First-Time Homebuyer's Guide

Fix Your Credit - The first step toward buying a home takes place months before walking into a lender's office. It's crucial to check your credit score at least three to six months ahead of your mortgage application. You can request a free copy of the report from each of the three credit bureaus (Experian, TransUnion and Equifax) at annualcreditreport.com.

Prepare for Down Payment and Closing Costs - A generation ago, it used to be the norm to put 20% down, but with the market in its current state of flux, many first-time homebuyers are finding ways to pay just 3-5% of the total cost upfront. Federal Housing Act (FHA) loans increasingly have become a popular option for first-time buyers. These competitively low-interest loans are ideal for buyers with less than perfect credit, and because the Department of Housing and Urban Development (HUD) minimizes the risk of default for lenders on these loans, borrowers are only required to put down 3.5% of the cost--a far cry from the traditional 20% down payment.

Figure How Much House You Can Afford - Your debt-to-income ratio (DTI) is the percentage of your gross monthly income set aside for paying debts. While some loans may qualify you for up to 50% of your monthly gross income, it's advisable that you use no more than 30%. Be realistic about how much you can pay, because an unexpected event could tear a hole in a tight budget.

Hunt for a House at Weidel.com - Finding the perfect home can have a lot to do with finding a compatible real estate agent, especially in today's evolving mortgage landscape. It's crucial to be in contact with an agent before starting the home search and first-time homebuyers should make it clear what features they're looking for and how much they're willing to spend.

Make an Offer - Sellers can price a property however they see fit, but that doesn't mean homebuyers should pay a ridiculous cost. Get your agent to pull all the comparable sold properties that occurred in the last six months then gauge by square foot the comparable cost.

Get Your Money's Worth - At signing, the buyer should demand that the contract be contingent on an objective appraisal of the house. Look into the history of the home and make sure there aren't any liens against the property. You should be able to negotiate with the seller to make any necessary repairs to the house before closing on the deal.

Stay on Course - Beginning to end, you can expect the entire process to last around four to five months. Of course, with as much great inventory on the market as there is, it's not unusual for homebuyers to find something within two to four weeks.