First-time buyers often need only a 5% deposit (or less) for a home, with many conventional loans allowing 3% to 5% down and FHA loans requiring just 3.5%. Specialized programs or government-backed schemes, such as Deposit Unlock in the UK, further facilitate 5% deposits for new builds.
What deposit do I need as a first-time buyer? The deposit is the cash you put towards buying a home. As a first-time buyer this will usually come from your savings. Your deposit should be at least 5% or 10% of the price of the home you'd like to buy.
First-time home buyers often qualify for down payments as low as 3% to 3.5%, depending on the loan program. Buyers who put down 20% avoid private mortgage insurance and generally enjoy lower interest rates.
A 95% mortgage, also known as a 95% loan-to-value (LTV) mortgage, is a mortgage to purchase a property with a small deposit (at least 5% but less than 10% deposit of the purchase price).
95% mortgages only require you to have a 5% deposit. They are mainly used by first-time buyers, and sometimes by existing homeowners who are looking to move or remortgage but have a lower amount of equity in their property.
You can get a low deposit buy to let mortgage by putting down a minimum of 15% of the property value. However, you may not need a cash deposit at all, if you own other property you can borrow against. There is a huge array of buy to let mortgage products in the market.
*If you're a first home buyer, and you're intending on living in the property, you'll usually need at least a 20% deposit. In limited circumstances you may be able to borrow with a 10% deposit but this is subject to loan-to-value ratio (LVR) restrictions.
You generally need a credit score of at least 620 to qualify for a conventional mortgage, though every lender is different. FHA loans, which are backed by the federal government, may be an option for individuals with credit scores as low as 500.
The 3-7-3 Rule in mortgages isn't a loan type but a federal timeline from the TILA-RESPA Integrated Disclosure (TRID) rule, ensuring borrower protection by mandating disclosures within 3 business days of application, a 7-business-day wait between the initial Loan Estimate and closing, and another 3-day wait if significant changes (like APR) occur, giving borrowers time to review costs before committing to a loan.
The minimum down payment for a conventional mortgage loan is 3% of the purchase price if you're a first-time home buyer, though many lenders will require a down payment of at least 5%. Conventional loans can be cheaper than FHA loans but come with stricter credit requirements.
Ignoring Their Budget
One of the most common mistakes first-time home buyers make is underestimating the costs involved. It's crucial to establish a budget and stick to it. Include not just the mortgage, but also property taxes, insurance, maintenance, and unexpected expenses. A common rule of thumb is the 28% rule.
What Is a Minimum Deposit? A minimum deposit or initial deposit is the minimum amount of money required to open an account with a financial institution, such as a bank or brokerage firm.
5 pros of the 5% deposit scheme
The best time to buy a house is a balance between market conditions and personal readiness, with late summer/early fall often ideal for lower prices and less competition, while winter offers the lowest prices but limited homes, and spring/early summer has the most inventory but highest prices and competition. Ultimately, the best time is when you're financially prepared with a good credit score, down payment, stable income, and emergency fund, as personal readiness trumps seasonal trends.
With $10,000 down, you could potentially afford a home in the $285,000 to $330,000 range, depending heavily on your income, credit, debts, and loan type, with FHA loans requiring 3.5% ($10k on $285k) and conventional loans often needing 3% ($10k on ~$333k) or more, plus you must account for property taxes, insurance, and PMI (Private Mortgage Insurance).
Can a first-time buyer get a buy-to-let mortgage? Yes, you could buy a property to let out to tenants as a first-time buyer. But you'll have to jump through a few more hoops than usual to get a mortgage. A buy-to-let mortgage is designed for those who want to invest in property and rent it out.
Things to remember before you start:
max LTV of 75% minimum age – 21 years old. maximum age – 85 years old.
Banks are generally comfortable lending up to 80% of the value of your home, minus the amount you owe to the bank. In our example, 80% of $750,000 is $600,000, so the useable equity is $200,000. This is the equity that you may be able to leverage as a deposit on an investment property.