First-Time Home Buyer Loans (2026): FHA vs Conventional vs VA vs USDA, Computed

Most first-time buyers in the US do not put down 20%, and they do not need to. What the loan type changes is how much cash you need now, what the mortgage costs each month, and how long you pay for insurance that protects the lender. Every figure below is for a $400,000 home at 7.28%, the Freddie Mac 30-year average for the week of 1 October 2026.

The five ways to finance it

30-year fixed at 7.28%. Upfront fees financed into the loan, as is usual. FHA's annual premium shown on the starting balance; it falls slowly as the loan is repaid. Property tax and homeowners insurance come on top of every row.

The 20% down payment saves about $465 a month in principal and interest against 3% down, plus the mortgage insurance, but needs $68,000 more cash at closing. For most first-time buyers the question is not whether 20% is better, it is how many years of saving it would take, and what rent and prices do meanwhile.

How long you pay mortgage insurance

This is the real difference between conventional and FHA. Private mortgage insurance on a conventional loan must end automatically when the balance is scheduled to reach 78% of the home's original value, and you can ask for it to be removed at 80%. With 3% down at 7.28%, the schedule reaches 80% after 11.9 years and 78% after 12.8 years. Extra principal payments shorten that; so can a rise in value, if the lender accepts a new appraisal.

FHA works differently. With less than 10% down, the 0.55% annual premium stays for the life of the loan; with 10% or more, for 11 years. The usual way out is refinancing into a conventional loan once you have enough equity, which depends on rates at the time. With a credit score good enough to get reasonably priced PMI, that makes conventional the better first loan for most buyers; with a lower score, FHA's flat premium often wins.

Limits and paperwork worth knowing

Conventional loans backed by Fannie Mae and Freddie Mac are capped at the conforming loan limit, $832,750 for a one-unit home in most of the country in 2026, higher in expensive areas. Above it, a jumbo loan usually needs a larger down payment. FHA has its own county limits.

Lenders must give you a Loan Estimate within three business days of an application, and a Closing Disclosure at least three business days before closing. The Loan Estimates from different lenders use the same form, which makes them the right way to compare offers, including closing costs, which come on top of the down payment.

Finding the down payment

• IRA. A first-time buyer can withdraw up to $10,000, once in a lifetime, without the 10% early-withdrawal penalty. Traditional IRA money is still taxed as income; Roth contributions can come out tax-free at any time.
• 401(k) loan. Up to $50,000 or half your vested balance, repaid through payroll with interest to yourself. If you leave the job, the balance usually comes due quickly, and unpaid amounts are taxed as a withdrawal.
• Down payment assistance. State housing finance agencies and many cities run grant and second-loan programs for first-time buyers, often paired with their own first mortgages. Eligibility and amounts vary by state and income.

Taxes after you buy

Mortgage interest is deductible on up to $750,000 of mortgage debt, but only if you itemize. First-year interest on the $388,000 loan above is about $28,123. That alone clears a single filer's $16,100 standard deduction comfortably, but falls $4,077 short of the $32,200 joint deduction; a couple needs that much more in state and local taxes or other deductions before itemizing helps. The standard deduction guide works through what it takes to beat it now that the state and local tax cap is higher.

Run your own price and rate through the mortgage calculator, and check what salary supports the payment in salary needed to take home $100k.

Frequently asked questions