Assess your credit.
Most mortgage lenders use FICO scores to determine loan eligibility. In general, the higher your FICO score, the better your interest rates. With a score of 650 or above, you're considered a good risk and should have no problem securing a mortgage. If your score is 600 or below, you may want to consider improving it before applying for loans. Also, keep in mind that mortgage lenders are reluctant to lend money to people spending more than 36% of their gross monthly income on debt. (For a free credit report, visit .)
Determine how much to borrow.
Many first-time home buyers make the mistake of borrowing as much as their banks or credit unions are willing to offer. While most lenders are comfortable issuing loans worth up to 33% of your gross income, many financial planners believe 25% is a more prudent number.
Factor in ongoing costs.
One of the upsides of renting is that when the pipes break or the refrigerator goes kaput, you can simply call your landlord to have it repaired. As a homeowner, you'll be charged with these responsibilities. So, before taking out a mortgage be sure to factor in expenses like home improvements, basic maintenance and property taxes.
Save up to buy.
Buying your first home isn't just a matter of bidding on a house and signing on the dotted line. Before you make an offer on a home, be sure to set aside enough money for a home inspection and appraisal. These fees vary from region to region, so ask your real estate agent how much you can expect to pay. And don't forget about closing costs! They generally run you from 3% to 6% of the cost of the house, according to the National Foundation for Credit and Counseling.
By Marshall Loeb