The moment I stepped into the foyer, I knew it was the house for us.

From the squeaky hardwood floors to the stained-glass windows welcoming the afternoon sun, everything about this bungalow at the end of a sleepy, bucolic street on Chicago's South Side felt like home to my husband, Scott, and me.
Newly married and neophytes in all matters of real estate, my husband and I arrived at this moment of wide-eyed, home-buying bliss after plenty of cajoling by our loved ones and a powerful government incentive—a federal tax credit for first-time home buyers worth up to $8,000, making buying a home a tempting proposition.

The American Recovery and Reinvestment Act of 2009 provides qualified first-time home buyers an $8,000 tax credit on a principal residence purchased after January 1, 2009, and before December 1, 2009. Unlike the standard tax breaks that accompany home ownership, the current tax credit can be applied to the closing costs and, in some instances, against the down payment of a home.

"Even without the tax credit, this is a wonderful time to buy a house," says Pat Vredevoogd Combs, past president of the National Association of Realtors. "Interest rates and home prices are both at historic lows."

While the current incentives have made owning your own home more attractive, the rules of home buying still apply. Now more than ever, there are no shortcuts. As Scott and I learned, tax credits alone won't buy us hardwood floors and pretty windows or cover all the closing costs; careful planning on our parts was necessary. Using the following steps as a guide, do your homework, save your money and review your financial situation before visiting a single open house.

Step 1: Assess Your Finances

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