Step 1: The key to moving from renting to buying, experts say, is to focus on what you can afford in the short term-say, within the next three years-rather than assume you can't invest in real estate until you can afford your dream house. To figure out what kind of home fits into your budget, you'll need to calculate how much debt you pay every month. Not sure what counts as debt? Think in terms of the money you have borrowed. For example, a student or car loan is debt; your phone bill or rent isn't. As for credit cards, yep, they're debt (because instead of paying in full when a bill is presented to you, you're asking the credit card company to cover the cost).

Experts say that the total amount you pay each month toward debt should not exceed 36 percent of your monthly income before taxes. So if your pretax pay is $3,000 a month, your monthly debt obligation should not exceed $1,080. If you're under this amount, that's good-because you can take on the additional debt of a home mortgage (although you shouldn't exceed that 36 percent ceiling when your monthly mortgage payment is added in). If you're above it, you need to start whittling down what you owe; for example, if you get rid of your special cable package and instead go for basic television, you can apply the difference toward paying off your credit cards. And remember: Now is not the time to take on additional debt, so hold off on, say, applying for that car loan.

Step 2: Once a home loan is within reach, you need to start saving for a down payment, for which you'll generally need from 3 percent to 20 percent of the home's purchase price, or between $7,500 and $50,000 for a $250,000 home. (Keep in mind that the more money you put down, the lower your monthly mortgage payments will be.) Ask your employer if you can have a certain amount automatically taken out of every paycheck and deposited into a separate savings account (if you never see this money, you're less likely to spend it). Even if that's not possible, you'll want to keep your house money apart from whatever account you use to pay the bills so that you're not tempted to spend it.

But what's the right kind of savings account? Because, as we noted above, your aim should be to buy a house as soon as possible, you should look for something that pays interest (which means you're earning money on your money) without putting your savings at too much risk (as would happen in the stock market). Some good choices: a certificate of deposit or a money market account, both of which are available at your local bank.

Step 3: Even while you're still saving, you should be getting ready to buy. Look through your employee-benefits handbook to see if your company offers any kind of homebuying assistance plan-many offer services such as advice from on-staff financial experts and assistance securing loans. There are also some terrific resources aimed specifically at Latinos, like Freddie Mac's bilingual CreditSmart Español guide, which walks you through the home buying process (go to espanol), and the National Council of La Raza's Homeownership Network program, offered in select cities (

Next order a copy of your credit report with your credit score (available for about $15 at services like Equifax, Experian, and TransUnion), which essentially indicates how good you are at paying your bills. Make sure all of the information on it is correct, and see how you can improve your credit score (the closer you are to the top score of 850, the lower the interest rate of your mortgage). One easy way to do so is to close some of your credit card accounts, because by reducing the amount of debt you can rack up, you reassure your lender that you'll be able to pay your bills on time.

Of course, if you have had serious credit problems in the past-such as defaulting on a loan-you will need to do some in-depth credit repair before anyone will give you a mortgage. The easiest way to do so is with the help of a local credit-counseling service, which you can find through the National Foundation for Credit Counseling (800/388-2227). Yes, you will have to pay a small initial fee ($23 on average) and ongoing monthly fee ($16 on average), but the credit counselor will get your lenders off your back and help you set up a realistic schedule to pay off your debt.

Once your credit report is in order, you are ready to make an appointment with the mortgage expert at your bank, who will tell you what kind of paperwork you'll need to apply for a home loan. Typically you'll need three months' worth of recent bank statements, one month's worth of pay stubs, and two years of tax returns. You'll also want to ask the bank or mortgage broker for a preapproval letter, which lets you know how large a mortgage you can take out and what interest rate you're likely to pay. As soon as you have that in hand, you're ready to go house hunting. But should you try to buy directly from the seller or go through a broker? Generally, you should pay less for a home that is for sale by the owner, since he or she is saving money by not paying a real estate agent's commission (which typically hovers around 6 percent of the purchase price). But if you use a real estate agent-particularly one who works for you instead of the seller, called a buyer's agent-he or she can give you a market analysis to help you determine the true value of the home you're looking to bid on, not to mention help you fill out all of the paperwork.

Published: 01/03/2005 in LATINA mag, a great mag
A Real Estate savvy pal promptly wrote me:
"You might want to mention a great way that is becoming more popular and that is: Lease Option!
I'm a real estate investor (not an agent) and work with people who are trying to buy their own home in today's market - all over the country..The benefits to buying this way are several: 1) Credit need not be a problem... even recent bankruptcy does not necessarily disqualify someone from various programs. 2) Down payment is substantially lower than traditional buying a home. Usually between $3,000 and $10,000 (depending on the home and the situation) - and that comes off the price of the home. 3) No real estate commissions to be paid.
4) After a period of 1 to 5 years (again, depending on your situation and the seller's) the home is financed at an agreed upon price and you become the home owner. 5) Usually a portion of the monthly rent goes towards the down payment.6) I like to work with lenders who can tell the potential buyers what needs to happen in order for them to get their home loan in the 1 - 5 years. That way, when it is time for the option to be exercised, there are no surprises about qualifying. 7). The lease option tenant is responsible for the upkeep of the home, but
can usually also make improvements to "their" property during the Leasing period.

If anyone has questions, I'd be happy to answer them. I live in Portland, OR and work with people in several other places. Perhaps I can help? Regards, 503-659-9052 call  about questions. Deborah Bauer,