By Candice Choi -- AP Personal Finance Writer
NEW YORK (AP) — The conditions seem ripe to become a first-time homeowner.
Real estate prices are tumbling, mortgage rates are at record lows and there are big tax credits on the table. All that might have you scrambling to assess whether you can afford to make the leap into homeownership.
That was the situation for 28-year-old Holly Dewar and her boyfriend last winter.
"We really wanted to get the most for our money, and the market timing seemed right," said Dewar, who works in public relations. Her boyfriend, 29-year-old Kurt Spring, works in real estate finance, which helped facilitate the purchase.
They closed on a 3-bedroom, 1-bathroom home just outside Boston for $340,000 in January. But that price didn't include a host of other of costs, such as $4,000 in closing fees and $700 for a home inspection.
And before even considering such details, find out whether the mortgage down payment is a deal breaker; lenders are requiring more money upfront as they tighten standards. For the less-than-ideal borrower, an array of new loan fees could be another hurdle.
So if you think it's time to stop renting, here are some big and small costs to consider.
Cost #1: Getting Ready
Start the process by polishing your credit report. While the cost can be relatively minor, it's particularly important now that banks are being more selective about making loans.
The Federal Reserve says a March survey found half of U.S. banks tightened lending standards on prime mortgages in the previous three months, up from 45 percent in February.
"We're in very uncertain times, and you're asking for a very big amount of money. The lender is going to be looking very closely at the credit report," said Jed Smith, a spokesman for the National Association of Realtors in Washington, D.C.
A higher FICO score also gives you greater negotiating power over the terms of the mortgage and ultimately, the total cost of the loan. A stellar score ranges from 760 to 850, while scores below 640 might mean you have to pay a significantly higher interest rate.
You're entitled to a free annual credit report from each of the three major credit bureaus. Getting your FICO score costs $15.95 at www.myFICO.com.