Buying Your First Home? Here's what you need to know.

First-time homebuyers stand to be the biggest group of winners in the current Phoenix housing market. They can essentially deduct $8,000 off the price tag for whatever home they choose to buy, in which the prices are already incredible, resulting in a tax credit from the government. They can even amend their 2008 return and get that money back right away.

In addition, prices are incredible and interest rates are very low. As a first-time buyer you typically don't have any contingencies either, such as selling your current home, making your offer much more likely to be accepted.

If you think you'll be in the same place for awhile, have steady income, and some money in savings for a down payment, now may be the time to consider buying.

Here are some frequently asked questions:

When should I talk to a mortgage loan officer?

Right away, before you even look at homes. Find out what you can not only afford, but qualify for. Go through the loan pre-approval process and obtain a Loan Status Report (LSR), which is required in the purchase contract to make an offer. It lets you know your max pricepoint and interest rate.

What info will the lender need?

2 years tax returns, one month pay stubs, several months of bank statements, and statements from any investment accounts you might own. You should also know info about your liabilities, student loans, credit cards, etc, mainly the balances and payments.

What kind of down payment am I looking at? Expect 3.5% for FHA financing.

How much cash do I need?

At the time of offer you will need to provide an earnest money deposit, typically 1% of the purchase price. It shows the seller you are a serious buyer. The earnest money is deducted from the closing costs and down payment due at closing. Closing costs tend to hover around 3% of the purchase price, but can range anywhere from about 2-5%. It's common to ask the seller to pay part of all of your closing costs, but there is no guarantee they will agree. Your home inspection will run about $250-350, and consider how much it will take to move, set up your new utilities, and whether you still owe rent on your current lease.

What is included in the mortgage payment?

Property taxes, mortgage insurance, principal and interest payment, and hazard/homeowner's insurance. The principal and interest goes towards the mortgage loan.

Do I need a real estate agent?

Yes. Agents can walk you through every step of the process. Buying a home is very complex, and you do not want to go through most likely the biggest purchase of your life alone. Agents can help you save time and energy by focusing your search based on your search parameters. They will help you understand the home inspection report, ask for repairs from the seller, and make sure the process is going smoothly. You should feel comfortable working with your agent, and never pressured. They should be able and willing to answer all of your questions and be straightforward when working with you all the way up to closing.

Do I pay them - if so, how?

Generally, your agent is compensated by the seller of the property, to the tune of 3% of the purchase price of the home. You usually do not have any out-of-pocket expense here.

What about using the agent that listed the property?

Strongly consider using a different agent. That agent primarily represents the seller and has an obligation to look after the seller's best interests, not that they wouldn't treat you fairly. Some buyers look for a discount in this arrangement, as the listing agent doesn't have to share the commission with a buyer's agent.

How do I know if I found the right home?

Go with your gut feeling and buy in a desirable location. Shoot for your non-negotiable items, and then go with your "wants" in a home. Think about your lifestyle and what areas would be conducive to a happy living environment for you.

What about short sales and foreclosures?

Can represent great bargains. Short sales take a longer than usual time to close on, typically several months in the works, assuming you can get it for the price you have offered. Bank-owned foreclosures are sold in "as-is" condition and require a degree of repairs.

What should I find out before buying?

Crime rates, school information, property values in the area. Talk to neighbors and get a feel for the area at different times of day.

What about a home inspection?

Get one. It's like insurance - you want to know everything about what you are buying before you buy, so there are no surprises after you close and it's too late. You have 10 calendar days to conduct a thorough home inspection. If there are significant issues you can cancel the contract and receive your full earnest deposit back, or ask the seller to repair the issues.

So the inspection period ends. Now what?

The focus shifts from the property condition & inspections to your loan. Finalize the mortgage paperwork with your lender to move towards full loan approval. Make sure you have funds available to easily make your down payment. If the seller agreed to repairs make sure they have been done during your final walk-through. Arrange to get utilities in your name, and be sure to line up homeowner's insurance.

What about delays?

Delays are becoming more common, as underwriters are taking longer to approve files, and are asking for more and more information from borrowers. Just when you think you're done, you'll be asked more questions and have to produce additional paperwork. It's frustrating - but those are the times we are in.

Closing day?

You'll go to the title company (a neutral party to your transaction) to sign a large number of documents. Bring your driver's license and plan for 1 hour. After the title company receives your down payment (must be certified funds, i.e. a wire transfer or cashier's check), closing costs, and funds from your lender, the deed is then recorded in your name and you own the home. At this point your agent will deliver the keys to you.