You can buy a Phoenix home for $150,000

There are 125 metro areas including Phoenix where starter homes cost $150,000 or less.

By Marilyn Lewis of MSN Real Estate

Believe it or not, you can get into a $150,000 starter home with less than $2,500 in savings. You'll need to leverage the new $8,000 federal tax incentive and have at least average credit, but your monthly payment would work out to about $1,000 a month including taxes and insurance.

According to National Association of Realtors economist Lawrence Yun, starter homes are usually priced about 30% below a local market's median. (The "median" is where half the homes cost more and half cost less.) So the most promising cities for families to buy a first home would have median prices of $215,000 or below (as a $150,000 home is about 30% less than the $215,000 median).

According to the NAR, 125 metro areas including Phoenix had a median price of less than $215,000 at the end of the first quarter; you'll find the list below, plus links to find homes priced 30% below each market's median. In some of these markets, that starter home will cost far less than $150,000.

3 tips for new buyers
Before you beat a path to the nearest open house, educate yourself on the homebuying process.

Curt Lorden, senior loan officer with Residential Finance Corp. in Tampa, Fla., offers this guidance:

1. Buy less home than you can afford. "Just because we might be able to qualify you for it, doesn't mean you should go for the max," the loan officer says. Leave slack for retirement and college savings. Rather than what you want, consider what, realistically, you need: "We, as Americans, got a little bit egregious as to how much house do you get," he says. "The reality is, you got there and you only needed half of it."

2. Think ahead. Since prices are still dropping, be prepared to stay in your new home at least five years. When prices recover, you should at least break even when you sell. Forget about making a fortune on a home. Those days are probably over for a while. And, if your family is growing, get a home big enough to meet your needs five years out rather than going for granite countertops and high-end upgrades now.

3. Stash the credit. If you don't need the tax credit for a down payment, use it to pay down consumer debt, to start a college fund for your kids or to fatten your retirement account.

You also can educate yourself on the home buying process by taking a class. Banks, credit unions, financial counseling agencies, community colleges and state extension services offer free or inexpensive classes and workshops. Watch your local papers and TV for announcements or see HUD's list of government home buying programs, including classes and counselors.

Find a loan
Once you're ready to get serious, your first step is to find the loan, Lorden says, even though it may seem backward when what you want to do right now is shop.

"If I had a friend or a family member looking to buy their first home, I think it would be very important to sit down or talk over the phone with a mortgage consultant, even before they retain [a real-estate agent]," Lorden says.

Apply to several lenders. Compare annual percentage rates (APRs) to see who's offering the best deal.

Lenders will offer to "pre-qualify” you, giving a rough idea of what you can borrow. They'll chat about your finances and pull your credit score. But what's the point? It's only an estimate. You can't hold them to it. You won't know how much they'll truly lend you and what the cost is until you get a lender to commit to a loan amount and interest rate — a "good faith estimate." For that, you must apply.

Lenders will ask for documents proving:

• Your income
• Your bank account balance
• Your monthly expenses, including what you owe and whom you owe it to.