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submitted: 2008-04-11 11:22:44 | by: BrendaPuckett
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The home buying process can be overwhelming for a first time home buyer, giving you the feeling that your financial destiny is rapidly spinning out of control. When it comes to real estate, most people don't have a lot of experience and even less knowledge. Buying a foreclosure home can be even more confusing. The fact is, buying a home is actually a simple process. All you need to do is concentrate on the basics, and the following steps will fall together more easily.

1. You need to get preapproved for a mortgage prior to looking at any homes. This gives you the maximum possible time to understand all the complicated paperwork and terms of your mortgage. Preapproval also shows the seller that you are a serious qualified buyer. This gives you an edge in negotiations. Particularly when competing with other buyers for the best deals. Preapproval for your mortgage will also give you time to solve any approval problems. This can prevent wasting time looking and falling in love with homes before you are able to buy.

2. On the mortgage front, the next thing you should watch out for is to avoid prepayment penalties at all costs. A prepayment penalty means that if you buy the home then later want or need to sell it or refinance it before the prepayment penalty expires, you'll have to thousands extra. You can find a variety of great loans that don't include these types of penalties. If your loan officer proposes a loan that does include prepayment penalties, you should usually turn it down and look for another loan. There is one caveat to this rule. If you know beyond any doubt that you will not qualify for a better loan prior to the expiration of the prepayment penalty and thus won't be able to refinance, it is reasonable to accept what is known as a "soft" prepayment penalty in exchange for a lower interest rate. This means that you would have no penalty if you needed to sell the property

3. As the interest rate markets change over the next year or so, you should also be on the lookout for good adjustable rate mortgages. I know that you have heard many horror stories about adjustable rate mortgages, but there are some that have strict adjustment limits and easy refinancing terms and could save you thousands over a couple of years. An example of a good ARM would be an FHA adjustable rate mortgage. FHA ARM mortgages have strict adjustment limits, no negative amortization (your loan balance only goes down and never up), and a streamlined refinance process.

4. Before you purchase a home, you should always be aware of how much you can afford. You should always go over your budget and figure out how much money you can spend on a mortgage payment. If you manage your money intelligently and know your finances, this should take very little time at all. On the other hand, if you are not on top of your finances, this may take longer but you will be highly rewarded for the effort. Do not base your decision on whether or not you can afford a certain home based on whether the loan officer and real estate agent tell you that you qualify. They are able to qualify you for more than you can comfortably afford and both get paid more when you buy a more expensive home. They will not, however, help you with your payments later on.

5. Once you have your financial house in order, take the time to become familiar with home prices in the area. Become an expert. Do research online to find out what sellers are asking and getting. Be sure to check for foreclosure homes. We are experiencing a very distinct buyer's market in real estate now. You should choose your first home more for its investment value than its dream home qualities. Do not ever pay list price. Expect to pay a minimum of 10% through 30% or more less than similar homes in the area have sold for. The greater the discount the better. This creates the greatest possible potential of avoiding the risks of buying in a down market, and the greatest odds of profiting when it is time to move up to a larger home. Never, ever, pay the full appraised value for a home and wait for inflation to build your equity. This was a losing strategy even during the housing boom. Inflation raises the value of all property. The home you hope to move up to will be getting more expensive due to inflation as well. Make your profit when you buy the home by getting a good deal right out of the gate.

The above are just a few basic tips and there are many other things you'll need to know before you buy your very first house. The key is to educate yourself before you take action. Most first time homebuyers fail to operate from a position of strength. Many are paying the price for that in today's market. Don't let that scare you. If you concentrate on the learning the basics, you can control your destiny.

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FHA loans are the smartest choice for first time home buyers in Georgia who want to take advantage of todays buyers' real estate market Don't reprint this exact article. Instead, reprint a free unique content version of this same article.

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