HOME BUYERS FAIR : Selecting the Right Realtor : Saving, Low Debt Help First-Time Buyers : First Home: Substantial sacrifices and lowered expectations are just part of the down payment.

You’ve scrimped for years--eating in instead of going out, shredding credit cards, watching television instead of going to the movies--anticipating the American dream of buying your first house.

For many first-time home buyers, though, the American dream is anything but sweet. Buying that first house often involves a lot of hard work, frustration and mind-numbing numbers crunching. But real estate experts say the benefits of homeownership are more than worth the effort.

“First-time home buyers face a considerable challenge,” said Glen Crellin, vice president of the National Assn. of Realtors.

Experts advise those who are thinking about buying their first home to be prepared by saving money and reducing debt to improve their credit rating.

“There will be a period where you find a lot of free places to visit, travel closer to home, your wardrobe will be less spiffy. It’s hard,” agreed Peter Miller, a real estate broker and author of “Buy Your First Home Home.”

Steadily rising real estate prices, which are not expected to drop to affordable levels any time soon, are another reason buyers should do whatever it takes to get into their first house, experts said.

The experience of buying a first home offers three opportunities in the wonderful world of residential real estate: an opportunity to build equity, a real opportunity to build debt and the not-so-welcome opportunity to come face to face with reality.

“(First-time buyers) need to approach the housing market with realistic expectations,” Crellin said.

“If they can come to the table with the understanding that the first home is not going to be their dream home with all the luxuries and frills they think they want, they can find a home in a neighborhood that will allow them to begin enjoying the homeowner life style and begin building equity,” he said.

There’s no question: Getting a toehold on homeownership is tough, especially in the high-priced California market.

According to the California Assn. of Realtors, only one-fifth of all families in the state earn the $61,420 it takes to qualify for a loan to purchase the median-priced home of $188,477.

Equally challenging, a mere 10% down payment on that median-priced home would be more than $18,000--a nest egg that few first-time buyers have accumulated.

That challenge can be mitigated somewhat by an aggressive personal savings plan, friendly family members, the government and quasi-government agencies.

President Bush has proposed the Family Savings Plan, which would allow individuals to withdraw up to $10,000 from their Individual Retirement Accounts for first-time home purchases without having to pay the 10% tax on early withdrawals.

The Federal National Mortgage Assn., in an effort to help more people qualify for their first homes, introduced this spring a “two-step mortgage” that blends elements of the traditional fixed- and adjustable-rate mortgage.

The plan allows people to pay less during the initial years of the loan, when they need the cash the most.

Under the new mortgage, buyers pay a discounted rate of up to three-eighths of a percentage point below market rates for a 30-year mortgage during the first seven years of the loan.

The rate would be revised at the end of the seventh year based on an index linked to the 10-year Treasury bond. Borrowers would then pay that rate for the remaining 23 years of the loan’s life.

The plan limits the high end of the interest rate to no more than 6 percentage points above the initial rate.

Miller said this loan may not be suited for first-time buyers because it requires a 10% down payment, an unattractive feature considering that Federal Housing Administration loans require a 5% down payment and Veterans Administration loans require no down payment.

“This is an important product but I think they pegged it to the wrong market,” Miller said. “What we’re looking at is a good loan for repeat home buyers.”