Financial advisers have long cautioned retirees to avoid taking on mortgage debt when they buy a home. But some find it unavoidable -- even when they're downsizing to a smaller property in a more affordable real estate market.

Rodney Harrell, a housing policy adviser for AARP, says older homeowners are increasingly likely to keep facing mortgage payments in their later years. In fact, a majority of owners over 55 now have mortgages versus a minority in 1989. The data -- the most recent available--show a dramatic change.

Economic factors are the key reason why fewer retirees are able to buy a different property without taking out a home loan.

"Housing costs have gone up higher than incomes," Harrell says.

Still, he notes that many longtime homeowners have less equity than before the housing downturn of recent years. When they sell one home to buy another, they often lack the funds to pay cash for the new property or to make a large enough down payment to be spared high monthly mortgage costs.

Facing a substantial monthly mortgage payment can be especially troublesome for retirees, who are often beginning to face health problems. The risk to those with a mortgage is that they'll lack the funds to pay for both housing and health care, including their medicine. They may also want to have enough of a cash reserve to pursue interests and hobbies in their retirement years.

Here are a few pointers for retired or soon-to-retire homebuyers:

-- Design your housing agenda in the context of a larger life plan.

Sheryl Garrett, the founder and CEO of the Garrett Planning Network, a nationwide network of fee-only financial advisers, says that for most people a home purchase in retirement involves lifestyle changes and trade-offs. As she says, such trade-offs are highly personal and best made after a period of reflection and planning.

She says her years of experience working with retired clients have taught her that those who are able to pursue their passions during this period of their life are most likely to thrive. But whether you plan to take up pottery, study a musical instrument or travel to China, your interests will have financial implications.

As a first step for couples seeking to identify their strongest personal interests, Garrett recommends that couples do one of the pencil-and-paper exercises she outlines in one of her many books, "Personal Finance Workbook for Dummies."

Working separately, the partners write down 30 things they'd like to experience, see or do. Then they classify these as "A," "B" or "C" level desires. Finally, the partners share their lists with each other. They then focus on the high-priority items.

To gain a broad understanding of retirement and how to balance your financial and personal plans before committing to a home purchase, Garrett recommends a book called "The New Retirementality" by Mitch Anthony.

-- Do an inventory of your savings for retirement.

Any comprehensive plan focused on cash-flow concerns in the present should also factor in long-term financial needs, says Eric Tyson, a personal finance expert and author of "Mind Over Money: Your Path to Wealth and Happiness."

Before you take out a mortgage of any size, he encourages you to do a full accounting of your retirement funds, especially if you're in good health and can anticipate a long life span.

To gauge how well-prepared you are for a potentially long period of retirement, he suggests you use the free planning calculators provided by such mutual fund companies as Vanguard and T. Rowe Price.

"Before making any mortgage commitment, the sensible thing is to first tally up your assets and liabilities. Making a move doesn't mean you have to be house poor. But you do need to plan," says Tyson, co-author of "Home Buying for Dummies."

-- Take into account the extra time a bigger property could cost you.

Suppose your housing dream involves a much bigger property complete with elaborate gardens. If an assessment of your finances indicates you could afford it, should you go ahead on that basis alone?

Not without considering the implications for your time, Tyson says.

"Time is precious, especially in retirement. And keeping up a really big home can be draining on both the physical and emotional levels," Tyson says.

Tyson suggests people carefully review their personal priorities before purchasing a property that could tax their time.

"For a lot of retired people, spending time with friends and family is more important than keeping up a big house," he says.

-- Don't rule out moving to a lower-cost area to fulfill your housing dream.

Are you willing to move to a different area to upgrade your housing without increasing your monthly mortgage payments? If so, Tyson suggests you might wish to consider changing venues.

Tyson cautions that anyone considering a retirement move to save money should factor in all the costs associated with the move, including the local property taxes in the new area. In addition, take note of the air travel costs associated with living in a remote area.

"Don't count on wishful thinking about moving to cut expenses. Do a detailed analysis or you might live to regret your move," he says.

(To contact Ellen James Martin, email her at ellenjamesmartin@gmail.com.)

Once his classic 1920s-era Tudor hit the market, its owner knew it wouldn't take long for his phone to ring. The house, located in a coveted suburb, featured soaring ceilings and a swank new kitchen suitable for a Better Homes & Gardens spread.

