NEW YORK (CNN/Money) - For years, it's been a seller's market in real estate. Bidding wars and sky-high prices became all too common.

But now it appears the balance of power may be shifting back to buyers. Sales of new and existing homes have fallen from their red-hot levels.

If you're thinking of jumping in now, you're not alone. Mortgage demand hit a four-month high last week. So, for all the potential homebuyers out there, here are 5 Tips to help you on your path to homeownership.

Picking the right realtor is key. Real estate expert Brad Inman that says if you don't find an experienced agent, the consequences can be dire.

"Too many real estate agents are salespeople, rather than the trusted advisors they're supposed to be. Buyers spend more time picking out a pair of socks than picking a realtor."

You must do your due diligence. "I suggest asking questions about your realtor's experience, background and training," says Inman, whose Web site, www.homegain.com [LINK], is a good resource for buyers and sellers.

"Are there any lawsuits or complaints against them and do they have references?" If they don't disclose their background, don't hire them.

Inman also says if you start with a bad agent, you're not going to get the best references for other services like mortgage brokers and home inspectors. And that can come back to haunt you later. "There's a gang of people between you and your home and you've got to 'scrub' all of them."

If you're considering hiring an agent who's new to the business, ask her manager to oversee the process. A good manager will be eager to help.

Also, make sure your agent is plying their trade full time, as some real estate agents are in and out of the market, and may have less knowledge about what's going on now in the neighborhood you've picked to live in. If the agent you're picking has only done six to 12 deals a year, look elsewhere.

Imagine that you've just seen the house of your dreams. The location is perfect and the schools are great. The only thing not so great is the price tag. But your heart is set on it and your mortgage broker is all too happy to lend you an extra large chunk of change.

If this situation sounds anything like yours, stop right now. You're about to overdose on debt. Buying the home you love may be your most immediate financial goal. But if you overdo it, you'll have a harder time achieving the other ones. Namely retirement and your children's educations (not to mention family vacations!)

CNNfn's Gerri Willis shares five tips on buying a home. Play video (Real or Windows Media)

Home overload can be disastrous to your financial future. Traditionally, the rule of thumb is spend only 28 to 33 percent of your gross monthly income should on housing. Additionally, your home shouldn't push your overall debt beyond 36 to 38 percent of your gross monthly income.

Expenses you'll want to consider beyond the down payment include property taxes, homeowners insurance, credit card bills and car payments.

To figure out just how much that home will cost you on a monthly basis, check out the "How much house can you afford?" calculator at CNN/Money.com. The calculator can also help you figure out how much home you can afford if you're going the conservative route or if you're planning to be more a bit more financially aggressive.

The 30-year-fixed rate mortgage is a favorite but other loans are gaining popularity. Some of them (adjustable rate and interest-only mortgages) may get you into the home of your dreams, but they could be disastrous if you don't understand what you're getting into.

Adjustable rate mortgages, or ARMs, typically offer rates lower than those involved with a plain-vanilla 30-year mortgage. They're often described as 3-1, 5-1, 7-1 or even 10-1 loans. Translation: In the case of the 3-1, your rate is fixed for three years, but after that it can float once a year in each subsequent year of the loan.

Though most ARMS have interest rate caps that set a limit on just how high your interest rate can go, you are exposed to rising interest rate risk.

Buyer beware: Most economists expect rates to rise over the coming quarters. To find out the impact on your loan, check out the mortgage calculators at Bankrate.com.

"Interest-only mortgages," as the name implies, allow you to pay just the interest on your mortgage for a set number of years. However, you still owe all of the money you borrowed, plus interest at the end of the fixed rate period. But instead of paying it off over 30 years, you now only have 25.

That means your payments will jump dramatically. For example, the five-year interest-only mortgage holder who borrows $120,000 at 6 percent interest still owes that amount at the end of the interest-only period. Instead of owing $600 a month as they did under the initial terms of the loan, the monthly payments will jump to $773, a 29 percent increase because of term compression.

There are other dangers involved in I-O mortgages. Because interest-only mortgages delay the build-up of equity in your home, falling home prices could spell disaster. If your home's value falls at the time you need to sell, you could be "under water" and on the hook for more money than your home is currently worth. If mortgage rates rise, you could be in for a double whammy.

Keep an eye on the clock. Imagine this: The closing date for your new home comes and goes and you haven't closed. The movers are arriving soon and you've already arranged to let in the cable company to start service. Nightmare, right?

You could have avoided the situation by checking with your attorney or agent about the closing date at the time of signing. Truth is, the date on your contract could mean that date or that date plus a window of 15 or even 30 days beyond that. The closing date often is a target, not a date set in stone.

Another deadline you will need to keep an eye on: the day your rate lock expires. Particularly now, with interest rates on the rise, you'll want to know when your guaranteed rate becomes history.

Keep in touch with your banker or mortgage broker about your timing; let them know whether your closing date is firm or only an approximation. Make sure you don't lock in too early; extending the lock can be expensive -- costing $70 or more a day.

And don't leave anything to chance. Deals can die because of disagreements over things as small as lights and clocks. If you want to make sure you're getting a fixture or built-in with your castle, make sure you get it in writing.

Just because you're in the homestretch, doesn't mean you're home free. You have to protect your investment -- and that means insurance.

Insuring a home has become much more expensive and complicated in recent years as companies have shifted more costs to consumers. The bottom line is the days of getting a policy, sticking it in a drawer and forgetting about it are long over.

It's a good idea get a "CLUE" report for the home you're buying. Insurance companies use information from "claims history databases" like Comprehensive Loss Underwriting Exchange (CLUE) to help gauge the insurance risk of properties and potential clients.

See if there have been any claims filed for damages to the home. If there were multiple structural or other damage claims filed by the previous owners, it can affect your home's insurability.

When you talk to your insurer, be sure to look closely at the language referring to "replacement." Insurers have been phasing out "guaranteed replacement policies" that would, as the name implies, guarantee the replacement of a destroyed home.

Similar sounding coverage in the form of "extended replacement policies" are now offered instead. These policies promise to pay the full value of the policy, plus an additional 20 to 25 percent.

That means if you haven't adequately determined how much it would cost to replace your home, you may not have enough coverage to replace it. If your home is insured for $250,000 and it's destroyed by wind or fire, in all probability you'll want to rebuild it. But as the costs of materials and labor have risen, your $250,000 home may be much more expensive to rebuild than you know.

To prevent this from happening it's important to have an up-to-date appraisal of your home -- and the amount of money it would cost to rebuild it.

YOUR E-MAIL ALERTS Mortgages Personal Debt Loan Markets Real Estate or Create your own Manage alerts | What is this?

Also, take time to understand your deductible. Many Florida residents have found a nasty surprise lurking in their policies. The surprise: "Hurricane Deductibles," which are triggered once a storm in their area has been declared a hurricane by the National Weather Service.

In these cases, homeowners in coastal or other at-risk areas see their flat rate deductible convert to a percentage deductible. Percentages range from 2 to 5 percent of a home's value. That means that when consumers go to file a claim they may be on the hook for much more than they realize.

Gerri Willis is a personal finance editor for CNN Business News. Willis also hosts CNNfn's Open House, weekdays from Noon to 12:30 p.m. (ET). E-mail comments to 5tips@cnn.com.