Most first-time homebuyers in Scottsdale choose from four loan families: FHA, conventional loans with a low down payment, VA loans for eligible veterans and service members, and USDA loans for eligible rural and suburban properties. Many buyers also qualify for down payment assistance that can cover part of the cash they need. This guide compares the options, explains the real costs of buying, and walks you through the process from budget to keys.
Before you read further: The figures below describe general program guidelines, which change over time and vary by lender. They are educational, not an offer or a commitment to lend. Bethany Sanchez can confirm what applies to your situation.
Are you really a “first-time” buyer?
The definition is more generous than many people realize. For most government-backed and down payment assistance programs, you count as a first-time buyer if you have not owned a primary residence during the past three years. That means someone who sold a home years ago and has rented since may still qualify. Single parents who only owned a home with a former spouse, and people who owned only a property that was not permanently affixed to a foundation, may also qualify under some programs.
Definitions differ by program, so never assume you are excluded. If you are not sure, ask us and we will check the rules for the specific program you are considering.
Your loan options compared
The table below summarizes how the main first-time buyer loan types usually differ. Every figure is a general guideline, and lenders may apply stricter standards.
| Topic | FHA | Conventional (low down payment) | VA | USDA |
|---|---|---|---|---|
| Typical minimum down payment | 3.5% with qualifying credit | 3% on certain programs | None for eligible borrowers | None for eligible borrowers and areas |
| Credit flexibility | More flexible | Stronger credit helps most | Lender-determined | Lender-determined |
| Mortgage insurance | Upfront and annual premium | Private mortgage insurance, cancelable | None, but a one-time funding fee usually applies | Upfront and annual guarantee fees |
| Income or location limits | No income limit | Some programs have income limits | Must be eligible through service | Income and property location limits |
| Best for | Buyers with smaller savings or imperfect credit | Buyers with solid credit and steady income | Eligible veterans, service members, and some spouses | Buyers in eligible areas with moderate income |
FHA loans
FHA loans are insured by the Federal Housing Administration and are popular with first-time buyers because the guidelines are flexible on credit and allow gift funds and seller help with closing costs. The trade-off is mortgage insurance: you pay an upfront premium (which can usually be financed) plus an annual premium collected monthly. Read the full breakdown on our FHA loans page.
Conventional loans with a low down payment
Conventional loans follow Fannie Mae and Freddie Mac guidelines. Certain programs allow a low down payment, and borrowers with strong credit often get the best overall value because private mortgage insurance is cancelable once you build enough equity. Some low-down-payment programs have income limits that vary by location. Learn more on our conventional loans page.
VA loans
If you are a veteran, active-duty service member, or an eligible National Guard, Reserve or surviving spouse borrower, a VA loan can be one of the strongest options available. There is typically no monthly mortgage insurance and often no down payment. A one-time funding fee usually applies unless you are exempt. We explain eligibility and the Certificate of Eligibility process on our VA loans page.
USDA loans
USDA guaranteed loans help moderate-income buyers purchase in eligible areas, and the eligible map is often broader than people expect. They can offer 100 percent financing. You can check whether a property address qualifies on the USDA eligibility site, then read our USDA loans page for the details.
Down payment assistance
Down payment assistance (DPA) programs can reduce the cash you need to bring to closing. They come in several forms:
- Grants that do not have to be repaid.
- Forgivable second mortgages that are forgiven gradually if you stay in the home for a set number of years.
- Deferred or low-interest second mortgages that are repaid when you sell, refinance or pay off the first mortgage.
- Matched savings programs that add to money you save.
Programs are offered by state housing finance agencies, cities, counties, nonprofits and some employers, and they are state specific: availability depends on each program’s current funding. In the Phoenix area, two programs buyers ask about most are:
- HOME+PLUS, the Arizona Industrial Development Authority’s statewide program, which pairs a 30-year fixed-rate mortgage with down payment assistance for eligible buyers within its income limits.
- Home in Five Advantage, offered by the Industrial Development Authorities of Maricopa County and the City of Phoenix, which provides down payment and closing cost assistance for eligible buyers in Maricopa County.
Bethany works with state-specific assistance programs in each of her licensed states and checks current funding and eligibility before recommending one. Teachers, first responders and healthcare workers should also read about hero home loan programs.
Typical requirements include income limits, purchase price limits, a minimum credit score, completion of a homebuyer education class, and living in the home as your primary residence. Some DPA programs require a slightly higher interest rate on the first mortgage, or a repayment if you sell early, so compare the total cost rather than just the upfront benefit. We help you run those comparisons.
Step-by-step: from budget to keys
- Check your credit and budget. Review your credit reports for errors at the official free report site, pay down high-interest balances if you can, and decide what monthly payment feels comfortable, not just what a lender might approve.
- Talk to a loan officer. A short call tells you which programs fit and which documents to gather. It also lets you fix small problems months before you apply.
- Get pre-approved. Provide your documents so a loan officer can review them. A pre-approval letter helps your offers stand out and tells you your price range.
- Hire a real estate agent. An agent represents your interests in the search, offer and negotiation. Ask friends for referrals and interview more than one.
- Find a home and make an offer. Your agent will help you structure an offer, including contingencies for inspection, financing and appraisal.
