First-Time Homebuyer Mortgage Checklist: Credit, Earnest Money, FHA, and Down Payment Help Forward Mortgage Guide

A first-time homebuyer should understand five things before choosing a forward mortgage option: how credit score affects loan choices, what earnest money does, how FHA loans work, what down payment assistance may cover, and which closing costs still need to be planned for.

The right mortgage path is not one-size-fits-all. It depends on your credit profile, income, debts, cash available, property type, location, and the loan program’s rules.

Los Angeles Mortgage Lender helps buyers compare forward-mortgage purchase options such as FHA, conventional, VA, USDA, and jumbo loans. This guide is educational, not a promise of approval, a quote for any specific loan terms, or a commitment to lend.

Related forward mortgage resources

What should first-time buyers understand before choosing a mortgage?

Before choosing a mortgage, first-time buyers should understand their budget, credit, savings, loan type, possible assistance programs, and closing costs. A mortgage is not just one number. It is a full approval picture that includes what you earn, what you owe, how much cash you have, and whether the property meets program guidelines.

A practical first-time homebuyer mortgage checklist starts with these questions:

• What monthly payment feels comfortable, not just technically possible?
• What is your current credit score and credit history?
• How much cash do you have for earnest money, down payment, closing costs, inspections, moving costs, and reserves?
• Which loan types may fit your situation: FHA, conventional, VA, USDA, jumbo, or another forward-mortgage option?
• Are there California, county, city, employer, or nonprofit assistance programs that may apply?
• Do you understand the difference between preapproval, final underwriting, and closing?

Preapproval is a lender’s review of your credit, income, assets, debts, and other documents to estimate whether you may qualify for a mortgage. It is not the same as final loan approval. Final approval usually depends on underwriting, property review, title work, appraisal when required, and final verification of your information.

For entity clarity, this article is from Los Angeles Mortgage Lender, a DBA of O1NE MORTGAGE INC, NMLS #1906814. We explain mortgage terms in plain language so you can ask better questions before making a major financial decision.

How does your credit score affect first-time homebuyer loan options?

Your credit score affects which mortgage programs may be available, but it is only one part of the lender’s review. Lenders also look at income, employment, assets, debts, property type, occupancy, and DTI.

DTI means debt-to-income ratio. It is the share of your monthly income that goes toward monthly debt payments, including the proposed mortgage payment. A borrower with a strong credit score but high monthly debts may have a different approval picture than a borrower with similar income and lower debt.

FHA is one option many first-time buyers ask about. According to HUD’s loan information page, the Federal Housing Administration, which is part of HUD, insures FHA loans. That insurance can allow lenders to offer FHA loan features that may be more flexible than some conventional loan paths.

Credit-score expectations vary by program and lender. For example, FHA.com’s FHA Loan Requirements in 2026 states that FHA loan applicants with a minimum FICO score of 580 may qualify for the 3.5% down payment path. Other sources note that lower scores may require more down, and lender overlays may still apply. A lender overlay is an additional lender rule that can be stricter than the base program guideline.

Conventional loans may have different credit expectations. Equifax’s first-time homebuyer credit score guide discusses a 620 benchmark for many conventional approval paths, but that should not be treated as a universal rule for every lender, borrower, or loan scenario.

The safest way to read credit-score guidance is this: your score matters, but it does not decide everything by itself.

What is earnest money, and is it the same as a down payment?

Earnest money is money a buyer pays after making or getting acceptance of an offer to show good-faith intent to buy the home. It is not the same thing as the down payment, although it may later be credited toward the buyer’s funds due at closing depending on the purchase contract and closing statement.

Wells Fargo defines earnest money as money paid toward the purchase of a home to show the buyer’s good-faith intent to complete the transaction. In plain English, earnest money tells the seller you are serious enough to put money at risk under the contract’s rules.

The down payment is different. Your down payment is the portion of the purchase price you pay from your own funds or eligible assistance sources, rather than borrowing through the first mortgage. Earnest money is usually paid earlier in the process. The down payment and remaining closing funds are handled at closing.

A simple timing example:

• You make an offer on a home.
• If the offer is accepted, your contract may require earnest money.
• Your loan file moves through processing, underwriting, appraisal when required, title review, and final conditions.
• At closing, your earnest money may be credited toward your required funds, depending on the purchase contract and final settlement statement.

Capital Bank’s earnest money vs. down payment guide explains that earnest money is typically paid around the offer stage, while the down payment is addressed at closing. LegalShield’s earnest money at closing article notes that earnest money may count toward closing costs or come back to the buyer in some situations.

Refund rules depend on your purchase contract, deadlines, contingencies, and state or local rules. A contingency is a contract condition that may allow a buyer to cancel under certain circumstances. Buyers should review contract terms with qualified real estate and legal professionals before assuming earnest money is refundable.

What does FHA consider for a first-time homebuyer?

FHA considers the full borrower and property picture, not just whether someone is buying a first home. FHA is often discussed by first-time buyers because it may offer a lower down payment path for eligible borrowers, but FHA loans are not only for first-time buyers.

According to HUD, FHA is part of HUD and insures the loan. That insurance helps lenders offer FHA financing under FHA program rules. A buyer still has to meet lender and underwriting requirements.

