6 Tips for First Time Homebuyers

1. SAVE EARLY!

It’s common to put 20% down, but many lenders now permit much less, and first-time home buyer programs allow as little as 3% down. The more you put down, the less your mortgage will be. If you put a 5% down payment on a $200,000 home is $10,000.

Play around with a down payment calculator to help you land on a goal amount. Some tips for saving for a down payment include setting aside tax refunds and work bonuses, setting up an automatic savings plan and using an app to track your progress.

2. EXPLORE OPTIONS

There are lots of mortgage options out there, each with its own combination of pros and cons. If you’re struggling to come up with a down payment, check out these loans:

• Conventional mortgages They conform to standards set by the government-sponsored entities Fannie Mae and Freddie Mac, and require as little as 3% down.

• FHA loans Loans insured by the Federal Housing Administration permit down payments as low as 3.5%.

• VA loans Loans guaranteed by the Department of Veterans Affairs sometimes require no down payment at all.

Again, making a higher down payment will mean having a lower monthly mortgage payment.

If you want the smallest mortgage payment possible, opt for a 30-year fixed mortgage. But if you can afford larger monthly payments, you can get a lower interest rate with a 20-year or 15-year fixed loan. Use our calculator to determine whether a 15-year or 30-year fixed mortgage is a better fit for you. Or you may prefer an adjustable-rate mortgage, which is riskier but guarantees a low interest rate for the first few years of your mortgage.

4. CREDIT. 

When applying for a mortgage loan, your credit will be one of the key factors in whether you’re approved, and it will help determine your interest rate and possibly the loan terms.

So check your credit before you begin the homebuying process. Dispute any errors that could be dragging down your credit score and look for opportunities to improve your credit, such as making a dent in any outstanding debts.

To keep your score from dipping after you apply for a mortgage, avoid opening any new credit accounts, like a credit card or auto loan, until your home loan closes.

5. Pick the right type of house and neighborhood

You may assume you’ll buy a single-family home, and that could be ideal if you want a big yard or a lot of room. But if you’re willing to sacrifice space for less maintenance and extra amenities, and you don’t mind paying a homeowners association fee, a condo or townhouse could be a better fit.

But even if the home is right, the neighborhood could be all wrong. So be sure to:

• Research nearby schools, even if you don’t have kids, since they affect home value.

• Look at local safety and crime statistics.

• Map the nearest hospital, pharmacy, grocery store and other amenities you’ll use.

• Drive through the neighborhood on various days and at different times to check out traffic, noise and activity levels.

  6. Not saving enough for after move-in expenses

  Once you've saved for your down payment and budgeted for closing costs, you should also set aside a buffer to pay for what will go inside the house. This includes furnishings, appliances, rugs, updated fixtures, new paint and any improvements you may want to make after moving in.