Michael Corbett's House-Hunting Tips: Put 20 Percent Down

This week's tips:

#1: Put 20 percent down. When buying a home today, it's critical to be conservative and to safeguard your purchase. Forget the "no money down," or the 5 and 10 percent down payment purchases. Many banks won't give you a mortgage otherwise, and a 20 percent down payment gives you some equity right from the start and usually gets you a lower interest rate. Too many home buyers purchased homes with little or no money down and when market prices sank, they were left owing more than the house was worth with few options to ride out the storm. Bottom line: If you can't scrape together the 20 percent, then you probably can't really afford to buy just yet.

#2: Whatever the bank will lend you, take 20 percent less. It's easy to fall into that all-you-can-eat attitude when it comes to your first home purchase, but remember that your eyes may have a larger appetite than your wallet -- and the bank may be willing to loan you more money than you can actually afford. If a mortgage broker evaluates your finances, income, and savings and says, "Well, Mr. Smith, we think that you can qualify for a $400,000 mortgage. Which means you can buy a house for $500,000! Congratulations." You say, "No thanks!" Subtract 20 percent from that $400,000 loan amount and plan on a $320,000 loan instead. By taking 20 percent less of a loan than what the bank has to offer, you are safeguarding yourself and your financial security by automatically buying a house that is more affordable.

For more tips and guidelines, check out Corbett's book "Before You Buy!" on Amazon.com.