Determine how much you can afford -  Prices have changed drastically in last 12 months. You may have to re-think where you want to live. In addition, interest rates are on the rise, increasing monthly payments.

Lenders typically don't want their borrowers' total home expenses -- including mortgage, taxes and insurance -- to exceed 28 percent of their gross income. A borrower with household income of $60,000 a year, paying off a car loan at $300 a month and property taxes of $3,000 a year, would be eligible for a loan big enough to buy up to a $300,000 home on a 30-year, fixed 6.5 percent rate.

It's important to know your buying power. It'll save you time and money while negotiating. Remember that every single interest rate increase, prices many out of the market.