There were 1 million foreclosures nationwide in 2010 and there are expected to be more in 2011. Many consider now a good time to buy because mortgage interest rates and home prices are low. But how can you keep from ending up in a distressed-sale situation, or ending up underwater with a loan amount that is higher than the market value of your home?

According to Robert Shiller, a professor at Yale and known for the S&P/Case-Shiller Home Price Indices, housing bubbles aren’t that common and are usually more localized than the one that began in the summer of 2006, which wreaked havoc with the housing market in this country.

Shiller points out that housing bubbles are dependent on extreme public exuberance. He and colleague Karl Case have been surveying homebuyer opinions since 1988. Speculative investment fueled the most recent housing bubble.

If anything, homebuyers now see homes as a risky, rather than a great, investment. This is a move in the right direction, and a good guideline to keep in mind going forward. Home prices will stabilize and appreciation will return to the market at some point. But we’re unlikely to see the stratospheric prices reached in some areas of the country in 2006 and 2007 anytime soon, if ever.

For decades, homebuyers have viewed a home as more than just a place to live. It was a virtual piggybank that buyers could use to pay for college education, vacations and new cars. One way to keep your head above water is to resist the temptation to borrow against your home.

HOUSE HUNTING TIP: Low-down-payment, interest-only, adjustable-rate mortgages (ARMs) got people into trouble during recent years. Many lost their homes in foreclosure. It has been impossible to obtain those loans during the past few years. However, recently they are being offered again, although the qualifying criteria are stiff. Even if lenders ease up on their requirements, be careful about easing up on yours.

Don’t buy beyond your means. There was a time back at the end of the 1970s and again at the end of the 1980s when the appreciation rate was high and it was common wisdom to buy the most expensive house you could afford. Now, you should buy a home that will suit your long-term needs, so that you don’t have to move again soon. Make sure you reserve cash for unanticipated emergencies.

Moving in a down market could cost you plenty when you consider the sale costs and that you might have to sell for less than you paid. Home prices could be lower or higher than they are now in another few years. If you aren’t forced to sell then, you can ride out the downturn in your comfortable home.

Some buyers are so intent on buying while interest rates are low that they may be susceptible to making a bad decision. For example, if you are a family of three, but expect to have more children, don’t buy a two-bedroom, one-bath home. You’ll be shopping for a new home within a few years.

Now is not a time, in most areas, where you can be certain the home you buy today will appreciate enough to cover all your costs and generate cash for a larger down payment to buy a bigger house. Don’t bank on appreciation.

Have any home you seriously consider buying inspected thoroughly by well-respected local inspectors. Ask the inspectors to prioritize the work that needs to be done. Stay on top of maintenance. This is essential to preserve the value of your home.

THE CLOSING: Buy in the best area you can afford for resale value.

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