Qualifying for a home loan isn't as hard as many potential buyers believe. The FHA offers low-down payment loans at low interest rates.

#5: Debunk mortgage myths and know what it really takes to get a home loan.

Bad news travels fast, so when mortgage guidelines tightened up, word spread faster than rumors of an A-list baby bump sighting. Problem is, the rumor mill is just not the most reliable source of money advice. It's just not as hard to qualify for a home loan as most would-be buyers believe. If you want to jump into this buyer-friendly market, here's the straight dope on what it actually takes to get a loan.

What's your number, baby? Contrary to popular belief, it does not take 20 percent down and a 850 FICO score to get a home loan. When the subprime, zero down, must-only-be-human-to-apply-type loans disappeared, the Federal Housing Administration (FHA) stepped up to make sure that normal folks would still be able to afford homes by vouching for low-down payment loans. An FHA loan -- now the loan du jour -- only requires a 3.5 percent down payment, and you can get one at most banks with a decent credit score: 620 or thereabouts. And these are really good loans -- fixed for 30 years at low interest rates. No, they won't let you go out and buy a Russell-and-Kimora-esque manse on a nurse's salary, but you didn't really need to do that anyway, now did you?

The downside -- with an FHA loan, you'll pay an extra Mortgage Insurance Premium to defray the risks of lending to you. It's an extra 1 percent at closing compared to what you'd pay for private mortgage insurance on a conventional loan. So if you have at least 10 percent down and a strong credit score, look at whether a conventional loan would save you a chunk of change on mortgage insurance.

Supersized loans. If you need a home loan that's above the FHA loan limit in your area -- for 2009, between $417,000 and $729,700, depending on where you live -- you'll need a conventional (i.e., non-FHA) loan. That means you'll also need about 10 percent down and good credit -- a 720 FICO is a pretty common requirement to get good interest rates. If you have the 10 percent and you need a loan over the $417,000 conforming limit but under the FHA loan limit for your area, you should probably compare rates on FHA and conventional loans. FHA loan interest rates shoot up for "jumbo" loans. Check https://entp.hud.gov/idapp/html/hicostlook.cfm to see what FHA loan limits apply to your area.

Ratio-ning. There's always the question of how much debt you can have and still get a home loan. But that's not the right question: if you meet the credit, assets and other guidelines for a loan, you'll qualify for that loan. But the loan amount for which you qualify hinges on your debt-to-income (DTI) ratio, an expression of how much of your income will be obligated to debt payments after you take on a certain mortgage payment. These days, you can get a loan with a total back-end maximum DTI ratio of 43 percent to 50 percent, depending on the bank, your other qualifications and the loan program.

Minus the mortgage gibberish: all the monthly bills that show up on your credit report plus your new mortgage can't exceed 43 percent to 50 percent of your gross monthly income. Your mortgage pro can help you work backwards from various price points to figure out how much you can afford with your current debt and how much more purchasing power you'll get if you pay off some bills or bulk up your down payment.

Too many would-be buyers wrongly assume they won't qualify and think they have to let this incredible buyer's market pass them by. Don't let mortgage myths make you miss out!

NEXT: #4: Know when it's time to refi >>

GO TO: Drama-Free Home Finance Main Page