Qualifying as a first-time homebuyer generally depends on your credit score, income and DTI, down payment, and required documentation.
Many programs allow credit scores in the high 500s to low 600s and down payments as low as 0% to 3.5%, though requirements vary by loan program and lender. You don’t necessarily need excellent credit, a high income, or 20% down to qualify.
The best way to know where you stand is to have a loan officer review your specific financial situation.
If you’ve assumed you need a near-perfect credit score, a large income, and 20% saved before you can even start the conversation, this article walks through what lenders actually require, program by program, and what you’ll need to have ready when you apply.
What Credit Score Do You Need to Qualify as a First-Time Homebuyer?
Not sure you count as a first-time buyer? See what “first-time homebuyer” means.
Most first-time buyer loan programs accept credit scores as low as the high 500s to low 600s, well below what many buyers assume they need. The exact minimum depends on the loan program and the lender reviewing your file, not a single universal number.
Conventional loans, including Fannie Mae’s HomeReady and Freddie Mac’s Home Possible low-down-payment options, commonly look for a credit score around 620.
FHA-backed loans go lower for some borrowers, generally accepting scores down to 580 with a 3.5% down payment, with a smaller set of lenders working with scores between 500 and 579 at a higher down payment.
VA loans have no credit score minimum set by the VA itself, though most lenders look for a score around 620. USDA loans commonly call for a score around 640.
“A credit score in the 580 to 620 range doesn’t automatically rule someone out. We see plenty of first-time buyers qualify in that range once we look at the full picture, not just the score.”
— Charlie Cooper, President, Austin Capital Mortgage
| Program | Typical Min. Credit Score | Typical Min. Down Payment | Who It’s Built For |
|---|---|---|---|
| Conventional 97 / HomeReady / Home Possible | ~620 | As low as 3% | Buyers with solid credit and modest savings, including income-limited borrowers |
| FHA | 580, or 500–579 with more down | 3.5% (or 10% for lower scores) | Buyers with lower credit scores or thinner credit files |
| VA | No VA-set minimum; lenders often use ~620 | 0% | Eligible service members, veterans, and some surviving spouses |
| USDA | ~640 | 0% | Buyers in eligible rural areas within local income limits |
What Income and Debt-to-Income Ratio Do Lenders Look At?
Lenders look at your income relative to your existing debts, expressed as your debt-to-income ratio, or DTI: your total monthly debt payments divided by your gross monthly income.
There’s no single income minimum required across all first-time buyer programs; what matters more is how your income compares to your debts and your new estimated housing payment.
General DTI guidelines run from around 41% for USDA loans to a typical 43% to 45% for conventional and FHA loans, and some borrowers qualify above that with strong compensating factors like a higher credit score or cash reserves. VA loans don’t set a hard DTI cap, though lenders commonly use a similar 41% guideline as a starting point.
If you’re a lower-income buyer, several programs are built specifically with you in mind rather than working against you. Fannie Mae’s HomeReady and Freddie Mac’s Home Possible programs set income limits based on the area median income where the home is located, which means a lower or moderate income can actually be part of what qualifies you for the program, not a barrier to it. For a full overview of your options, see our first-time home buyer guide.
How Much of a Down Payment Do You Actually Need?
Down payment minimums for first-time buyers commonly range from 0% to 3.5%, far below the 20% many buyers assume is required. That 20% figure mainly affects whether you’ll pay mortgage insurance, not whether you can qualify to buy at all.
Conventional 97 and HomeReady/Home Possible loans allow down payments as low as 3%. FHA loans require 3.5% down for borrowers with a 580 or higher credit score. VA and USDA loans, covered in more detail below, can require no down payment at all for eligible borrowers.
Down payment funds can often come from your own savings, a gift from a family member with proper documentation, or a down payment assistance program, rather than needing to come entirely out of pocket.
“The biggest myth we run into is that you need 20% down just to be considered. For most first-time buyers, that number is closer to 0 to 3.5%.”
