Helping First-Time Buyers Overcome Mortgage Hurdles in 2026

By Melissa Dittmann Tracey

Navigating today’s housing market can be intimidating for first-time buyers. High prices, down payment concerns and mortgage complexity—or confusion—can leave hopeful buyers feel “locked out.” Yet staying out of the market has its costs.

First-time buyers made up just 21% of the nationwide home sales last year—the lowest share ever recorded. Delaying homeownership until age 40 (the median first buyer age last year), instead of 30, could mean missing out on about $150,000 in equity on a typical starter home, according to the National Association of Realtors^®.

Real estate professionals can play a key role in connecting first-time buyers with mortgage lenders and to help clear up financial confusion that could be holding them back. Shawn Yerkes, group president of Financial Services at Genstone Financial, shares insights on the mortgage knowledge gaps that often prevent buyers from moving forward.

How much do buyers really need to save, and what kind of down payment is realistic?

YERKES: It really depends on the type of loan product, your credit, your payment history and maybe your trade lines. But in general, you can buy a home for 3% down. There are conventional loans at 3% down, FHA loans at 3.5%, and VA loans for veterans that don’t require any down payment at all. There’s also down payment assistance available in nearly every state—about 2,600 programs nationally—that can help cover initial down payments and closing costs. So there’s a lot of opportunity out there.

Should buyers worry about PMI if they put less than 20% down?

YERKES: PMI—or private mortgage insurance on conventional loans—is insurance to protect the lender because of a higher loan-to-value ratio. On conventional loans, it’s usually 0.5% to 1% of the loan annually, divided by 12 for the monthly payments. FHA loans have a similar concept called MIP (Mortgage Insurance Premium), with an upfront payment of 1.75% plus a monthly charge. The good news: On conventional loans, PMI is usually removed once the balance hits 80% of the original purchase price.

What determines the lowest interest rate a buyer can qualify for?

YERKES: Credit is key—ideally over 700. Lenders want to see three to four active trade lines with low balances. Payment history, debt-to-income ratio and assets matter too. The more you put down, the better the rate. Essentially, lenders are looking at your ability to consistently manage credit and handle debt responsibly.

What programs exist to help first-time buyers?

YERKES: Fannie Mae and Freddie Mac have first-time buyer programs allowing as little as 3% down. FHA loans are more lenient on credit. Veterans can use VA loans with no down payment or PMI. And state-level down payment assistance programs can cover part of the down payment and closing costs. Renovation loans [e.g. FHA 203(k)] also are an option, helping buyers finance cosmetic updates and increase the home’s value after purchase.

Are there any trends in the types of mortgage products more buyers are using to better afford homeownership?

YERKES: Adjustable-rate mortgages are seeing more attention for higher loan amounts because they start with a lower rate. Rate buy-downs from sellers also are popular—they reduce payments for the first two to three years, helping buyers manage the initial costs of homeownership. FHA and VA loans continue to be strong options for buyers with moderate credit or high debt.

What’s your top advice for buyers preparing financially to purchase a home this year?

YERKES: Save creatively—maybe live with family or roommates to build up your cash reserves. Aim to save at least 10% of the home’s value, even if the down payment is smaller. Set up three to four active trade lines to build credit. Research local first-time buyer programs. Also, don’t forget to factor in taxes, insurance and potential maintenance costs, which can impact monthly affordability.

Related Podcast:

Want to dive even deeper? Melissa joined NAR's Real Estate Today podcast titled Smart Financial Planning for Today's Homebuyers. Listen below!

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