You can buy a home for $150,000 (© Jupiterimages/Getty Images)

Believe it or not, you can get into a $150,000 starter home with less than $2,500 in savings. You'll need to leverage the new $8,000 federal tax incentive and have at least average credit, but your monthly payment would work out to about $1,000 a month including taxes and insurance. (MSN Money walks you through the math.)

According to National Association of Realtors economist Lawrence Yun, starter homes are usually priced about 30% below a local market's median.  (The "median" is where half the homes cost more and half cost less.) So the most promising cities for families to buy a first home would have median prices of $215,000 or below (as a $150,000 home is about 30% less than the $215,000 median).

According to the NAR, 125 metro areas had a median price of less than $215,000 at the end of the first quarter; you'll find the list below, plus links to find homes priced 30% below each market's median. (Check out the NAR’s interactive U.S. map for your town's median price if you don’t see it listed.) In some of these markets, that starter home will cost far less than $150,000.

Slide show:  15 standout metros for starter homes

NOTE: You may need to disable your pop-up blocker before clicking links in the right-hand column of the table below.

3 tips for new buyers
Before you beat a path to the nearest open house, educate yourself on the homebuying process.

Curt Lorden, senior loan officer with Residential Finance Corp. in Tampa, Fla., offers this guidance:

1. Buy less home than you can afford. "Just because we might be able to qualify you for it, doesn't mean you should go for the max," the loan officer says. Leave slack for retirement and college savings. Rather than what you want, consider what, realistically, you need: "We, as Americans, got a little bit egregious as to how much house do you get," he says. "The reality is, you got there and you only needed half of it." Use the Home Affordability Calculator to determine how much house you should really buy.

What's your home worth?

2. Think ahead. Since prices are still dropping, be prepared to stay in your new home at least five years. When prices recover, you should at least break even when you sell. Forget about making a fortune on a home. Those days are probably over for a while. And, if your family is growing, get a home big enough to meet your needs five years out rather than going for granite countertops and high-end upgrades now.

3. Stash the credit. If you don't need the tax credit for a down payment, use it to pay down consumer debt, to start a college fund for your kids or to fatten your retirement account.

For additional tips, see the "Getting Started" section at the top of MSN Real Estate's First-time Buyers Center and read “Think you’re ready to buy a home?” which outlines a one-year plan.

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Bing: Search & decide

You also can educate yourself on the homebuying process by taking a class. Banks, credit unions, financial counseling agencies, community colleges and state extension services offer free or inexpensive classes and workshops. Watch your local papers and TV for announcements or see HUD's list of state and local government homebuying programs here, including classes and counselors.

Get free counseling from someone who has no stake in selling you a loan. Find HUD-certified nonprofit counselors in your area:

Find a loan
Once you're ready to get serious, your first step is to find the loan, Lorden says, even though it may seem backward when what you want to do right now is shop.

"If I had a friend or a family member looking to buy their first home, I think it would be very important to sit down or talk over the phone with a mortgage consultant, even before they retain [a real-estate agent]," Lorden says.

Apply to several lenders.  Compare annual percentage rates (APRs) to see who's offering the best deal. (Use this worksheet, from the Washington State Department of Financial Institutions, to compare loan offers.)

Home affordability calculator

Lenders will offer to "pre-qualify” you, giving a rough idea of what you can borrow. They'll chat about your finances and pull your credit score (read "Your 5-minute guide to credit scores" on MSN Money). But what's the point? It's only an estimate. You can't hold them to it. You won't know how much they'll truly lend you and what the cost is until you get a lender to commit to a loan amount and interest rate — a "good faith estimate." For that, you must apply.

Lenders will ask for documents proving:

  • Your income
  • Your bank account balance
  • Your monthly expenses, including what you owe and whom you owe it to.

You can practice filling out the Uniform Residential Loan Application that's used by every lender: View or download it here, at

Start shopping
Once you have your finances in order and know your own price point, start your search using one of the following links:

You also can consider foreclosures.  They are not necessarily recommended for first-time buyers, but given the steep discounts these often present, they could be worth a look in the right circumstances.