.2%	FHA	Conventional expensive
620–639	+1.2–1.5%	FHA	Minimum conventional
580–619	N/A	FHA only (3.5% down)	Work on score first

Estimates only. Consult a licensed mortgage professional for pre-approval.

FHA vs Conventional: Which Is Right for First-Time Buyers?

The answer depends on your credit score and down payment. FHA loans are less rate-sensitive to credit score — a buyer with a 680 score pays a similar FHA rate as one with a 760. On a conventional loan, that 80-point gap translates to a 0.4–0.6% rate premium, adding $80–$120/month to a $300K mortgage.

When FHA Wins

Credit score below 700, or down payment below 10%: FHA's mortgage insurance premium (0.55%/year) is often cheaper than conventional PMI at these score tiers. The catch: FHA MIP stays for the life of the loan if you put less than 10% down. You'll need to refinance to remove it.

When Conventional Wins

Credit score above 720 and at least 5% down: conventional PMI is typically cheaper and falls off automatically at 20% equity. If you plan to stay 5+ years, conventional usually costs less over time despite the higher upfront qualification bar.

First-Time Buyer Programs Worth Knowing

Fannie Mae HomeReady and Freddie Mac Home Possible allow 3% down with reduced PMI — but have income limits (typically 80% of area median income). Most states also offer down payment assistance grants of $5,000–$20,000. Use our down payment calculator to see how long to reach 20% and avoid PMI entirely.

Frequently Asked Questions

What credit score do I need to buy my first home?

For FHA: minimum 580 with 3.5% down, or 500 with 10% down. For conventional: minimum 620, but 700+ is needed for competitive rates. A 740+ score gets you the best available rate. Improving from 640 to 720 can save $150–$250/month on a $300,000 loan.

What is PMI and how do I avoid it?

PMI (private mortgage insurance) is required on conventional loans with under 20% down — typically 0.5–1.5% of the loan amount annually. On a $300K loan that's $125–$375/month. Avoid it by putting 20% down, using a VA loan, or requesting cancellation once you hit 20% equity. FHA loans have their own mortgage insurance that is harder to remove.

What closing costs should I expect?

Closing costs run 2–5% of purchase price: lender origination ($500–$1,500), appraisal ($400–$700), title insurance ($1,000–$2,500), escrow/settlement ($500–$1,500), recording fees ($100–$250), plus prepaids (insurance, property tax escrow). Shop at least 3 lenders — origination fees vary significantly.

Should I use FHA or conventional as a first-time buyer?

FHA if your score is below 700 or down payment below 10%. Conventional above 700 credit and 10% down — PMI is cheaper and removable. FHA MIP is typically 0.55%/year for the life of the loan. Conventional PMI drops at 20% equity, making it cheaper long-term for buyers who stay 5+ years.

Last updated: May 2026

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