8 tips for first-time home buyers

Whether you want to buy a new condo or house in three months or ten years, you need to know the steps involved. First time home buyers are in an exciting and terrifying position -- and these tips for new home owners will help smooth the process...

"Home ownership remains a good investment and a big part of the American dream," says Ethan Ewing of Bills.com. "You may be able to save thousands on your piece of that dream by buying a house this year -- but you must act quickly."

Here are his tips for first time home buyers....

1. Double-check your credit report. The mortgage industry meltdown means the best deals go to buyers with spotless credit. People with damaged credit might not be able to get a home loan at all, or may face high interest rates. "Before starting house-hunting, check your credit report to be sure it does not show any incorrect information," says Ewing says. "If it has an error, dispute it immediately and make copies of evidence regarding the error to discuss with your mortgage lender." Knowing your credit report information can make a huge difference when you're buying a home.

2. Talk to mortgage lenders. Ask friends and relatives for references to reliable mortgage lenders. Be sure the lender you choose has the appropriate state licenses. Before you buy a new house, check rates and offers from several mortgage professionals. Credit scores do not decline if multiple similar credit report requests are submitted within a close time period (usually a few weeks), so it pays to shop around.

3. Buy a home while house prices are still low. Home prices have increased slightly since the beginning of 2009, but they are still about 13 percent lower than they were a year ago. That means now is an excellent time for first time home buyers to invest in real estate.

4. Buy a new house when interest rates good. Mortgage interest rates have dropped again this fall, to about 5 percent annually for a 30-year fixed-rate mortgage. Again, this means it's an excellent time for first time home buyers to invest in property.

5. Make sure you have enough in savings. A down payment is essential today. Ideally, first time home buyers will put down 20 percent of the purchase price. If not, ask the mortgage lender about options before buying a new house.

6. Know the costs of home ownership. The principal and interest on a mortgage payment is only the beginning. Escrow payments - money set aside by the mortgage holder to pay insurance and taxes - and private mortgage insurance, if it is required, can add a few hundred dollars or more per month to a mortgage payment. In addition, home owners must pay for repairs and maintenance. A rule of thumb is to budget 1 percent of the home's purchase price per year for upkeep.

7. Be wary of "bargains." To make owning a home easier, remember that some bargains on houses today are "fixer-uppers" or homes sold "as is" because of foreclosure. Invest in a home inspection (about $400) before buying a new house. The inspection will highlight any faults in the home and help estimate the cost to remedy those problems.

8. Be wary of "short sales." A short sale is a home sale where the owner must sell the home for less than is owed on the current mortgage. Because the bank must approve any such sale, a "short-sale" home may have a sales and negotiation process that is too lengthy to be completed before the tax-credit deadline. Additionally, short sales are usually "as is," which may carry more risk than makes sense for many first-time buyers.

For more info, read 10 Tips for First Time Home Buyers.

Laurie Pawlik-Kienlen is a full-time writer and blogger who created and maintains five "Quips and Tips" blogs: