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Your Money

Credit & Debt

So You Want to… Buy a Home

Tips to Make the Process Easier

For some, buying a home is still the epitome of the American dream, and millennials are embracing it. People age 34 and younger were the largest group of homebuyers for the 12 months ending in June 2014, according to a National Association of Realtors study, making up 32% of all buyers.

The median home acquired by a millennial in the survey cost $189,900, up from $180,000 the year before, with a median down payment of 7 percent, or about $13,000 in this scenario. Those aren't small numbers for a first-time homeowner, who will also be responsible for the rest of the costs that come along with a new house.

Here are some tips to consider before you buy:

Save up. There are programs that allow you to buy a house with a down payment as small as 0 to 3.5 percent. But they often require additional up-front and ongoing fees for the life of the loan, which can add up. For a 5 percent down payment or more, you may be able get a conventional home loan with fewer fees. Many lenders will still require that you pay for private mortgage insurance (PMI) until you've got at least 20 percent equity in your home, at which point that monthly charge can go away.

Add up all the numbers. When you're looking at costs, don't forget to include property taxes, homeowners insurance, utility bills and maintenance . Some experts estimate that you'll spend about 1 percent of your home's value on maintenance every year. As a homeowner, you will likely have to care for your own yard (if you have one) and fix your own leaky roof and broken appliances, so factor that in.

Budget for closing costs. When you settle your home loan, you'll typically owe 2 to 5 percent of the purchase price in closing costs. On the median millennial home referenced above, that would mean $3,798 to $9,495 at the closing table, on top of sometimes being required to pay for homeowner's insurance and property taxes up front. In the right market, a good realtor may be able to negotiate for the seller to pay for part of the closing costs, but it's not a given.

Ask about first-time buyer help. If you qualify, your realtor and lender or mortgage broker may be able to steer you toward programs in some cities or states that offer assistance to first-time homebuyers. These are often based on your income.

Read the contract. If you're working with the right professionals, they should be able to help you understand the important parts of the contract. If you have questions, ask. And if there's anything you think is included with the house, like fixtures, lights or curtains, make sure it's specified. “Sometimes a decorative mirror in a powder room or half bath is just hanging on a hook," says Sandra O'Connor, a realtor in Greensboro, N.C., and a regional vice president for the National Association of Realtors. “And buyers come in and the mirror is gone."

Don't skip the home inspection. One of the best ways to know what you're getting into is to have a professional look at the home before you close on it. “When you have that home inspection, you're going to find out what needs to be fixed today and what's down the road in two, three and five years," O'Connor says. “Your home inspector is a great resource to give you an idea of what those items are going to cost you, so you can start planning ahead."

Think about resale. Some people get into trouble when they buy too much house for their budget. Millennials sometimes want to buy too little, O'Connor says. “I find, as a group, that millennials like to simplify their lives. They only want one bedroom and one bath, for instance. But when you go to resell it, if you had invested in a two-bed, two-bath, you might have a better audience for reselling."

For more tips and resources on mastering your finances, visit

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