But the seller's first contract offer proved disappointing. It came from a couple in their 20s who offered $50,000 under his asking price and requested extensive help with closing costs. What's more, the would-be buyers hadn't bothered to attach a "pre-approval letter" from a mortgage lender showing they could finance the place.

"The gap between what the sellers wanted and what the buyers bid was absolutely huge," says Ashley Richardson, the real estate agent representing the home's sellers.

In a different market, the seller might have taken personal offense at the low bid and dismissed it without response. But acting on the advice of Richardson, he counter-offered $5,000 below their asking price. He also asked for proof the couple could afford the house.

The seller was wise to stand his ground. It took a couple of weeks for the buyers -- who were searching for a one-of-a-kind house with character -- to circle back with a better bid. But when they did, they submitted a bid $40,000 higher than their original offer. They also reduced their demand for closing cost help and provided a pre-approval letter.

This example illustrates how sellers can often shape an offer to their liking without alienating prospective purchasers, says Richardson, a veteran agent affiliated with the Council of Residential Specialists (www.crs.com).

The current mismatch between buyer and seller expectations is leading to an increasing number of counteroffers and counter-counteroffers, according to Kevin Borland, the broker-owner of a real estate franchise.

"Sellers definitely have more clout now. But they're not overconfident. If an offer comes in -- even a low offer -- they see it as a bird in the hand. They try to work with the buyers to make a deal happen," says Borland, who's sold homes since 1992.

He cautions sellers against summarily rebuffing any offer "that's within the right ballpark" -- especially one that comes in soon after their property hits the market.

"The first offer you get is often your best one. The longer your home sits unsold, the less you'll ultimately get. People who are too cocky about initial offers usually live to regret it," Borland says.

Here are a few pointers for home sellers:

-- Take special note of changes made by buyers to a standard contract.

Many sellers are tempted to ask neighbors to look at a contract offer before deciding how to respond.

But Borland cautions that neighbors typically have a foggy notion of local property values. As a result, they might urge you to reject a perfectly good bid on the mistaken belief that property values are much higher than what's being offered.

"Remember that your neighbors are hardly objective. They're biased because they want to believe their own home is worth more," he says.

A trusted listing agent should be the first source of advice for cautious home sellers who want to ensure that a contract offer is sufficient and that all the clauses in the document are acceptable.

Each year, the so-called "standard" sales contracts used by the real estate industry become more lengthy and complex. Yet often the most troublesome provisions involve non-standard language.

"It's especially important to notice any clauses that are handwritten into a contract offer or included in special addendums that are attached," Borland says.

Eric Tyson, a personal finance expert and co-author of "House Selling for Dummies," advises anyone seeking a second opinion on an offer's fine points to have it reviewed by an attorney who specializes in real estate.

"Just as you don't want a heart surgeon operating on your brain, you don't want a generalist lawyer advising you on a house contract. Real estate law is a specialized field," Tyson says.

Also, he says you're probably not going to want your lawyer directly involved in nitty-gritty negotiations with prospective purchasers.

"If you get an attorney into negotiations, your buyers might think they also need a lawyer. That will run up your legal bill and could also lead to an adversarial relationship that might kill the deal," Tyson says.

-- Beware of troublesome conditions attached to an offer.

In popular neighborhoods where demand for homes exceeds supply, Borland says it's uncommon for would-be buyers to make the purchase of a property conditional on the sale of a home for which they've yet to find a buyer.

But he says any seller who encounters such a contingency should shy away.

As a practical matter, such a bid will discourage other potential buyers from stepping in with an unconditional offer.

"Essentially you're taking your home off the market without knowing that the deal will finally go through. That's not in your interest. If your buyers can't sell their house, you have to go back to square one," Borland says.

-- Make doubly sure the buyers' financing plans are solid.

Attached to any good contract offer is a mortgage pre-approval letter. This shows that the would-be buyers' credit has been verified and they have sufficient assets -- including cash in the bank -- to go through with the deal.

These days, the terms "pre-approved" and "pre-qualified" are often used interchangeably. But as Borland says, a pre-qualification letter "doesn't prove anything." That's because the borrowers have yet to provide to the lender the bank statements, W-2s and pay stubs needed to confirm they can afford your place.

Even a pre-approval letter is not a watertight guarantee the lender will fund a mortgage for a particular set of buyers, allowing the deal to clear without snags, Borland says.

To protect the sellers he represents, Borland routinely calls the lender who's signed a pre-approval letter to ask about the buyers' financial status and to ensure they've had their credit run and their assets verified.

