How much cash do I need upfront?
Fannie Mae and Freddie Mac require a minimum 5% down payment. If you put down less than 20%, you'll have to pay private mortgage insurance to protect the lender if you default. PMI costs about 0.5% to 1.5% of your loan amount per year, and the monthly cost factors into the debt-payment -to-income ratio. The FHA sets the bar at 3.5% down but requires an upfront mortgage-insurance premium, which is often rolled into the loan amount.

You can use part of your down-payment money for an earnest-money deposit, which you'll give to the seller with your purchase offer to show that you are a serious buyer. The amount required varies by location but typically runs 1% to 2% of the purchase price. The seller's agent will hold the money in escrow until the sale closes, when you'll receive credit for it. You may lose all or part of that money if you back out of the contract (which is why financing and home-inspection contingencies are essential additions to the contract).

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You'll also need money for closing costs — usually 3% to 6% of the home's purchase price. Sellers of entry-level homes often cover at least some of your closing costs, but loan guarantors limit how much they can help. If your down payment is 10% or less, the seller can pay up to 3% of the closing costs; and with 10% to 25% down, it's 6%. If a buyer takes VA financing, the seller can pay all closing costs plus up to 4% of the sale price to cover other buyer costs or to pay down debt so that the buyer will qualify for a mortgage.

You can use a gift for your earnest money, down payment, closing costs or reserves. The lender will require a gift letter from the donor stating that no repayment is expected. You can also borrow money from your 401(k) or IRA.

You may qualify for down payment and closing assistance from your city, county or state. Locate help in your area.

Where should I go for a mortgage preapproval letter?
You won't know for sure how much money you can borrow until you talk with a loan officer, who will review your financial profile and require you to document your resources with pay stubs, W-2s, tax returns, and bank and investment statements.

Read:  Find the right home? Find the right lender

Agents prefer that you be preapproved before they start showing you homes. That avoids wasted time and frustration looking at houses you can’t afford (a peril of surfing home-sale websites). Your real-estate agent may urge you to meet with a "preferred" lender, whether it's a favorite loan officer or a lender that's affiliated with the real-estate brokerage company. You can still shop for your financing elsewhere when a seller has accepted your purchase offer. Start with your bank or credit union. As a first-time borrower, you may feel more secure working with a local loan officer who can provide hand-holding. If you want to shop online, try www.mortgagemarvel.com, which provides real-time rate quotes from participating lenders who do business in your area. They won't call or e-mail you; you contact them to pursue a mortgage.

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When you're ready to make an offer, the lender will write an up-to-date preapproval letter for the specific property and the specific price you want to pay. The letter will show sellers you can afford their house, but it won't reveal whether you can afford more than you're offering.

How do I find a good real-estate agent, and what will I pay?
Agents receive a commission — the national average is 5.3% of the home sale price, according to Real Trends, a real-estate consulting company. The money is divided between the seller's (listing) agent, your agent and the real-estate brokerage companies that employ them. As a buyer, you're off the hook for payment (sort of) because the sellers pay the entire commission from the proceeds of the sale (with money you hand over to them). The more you agree to pay for a house, the bigger the payday for agents — and therein lies the potential conflict of interest for your agent.

Protect yourself as best you can by hiring an agent who represents your interest only — a buyer’s agent, with whom you sign a "buyer's agency agreement." The agent pledges to protect your interest (that is, he or she owes you fiduciary responsibility), and you agree to work only with that agent for a period of time. Or you can hire an exclusive buyer's agent, who represents buyers only, never sellers. To find one, visit www.naeba.org, or search exclusive buyer’s agent plus your city's name. Interview a few prospects, and don't sign a buyer's agency contract until you establish good rapport.

Can I still find a steal?
It's possible, but in most cities excess market value has been wrung out and home prices have stabilized or begun to rise. Your agent will help you prepare an offer based on recent comparable sales, the local sale — price-to-list — price ratio (if the average is 95%, it may not make sense to offer 90%), and the listing history (how many times and how long the house has been for sale, and with how many price reductions), plus the likelihood of competitive offers. In markets with low inventory, you may have to settle for a home that requires a little TLC.

Include an inspection contingency in the contract so that you can renege without penalty if the house doesn't pass muster. If your state provides a rescission period, you can arrange for an inspection before the deadline. If there's no rescission period, you should also include financing and appraisal contingencies.