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As the housing market becomes more competitive, it's never been a better time to get your finances in order. For first-time homebuyers saving for a house, here are the ins and outs of the process.

Make Sure Your Credit Score Is Good

Lenders take many factors into account when making loan decisions, but your credit score is one of the most important when you take out a mortgage. Before you begin this process, check your credit score and be sure there are no errors. You want to be in the 700 range or higher. If your score is subpar, find out what you can do to improve it and start taking these steps immediately.

Know What You Can Afford

When buying a home, lenders will generally look at three things: the size of your down payment, your credit score and your debt-to-income ratio. Many lenders want to see that no more than 28 percent of your monthly gross income going toward your mortgage payment, property taxes and insurance, according to U.S. News and World Report. And they want to see no more than 36 percent going toward all debt payments. So it's important to pay off debts as you prepare to buy a home.

Just because a lender says they'll lend you a given amount doesn't mean you should borrow the maximum amount you're approved for. Buying a house with payments that you can comfortably afford can be a great choice. After all, housing prices can come down quickly and drastically and severely impact homeowners with little or no equity. Note that your home will be subject to both an inspection and an appraisal by the lender. If the home appraises below the price you're paying, this may limit the amount you're able to borrow as well.

Save for a Down Payment

A major first step when buying a house is saving for a down payment. Saving for a down payment takes time, but it's doable. If you're having trouble coming up with a down payment, you can apply for down payment assistance programs. Many lenders have first-time homebuyer programs available that offer lower down payment requirements.

Understand the Benefits of Owning a Home

Owning a home has many benefits. Among the financial benefits are tax savings from the ability to deduct the cost of mortgage interest from your federal taxes. Be sure to consult with your tax professional to determine how much of a deduction you're eligible for. Real estate can be a good investment over time. Having a home that increases in value is a good thing. Home ownership offers other benefits as well. Having a place to call home is a wonderful feeling. There's nothing wrong with renting, but having a place of your own can offer you and your family a sense of stability.

Buying your first home is exciting. Saving for a house takes discipline and you'll need to have your financial ducks in a row before forging ahead with the process.

This information and recommendations contained herein is compiled from sources deemed reliable, but is not represented to be accurate or complete. In providing this information, neither KeyBank nor its affiliates are acting as your agent or is offering any tax, accounting, or legal advice.

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