Getting ready to buy a home

Start with your credit

Get your free credit reports from Equifax, Experian and TransUnion at AnnualCreditReport.com and check them for mistakes. If something is wrong, dispute it with the credit bureau and the company that reported it.

Then focus on the habits that matter most: paying every bill on time and keeping your card balances low compared with your limits. Our credit score basics guide walks through how it all works.

FHA loans: lower credit score and down payment minimums

FHA-insured loans are often a good fit for first-time buyers. Under FHA's rules, a credit score of 580 or higher can qualify for maximum financing, which means a down payment as low as 3.5%. With a score from 500 to 579, financing is limited to 90% of the home's value, so you'd need at least 10% down. Below 500, you can't get an FHA-insured loan.

These are FHA's minimums. Individual lenders can set higher requirements, so it's worth asking more than one.

VA and USDA loans: zero down if you're eligible

VA loans are for eligible veterans, service members and surviving spouses. There's usually no down payment as long as the price isn't above the appraised value, and no monthly mortgage insurance, though there's usually an upfront funding fee.

USDA loans are for low- and moderate-income buyers in eligible rural areas. They also allow zero down, with an upfront fee and ongoing mortgage insurance. USDA has an online tool to check whether an address and your income qualify.

Look for down payment assistance

Many states, cities and nonprofits offer help with a down payment or closing costs, often for first-time or low- and moderate-income buyers. HUD lists homebuying programs by state at hud.gov/states, and a HUD-approved housing counselor can help you find programs where you live.

Many of these programs can be used with an FHA or conventional loan. Read the terms, since some are loans you'll repay later.

Know your debt-to-income ratio

Your debt-to-income ratio (DTI) is all your monthly debt payments divided by your gross monthly income. Lenders use it to see how much more debt you can take on, and each loan type and lender sets its own limits.

Paying down a card or a small loan before you apply can lower your DTI. Our home affordability calculator uses your income, debts and down payment to show a comfortable price range.

Save for closing costs, too

On top of the down payment, you'll pay closing costs for things like the appraisal, title and lender fees. Your Loan Estimate will list them. It also helps to keep some savings after closing for repairs and surprises, so the move doesn't leave you with nothing to fall back on.

Take a homebuyer education class

HUD-approved housing counseling agencies offer pre-purchase counseling and homebuyer education workshops. Some charge a modest fee, but they have to tell you up front and waive it if you can't afford it.

Call HUD at 800-569-4287 to find an agency.