Owning your own home is an American dream we all strive to achieve one day. Even though we’ve experienced the biggest housing market bust in U.S. history, there are still several promising opportunities for first time home buyers to snag a great home at an even better price. This major investment deserves a lot of thought and planning, but if you play your cards right, you too could be a proud first time home owner this year. Here are 7 tips for first time home buyers:

  1. Pay Off Your Debt: Paying off your debts can be difficult when you’re trying to save for a new home, but the reality is that if you are loaded down with debt, you may not be able to get a loan or the exact amount you need. Besides, having debt hinders your ability to save. It’s very important that you settle unpaid bills and late payments on credit cards, loans and other money owed. Eliminating your debt will not only lift a huge weight off your shoulders, but it will also increase the amount of money lenders will be willing to give.
  2. Save Big: Once you’ve paid off your debts and get your finances in order, you can really start saving for your future house. It’s important to save big for a couple of reasons. For one, you can make a larger down payment with more money saved, and you won’t have to borrow as much from lenders. In addition to a down payment, home buyers also have to account for closing costs that can be as much as 3 to 5 percent of your total home value. When you have money set aside, you will feel more secured and ready to take on a mortgage and all the other pesky costs of owning a home.
  3. Do Your Research Online: As a first time home buyer, it’s crucial to know what you’re up against before you plunk down any money. Instead of aimlessly hunting for houses and wasting time with homes that are out of your price range, utilize the research tools that are right at your fingertips. You can check out homes for sale based on your desired area, price range and requirements using real estate web sites.
  4. Get a Government-Insured Loan: Government-backed loans are by far the best option for first time home buyers because they are specifically designed to make homeownership more affordable for you. Unlike traditional loan programs, government-backed loans are less strict on credit score requirements and they have more flexible down payment minimums, as well as a variety of interest rate plans. If your credit is less than stellar, a government-backed loan program is still the best choice because it reduces some of the risk for the loan. There are a wide variety of government-sponsored loans that may be available to you, such as FHA loans from the Federal Housing Administration and VA loans for veterans or their surviving spouses.
  5. Borrow From Mom and Dad: If you’re determined to buy but want to limit your loans, consider banking with Mom and Dad. If your parents are financially able and willing to help with your down payment, they can give you a tax-free gift up to $13,000 a year. This parental loan should be properly documented to meet IRS standards, and you should notify your mortgage lender because it will change the amount of your total monthly debt service.
  6. Consider Foreclosures: Foreclosures may not be your dream starter home, but these residences often sell at discounts that will better suit your budget. Not only is the price right on foreclosures, but many of them are wonderful family homes with excellent amenities. Since foreclosures are the result of owners’ defaulted payments, some of the homes may require upgrades and additional inspections to measure the damages. If you are open to the idea of buying a foreclosure, get in touch with a real estate agent who specializes in selling these homes, and get a mortgage pre-approval letter from a lender prior to the purchase.
  7. Think It Over, Again: Buying a home is a huge decision that deserves a lot of thought and planning. Although it’s a great investment and one that could last you a lifetime, owning a home is an expensive endeavor. Unlike renting, there’s no longer a landlord to call when the sink overflows or the dishwasher breaks &ndash it’s your responsibility now. Homeowners insurance, property taxes, maintenance costs and a mortgage are all costs you have to consider and make sure you can pay before buying a home. If you are the least bit concerned about your financial state or have run into some major roadblocks, it’s in your best interest to wait until the time is right.