Make sure you can really afford that down payment

The recent increases in mortgage rates have cut the amount potential buyers can borrow to make one of the largest purchases of their lives. Generally, the larger the value of the house, the more equity you can build, but one of the biggest barriers to owning a home is being able to afford the down payment.

"It is extremely important for home buyers to examine their finances with a professional lender before they start looking at homes," said Jim McEneaney, senior regional vice president of Coldwell Banker Residential Brokerage. "Knowing how much you can really afford makes the house hunt more productive, efficient and realistic."

Down payment. In the past, 20 percent of the purchase price was suggested as down payment, but that's no longer the case today. However, the higher the down payment, the lower your monthly payment will be. Mortgage calculators, many are conveniently located online, are useful tools for calculating approximate payment amounts.

Credit standing. Many factors will be considered when applying for a mortgage, such as your income, liquid assets or current debt. Your credit report also is a primary tool your lender will use to determine how big a mortgage you can manage. It shows your history of bill payments and outstanding debts. Obtain a copy of your credit report, in advance, and review it for any fraud or errors.

Additional costs. Don't forget to think ahead. Consider the cost of new furnishings, window treatments and paint as you assess your spending power. Also, remember that closing costs will range between two to five percent of your purchase price.