Lenders take borrowers' savings, job and credit histories and debt-to-income ratios into consideration when determining whether or not they qualify for a mortgage. In the past, borrowers could spend no more than 28 percent of their gross monthly incomes on housing and 36 percent on all outstanding debts. However, lenders now let homebuyers set aside as much as 45 percent of their income for housing and 50 percent for total debt payments - especially in areas where housing costs have skyrocketed.

Though larger loan amounts allow borrowers to purchase bigger homes and deduct a greater amount of interest from their income taxes, they might want to consider smaller houses or condominiums to avoid stretching their budgets.

Harvard University's Joint Center for Housing Studies estimates that 30 percent of the nation's households devote at least 30 percent of their income to shelter. Furthermore, many families depend on two incomes to make their monthly payments and are easily pushed into foreclosure if one income is lost.

Borrowers can obtain the best interest rates by making timely payments, maintaining low balances, leaving old accounts open, and applying for credit only when necessary.