For many buyers there has literally never been a better time to purchase a home. There are certainly many incentives to encourage even the most reluctant first-time home buyers to step off the fence and begin looking for a starter home. At the top of the list are low sales prices and low interest rates. Combine those two factors with a large inventory from which to choose and an $8,000 tax credit available to first time home buyers thanks to the American Recovery and Reinvestment Act of 2009 and it can be quite hard to resist the opportunity to purchase a home. The tax credit, in particular, has been especially helpful in persuading many people to take the plunge. Unlike many tax breaks, the current credit can be used on closing costs and in some circumstances can even be applied toward the down payment. The credit must be used on the purchase of a principal residence between January 1, 2009 and December 1, 2009.

Even though these incentives have made the prospect of purchasing a home more attractive, it is still important for first time home buyers to pay attention to the rules of the game. One of the reasons that this is so important right now is the state of the real estate market. Lenders are not quite as generous as they once were and as a result, you will need to do your homework in order to find the best deal and be sure you purchase a home you can afford.

Perhaps the most important thing first time home buyers can do is to review their current financial situation before they begin window shopping. In the best situation, you should begin looking at your finances about six months before you plan to begin looking for a home. This will give you ample time to review your credit score as well as your budget. If you discover that your credit score is not up to par, this will also buy you some time to work on raising your credit score; a move that can help you to get approval for a mortgage loan as well as the best rates possible. Keep in mind that right now in order to get the best interest rates you need to have a minimum credit score of 740.

You should also take a look at your budget and personal finances to be sure you have sufficient savings to cover the down payment, a minimum of 20% if you want to avoid private mortgage insurance, as well as closing costs; which can run several thousand dollars.

Also, will you be able to reasonably afford the mortgage on the home you want to buy? Remember that just because you can afford $1,300 per month for rent that does not meant the same amount will be affordable for a mortgage note when you figure in the additional costs of home maintenance, repairs, homeowner’s insurance, homeowner’s association fees and possible private mortgage insurance. Take advantage of online mortgage calculator tools to be sure you know exactly how much you can afford.

When you are ready to begin looking for a home, be sure to shop around for the best real estate agent. This is a tip that can really help you in the end. Ideally, it is always best to work with a buyer’s agent even if that means paying part of his or her commission on your own. Otherwise, you will be relying on a seller’s agent who won’t have your best interest in mind.

In addition, make sure you know what you need in a home. How long do you plan to remain in the home? This can make a difference, especially if you plan to start a family in the future or expand your family. Considering your needs will help you to avoid the problem of outgrowing the home in the next few years. Along with the size of the home, also be sure to consider proximity to work and schools as well as conveniences and services. Your dream home could become less than ideal once you have to start making that long commute every day.

The best way to make sure you do not overlook anything is to write up a wish list of everything that you want in your future home. Prioritize items according to importance and then let your agent know exactly what you are looking for.

While the process described above may seem as though it is time consuming, each step will help to ensure you find the right house that will suit your needs as well as your budget.