4 tips to help determine if owning a home is right

Home prices aren't what they used to be. Their steady decline may be causing your anxiety to rise. After all, buying a home is a big commitment.

But even in a down market, how you go about deciding whether to buy a home remains the same. Taking a few practical steps to prepare can make navigating the search for a home and a mortgage easier.

Here are a few tips to consider:

1. Determine how much you can afford.

There are several factors that influence your budget, but an online calculator can be a useful starting point. For instance, the calculator at Bankrate.com can help you work through what you need to consider, http://tinyurl.com/yjgnoxf .

Real estate websites, such as Zillow.com and Trulia.com, also offer calculators that can assist with your financial planning throughout the process.

2. Know the strength of your credit score.

Go to http://www.annualcreditreport.com and check your free credit report for accuracy. You'll also want to buy your credit score so you know where you stand. The cost for a score is usually under $20. Go to Myfico.com to learn more.

Most banks require a score somewhere around 680 for an attractive mortgage interest rate. If your score is much lower, you may need to take the time to repair your credit before applying for a mortgage.

3. Determine whether renting or buying makes more sense.

Rents are climbing in some markets where homes have become quite affordable.

Trulia.com issues a quarterly report on the nation's 50 largest cities, comparing the median list price of homes to the cost of renting. In the latest report released in April it found that buying a home is more affordable in most major cities. In New York, Fort Worth and Kansas City renting cost less. See an interactive map at: http://explore.trulia.com/datavis/rentvsbuy/Q2-2011/ .

A buy vs. rent calculator can give you an approximation of how much you might actually save if you buy a home. Many former renters find that within four to five years they're saving money by owning. This is due in large part to tax benefits. The mortgage interest tax credit, for example, reduces your taxable income by the amount of money you pay in interest on your mortgage. Ginnie Mae provides a calculator: http://tinyurl.com/3rt5n37 .

4. Know what to expect as far as a down payment.

Traditional bank lenders may expect 20 percent down, which can be a major obstacle for many homebuyers. That equates to $40,000 on a $200,000 home. However, lower down payments may be accepted in some cases. Check on the government FHA program, which allows down payments for as little as 3.5 percent for borrowers with good credit.