The timing is great for you to consider buying a home. Low interest rates, $8,000 tax credit for 1st time homebuyer program, and a reasonable inventory of homes for which you would qualify. In many cases, todays prices are equal to the 2000-2002 time period. After 3 months of increasing sales and pending sales, sales activity is approaching the the 2005 period.
As one mentioned, I would suggest you go through the process of a a pre-approval with a lender or mortgage broker who can best explain in our market all aspects of your question. If you work with a national firm like Coldwell Banker, we have an in-house affiliate, Sunbelt Lending, where you can apply online, by email, or over the phone.
Downpayment Assistance----Assuming you are looking a single family residence, you can find out if you qualify for either VA or FHA financing. The latter as mentioned is 3 1/2% down. VA is 0% down. Neither of these programs are available for the purchase of a condo, townhouse, or villa unfortunately. The $8,000 Obama tax credit is the major incentive for buyers today, since it doesn't have to be repaid if you hold your new home for 3 years. You would receive a total refund of your taxes due and deducting that from the $8k, the IRS would issue you a check for the difference. Since May 2009, in many states you can apply for an advance loan equaling the $8k;however, I would need to research in our area which non-profit government agency you would contact. That is one of the main reason, I suggest speaking to a lender to clarify.
Other Options for Your Downpayment----A buyer has closing costs to consider as well as perhaps a minimum of 3 1/2% down. (lender or a good realtor can itemize and estimate for you). Now your buyer agent realtor should discuss the option of asking the seller or perhaps the bank to contribute up to 6% of the contract price to you at close.
Reason to Act Soon----at the moment, the $8k credit expires Nov 30, 2009. Once you and a seller have a signed contract, it is more common today to take 30-45 days because of significant increase in activity and delays getting appraisals. Over 50% of our sales today are short sales or REO (bank-owned). Buyers and agents often are afraid of short sales, but there are excellent values to choose from. Banks are getting better and my last 3 short sales closed in less than 3 months; but remember you have to close before November 30. This is why it is critical to interview or find a well-trained short sale/REO realtor who has lots of experience in the area as well as obtaining answers to your questions.
I wish you the best in your search for a dream home. When one considers that home ownership is often approximately the same as today's rents before tax benefits, it is an excellent time to be looking. If I can help, please feel free to contact me.
Randy Schweitzer, Coldwell Banker, Downtown Sarasota