First Home Buyer Guide USA: PITI, FHA/VA Loans, and Closing Costs in 2026
US first-time buyer essentials — loan types, PITI components, down payment options, and the closing process.
The US homebuying process is more complex than most countries — but the loan options are also more varied. Here's the US-specific guide for first-time buyers.
Pick the right loan type for your situation
| Loan type | Min down | Min credit | Mortgage insurance | Best for |
|---|---|---|---|---|
| Conventional | 3% | 620 | PMI (cancellable) | Good credit, planning to stay 5+ years |
| FHA | 3.5% | 580 (3.5% down) / 500 (10% down) | MIP (life of loan if <10% down) | Lower credit, smaller down payment |
| VA | 0% | 580 typical | None (just funding fee) | Active military / veterans |
| USDA | 0% | 640 | Guarantee fee 1% + 0.35% annual | Rural / suburban areas, income limits |
Most first-time buyers go conventional (with PMI) or FHA. VA is the best deal if you qualify.
Understanding PITI
Your monthly mortgage payment usually includes 4 things:
- Principal (loan paydown)
- Interest (lender's fee)
- Taxes (property tax, escrowed)
- Insurance (homeowners + PMI if applicable)
Real example, $400,000 home, 10% down ($40k), 6.9% rate, 30-year fixed:
- P&I: $2,371
- Property tax (~1.1%): $367
- Insurance (~$2,000/yr): $167
- PMI (~0.55%): $165
- Total PITI: ~$3,070
Many first-time buyers shop on P&I alone and get sticker-shocked at closing.
Closing costs
In addition to the down payment, budget 2-5% of the loan amount for closing costs:
- Loan origination fee
- Appraisal ($400-$700)
- Title search and insurance
- Attorney/escrow fees
- Recording fees
- Prepaid items (first year insurance, property tax escrow setup)
On a $360,000 loan, that's $7,200-$18,000 extra in cash needed at closing.
Many sellers will pay some closing costs in a competitive market — ask.
The pre-approval letter
In the US, you need pre-approval BEFORE making offers:
- Lenders run hard credit pulls
- Verify income via paystubs, W-2s, tax returns (last 2 years)
- Letter typically valid 60-90 days
- Most sellers won't even consider offers without one in hot markets
Down payment assistance programs
Many states and cities offer down payment assistance for first-time buyers:
- State HFAs (Housing Finance Agencies): grants or low-interest loans
- Good Neighbor Next Door (teachers, EMTs, firefighters): 50% off list price
- NACA program: 0% down, no PMI, no closing costs (but lengthy process)
Look up your state's housing finance agency website. These programs are underused.
The Mortgage Interest Deduction reality
Many believe buying a house = big tax break. Post-2017 TCJA:
- Standard deduction is ~$15,000 single / $30,000 MFJ
- You can deduct mortgage interest on up to $750,000 of debt — but only if you ITEMIZE
- Itemizing only pays off if your total deductions exceed the standard
Result: ~90% of homeowners take the standard deduction. The interest deduction matters mostly to high-income homeowners in expensive markets.
Common US FTB mistakes
- Skipping the home inspection: $400-$700 vs a $50,000 hidden problem. Always inspect.
- Buying at top of pre-approval amount: Banks will lend it, but you need buffer for property tax, insurance, repairs
- Not understanding HOA fees: Some condos have $500-$1,500/month HOA on top of mortgage
- Ignoring property tax variance: Texas has no income tax but property tax can be 2-3%; California has Prop 13 protection
- Buying with a job change imminent: Lenders verify employment days before closing
Run your specific numbers on our US Mortgage Calculator with PITI inputs enabled.