One reason so many people can still afford today's expensive homes is the availability, in most areas, of private mortgage insurance. With insurance, you need a down payment of around 20 percent. With insurance, you can get away with only 5 or 10 percent down. In dollar terms, that means you can often buy a house with only $2,000 to $4,000 in the bank.

Insured loans are made to order for thousands of young couples, many of whom have two regular incomes. Their savings may be low, but their earnings are high enough to carry a substantial mortgage. Traditionally, lenders restrict basic housing expenses (mortgage, insurance and taxes) to 25 percent of total income, but many now go up to 30 percent for people with good earnings prospects and little debt.

Couples thinking about a first house are often discouraged because average prices in their area are too high. But there are plenty of suitable houses priced below the average. The Mortgage Guaranty Insurance Corp., the nation's largest mortgage insurer, says that, as of June 30, the median selling price of homes bought by its insured borrowers was not far above $40,000. ("Median" means that half the homes cost more than the amount and half cost less.)

The median price in Atlanta was $41,666; in Chicago $44,830; in Dallas, $43,400; in Los Angeles, $57,614; in New York City, $49,809; and in Seattle, $46,676. Median family incomes range from $23,000 (in Atlanta) to $27,000 (in Los Angeles). The median age was around 30, and about three-quarters of the buyers were married.

Private mortgage insurance works this way:

Lenders make you a loan for 90 or 95 percent of the cost of the house, and insure the top 20 or 25 percent of the loan with a private company. On a $40,000 mortgage, for example, the top $8,000 may be insured. If you default insurance covers a portion of the loan; the rest is repaid through the sale of the house.

With a 10 percent down payment, you have to pay a first-year fee for the insurance of one-half of 1 percent of the mortgage's face value ($200 on a $40,000 loan). Each year thereafter, you pay one quarter of 1 percent of the outstanding mortgage balance.

If the normal mortgage rate is 10 percent, a privately insured mortgage will cost around 10.25 percent.On a $40,000 30-year loan, insurance raises the monthly payments by $17.

Loans insured by the Federal Housing Administration may be more expensive than those with private coverage. The top FHA rate is now 9.5 percent, but you can be charged a first-year fee of an extra 1 percent. In subsequent years, the annual fee is one-half of 1 percent.

Veterans Administration mortgages, on the other hand, may cost a little less; there's a 1 percent fee but no subsequent annual premium. With either FHA or VA loans, however, the seller may be charged a fee which he will generally pass on to you in the cost of the house.

Lenders usually require that you carry private mortgage insurance only for 7 to 10 years. After that, coverage can be dropped, which saves you the annual cost. It's possible to drop the insurance even sooner if your house has appreciated enough in value. Ask the lender about this. (It may also be possible to drop FHA coverage after a comparable period of time, but it won't even be considered unless you ask.)

If money tightens up a little toward the end of this year, as many people in the industry expect, low down payment mortgages will be harder to get. They're already rare in states with low usury ceilings - like New York, where mortgage rates can't exceed 8.5 percent. (The national mortgage rate is now around 10 percent.) There are also scattered reports of tighter money in the North Central and Midwest regions.

In most parts of the country, however, mortgage money is still readily available. "Buyers don't care if they pay 9.75 or 10 percent for a mortgage if they think homes are going to appreciate in value the way they have in the past," Preston Martin, president of PMI Mortgage Insurance Co., told my associate, Linda Rubey.

The rate of housing inflation may slow now and then, but strong demand for homes from the huge Baby Boom generation implies continued upward pressure on prices in the years ahead.