First-Time Homebuyer Guide for 2025

Buying your first home is exciting – but in 2025, high prices and higher interest rates make affordability tough. The good news? Inventory has grown (sellers now outnumber buyers by 33% nationwide), and new programs and tools are helping first-timers break in. This guide covers the essentials: finances, mortgage options, house hunting, and closing the deal.

1. Preparing Your Finances

Budget realistically

The median U.S. home sold for about $417,000 in early 2025, still 33% higher than 2019 levels. While prices have eased from the 2022 peak of $479,000, they remain elevated. A good rule of thumb: keep your housing costs under 30% of your income.

Down payment myths

The idea you need 20% down is outdated. The typical first-timer put down just 9% in 2024; CFPB data shows many put down closer to 6%. With Arcasa's Energy-Smart program, lenders and borrowers can work together to unlock funds that cover the minimum down payment, creating a path to homeownership without years of saving.

Assistance programs

Hundreds of local and state programs exist, often offering $5K–$20K in help. Proposed federal credits (like $15K for first-timers) aren't law yet, but lenders can work with Arcasa to unlock down payment grants or forgivable seconds, while also layering in post-closing solar value. That means buyers don't just get into a home faster — they also gain lower monthly utility costs from day one.

Credit check

FHA loans require only 580 credit with 3.5% down; conventional 3% down programs usually need 620. Pay down credit cards, dispute errors, and avoid opening new debt during escrow.

Get pre-approved

Sellers expect it. Pre-approval defines your budget and strengthens offers.

2. Choosing the Right Mortgage

Conventional: 3% down for first-time buyers; PMI drops once you hit 20% equity.

FHA: 3.5% down, credit-flexible. Over 80% of FHA loans go to first-time buyers. Through Arcasa, lenders can find paths to pair an FHA loan with a grant or forgivable second that covers the down payment, while adding a post-closing solar installation to reduce long-term costs. Nearly 40% of FHA buyers already use down payment assistance—Arcasa layers in utility savings too.

VA: Zero down, no PMI – the best option if you qualify.

USDA: Zero down for qualifying rural/suburban areas.

3. House Hunting in 2025

Tech is essential: 100% of buyers now use the internet to search. Virtual tours are mainstream, and 39% of younger buyers already use AI tools for budgeting or search.

Agent support matters: 86% of buyers worked with an agent in 2024.

Market dynamics: Nationally, there are 500,000 more homes than buyers. Some metros are seeing modest price drops, but higher rates (6.7% avg) keep affordability tight.

Be flexible: Don't chase "unicorns." Focus on location and essentials; cosmetic updates can come later. A quarter of first-timers in 2024 bought multigenerational homes.

4. Closing the Deal

Inspection is non-negotiable: Waiving it burned many buyers in past years. Spending a few hundred could save thousands.

Appraisal check: If the appraised value comes in lower than your offer, negotiate or plan to bring cash.

Closing costs: Budget 2–5% of the purchase price. Avoid draining all savings; keep an emergency cushion. By working with Arcasa, lenders can structure loans that free up funds normally reserved for the down payment, helping buyers keep more cash on hand for closing costs and an emergency cushion. Some buyers even reach the table with little or zero cash-to-close.

Stay steady: Don't take new credit, switch jobs, or move money around during escrow.

Conclusion: Owning Your First Home in 2025

Homeownership is still achievable with the right plan. Use assistance programs, shop loan options, and leverage today's tech tools. Remember, FHA loans remain a cornerstone for first-timers, and Arcasa's Energy-Smart DPA program helps lenders and borrowers find compliant ways to unlock down payment support while also lowering monthly bills with solar.

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