- Complete your application. After your offer is accepted we finish your application and send your Loan Estimate within three business days. Review it and ask questions.
- Inspection, appraisal and underwriting. Schedule a home inspection, and let the lender order an appraisal. The underwriter reviews everything and may request documents. Respond quickly.
- Final walkthrough and closing. You receive a Closing Disclosure at least three business days before closing. Compare it with your Loan Estimate, do a final walkthrough, bring your photo ID and cashier’s check or wire confirmation, and sign.
What buying a home really costs
First-time buyers are often surprised that the down payment is only one piece of the total. Plan for:
- Down payment. The amount depends on your program.
- Closing costs. These include lender fees, appraisal, credit report, title insurance, escrow or settlement fees, recording fees and prepaid items such as property taxes and homeowners insurance. Sellers can often contribute toward closing costs within program limits.
- Mortgage insurance. FHA, USDA and many low-down-payment conventional loans include it, and VA loans include a funding fee instead.
- Ongoing costs. Property taxes, homeowners insurance, HOA dues, utilities and maintenance. A common rule of thumb is to set aside money each year for repairs.
- Reserves. Some loans require, and all buyers benefit from, a cushion of savings after closing.
How much home can you afford?
Lenders measure affordability using your debt-to-income ratio (DTI): your total monthly debts, including the proposed housing payment, divided by your gross monthly income. For example, if your gross monthly income is $6,000, your car, student loan and credit card payments total $600, and your proposed housing payment is $1,800, your DTI is $2,400 divided by $6,000, or 40 percent. Each program has its own guidelines, and automated underwriting can allow higher ratios when other parts of your file are strong.
Your comfort level matters as much as the lender’s formula. A payment that is approved is not necessarily a payment that fits your life. We will show you several price points so you can see the difference in monthly cost.
Common first-time buyer mistakes to avoid
- Making big purchases before closing. Financing a car, furniture or new credit cards can change your DTI and jeopardize your approval.
- Changing jobs without telling your loan officer. A job change is not always a problem, but lenders need to verify employment through closing.
- Moving money around. Large, unexplained deposits must be documented. Keep your funds in your own accounts and keep records.
- Skipping pre-approval. Without one, you risk falling in love with a home outside your budget and losing offers to better-prepared buyers.
- Spending to the limit. Leave room for repairs, savings and life.
- Ignoring the inspection. Waiving an inspection can save time but may cost thousands later.
- Not comparing lenders. Request a Loan Estimate from more than one lender and compare them line by line.
Local help in Scottsdale
You do not have to do this alone. Besides working with us, consider a HUD-approved housing counseling agency, which can provide low-cost or free homebuyer education and one-on-one guidance. Our Community page lists local classes, events and resources, including a guide to finding a housing counselor. Ready to start? Get pre-approved or call (760) 713-3814 to talk with Bethany Sanchez.
Frequently asked questions
What credit score do I need to buy a first home?
There is no single minimum, because it depends on the loan program and the lender. FHA guidelines allow scores in the 500s with a larger down payment, conventional loans commonly start around the 620 range, and VA and USDA loans leave much of the decision to lenders. Many lenders set higher minimums than the program, so ask us what applies to your file before assuming you are ruled out.
How much down payment do I really need?
It depends on the program. FHA loans can require 3.5% down for borrowers who meet credit guidelines, some conventional programs allow 3% down, and VA and USDA loans may require no down payment for eligible borrowers. You also need cash for closing costs and reserves, so plan beyond the down payment alone.
Can I use gift money for my down payment?
Yes, most loan programs allow gift funds from acceptable donors such as family members, with a signed gift letter and documentation showing the transfer. The rules differ by program and occupancy, so tell us about any gift early so we can document it correctly and avoid delays.
Do I have to be a first-time buyer to use down payment assistance?
Often, but not always. Many programs define first-time buyer as someone who has not owned a primary residence in the past three years, and some programs are open to repeat buyers in certain areas or professions. Each program publishes its own eligibility rules, including income limits, purchase price limits and homebuyer education requirements.
How long does it take to get pre-approved?
Once we have your documents, a pre-approval review can often be completed in a few business days, and sometimes faster. The timeline depends on how complete your documents are and whether your income, credit or assets need extra explanation. We do not guarantee any outcome or timeline, but we will tell you exactly what is holding things up.
Will my student loans keep me from qualifying?
Not automatically. Lenders count a monthly student loan payment in your debt-to-income ratio, and each program has its own way of calculating that payment when a loan is deferred or on an income-driven plan. We review your actual loan statements and explain how the payment will be treated so you know where you stand.
Should I wait to buy until I have 20% down?
Not necessarily. Waiting for 20% down avoids private mortgage insurance on a conventional loan, but it can also mean years of renting while prices and rents change. A lower down payment with mortgage insurance may make sense if you plan to stay in the home and can comfortably afford the payment. We can compare both scenarios using your numbers.
What is the difference between pre-qualification and pre-approval?
A pre-qualification is a quick estimate based on information you provide, while a pre-approval involves reviewing documents and credit so the result is more reliable. Sellers and agents take pre-approvals much more seriously. Read our guide on pre-qualification vs pre-approval for details.