— Charlie Cooper, President, Austin Capital Mortgage
| Down Payment Option | Eligibility Note |
|---|---|
| 0% Down | VA (eligible service members/veterans) or USDA (eligible rural area, income-limited) |
| 3% Down | Conventional 97 / HomeReady / Home Possible |
| 3.5% Down | FHA, with a 580+ credit score |
| Down Payment Assistance | Grants or forgivable second loans stacked on another first-time buyer loan; income limits and homebuyer education often apply |
Can You Qualify for a Zero-Down Loan or Down Payment Assistance?
Yes. VA and USDA loans offer 0% down payment options for eligible borrowers, and many state and local programs offer down payment assistance in the form of grants or forgivable second loans stacked on top of another first-time buyer loan.
VA loans are available to eligible service members, veterans, and some surviving spouses, and require no down payment or mortgage insurance, though a funding fee typically applies.
USDA loans also require no down payment, but the property must be in an eligible rural area and your household income must fall under the program’s local income limit.
Down payment assistance programs, including Texas-specific options, generally have their own income limits and often require a homebuyer education course; availability and terms vary by lender, program, and state.
Because eligibility for these options depends on service history, property location, income limits, or state residency, confirming which ones you actually qualify for is a conversation with a loan officer, not a guess based on the program name alone.
What Documents Will You Need to Apply?
Most first-time buyer applications need proof of income, assets, identity, and your current housing situation, gathered before you apply rather than scrambled together afterward. Having these ready shortens how long pre-approval takes and reduces back-and-forth during underwriting.
- Your two most recent pay stubs
- Your last two years of W-2s, and tax returns if you’re self-employed, commissioned, or have additional income sources
- Two to three months of statements for every bank and investment account you plan to use
- A government-issued photo ID
- Your current landlord’s contact information and rent payment history, or your mortgage statement if you already own
- A signed gift letter and a paper trail showing the transfer, if any part of your down payment is a gift
- Any paperwork specific to a down payment assistance or grant program you’re applying through, such as a homebuyer education certificate
A Lower Credit Score Doesn’t Close the Door
A borrower came in with a 580 credit score and about $45,000 in annual income, and assumed those numbers put homeownership out of reach. She had less than $3,000 saved and no family able to help with a down payment.
When she sat down with a loan officer, her file was reviewed against FHA guidelines, which accept a 580 score at 3.5% down, alongside a state down payment assistance program available to buyers at her income level.
Between the two, her out-of-pocket cash need dropped substantially, and her application moved forward on the strength of her income and payment history rather than being screened out by her credit score alone.
A first-time buyer with a 580 credit score and modest income can still qualify by combining an FHA loan with a down payment assistance program, rather than assuming a lower score or income closes the door on homeownership.
Case study attributed to Charlie Cooper, President, Austin Capital Mortgage. Borrower details are fictionalized.
Your Next Steps
- Pull your credit report and check your actual score before assuming you don’t qualify
- Add up your monthly debt payments and divide by your gross monthly income to estimate your current DTI
- Gather your last two years of income documentation and two to three months of bank statements
- Look into whether your income falls within the limits for a low-down-payment or down payment assistance program in your area
- Ask a loan officer which specific program fits your credit, income, and down payment situation, rather than assuming one program’s rules apply to all of them
Ready to see where you stand? A loan officer can review your full picture and tell you what you actually qualify for.
Not Sure You Qualify? Let’s Find Out Together.
Credit scores, income, and down payments look different for every borrower, and the only way to know your real options is to look at your actual numbers.
Austin Capital Mortgage has been helping first-time buyers navigate exactly these questions since 1996, with pre-approval available in as little as 24 hours and no impact to your credit to get started.
Approval is subject to underwriting review and program eligibility. Rates and payments vary. Austin Capital Mortgage is a DBA of Aspire Home Loans, LLC, NMLS #1955132. Equal Housing Lender.
