First-time homebuyers face an uphill battle when applying for a mortgage in today’s real estate environment.  The days of no-credit and no-money-down loans are definitely over—at least for now. There are, however, a number of steps every first-time buyer should follow in order to make the homebuying process as smooth as possible.

Here are 10 steps to guide you into homeownership:

1.) Improve your credit

If your credit is a bit lackluster, the first item of business to consider will be improving your credit scores. A good score will save you thousands in interest over the life of a loan, so get your FICO scores at least above 750 before you start shopping around.

2.) Get pre-approved

This may seem backwards, but you might not know how much home you can truly afford. If you get pre-approved first, then you’ll know exactly what is within your price range when it comes time to house hunt.

3.) Save for a down payment

Start now, don’t wait. In fact, this is something that can be done concurrently with step #1. Not only is it wise to have money put aside for a rainy day, but doing so for a down payment is absolutely essential. Shoot to have 20 percent or more of the purchase price tucked away in a high-yield savings account.

4.) Find an agent or perhaps even a lawyer

A good agent can help you find a home that meets your needs within your price range, and a good lawyer can help protect you from legal issues which may arise throughout the homebuying process. It’s a personal preference here, but integrity in both is absolutely paramount.

5.) Start poking around

Many put the horse before the cart and assume this is step #1. However, you’re really just window shopping if you look before you can even buy. Complete steps 1 through 3 at the very minimum before proceeding to this point.

6.) Find the perfect house

You will eventually need to hit the pavement, view a lot of homes, and then make a decision on the exact home you will want.  When you find the perfect house, make sure it’s for sale and not already under contract before you get too excited.  Even in a depressed real estate market, great buys can go very fast.

7.) Make an offer

If your offer is accepted, you will then want to get with your lawyer or real estate agent to look over the legal agreements. If you need a lawyer to make changes or additions, that is all right as well, but be careful as they are often paid by the hour and can become costly.

Also, when you make an offer, be prepared to provide an earnest money deposit. This amount varies depending on the seller, so be sure to determine what is acceptable up front.

8.) Sign the agreement

If you’ve been pre approved for a mortgage, which doesn’t exceed the amount of your offer, then you’re ready to sign the purchase and sale agreement and move onto the final underwriting stages of your loan. This is an exciting but stressful time for many.  Be prepared to provide lots of documentation regarding income and assets, especially if you’re self employed!

9.) Make the down payment

This is when your years of scrimping and saving will be all worth it. If you have saved appropriately, you can now write a check to your mortgage company for a sizable down payment.  Be prepared to provide a cashiers check at closing as personal checks are often not accepted.

10.) Wait for it to close and get the keys

Now it’s time to get the keys, move in, and begin to make the house your home. Congratulations, you’re no longer paying rent to a landlord!

One final note: when it comes time to purchase your home, remember that the way you’ve managed your credit will either be your biggest help or hindrance in obtaining the home you desire.  Take the time to make sure your credit scores are in great shape and your efforts will be well worth it.  Good luck!

A recent TransUnion study found that the percentage of Americans behind on their mortgage but current on their credit cards increased nearly 55 percent between early 2008 and the third quarter of 2009.

And while the amount of consumers we’re talking about is still relatively small (6.6%), I find the overall trend to be quite compelling. Clearly, consumers are beginning to think differently about the priority of their debts.

When I bought my first home in 2005 (at the peak of the market in my area- grrhh!), it was ingrained in my mind that no matter what, I would always strive to pay my mortgage first. It seemed logical to me that the house would take priority over other debt, and it still does, but a lot more people obviously feel different these days.

I’ve had several conversations with personal friends as they’ve tried to decide if they should keep paying their mortgage or simply walk away while staying current on other debts like their credit cards. In each case, for those that did choose to walk away from their mortgage, their reasoning was the same. They couldn’t see the sense in sinking more money into a home that had lost so much value it might never recover. They just wanted out, once and for all.