FHA review commonly includes:

• Credit score and credit history
• Down payment source and amount
• Income and employment
• DTI, or how much monthly income goes toward debt payments
• Property eligibility and condition
• Occupancy requirements
• Mortgage insurance
• Closing costs and cash needed to close

Mortgage insurance is a cost that helps protect the lender or insurer if the borrower defaults. FHA loans typically include mortgage insurance, so buyers should compare the monthly payment, upfront costs, and long-term cost of the loan, not only the down payment.

The National Association of Realtors FHA requirements overview discusses FHA’s flexible credit requirements, including references to 580 FICO scores for a 3.5% down payment path. Wells Fargo’s first-time homebuyer loans and programs page also notes that FHA loans may require a 3.5% down payment, while reminding buyers to consider mortgage insurance and other costs.

The key point is simple: FHA may help some first-time buyers, but it is not automatic approval. The loan still has to work on credit, income, debts, property, and underwriting.

Can down payment assistance help with a first home purchase?

Down payment assistance may help eligible buyers with down payment and/or closing costs, but program rules vary. Assistance may come as a grant, credit, deferred-payment loan, forgivable loan, or another structure depending on the program.

In California, the CalHFA MyHome Assistance Program is described by CalHFA as a deferred-payment junior loan that can assist with down payment and/or closing costs. A junior loan means it sits behind the first mortgage in lien position. Deferred-payment means repayment is not structured like a normal monthly installment loan, though the program’s repayment rules still matter.

Down payment assistance programs often have eligibility rules tied to:

• Income limits
• First-time buyer status
• Property location
• Property type
• Occupancy
• Homebuyer education
• Loan type
• Credit and underwriting guidelines
• Available program funds

Some buyers also ask whether assistance programs can be combined. That is called stacking. Framework’s guide to stacking down payment assistance programs discusses the concept, but stacking depends on each program’s rules, the loan type, lender or investor guidelines, and property details. Buyers should not assume two programs can be combined until the lender and program administrators confirm compatibility.

Down Payment Resource’s assistance program overview explains that assistance programs may help eligible buyers with down payment or closing costs. That can be useful, but it does not remove the need to qualify for the mortgage itself.

What should you prepare before preapproval and closing?

Before preapproval, prepare your credit, income documents, asset records, budget, and cash-to-close plan. Before closing, prepare for the final funds listed in your closing disclosure and any non-mortgage costs tied to the purchase.

A first-time buyer should gather:

• Recent pay stubs
• W-2s, 1099s, or other income records
• Bank statements
• Retirement or investment account statements, if being used
• Government-issued ID
• Address history
• Employment history
• Documentation for large deposits
• Gift documentation, if gift funds are being used
• Student loan, auto loan, credit card, or other debt information

You should also budget for costs that may happen before or at closing:

• Earnest money
• Home inspection
• Appraisal, when required
• Down payment
• Closing costs
• Prepaid items, such as property taxes or insurance
• Escrow deposits, when applicable
• Moving costs
• Reserves after closing

Escrow can mean different things depending on context. During closing, escrow may refer to a neutral process for handling funds and documents. After closing, an escrow account may refer to money collected with your mortgage payment for items such as property taxes and homeowners insurance.

The First Bank first-time homebuyer guide PDF frames homebuying as a step-by-step process. Navy Federal’s first-time home buyer guide points buyers toward evaluating savings, credit score, income, and long-term plans before buying. INTRUST Bank’s guide starts with assessing financial health, including credit, income, expenses, and savings for a down payment.

That is the right mindset. Preapproval is not just about asking, “How much can I borrow?” It is also about asking, “What payment, cash requirement, and loan structure actually fit my life?”

First-Time Homebuyer Mortgage FAQ

What credit score does a first-time homebuyer need?

It depends on the loan program, lender guidelines, and the full borrower profile. FHA sources commonly reference a 580 FICO score for the 3.5% down payment path, while conventional loan expectations may differ. Credit score is important, but lenders also review income, debts, assets, property details, and underwriting requirements.

Is earnest money part of the down payment?

Earnest money is separate from the down payment when paid, but it may be credited toward the buyer’s funds due at closing depending on the purchase contract and settlement statement. Refund rules depend on contract terms, deadlines, and contingencies.

Can FHA help first-time buyers with a lower down payment?

FHA loans may offer lower down payment options for eligible borrowers, including the commonly cited 3.5% down payment path for borrowers meeting applicable credit requirements. FHA approval still depends on credit, income, debts, property requirements, mortgage insurance, and underwriting.

What is CalHFA MyHome?

CalHFA MyHome is a California assistance program described by CalHFA as a deferred-payment junior loan that may help eligible buyers with down payment and/or closing costs. Eligibility depends on CalHFA rules, loan type, borrower profile, property details, and available program guidelines.

Can I combine down payment assistance programs?

Sometimes, but not always. Combining or stacking assistance programs depends on each program’s rules, loan type, income limits, property location, lender requirements, and investor guidelines. Buyers should confirm compatibility before relying on multiple assistance sources.

What costs should I expect before and at closing?

Buyers should plan for possible earnest money, inspection costs, appraisal costs, down payment, closing costs, prepaid items, escrow deposits, moving costs, and reserves. The final closing disclosure will show the official loan-related costs and funds needed for closing.