Excellent time to buy.
First, get in touch with a mortgage broker. Preferably one that is local. Perhaps even a local bank or credit union. Find out what you qualify for. And from there you ccan figure out how much you can actually afford.
Then, find a good real estate agent in your area who will work with and for you. A buyer agent usually does not cost anything because his/her fees are paid from the seller. Usually. Then they will educate you in the foreclosure process. And hopefully you will be able to find something to your liking.
REO properties can take a while to hunt down and purchase. Keep this in mind while realizing that the government is giving a tax break of $7500 to first time home buyers. Your agent can discuss this with you as there are restrictions.
Hope that helps.