Their Credit cards, on the other hand, could be a lifesaver if times got even worse during a longer period of unemployment. Credit cards could help finance their basic necessities, and the house couldn’t do that. In addition, they really didn’t care much at all about their credit scores anymore, so the negative effects of a foreclosure didn’t scare them. All they cared about was keeping what credit cards they did have, while hoping that the foreclosure process would take a “really long time”, essentially rewarding them with free rent.

I’ve often wondered what I would do if I was faced with the same situation. My gut feeling is I would pay the mortgage first. That said, I’m a huge advocate of not only holding an emergency fund large enough to cover the mortgage and other living expenses for at least twelve months, but also never carrying a balance on credit cards. So, theoretically, I should never have to choose between the two, unless I found myself out of work for much longer than a year.

However, I’m interested to hear what the majority of you would do. If you had to choose one over the other, would you pay your mortgage or your credit card bill?

Perfect timing guys! Just what our economy needs to pull itself out of this seemingly never-ending slump. And while I can understand their desperate need for additional revenue-generating fees, it just doesn’t make any sense to penalize future buyers that come to the table with solid credit scores and sizable down payments for the sins of the past. That’s not going to improve the situation for anyone but Fannie and Freddie.

Were you thinking about buying a condo this year? Make sure you plan on paying a three-quarter point add-on loan fee if you don’t have at least a 25 percent down payment. And if you think your stellar credit score of 800 will save you from paying the fee, you’re wrong. Your credit score won’t mean a thing in this circumstance. Even buyers of traditional stand-alone homes with a FICO score of 720 will pay a mandatory three-quarter point fee at closing unless they can come up with a down payment of 30 percent or more.

According to Freddie Mac spokesman, Brad German, various combinations of credit risk and certain loans are defaulting at a rate of “four to eight times” the rate of other mortgages in the company’s portfolio. He claims that these new rules are simply a way for them to better manage their portfolio and appropriately price riskier loans.

They’re acting irrational in my opinion, and shooting themselves in the foot at the same time. How can Congress and the Obama administration claim with a straight face that they are working to stimulate housing while they stand by and let these organizations under federal control make such egregious mistakes?

I’ve received several emails lately from ‘Creditnetters’ expressing concern about their HELOCs getting frozen without much notice from lenders. Yes my friends, they can do it, and there’s not a whole lot you can do to fight it. HELOCs, just like credit cards, can be frozen or shut down at any time.

In some cases, reductions in home values have triggered the HELOC freeze (you may be able to fight this by using comparables to prove them wrong). In others, a minor drop in credit score or a late payment gave the lender enough of a reason to reduce their risk by completely removing the exposure from their books. As credit issuers are rushing to stanch the bleeding in every way possible these days, I wouldn’t expect things to get much better in the near future. It’s just the reality of the world we live in at the moment.

The real thing that bothers me is that in most cases the individuals have been using their HELOCs to cover monthly bills and other daily expenses. So, when the creditor pulled the plug, they found themselves in an extremely difficult financial position. While I am sympathetic, a part of me wants to repeatedly rap on top of their heads and do one of those, “Hello McFly, anybody home?” lines from Back to the Future. Haven’t we learned anything by now? Yes, our homes are probably one of the largest investments we will ever make. Hopefully, in the long run, they will be one of the most profitable investments as well. But really, we should never be using them to finance our daily lifestyles. It’s just not a financially smart thing to do.

As the economy continues to weaken, it’s become apparent that the big auto companies and financial institutions are not the only ones who need a revamping. Millions of Americans also need to take a step back and revisit what it means to actually live within one’s means. In other words, make a promise to yourself today that you will spend less than you make each month. It’s all about changing your lifestyle so it coincides with reality. It may seem obvious, but the truth is most people struggle with this principle every day. So, if you can master the art of living within your means, I promise you will emerge from this credit crisis financially better off than those who don’t.

