Becoming a first-time homeowner takes a lot more than a desire to buy a house.  It takes effort and planning on your part to save up a down payment — which is usually a pretty good-sized chunk of change — as well as research neighborhoods and get pre-approved for a loan.  Fortunately, it is quite possible to transition from renting to homeownership, especially when homeowners-to-be consider the following tips:


Focus on the Down Payment


In order to leave the land of rent, you are going to need a down payment — plain and simple.  It is common to put down 20 percent, but some lenders allow a much smaller amount, and first-time homebuyer programs may go as low as 3 percent.  While a smaller down payment may sound enticing, a 5 percent down payment on a $200,000 home is still $10,000 — not exactly a small sum.


If saving money does not come naturally for you, don’t worry.  With some relatively minor lifestyle changes you can speed up the down payment savings process.  Come up with a savings plan to determine how much you need to set aside every week or month and then “find” that money in your budget.  Using the $10,000 example from before, if you are determined to buy a home in two years, plan to come up with about $415 a month to stash into your down payment account.  Take a close look at your monthly bills and determine what you can pare down or eliminate — maybe you are paying $75 a month for a gym membership you rarely use, or you pay $40 extra for premium satellite channels that no one watches.  Cancel these services and reroute the money into your savings account.  Eat out less, have Starbucks twice a week instead of every day, and if you need to, consider a part-time job on the weekends to reach your monthly goal.


Avoid Identity Theft


Unfortunately, the chances of becoming a victim of identity theft increase when you are buying and moving into a new home.  The stacks of documents that are part of buying a home are filled with your personal information; if files or hard copies are not kept secure – including the proper rerouting of your mail after moving – your information may fall into the wrong hands.  Prevent this situation by purchasing an identity theft protection program; find a trusted company that will help safeguard your personal data.  This service will not only alert you when a bank pulls your credit report and ask if you have authorized this inquiry, but also will monitor your financial activity and notify you if anything is amiss.


Check Your Credit Report


When you start the pre-approval process for a loan and then move on to apply for an actual mortgage, your credit report will be requested several times.  Your credit score is used to determine your credit worthiness and what interest rate you will get.  Do not wait until you have saved the down payment and are ready to go look at houses to check your FICO score — check your credit report as early in the process as you can.  If you have a credit card that has been issued through your bank, give them a call and see if they can run your report for you for free; some credit cards offer a free monthly FICO score check.  You can also go to to see a copy of your credit report from one, two, or all three of the major credit reporting agencies. 


Read through the report and check for any errors; this includes credit lines you never opened and delinquent payments that you know were made on time.  Dispute mistakes and look for ways to boost your credit score, such as paying down credit card bills and setting up automatic bill pay so your payments are always on time.


Courtesy of Realty Times

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