How to Make Your First Time a Charm

The transition from renter to first-time homeowner is a major one. While today's real estate market has softened enough to provide buyers the luxury of selection, a first-time buyer has new worries: Will the value of my new home hold up? Will I be able to sell when my needs change?

To minimize those concerns, buy smart the first time around. If you invest in a home that meets your long-term needs -- at least five years -- and keep the financial burden manageable, you stand a good chance of weathering whatever the market dishes out. Here are 10 steps to making that happen.

· Look into the future. Big tax breaks come with homeownership. And it can be nice to watch an investment in a home increase over the years rather than watch rent payments grow. But that doesn't mean buying is the right choice -- or that today is the right time -- for you. Renting can be prudent if you're likely to relocate within a year or two, your employment or income is unstable or your credit needs work. And if you can't spare the time (or cash) to handle plumbing emergencies and other expenses, you may want to hold off. Finally, if you are ready to buy, try to envision your needs in five years: A place with extra room or remodeling potential might be a better investment than a home that suits you perfectly today.

· Prepare a budget. You, and not a real estate agent or a lender, know how much you can comfortably spend on a home. To figure it out, start with a no-holds-barred examination of your current income and spending. What can you trim? Phone services? Dining out? Entertainment? If you're looking for help, Ginnie Mae has a good calculator that can help you estimate how much you can afford to spend ( http://www.ginniemae.gov ). Some practice can be helpful, too: Pretend you're already making a big mortgage payment each month, get serious about budgeting and save the extra money for a down payment.

· Build a down payment. While no-money-down mortgages are widely available, using one burdens you with higher monthly payments -- and often entails mortgage insurance, which lenders require for buyers who put down less than 20 percent. A down payment of 5 or 10 percent can really trim monthly costs. You can borrow against your 401(k) retirement savings plan, up to half your vested balance to a maximum of $50,000 -- though you face a 10 percent early distribution penalty if you don't pay back the money before switching jobs -- and you can also withdraw up to $10,000 from an IRA for a down payment on your first home.

· Look for help. A number of programs are out there for first-timers looking to get into a home. Some are geared toward teachers, police officers or other public service providers and others to low-income buyers, but some are broadly available. Buyers in the District and Montgomery County can learn more about federal and local home-buyer assistance programs through a Web page maintained by the Greater Capital Area Association of Realtors ( http://www.gcaar.com ), while buyers in Northern Virginia can find similar information at the Virginia Housing Opportunities Alliance's Web site ( http://www.nvar.com/affordable ). The chart in this section (Page R12) provides more detailed information on specific programs.

· Get your credit in order. Before shopping for a mortgage, find out where you stand in the eyes of lenders. Borrowers with poor credit histories are charged higher interest rates and offered fewer mortgage choices. Take about $45 and buy your credit scores and reports from the three major credit bureaus -- you can do this at the MyFICO.com Web site, run by Fair Isaac Corp. You can achieve significant improvements with just one or two years of diligent money management.