Don't borrow the maximum you qualify for
Some young people think that just because a lender will give them $500,000, it must be safe for them to borrow that much. Not necessarily, says Shah. Lenders know that most borrowers will do almost anything to avoid a default, so they feel safe doling out lots of money.

But think about it from your own perspective
Do you really want to be eating surplus cheese and sitting on milk crates so you can keep making extreme monthly mortgage payments?

Watch out for unconventional mortgages
One potentially dangerous loan is the so-called option ARM, warns the National Association of Realtors. The loan allows you to pay less than the monthly interest you owe, with the shortfall getting added to your principal. That means you owe more and more as time goes on instead of less and less. That is, until you hit a ceiling, at which point your minimum payments suddenly zoom. It can be a killer.

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Remember, a house is most of all a home
People's views of the housing market are shaped by their experiences, and for young people today, the experience is year after year of double-digit appreciation. In their experience, housing has done far better than the stock market as an investment.

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But before the last five or six years, house prices rose at barely above the rate of inflation. Older people tend to be more aware of that history -- and plan accordingly. Says Allen Fishbein, the Consumer Federation of America's director of housing and credit policy: "A generation gap started emerging as a result of this housing boom."

Brace for the risk of a market drop
You may get lucky and prices will keep going up. But many experts say the market is top-heavy. One bubble theorist is John Talbott, author of a new book, Sell Now! The End of the Housing Bubble. Here's Talbott: "The group that's most vulnerable is the young. I think the mortgage bankers have played to them. That whole generation is concerned with status. They've made homes into status goods. And it's all going to unravel."

Talbott's advice for the tough times he sees ahead? "Young people should be considering a two-bedroom fixer-upper instead of a four-bedroom."

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