Despite the tough economy, there are several factors currently making homeownership more appealing. There's a huge inventory of homes at discounted prices, near-record low mortgage rates and a new first time homebuyers tax credit of $8,000. While the time might be right to take the plunge toward becoming a homeowner, like any major financial decision, it's one that requires careful consideration. The Illinois CPA Society offers these suggestions for making a wise buying move:

1. Be Realistic - don't spend more than you can afford.

The easiest way to decide how much you can afford is to determine what size mortgage payment fits into your budget. As a general rule, your monthly housing cost should not exceed 25% to 30% of your gross monthly income if you want to qualify for a conventional mortgage. Monthly housing costs include your mortgage principal payment, interest payment, property taxes and home insurance.

To determine your possible mortgage costs, use a mortgage calculator like the one found on the AICPA's (American Institute of Certified Public Accountants) 360 Degrees of Financial Literacy Program at www.360financialliteracy.org. On their site you can click on "Home Ownership" to help find a range for your home price and mortgage.

2. Don't Forget the Costs Beyond the Price - there's more than meets the eye.

There are a lot of bargains to be found in the current huge inventory of unsold homes. However, the home may not be a bargain if in the long run you'll incur more expenses than you can afford. Consider the other monthly costs beyond your mortgage payment like utilities, which will vary by the size of the home, and what you need to pay for moving expenses, furniture, home appliances, general maintenance and home improvements. Make a list of all the possible one-time and ongoing expenses so you have an accurate picture of how home ownership will change your financial situation. Also, get a home inspection and a detailed list and/or cost options for any big ticket items needing maintenance or replacement. Ask your seller to offer an allowance on the sales price for these costs.

3. Review Your Credit Situation - get in good financial shape.

When you apply for a mortgage, the lender will examine your financial information to determine whether you qualify for the loan. Standards for qualifying for a mortgage have become very tight; if you have a large amount of outstanding debt or if you've missed car loan or credit card payments in the past, you may not qualify.

Before starting your home search, evaluate your current credit situation and history. You can get a free credit report from each of the three credit bureaus each year or go to www.annualcreditreport.com. If you find any problems with your credit history or credit score, you can take steps to repair your record before applying for a mortgage. You should also notify the credit bureau about any errors you find and ask to have them corrected. Don't cancel any credit cards before you apply for a mortgage. Canceling the cards lessens your available credit and may lower your credit score.

4. Remember the Tax Advantages - especially the new First Time Homebuyer's one time credit.

With the expanded first time homebuyer credit created under the Federal American Recovery and Reinvestment Act, homebuyers can claim a credit amount to $8,000 for purchases made in 2009 before December 1. Unlike an earlier version of this type of credit, the 2009 credit does not need to be paid back unless the home ceases to be the taxpayer's main residence after a three-year period following the purchase. For more information on the credit, visit www.irs.gov.

You are also allowed to deduct the interest you pay on up to $1 million of debt used to buy, construct, or improve your principal residence or second home ($500,000 if married filing separately). That's a tremendous advantage to homeownership that you'll reap benefits from right away. In addition, you can deduct the real estate taxes you pay on your home.

Turn to a CPA if you need help determining how much house you can afford or on selecting the best mortgage for you. A CPA can help you make smart decisions and plan for a stronger financial future. For more tips on home buying visit the Consumers section of the Illinois CPA Society site, www.icpas.org.

About the Illinois CPA Society

The Illinois CPA Society, founded in 1903, is the fifth largest state CPA society in the nation, with approximately 24,000 members. It is the premier professional organization that represents CPAs in Illinois. During its over 100 years of existence, the Society has advanced the highest ethical and financial standards of the profession, and has been a leader in educating the public on financial issues.

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