A first-time buyer can reduce avoidable risks by addressing five common planning mistakes.

Homeownership offers potential benefits but involves financial risks and obligations.

10 Steps to Prepare for Homeownership

1.      Decide how much home you can afford. Generally, you can afford a home equal in value to between two and three times your gross income.

2.      Develop a wish list of what you’d like your home to have. Then prioritize the features on your list.

3.      Select three or four neighborhoods you’d like to live in. Consider items such as schools, recreational facilities, area expansion plans, and safety.

4.      Determine if you have enough saved to cover your downpayment and closing costs. Closing costs, including taxes, attorney’s fee, and transfer fees average between 2 percent and 7 percent of the home price.

5.      Get your credit in order. Obtain a copy of your credit report.

6.      Determine how large a mortgage you can qualify for. Also explore different loans options and decide what’s best for you.

7.      Organize all the documentation a lender will need to preapprove you for a loan.

8.      Do research to determine if you qualify for any special mortgage or downpayment-assistance programs.

9.      Calculate the costs of homeownership, including property taxes, insurance, maintenance, and association fees, if applicable.

10.  Find an experienced REALTOR^Ò who can help you through the process.

The Pros and Cons of Condos

Condominiums and townhouses offer an affordable option to single-family homes in most areas. But consider these facts before you buy.

1. Storage. Some condos have storage lockers, but usually there are no attics or basements to store belongings.

2. Outdoor space. Yards and outdoor areas are usually smaller in condos, so if you like to garden or entertain outdoors, this may not be a good fit. However, if you hate yard work, this may be the perfect option for you.

3. Amenities. Many condo properties have swimming pools, fitness centers, and other facilities that would be very expensive in a single-family home.

4. Maintenance. Many condos have onsite maintenance personnel to care for common areas, do repairs in your unit, and let in workers when you’re not home.

5. Security. Many condos have keyed entries and or even door attendants. Plus, you’ll be closer to other people in case of an emergency.

6. Reserve funds and association fees. Although fees generally help pay for amenities and provide savings for future repairs, you will have to pay the fees agreed to by the condo board, whether or not you’re interested in the amenity or not.

7. Resale. The ease of selling your unit is more dependent on what else is for sale in your building, since units are usually fairly similar. Single-family homes usually are more individual.

8. Freedom. Although you have a vote, the rules of the condo association can affect your ability to use your property. For example, some condos prohibit home-based businesses. Others prohibit pets. Read the covenants, restrictions, and bylaws of the condo carefully before you make an offer.

9. Proximity. You’re much closer to your neighbors in a condo or townhome. If possible, try to meet your closest prospective neighbors before making a decision.

Tips on Buying in a Tight Market

Increase your chances of getting your dream house instead of losing it to another buyer, with these easy steps.

1. Get prequalified for a mortgage. You’ll be able to make a firm commitment to buy and make your offer more desirable to the seller.

2. Stay in close touch with your real estate sales associate to find out first about new listings that come on the market. And be ready to go see a house as soon as it goes on the market.

3. Scout out new listings yourself. Look at Internet sites, newspaper ads, and drive by the neighborhood frequently. Maybe you’ll see a brand-new “for sale” sign before anyone else.

4. Be ready to make a decision. Spend lots of time in advance deciding what you must have so you won’t be unsure when you have the chance to make an offer.

5. Bid competitively. You may not want to start out offering the absolute highest price you can afford, but don’t try to go too low to get a deal. In a tight market, you’ll lose out.

6. Keep contingencies to a minimum. Restrictions such as needing to sell your home before you move or wanting to delay the closing until a certain date can make your offer unappealing. In a tight market, you’ll probably be able to sell your house rapidly. Or talk to your lender about getting a bridge loan to cover both mortgages for a short period.

7. Don’t get caught in a buying frenzy. Just because there’s competition doesn’t mean you should just buy anything. And even though you want to make your offer attractive, don’t neglect inspections that help ensure that your house is sound.

Tips for Finding the Perfect Neighborhood

The neighborhood you choose can have a big impact on your lifestyle—safety, available amenities, and convenience all play their part.

