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Ready to take the leap from renting to owning? Buying a home is a significant step, but with the right strategies, it doesn’t have to feel overwhelming. These essential tips will help you find a home and mortgage that fits your budget with ease.

Improve Your Credit Score

Your credit score is an important factor in the mortgage approval process, especially for first-time homebuyers. Most lenders require a minimum score between 580 and 620, and a higher score can qualify you for lower interest rates, which can save you thousands of dollars over the life of your loan. Ideally, you will keep your credit utilization below 30%, pay bills on time, and avoid opening too many new accounts.

You’re entitled to a free copy from each of the three major credit bureaus annually through annualcreditreport.com. Once you receive the report, you’ll want to review it carefully for any errors and dispute any inaccuracies immediately. 

What factors influence your credit score? Two major contributors are:

• Available credit: This is the total amount of credit you have access to, including your credit card limits and any other open lines of credit.
• Credit utilization ratio: This is the percentage of available credit you're currently using. Try to keep this ratio below 30%.

To boost your credit score, you should pay down debt and maintain low balances. This demonstrates responsible credit management. Late payments can hurt your credit score, so always pay your bills on time. Avoid transferring balances between cards—this can be seen as a sign of financial difficulty. Don’t open multiple new credit accounts in a short period of time because this can negatively impact your credit history. Finally, limit the number of credit inquiries. When shopping for loans, try to bundle your applications within a short time frame.

Determine Your Needs and Wants

Before you start house hunting, determine your must-haves and nice-to-haves. Focus on factors like location, home size, and other essential features to help streamline your search. Knowing which features you’re willing to compromise on can prevent “house-hunting fatigue” and keep you focused. By prioritizing your must-haves and nice-to-haves, you’ll focus your search on homes that truly fit your needs and ultimately save time and avoid frustration. 

For example:

• Must-have: A good school district.
• Nice-to-have: A large backyard or an extra bedroom.

By creating a clear list of priorities, you can target homes that best suit your needs and budget.

Work with a Real Estate Agent

Navigating the homebuying process is much easier when you work with a real estate agent. Agents are licensed professionals who protect your interests, give you access to homes for sale, and guide you through the complex buying process.

When selecting a real estate agent, look for professionals with a few key qualities. First, ensure they have a deep knowledge of the local housing market. This can make a significant difference in finding the right home at the right price. Look for someone with professional experience and the proper licensing to ensure they have the qualifications needed to navigate the process smoothly. Finally, seek out agents with satisfied customers and positive testimonials, which are good indicators of their reliability and track record. 

Having the right agent on your side can make all the difference when it comes to finding the right home at the right price.

Build Your Savings for a Down Payment

One of the most significant challenges for many first-time homebuyers is saving for a down payment. Typical down payment options range from 3% to 20% of the home’s purchase price, and the size of your down payment can affect your mortgage terms, including interest rates and whether you’ll need to pay for private mortgage insurance (PMI). 

Save smarter with automatic deposits, cut unnecessary expenses, and allocate bonuses or refunds to your down payment. Consistent savings will put you on track for your dream home. By building your savings steadily over time, you’ll be better prepared when it’s time to make your purchase.

Get Pre-Approved

Getting pre-approved for a mortgage can help you determine how much house you can afford. A mortgage pre-approval is a commitment from a lender stating the amount they are willing to lend you based on your financial situation. This process involves the lender reviewing your credit history, income, assets, and debts to determine your eligibility for a loan. Once pre-approved, you will receive a letter from the lender that specifies the loan amount, which can be shared with sellers to demonstrate that you are a serious and qualified buyer. While pre-approval isn’t a guaranteed loan offer, it’s a good indicator of your creditworthiness and ability to get financing.

Getting pre-approved gives you a competitive edge in the housing market and helps you focus on homes within your budget. Pre-approval signals to sellers that you’re serious—and ready to buy. 

You can get a quick idea of how much you can afford with our Mortgage Qualifier Calculator. This tool will help you assess your budget based on factors such as your income, assets, obligations, and potential mortgage interest rates. Knowing this information ahead of time allows you to be more strategic in your search, ensuring you don’t overextend yourself financially.

Explore First-Time Homebuyer Programs and Assistance

American Heritage Credit Union, like many other financial institutions, offers special programs designed to help first-time homebuyers. Our My CU Home Connection program is one of the most progressive home buying and selling services available, designed to streamline the process and save you money.

Make Your Move

Buying a home is a major milestone, and these tips can help make the process a little easier, especially for first-time homebuyers. Contact us today to learn more about how American Heritage Credit Union can help you turn your homeownership dreams into reality.