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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 Affairs 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 find down payment assistance online, and it’s more readily available for first-time home buyers. If you’re searching for your first 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.” This 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

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