1. Run the numbers. Put together a financial plan to determine whether you can really afford to buy. After all, just because it's a good time to purchase a home doesn't mean it's a good time for YOU to buy. It's important to understand how much home you can afford and whether home ownership might preclude you from addressing other important financial issues in your life.

2. Save 20 percent for a down payment. I'm not a huge fan of putting down less than that amount (although the Federal Housing Administration allows it). Keep your downpayment fund in cash or cash equivalent accounts, so that market movements don't thwart your plans.

3. Use this great "rent vs. buy" calculator from the New York Times. Renting might still be the better deal in your area.