I love this! How smart to ask the question. Now is the perfect time for you since the 1st time homebuyer tax credit (up to $8,000) may be available to you if you qualify. Your first deadline is at the end of April to find a home. Potentially, that means a check sent to you by the government simply for buying a home. It doesn't get any better than that!
I think that I read your question as should you pay cash and purchase a property outright. If that is the case, I am fully in favor of owning paid in full, debt free real estate. If you think about it, everyone wants to pay their mortgage off. Debt equals risk. Can you imagine how secure you would feel if you have a home that is paid off and lose a job, or have another financial setback? You will not have to worry about making the mortgage payment, or possible foreclosure. Lower stress. With real estate being one of the best, and relatively safest investments - you can't really go wrong regardless of how you pay for it.
One of the biggest arguments that people give for financing property is that you would get the mortgage interest deduction. That is a really good benefit if you must finance it. But, if you have a choice, instead of simply paying the bank - let's say $4-5,000 a year just to get that deduction, why not write a check to your favorite charity for $4-5,000 and get the benefit of a charitable contribution to someone that can really use it. Either way, you can still deduct your property taxes and other costs when it's time.
While I happen to be a real estate agent, (& even if I weren't), my position would be the same. Find someone that you can trust to protect and guide you through the process since it may be the largest financial investment of your life. Then, if you can - pay cash for your American Dream. Good luck and have a great 2010!