"Buying your first home is a very important step to take," said Judy Hamilton, a certified mortgage planner with Bankers Network Corp. "I take the time to have my clients answer some important questions to see if they are ready to take the next step."

If Hamilton's clients score eight or more points on her questionnaire, she considers them ready to move forward with the buying process. She also examines their short- and long-term goals.

"I take a look at what they can afford to pay monthly and also what they can afford to save. I balance them both so that the equity in their home is doing two things: building equity and also creating wealth with their savings," Hamilton said.

She also discusses the benefits of home ownership with clients to let them know that monthly payments can be controlled, unlike annual rent increases, and she reminds them that renting will incur a monthly expense for life versus paying off a home loan over a period of time. In addition to any tax benefits, Hamilton believes appreciation is also a big factor. Pride of ownership is important, too.

"In addition to the benefits, I let them know what kind of loan programs are available to them. Today a first-time homeowner has many choices and should talk to a well-versed lender that can explain the different options. There are other loans that, with very little down payment and closing costs, make it possible for someone to own their first home," Hamilton said.

Although Hamilton doesn't handle government loans, there are 103 percent or 100 percent loans available to anyone who wants to purchase a home, depending on their qualifications. She believes the consumer needs to be educated about different loan options and the ramifications of increases in interest rates.

"Alan Greenspan has said that he is planning to raise the prime rate to an amount between 7 and 8 percent by the year's end. What that means is that some of the old loans may not make as much sense as before," Hamilton said.

A recent report from the California Association of Realtors shows the median household income of $53,240 is $56,080 short of the $109,320 qualifying income needed to purchase a median-priced home at $470,920 in California. The San Francisco Bay Area reported the highest gap in the state at $84,690 with potential homeowners having a median household income of $67,750 but needing a qualifying income of $152,440 to purchase a median-priced home at $656,690.

Nancy Soulé of GMAC Mortgage in San Jose works with many first-time homebuyers. She specializes in CalHFA loans, a state-subsidized program for first-time buyers who purchase in Santa Clara County under $496,804.

"With this program a buyer gets fixed-rate financing, so the entire payment is relatively low. It can be financed 100 percent in some cases, depending on income levels, and can include financed closing costs," Soulé said. "The maximum income for households of one to two people is $112,999, and for three or more people it is $129,949. Teachers may qualify for additional benefits, and the state program can be combined with other local programs."

Soulé believes one of the biggest advantages to homeownership is getting in on the appreciation traditionally experienced by long-term investing in real estate.

ARE YOU READY TO BUY? SCORE EIGHT POINTS AND MOVE FORWARD

If you score eight points, you're ready to move forward and buy a home.

Are you sure you want to buy a home? Yes = 1 point

Do you anticipate any large expense in the next two years, such as buying a car or having kids? No = 1 point

Do you expect to stay in your current job for the next two to three years?
Yes = 1 point

Do you know how much you can realistically afford to pay for housing?
Yes = 1 point

Do you have enough money for a down payment and closing costs? Yes = 1 point

Have you been pre-qualified for a mortgage so you know how much you can afford? Yes = 1 point

Will your excising debt reduce your ability to qualify for a mortgage?
No = 1 point

Is the amount you can borrow sufficient to enable you to buy a home you can truly enjoy? Yes = 1 point

Source: Judy Hamilton, Bankers Network