MYTH: "Buying the most expensive home you can afford makes economic sense."

REALITY: When homes in an area are appreciating rapidly, it may be a good idea to buy as much as you can afford. The more you invest, the more you'll get back when you sell, assuming the market remains strong.

Buyers should exercise greater caution, however, during times of slower appreciation. The extra money paid for that "most expensive" home might bring a better return if invested elsewhere.

In either case, make certain you don't bite off more, financially, than you can chew.