1. Make a list of the activities—movies, health club, church—you engage in regularly and stores you visit frequently. See how far you would have to travel from each neighborhood you’re considering to engaging in your most common activities.

2. Check out the school district. The Department of Education in your town can probably provide information on test scores, class size, percentage of students who attend college, and special enrichment programs. If you have school-age children, also consider paying a visit to schools in the neighborhoods you’re considering. Even if you don’t have children, a house in a good school district will be easier to sell in the future.

3. Find out if the neighborhood is safe. Ask the police department for neighborhood crime statistics. Consider not only the number of crimes but also the type—burglaries, armed robberies—and the trend of increasing or decreasing crime. Also, is crime centered in only one part of the neighborhood, such as near a retail area?

4. Determine if the neighborhood is economically stable. Check with your local city economic development office to see if income and property values in the neighborhood are stable or rising. What is the percentage of homes to apartments? Apartments don’t necessarily diminish value, but they do mean a more transient population. Do you see vacant businesses or homes that have been for sale for months?

5. See if you’ll make money. Ask a local REALTOR^Ò or call the local REALTOR^Ò association to get information about price appreciation trends in the neighborhood. Although past performance is no guarantee of future results, this information may give you a sense of how good an investment your home will be. A REALTOR^Ò or the government planning agency also may be able to tell you about planned developments or other changes in the neighborhood—like a new school or highway—that might affect value.

6. See for yourself. Once you’ve narrowed your focus to two or three neighborhoods, go there, and walk around. Are homes tidy and well maintained? Are streets quiet? Pick a warm day if you can and chat with people working or playing outside. Are they friendly? Are their children to play with your family?

Credit scores can influence mortgage eligibility, pricing and available loan programs. There is no universal credit-score threshold that qualifies every borrower for every loan.

Credit preparation should emphasize accurate reports, manageable balances and reliable payments rather than promises about a particular score.

 8 Steps to Getting Your Finances in Order

1. Develop a family budget. Instead of budgeting what you’d like to spend, use receipts to create a budget for what you actually spent over the last six months. One advantage of this approach is that it factors in unexpected expenses, such as car repairs, illnesses, etc., as well as predictable costs such as rent.

2. Reduce your debt. Generally speaking, lenders look for a total debt load of no more than 36 percent of income. Since this figure includes your mortgage, which typically ranges between 25 percent and 28 percent of income, you need to get the rest of installment debt—car loans, student loans, revolving balances on credit cards—down to between 8 percent and 10 percent of your total income.

3. Get a handle on expenses. You probably know how much you spend on rent and utilities, but little expenses add up. Try writing down everything you spend for one month. You’ll probably see some great ways to save.

4. Increase your income. It may be necessary to take on a second, part-time job to get your income at a high-enough level to qualify for the home you want.

5. Save for a downpayment. Although it’s possible to get a mortgage with only 5 percent down—or even less in some cases—you can usually get a better rate and a lower overall cost if you put down more. Shoot for saving a 20 percent downpayment.

6. Create a house fund. Don’t just plan on saving whatever’s left toward a downpayment. Instead decide on a certain amount a month you want to save, then put it away as you pay your monthly bills.

7. Keep your job. While you don’t need to be in the same job forever to qualify, having a job for less than two years may mean you have to pay a higher interest rate.

8. Establish a good credit history. Get a credit card and make payments by the due date. Do the same for all your other bills. Pay off the entire balance promptly.

For many aspiring homeowners, saving for a down payment is one of the biggest hurdles to homeownership. Are you looking for Down Payment assistance or know someone who could benefit?

The good news? Down payment assistance (DPA) programs are available to help bridge the affordability gap. But how do you apply for DPA, and what steps should you take to qualify? Let’s walk through the process, so you can secure the financial help you need to achieve homeownership.

Step 1: Identify Available Down Payment Assistance Programs and Check Your Eligibility

There are over 2,400 homebuyer assistance programs across the country, including grants, low-interest loans, forgivable loans, tax credits, and matched savings programs.

Eligibility varies by program, but common factors include household income, location, first-time homebuyer status, and the type of property you’re purchasing.

To quickly check your eligibility for these programs, you can use our Free Down Payment Assistance Search. Simply answer a few questions to discover what programs may be available in your area.