NEW YORK (CNNMoney.com) -- What a difference a year makes when you're in the market for a new home, especially if you're a first-time buyer.

Thanks to a combined jump in mortgage interest rates and home prices, a starter home in many areas of the country could cost you several hundred dollars more per month today than if you bought it last year.

Housing Don'ts If total cost of owning each month exceeds by 25% or more the cost of renting, you may be better off renting. Spend no more than 30% of gross income on housing.

Nationwide, median home prices rose at annual rate of more than 10 percent in the first quarter of 2006, according to the National Association of Realtors.

Meanwhile, rates on adjustable rate mortgages, the most common for first-time buyers, are up more than a percentage point.

The rate of home-price gains varies widely from market to market. In Gainesville, Fla., for instance, the median sales price of existing family homes rose 31 percent, or about $50,000, to $210,100 between the first quarter of last year and the first quarter of this year, according to NAR.

The percentage gains were more muted - but still high - in richly-priced markets like the New York City-Northern New Jersey area, where the median price rose 11.2 percent to $458,500, an increase of about $46,000.

So for the first-time home buyer in Gainesville or New York, those price and rate increases can mean an extra $400 to $450 in monthly payments to own a home. That assumes you put down the same amount this year on the home as you would have last year.

If you can't put down 20 percent -- as many first-timers can't -- your monthly bite is likely to be larger because you'll have to take out a bigger loan and you may have to pay for private mortgage insurance, which can run up to $50 for every $100,000 in mortgage debt.

Remember, too, the additional costs cited here do not include the cost of homeowner's insurance and property taxes, which also have been on the rise in many markets, as have utility costs.

Most first-time home buyers ratchet down expectations about what kind of home they can afford once they figure out how much a home will really cost.

But in markets where they're quickly feeling priced out of the market, they're looking to less expensive neighborhoods far from their original preference.

In Gainesville, for instance, a lot of first-time home buyers are choosing communities up to 20 miles from where they really want to live, or they're opting for condos or attached housing, said Gene Ritch, president of Coldwell Banker MM Parrish in Gainesville.

In the Phoenix area, another hot market, buyers are moving up to 25 miles away from the valley since they can still get a three-bedroom house for considerably less than a comparable home in the valley, said certified financial planner Michael Furois.

In New York City, where six-figure-earners with fat savings accounts are at risk of being priced out of former drug dens, moving away from a desirable neighborhood is nothing new. But first-time home buyers are also more likely to opt for fixer-uppers rather than move-in condition housing if it gets them "into the game," said Corcoran senior vice president Wendy Sarasohn.

In terms of financing, banks are willing to offer 100 percent financing so long as a buyer has good credit and liquid assets equal to 5 percent of the purchase price, said mortgage broker Melissa Cohn. Some are even willing to finance 103 percent, in order to cover the buyer's closing costs as well.

In Phoenix, Furois said, the difference between first-time buyers last year and now is greater willingness to go for an interest-only loan if that's the only way they can afford the purchase. The hope being that they will build equity over the next five years via price appreciation, rather than through their monthly payments.

New York-based certified financial planner Stacy Francis of Francis Financial isn't a fan of 100 percent financing or interest-only loans since the point of buying a home is to build equity sooner rather than later.

While these loan structures may pay off in a booming housing market, buyers run the risk of owing the bank should they have to sell when prices are down. At the very least, if prices flatten, they'll have to pay for the selling costs, such as a realtor fee.

Ideally, Francis likes her clients to spend no more than 30 percent of their gross income on housing in high-cost markets like New York City. And she'd like them to shoot for a 20 percent down payment. If that's not possible, she recommends 5 percent to 10 percent down and having enough in liquid assets left over to cover three to six months of expenses, plus the costs of closing, moving, new furniture and bigger utility bills.

Another option, of course, is to drop the search for now and work on building a bigger down payment either by saving more or taking a second job, Francis said.

And if a first-time buyer lives in a market where home prices have showed signs of cooling, it may pay to wait a little and rent in the meantime.

One way to gauge whether it pays to rent or buy is to compare the cost of buying the house you're considering with the cost of renting something comparable.

Gary Eldred, coauthor of "Investing in Real Estate," suggests that if the monthly cost of owning a home -- including mortgage principal, interest, insurance, homeowner's association fees and maintenance -- exceeds the cost of renting a comparable home by 25 percent or more, you're better off renting.

That's because the price of the home is not likely to appreciate enough over the next several years to justify the financial sacrifices you would need to make to own it.

On the bright side, if you do decide to rent, a rising rate environment can work to your advantage. That down payment you've been saving can earn a respectable amount of interest in a CD or money market account. (See how high they've gone.)