OMG! Sooooo much misinformation in this thread!! I'm sorry guys, I know you all mean well, but jeeeeeebus!! Where do I start?!?
+ Markets change! From year to year and from location to location! Get a Realtor that knows your area and is willing to help you through this! The seller is paying for your agent and you will NOT save money by trying to buy without representation! That will just lead to the sellers agent making double. If your agent doesn't want to work for 2%, then find another agent.
+ Get prequalified. You don't want to waste your time or anybody elses if you can't buy right now and you certainly don't want to get your lady's hopes up if it's not an option. Typically, you need 3.5% down (FHA). Fannie Mae (HomePath) and Freddie Mac (HomeSteps) homes can be as little as 3%, but that goes with the home (these are Federally insured foreclosures). Are you a Vet by any chance? VA loans require no down payment and no PMI. Other than that, some communities or some rural areas have 100% financing through USDA loans or grants; a good Realtor and a good loan officer is going to be able to tell you about that.
+ Yes, it's a buyer's market, but it's a weird one and it is NOT the same all over the country! Around here, sellers are losing their shirts and prices are in the toilet, but homes are selling 48 hours after being listed (at the right price, of course)! Unless my client is looking for something very unusual or unique, I won't even show a house that's been on the market for more than 10 days... and that's pushin' it!
+ Around here, the three big banks require a prequal from their institution in order to submit an offer on one of their foreclosures, so I encourage my clients to get a prequal from Wells Fargo, Bank of America, and Chase before they start looking. We don't want to find the perfect house and then miss out while we're waiting on a letter. If you really want to shop around for the best deal on a loan, I would ALSO get a good faith estimate from a credit union and a mortgage broker. If you do all this within a matter of weeks, your credit score won't be negatively effected by having multiple inquiries - you're no longer penalized for shopping around like you used to be, but you've got to work fairly fast (3 weeks). You can also get a copy of your credit report from the first lender and provide it to subsequent lenders with the understanding that they will have to re-pull credit before a full approval is issued (this would probably have to happen anyway).
+ Foreclosures don't take a long time, short sales do. A foreclosure should close escrow (ie. the process is complete, here are your keys, congratulations) as fast as your loan officer can process the loan (45 days usually).
+ With short sales, it's not uncommon to wait 90 days just to get bank approval - then you've got to wait another 45-60 days to close the deal. I've had some deals take 6 months for bank approval! Or longer! The fastest short sale I've done was just 6 days to bank approval, but that's super rare. Around here, only about half of short sales ever close escrow, and that's a significant improvement from a couple years ago! IMO, they're still worth all the time and hassle unless you're in a real time constraint or you or your lady get real attached easily and are going to end up heart broken. The important thing is, if you're going to submit an offer on a short sale, don't stop looking until you get bank approval! Ask your agent up front if they're going to be willing to do that. You
can have multiple offers out there, anything less is putting all your eggs in one basket. (That's with short sales only, while you're waiting for bank approval since such a low percentage actually receive it).
Sorry I can't go over more with you, hopefully that helps! If you (or anybody else) have any other specific questions, feel free to drop me a line (I may forget to check back in here)... just mention you're from

!
Billy <at> RedCedarRealty <dot> com
Oh, in case you're wondering, I've been in the business for about 8 years now, many of which were in new home sales. I've closed over 100 escrows. Now I operate my own independent brokerage.
Good luck man! It's a great time to buy!
Billy