First-Time Homebuyer's Guide to Mortgages

If you’re buying your first home, understanding how a mortgage works and what you can afford will help you plan.

Key concepts

• Principal and interest (P&I) – The core loan payment. Principal pays down the balance; interest is the cost of borrowing.
• PITI – Principal, interest, property taxes, and insurance. This is the full monthly housing cost many lenders use.
• Down payment – The amount you put down upfront. Often 3–20% of the purchase price. A higher down payment can lower your payment and may avoid PMI on conventional loans.
• Term – Usually 15 or 30 years. Shorter term = higher payment, less total interest.

Use our mortgage calculator to try different home prices, down payments, and terms and see your estimated monthly payment and total interest.

Steps for first-time buyers

1. Check your budget – See what monthly PITI you can afford. Many guidelines suggest keeping housing at or below 28% of gross income.
2. Estimate down payment – See how much you have saved and what loan types you might qualify for (e.g., conventional, FHA).
3. Get pre-approved – A lender will review your income, assets, and credit and tell you how much they’re willing to lend.
4. Shop rates – Compare offers from multiple lenders. Even a small rate difference can mean a lot over 30 years.
5. Use our tools – Run numbers with our calculator and, if you already have a loan, our refinance and extra payment calculators.

Common first-timer mistakes

• Maxing out what the lender approves instead of what you’re comfortable paying.
• Ignoring property taxes, insurance, and HOA in the budget.
• Skipping comparison of 15- vs 30-year and the impact of extra payments.

This is for informational purposes only and not financial advice. Consult a licensed lender or advisor for your situation.