outstanding debts. Research what you can to improve your score. Don’t apply for any new credit for a full year before you decide to apply for a mortgage. STEP 2: SAVE FOR A DOWN PAYMENT (AND CLOSING COSTS) Once you’ve started working on improving your credit score, you need to start saving for a down payment, as well as closing costs, which some buyers forget about. According to Bankrate.com, you’ll need to save between 3 and 20% of the total purchase price for a down payment. Your credit history and loan terms determine how much you’ll need. Twenty percent is standard, but an FHA (Federal Housing Administration) loan can be as low as 3.5%, with a minimum credit score of 580. Further, Department of Veterans A ff airs loans require zero down payment. As for closing costs, according to Bankrate’s latest survey, the national average for closing costs for a $200,000 mortgage is $2,084. Expect to save at least 10% of your mortgage for these fees. Don’t let these numbers get you down. Start saving and do some research, because you can fin d down payment assistance online, and it’s more readily available for fir st-time home buyers. If you’re searching for your fir st home in a buyer’s market, you can also likely have the seller pay a portion of the closing costs as part of your negotiations. STEP 3: BUILD UP YOUR SAVINGS ACCOUNT Don’t forget to build up your regular savings account — not just for a down payment, but for a little “cushion.” Th is will not only improve your chances of being approved for a loan — lenders like to see that you have money set aside and aren’t just living from 16
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