"Lending standards are extremely stringent nowadays. So you can't be too sure your buyers' mortgage application will really go through," he says.

(To contact Ellen James Martin, email her at ellenjamesmartin@gmail.com.)

During an economic downturn, some couples who've decided to split up postpone moving. Instead they opt for what's known as a "domestic divorce." They continue living under the same roof, waiting for their finances to improve before one or both can leave.

Given the rising real estate market, an increasing number of estranged partners are now moving out, often bent on buying property. But financial planners caution against making a hasty decision.

"It's tough getting your bearings when going through a traumatic life event like divorce. Even if your divorce is amicable, it's wise to go slowly when making a major money move," says William J. Beecher, a veteran financial planner who's been through divorce himself.

Leo Berard, a real estate broker and charter president of the National Association of Exclusive Buyer Agents, says it's often prudent for a departing spouse to take a short-term rental before heading into a home purchase.

Still, he acknowledges that some resist this notion because of the hassle involved in renting first and moving later. If their finances and credit allow, such people would rather buy immediately.

Are you exiting a marriage and intend to buy a property? If so, these pointers could help:

-- Look for objective advice to help shape your purchase plans.

Besides changing their housing situation, newly divorced couples are often rebuilding their entire lives. "Making a sudden or impulsive decision when you're facing so much uncertainty can lead to a costly mistake you'll later regret," Berard says.

Assuming they can afford it, he urges newly divorced homebuyers to spend a couple of hours reviewing their current budgetary picture with an accountant or financial planner who charges on an hourly basis. One way to find a fee-only planner near you is through The National Association of Personal Financial Advisors (www.napfa.org).

"Whenever you're making a money decision, you have to keep your long-term financial goals in mind, such as sending your kids to college and saving for retirement," says Beecher, a fee-only planner.

-- Realize that mortgage lenders may let you borrow more than is wise.

Financial planners say it's always smart for prospective homebuyers to gain mortgage pre-approval before shopping for properties. This helps ensure they won't waste time looking at homes above their price range. Also, a pre-approval letter gives you more credibility with sellers when bargaining for a home.

But Andrews notes that despite currently stringent lending standards, many people can still gain approval for a bigger mortgage than they can afford, given their expenses.

"Do an independent budget before you fall in love with a house," says Andrews, a fee-only planner who heads her own firm.

"Divorce can be expensive and the costs of your transition are a big unknown," Andrews says.

-- Don't let a real estate agent pressure you into a premature purchase.

People going through a marital breakup face many stresses. That's why Berard says it's important they don't compound the problem by working with a real estate agent who tries to hurry them.

"There are a few agents out there who just want a quick sale. But if you're going through a divorce, you need to find someone to work at your pace," he says.

He contends it's a smart strategy for newly separated or divorced people to begin working with an agent as soon as they're sure they'll be buying a home. At this early stage, the agent can help you get an overview of your market area.

"There's no need to rush into a high-intensity shopping tour. Without pressuring you, your agent can help you check out alternative neighborhoods, price levels and housing styles," Berard says.

Agents who enjoy working with buyers often gain special expertise in this segment of the real estate market. You can find such specialists through the Real Estate Buyer's Agent Council (www.rebac.net), or by contacting The National Association of Exclusive Buyer Agents (www.naeba.org).

-- Analyze the implications of buying a home in one area versus another.

Newly divorced people -- especially those on a tight budget -- can face tough trade-offs in terms of location. To get the most for their money, some might believe an outlying suburb is the right choice.

But if you plan to start dating soon, an exurban neighborhood could be a lonely choice.

"Living far from the city, you'll have fewer opportunities to meet other singles and fewer places to go for dates," Berard says.

Decisions about location are all the more complex if you and your former spouse have young children.

"Whether you have sole custody, joint custody or just visitation rights, you'll want to spend as much time with your kids as possible. That's why living near your ex makes tremendous sense," Berard says.

Assuming that proximity to your children is a top priority, you might be willing to buy a relatively small place, such as a condo apartment, to achieve that goal. Ideally, your new home will still allow enough bedroom space to comfortably accommodate the kids.

"Obviously, not everyone going through a divorce is in a position to buy any home, let alone one near the kids. Their job situation might make that impossible. But if you can possibly afford to live near your children, that's greatly preferable," Berard says.

(To contact Ellen James Martin, email her at ellenjamesmartin@gmail.com.)