Amy Schroeder thought home ownership was a few years off.

She hadn't even begun saving for a down payment, and she assumed she'd need a substantial amount to buy anywhere in Chicago, a city known for its pricey real estate.

It was her mother who set her straight. She told Amy that some types of loans didn't require a down payment and would cover a home's entire purchase price.

"As soon as she said that the light just went off," says Amy, a 31-year-old magazine editor. She called a friend, who is a real estate agent, and began researching up-and-coming (read: affordable) Chicago neighborhoods close to public transportation.

She zeroed in on Humboldt Park, a diverse neighborhood on the northwest side of the city. Since moving to Chicago six years ago, she had rented in bordering neighborhoods and was already familiar with the area.

Amy saw eight properties her first day and fell in love with a one-bedroom, one-bath condo in a building being converted from rental apartments.

Light from an abundance of windows filled the third-floor space. Garage parking was available. And best of all, it was cheapest of the bunch.

"A month later I closed on the place," Amy says.

Amy's agent passed along of a list of recommended lenders, and she chose American Home Mortgage. "They were the most responsive, and offered me the best rate, too," she says.

Putting no money down can be risky when home prices are stagnant or falling, as they are right now in many parts of the country. Amy could have wound up owing more than her new apartment was worth.

But the appraisal on Amy's condominium came back $20,000 more than she paid for it.

"I feel like I made a good investment," she says.

Her mortgage broker also discovered a city program for first-time homebuyers that offered to pay part of her closing costs and the building's developer had a closing credit, too.

Because of that, and an incentive from her developer, Amy actually had some cash left over after the closing.

She smartly put it right into her new condo.

"I used that money to buy new appliances for my kitchen," she says.

Only three weeks after closing, Amy learned that her lender had filed for bankruptcy. Luckily, she wasn't affected because her loan had closed, but she did have to find out where to send her second mortgage payment.

Now in her own home for two months, Amy has dedicated herself to "spreading the gospel" of home ownership.

"I thought it was going to take me forever to be able to do this," she explains. "It is exciting to own something and not throw away your money away every month on rent."

Amy offers the following tips for those buying their first home:

• Don't be afraid to negotiate. Although Amy bought her condominium "as is," she made a list of items for the developer to fix -- and then made sure he did.
• Work on your credit score. Even though she didn't have money for a down payment, Amy's stellar credit and steady job allowed her to obtain 100% financing at a time lenders were imposing stricter requirements to qualify for such loans.
• Find out if you qualify for assistance from your city. Ask your real estate agent and mortgage lender about programs that might help you with a mortgage, a down payment or closing costs because of where you buy, your occupation or your income level. Or better yet, get on the Internet and find out for yourself.
• Take advantage of a buyer's market with lots of homes for sale and prices stable if not falling. "I didn't think you could find condos for less than $200,000 in the city, and I totally did," Amy says.

By Darci Smith

Interest.com Contributing Editor

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