I’ve been planning to call ING since a bright orange postcard arrived in the mail a few days ago marketing the popular Orange Mortgage. Low closing costs and a 5.25% rate sounded pretty good, and since I’m in the market for a new place, I thought I would check it out. I’ve always been impressed by ING’s customer service and the ease of doing business with them as well, so I was interested to experience first-hand how things have changed in their lending division given the current state of the credit markets. It didn’t take long to see that they too have become like everyone else.

I’m serious. Have you talked to anyone at a bank lately? It’s like talking to a bunch of zombies! Everyone is wound up so tight they have completely forgotten how to actually take care of a good customer, listen to what you say, and try to meet your needs. You would think that if anyone could hold onto the customer-centric approach, it would be ING. But alas, tightened underwriting standards and the fact that they are just plain scared of any risk have forced them to become internally focused. I can certainly understand why, but it’s still a shame.

So, if you’re in the market to finance the purchase of a new condo, don’t even bother calling ING. They won’t care if you’ve been a long-time customer with excellent credit history, solid credentials, and a big chunk of cash to make a down payment. All they will care about is following the new underwriting standards by the book, which require at least a 55% down payment on new-construction condos. That’s right, the maximum loan they can offer is a measly 45% of the purchase price. In regards to the estimated closing costs, they weren’t that low either. So, my search for a lender who actually wants to “lend” continues, and ING has lost the opportunity to make a great deal of money off someone who has never made a late payment in his life.

Have you had difficulties securing a loan lately? We would love to hear about your experience, so send us an email at creditcents@creditnet.com, or post a reply below.

Real estate values continue to do a big cannonball in the deep end, and some lenders are trimming their exposure to home equity by shutting down idle lines of credit on their books. If you’re lucky, you may receive a nicely written letter in the mail explaining how you haven’t drawn against your line in quite some time, so the bank wants to give you the opportunity to close the HELOC before the agreement permits.

How thoughtful, right?

They want it to sound like they’re doing something nice for you, but it really has nothing at all to do with you or what the original agreement states. They’re just hoping you won’t have the time to sit down and write a letter back within 14 days so they can terminate the HELOC at will. But at least they gave you a chance. Other banks may send zero correspondence before shutting it down. The bottom line – they want the exposure off their books.

If you currently have a HELOC that hasn’t been shut down yet, perhaps it’s a good time to think about how you can safely use it before the bank attempts to snatch it away? There are certainly some risky ways you can use home equity to invest in stocks or real estate, which have the “potential” to provide a high yield. However, I wouldn’t suggest you take that risk in this market, unless you have some serious investment skills and plenty of reserve cash to bail you out in an emergency. It’s generally never a good idea to gamble with your home. But if you want to get some of the cash in your hands, avoid letting your HELOC get terminated without notice, and invest it safely for a small return, then try this simple arbitrage method.

Best Arbitrage Strategy

The prime rate is currently 4.5%, which means your HELOC’s interest rate is probably less than 5%. You should be able to easily locate your current rate by looking at your last bank statement or checking your account online. The next step is to apply for a 0% balance transfer credit card that should provide you with a reasonable credit limit. Let’s say $15,000.

Now, it’s time to spend a few minutes shopping around for the best place to park cash these days. For example, take a look at an I Savings Bond, which provides a return of 4.84% if purchased before November. Using your HELOC, you could purchase $5,000 in I-Bonds, and then take advantage of your new 0% balance transfer card by using it to pay off the HELOC. For the next 12 months you will enjoy a low-risk investment returning 4.8%, and your HELOC will no longer be considered inactive by the bank. At the end of 12 months, cash out of the I-Bond, pay off the balance on your 0% credit card, and pocket the difference. Voila – you have made money without using any of your own actual cash. Of course, your total profits will depend on how much money you’re willing to move around and what kind of fees you’ll have to pay. I just chose $5,000 to keep it simple.

If anyone has a personal experience applying this strategy, I would love to hear about it! Post a reply or send us an email at creditcents@creditnet.com.