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Buying your first home

Buying your first home doesn't have to be stressful. We'll help you understand some tips that can make the homebuying process smoother and more efficient.

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If you're thinking about purchasing a home for the first time, it's normal to be both excited and anxious. After all, this is probably the biggest purchase you've ever made. You want to be absolutely certain you get it right. Just remember that millions of people have been in your shoes and found a path to a happy home.

With some common sense and trusted guidance you can get there, too. Here are some tips to make the process smoother and more efficient.

Determine your budget.

The first — and perhaps most important — question you need to ask is "How much house can I afford?" Start by looking at your monthly budget to see what sort of payment can fit comfortably. If you're currently renting, what are you paying? Another guideline, but not a hard rule, is to keep housing payments within 28% of your take-home pay. To quickly get an idea of how much payment comes with a specific loan amount, using a mortgage calculator can be a helpful tool. Be sure to include all parts of a mortgage payment, including principal, interest and at least an estimate of property taxes and homeowners insurance.

Stay within your limits.

Once you've established what you can afford, stick with your plan. It's easy to start shopping for a home and fall in love with a property outside your price range. So make sure you choose a loan amount that leaves you both comfortable and able to meet your other financial obligations.

Homeownership comes with a variety of potentially new expenses, including furniture, monthly utilities, home insurance and property taxes, so don't forget to factor in those items. You'll also need to establish an emergency fund for unexpected repairs that pop up from time to time. That's another reason to stay within your budgetary boundaries.

Paying debts on time and paying down balances can improve your credit and your debt-to-income ratio — something lenders look at when they qualify you for the loan. You also want to avoid taking out new debt, such a car loans or credit cards, once you're in the homebuying process.

Know your credit score.

In general, the higher your credit score, the better the interest rates you'll qualify for. Your mortgage lender will check your credit score very early in the process, so be sure you know where you stand before you start looking for a home. If you know you're going to buy a home in the next year, check your credit report now. If you see errors or things you don't recognize, take steps to contest them, as it may quickly boost your credit score.

Identify what you want.

Do you want to live in the city or the country? Are you looking for a home with many bedrooms and bathrooms? Do you want a house in an excellent school district? Would you like to walk to shops and restaurants? By identifying your desires early in the process, you can simplify your search and save time and effort. Many websites have advanced search functions that allow you to pinpoint the homes with the features and amenities you're looking for.

Decide on a down payment.

Making a 20% down payment eliminates the need for private mortgage insurance, or PMI. This will help you save on your monthly payment and give you equity in your home right away. However, there are loan options that require as little as 3% down — or even 0% for eligible service members and veterans. It's important to know how much you'll really need for a down payment.

Hire a great real estate agent.

What constitutes a great real estate agent? Someone who listens to what you want, helps you find homes in your price range with the right location and features, and works tirelessly on your behalf to secure the best deal. You want an agent that knows the areas where you're looking, because he or she will have insights that other agents won't.

Visit your prospective home often.

Once you identify a home you're interested in, be sure to drive by the property at different times of the day and night to get a real feel for the surrounding neighborhood. A home that looks wonderful by day may look quite different in the evening hours.

Get prequalified or preapproved for your mortgage.

Prequalifying for a mortgage doesn't take much time, and it can give you several important benefits. First, when you are prequalified for a mortgage, you'll gain an even better understanding of the kinds of homes you can afford. Second, you can make an offer on the home you want with confidence knowing that it’s within your price range. Finally, a prequalification may increase your leverage with sellers. If there are multiple offers on the table, a buyer may gain advantage by having a prequalification letter.

Ready for the next step?

Explore our options to find the home loan that's right for you.